What changed in this filing

/stocks — the workspaceLOADING

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

2023-03-06 compared with 2022-02-23 · 466 added, 419 removed, 681 unchanged (57% of the section changed)

Quantitative and Qualitative Disclosures about Market Risk

As of December 31, 2021, we had cash and cash equivalents of $417.2 million.

A portion of our cash equivalents, which are in money market funds, may be subject to interest rate risk and could fall in value if market interest rates increase.

However, because our cash equivalents are primarily short-term in duration, we believe that our exposure to interest rate risk is not significant and a 1% movement in market interest rates would not have a significant impact on the total value of our portfolio.

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 United States dollars.

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

All foreign transactions settle on the applicable spot exchange basis at the time such payments are made.

An adverse movement in foreign exchange rates could have a material effect on payments made to foreign suppliers and for license agreements.

A hypothetical 10% change in foreign exchange rates during any of the periods presented would not have had a material impact on our financial statements.

We do not enter into investments for trading or speculative purposes and have not used any derivative financial instruments to manage our interest rate risk exposure.

As of December 31, 2022, we had cash and cash equivalents and marketable securities of $191.7 million, consisting of cash, investments in money market funds and investments in marketable securities.

A portion of our cash equivalents and investments in marketable securities may be subject to interest rate risk and could fall in value if market interest rates increase.

However, because our cash equivalents are primarily short-term in duration, we believe that our exposure to interest rate risk on these investments is not significant and a 1% movement in market interest rates would not have a material impact to our financial results.

We do not enter into investments for trading or speculative purposes.

Our financial instruments that are exposed to concentration of credit risk consist primarily of cash, cash equivalents, investments and accounts receivables.

We attempt 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 our investment policy, which defines allowable investments, specifies credit quality standards and limits the credit exposure of any single issuer.

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

We are not exposed to any significant concentrations of credit risk from these financial instruments.

We are also subject to credit risk from trade receivables related to product sales, and we monitor 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.

We have not experienced significant losses with respect to the collection of trade receivables.

We are exposed to interest rate risk with respect to variable rate debt.

As of December 31, 2022, we had $250.0 million principal outstanding on our 2027 Term Loans that accrue interest from inception through March 31, 2023 at 8.25% plus three-month LIBOR per annum with a LIBOR floor of 1.0%;

and, starting April 1, 2023, accrue interest at 8.25% plus the Adjusted Term SOFR, with a floor on Adjusted Term SOFR of 1.0%.

We currently do not hedge our variable interest rate debt.

The interest rate for our variable rate debt during the quarter ended December 31, 2022 was 12.00%, and the interest rate during the first quarter of 2023 will be 13.03% based on the 3-month LIBOR on January 1, 2023.

A hypothetical 100 basis point increase in the interest rate on our variable rate debt could result in up to a $2.5 million increase in the annual interest expense as of December 31, 2022.

In April 2020, we issued $230.0 million aggregate principal amount of 2026 Convertible Notes with a fixed interest rate of 1.5%.

Since the notes have a fixed annual interest rate, we have no financial or economic interest exposure associated with changes in interest rates.

However, the fair value of fixed rate debt fluctuates when interest rates change.

Additionally, the fair value of the 2026 Convertible Notes can be impacted when the market price of our common stock fluctuates.

We carry the 2026 Convertible Notes on our balance sheet at face value less the unamortized discount and issuance costs, and we present the fair value for required disclosure purposes only.

Substantially all of our sales are denominated in U.S.

We have exposure to the exchange rate between the U.S.

Dollar and the Euro because we make purchases of CIMERLI inventory from and pay royalties to our partner Bioeq that are denominated in Euros and we are therefore subject to fluctuations due to changes in foreign currency exchange rates.

Accordingly, fluctuations in the exchange rate between the U.S.

Dollar and the Euro may impact our consolidated statements of operations.

Consolidated Financial Statements and Supplementary Data

16 unchanged sentences

generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 23, 2022 expressed an unqualified opinion thereon.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated March 6, 2023 expressed an unqualified opinion thereon.

Basis for Opinion

19 unchanged sentences

Estimated chargebacks are recorded as a reduction of trade receivables on the consolidated balance sheet and totaled $42.7 million at December 31, 2022.

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

Estimated rebates are presented within accrued rebates, fees and reserves and other liabilities, non-current on the consolidated balance sheet and totaled $38.7 million at December 31, 2022.

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

9 unchanged sentences

As of December 31, 2022, the Company had $115.1 million of inventory which included $10.3 million of raw materials, $86.7 million of work in progress and $18.1 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.

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

7 unchanged sentences

We have served as the Company’s auditor since 2012.

Redwood City, California

February 23, 2022

San Mateo, California

March 6, 2023

Coherus BioSciences, Inc.

3 unchanged sentences

Cash and cash equivalents

Investments in marketable securities

Trade receivables, net

Prepaid manufacturing

Other prepaid and other assets

Other prepaids and current assets

Total current assets

1 unchanged sentence

Inventory, non-current

Intangible assets

Goodwill and intangible assets

Other assets, non-current

Liabilities and Stockholders’ Equity

Liabilities and Stockholders’ Equity (Deficit)

Current liabilities:

5 unchanged sentences

Convertible notes

2022 Convertible Notes - related parties

2026 Convertible Notes

2025 Term loan

Lease liabilities, non-current

2 unchanged sentences

Commitments and contingencies (Note 8)

Stockholders’ equity:

Stockholders’ equity (deficit):

Common stock ( $ 0.0001 par value;

7 unchanged sentences

( 1,341,608 )

Total stockholders' equity

Total liabilities and stockholders’ equity

( 1,049,854 )

Total stockholders' equity (deficit)

Total liabilities and stockholders’ equity (deficit)

See accompanying notes.

3 unchanged sentences

Year Ended December 31,

Cost and expenses:

Costs and expenses:

Cost of goods sold

1 unchanged sentence

Selling, general and administrative

Total cost and expenses

Total costs 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 (expense) income, net

Net (loss) income before income taxes

Interest expense

Loss on debt extinguishment

Other income (expense), net

(Loss) income before income taxes

Income tax provision

1 unchanged sentence

Net (loss) income per share:

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

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

See accompanying notes.

5 unchanged sentences

Other comprehensive (loss) income:

Unrealized gain on available-for-sale securities, net of tax

Foreign currency translation adjustments, net of tax

8 unchanged sentences

Balances at December 31, 2019

Cumulative translation adjustment

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 RSUs

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

Issuance of common stock under the ESPP

1 unchanged sentence

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

Purchase of capped call options related to convertible notes due 2026

Stock-based compensation expense

Balances at December 31, 2019

Cumulative translation adjustment

Balances at December 31, 2020

Issuance of common stock upon exercise of stock options

1 unchanged sentence

Issuance of common stock under the ESPP

Issuance of common stock upon 2019 bonus payout in RSUs

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

Purchase of capped call options related to convertible notes due 2026

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 )

Issuance of common stock upon exercise of stock options

1 unchanged sentence

Issuance of common stock under the ESPP

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

Issuance of common stock under ATM Offering, net of issuance costs

Taxes paid related to net share settlement of RSUs

Stock-based compensation expense

Other comprehensive gain, net of tax

Balances at December 31, 2022

11 unchanged sentences

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

Non-cash operating lease expense

Upfront license fee payment to Junshi Biosciences

Upfront and milestone based license fee payments

Inventory write-offs, net

Non-cash interest expense from amortization of debt discount & issuance costs

Upfront and option payments to Junshi Biosciences

Other upfront and milestone based license fee payments

Loss on debt extinguishment

Other non-cash adjustments, net

14 unchanged sentences

Proceeds from sale of investments in marketable securities

Upfront license fee payment to Junshi Biosciences

Upfront and milestone based license fee payments

Upfront and option payments to Junshi Biosciences

Other upfront and milestone based license fee payments

Net cash used in investing activities

Financing activities

Proceeds from common stock offering, net of underwriters discounts, commissions and offering costs

Proceeds from issuance of Convertible Notes due 2026, net of issuance costs

Purchase of capped call options related to Convertible Notes due 2026

Proceeds from 2025 Term Loan, net of issuance costs

Proceeds from issuance of 2026 Convertible Notes, net of issuance costs

Proceeds from 2027 Term Loans, net of debt discount & issuance costs

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

Proceeds from issuance of common stock under ATM Offering, net of issuance costs

Proceeds from issuance of common stock upon exercise of stock options

Proceeds from purchase under the employee stock purchase plan

Purchase of capped call options related to 2026 Convertible Notes

Taxes paid related to net share settlement of RSUs

Principal payments for finance lease obligations

Repayment of 2022 Convertible Notes and premiums

Repayment of 2025 Term Loan, premiums and exit fees

Other financing activities

Net cash provided by financing activities

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

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

4 unchanged sentences

Cash paid for income taxes

Right-of-use assets obtained in exchange for lease obligations related to operating leases

Right-of-use assets obtained in exchange for lease obligations related to finance leases

Supplemental disclosures of non-cash investing and financing activities

7 unchanged sentences

Coherus BioSciences, Inc.

(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” or “Coherus”) is a commercial-stage biopharmaceutical company focused on the research, development and commercialization of innovative cancer treatments and commercialization of its portfolio of FDA-approved biosimilars.

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 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.

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

The FDA approved YUSIMRY (adalimumab-aqvh), a biosimilar to Humira, in December 2021, which the Company plans to launch in the United States on or after July 1, 2023, pursuant to the terms of an agreement with Humira’s manufacturer, AbbVie.

On August 2, 2022, the FDA approved CIMERLI (ranibizumab-eqrn) , a biosimilar to Lucentis, and commercial launch commenced on October 3, 2022 in the United States.

The Company’s product pipeline comprises the following three product candidates:

toripalimab, an anti-PD-1 antibody being developed in collaboration with Junshi Biosciences;

CHS-006, an antibody targeting TIGIT being developed in collaboration with Junshi Biosciences;

and one wholly-owned preclinical immuno-oncology program, CHS-1000, an antibody targeting ILT4.

In May 2022, the Company discontinued development of its bevacizumab (Avastin) biosimilar product candidate in-licensed from Innovent.

In October 2022, the Company discontinued development of its preclinical immuno-oncology program, CHS-3318, an antibody targeting CCR8.

On January 9, 2023, the Company announced that it entered into the Term Sheet with Klinge Biopharma for the exclusive commercialization rights to FYB203, a biosimilar candidate to Eylea® (aflibercept), in the United States.

The parties to the Term Sheet expect to execute the Definitive Agreements contemplated by the Term Sheet and complete the transaction in the first half of 2023.

Basis of Consolidation

8 unchanged sentences

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.

Estimates are assessed each period and updated to reflect current information, such as the economic considerations related to the impact that COVID-19 outbreaks 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.

1 unchanged sentence

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 and all long-lived assets are primarily maintained in the United States.

The Company’s chief executive officer, as the chief operating decision maker (“CODM”), manages and allocates resources to the operations of the Company on an entity-wide basis.

Managing and allocating resources on an entity-wide basis enables the CODM to assess the overall level of resources available and how to best deploy these resources across functions.

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

Cash, Cash Equivalents and Restricted Cash

1 unchanged sentence

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:

Year Ended December 31,

(in thousands)

7 unchanged sentences

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.

Investments in marketable securities primarily consist of U.S.

Treasury securities, commercial paper, corporate debt obligations and short-term money market instruments.

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.

The Company’s investment policy requires that it only invests in highly rated securities and limits its exposure to any single issuer, except for securities issued by the U.S.

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.

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.

The Company regularly reviews its investments for declines in fair value below the amortized cost basis to determine whether the impairment, if any, is due to credit-related or other factors.

This review includes the credit worthiness of the security issuers, the severity of the unrealized losses, whether the Company has the intent to sell the securities and whether it is more likely than not that the Company will be required to sell the securities before the recovery of the amortized cost basis.

Unrealized gains and losses on available-for-sale debt 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, 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.

When the fair value of an available-for-sale debt 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.

There were no impairments related to credit losses during any of the periods presented.

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

During 2022, 2021 and 2020, interest income from marketable securities was $ 1.9 million, $ 1.4 million and $ 0.6 million, respectively, and is included in other income (expense), net, in the consolidated statements of operations.

Trade Receivables

1 unchanged sentence

The Company estimates an allowance for expected credit losses by considering factors such as historical experience, credit quality, the age of the accounts receivable balances, and current economic conditions that may affect a customer’s ability to pay.

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, 2021 and 2020.

The corresponding expense for the credit loss allowance is reflected in selling, general and administrative expenses and was not material during the periods presented.

The Company believes that its allowance for expected credit losses was adequate and immaterial as of December 31, 2022 and 2021.

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 Company’s financial instruments that are exposed to concentration of credit risk consist primarily of cash, cash equivalents, investments in marketable securities and trade receivables.

The Company attempts to minimize the risks related to cash, cash equivalents and marketable securities 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.

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.

The Company 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 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.

UDENYCA and CIMERLI were the only products sold by the Company during 2022.

UDENYCA was the only product sold and accounted for all of the Company’s revenues in 2021 and 2020.

The Company enters into a strategic commercial supply agreement for each of its products.

The Company currently has not engaged back-up suppliers or vendors.

If any of the Company’s current vendors are 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.

Foreign Currency

Assets and liabilities denominated in foreign currency are remeasured at period-end exchange rates for monetary assets and liabilities.

Non-monetary assets and liabilities denominated in foreign currencies are remeasured at historical rates.

Translation gains and losses are included in accumulated other comprehensive loss in stockholders’ equity (deficit).

Revenue and expense accounts are translated to U.S.

dollars at average exchange rates in effect during the period with resulting transaction gains and losses recognized in other income (expense), net in the consolidated statements of operations.

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.

2 unchanged sentences

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.

During the third quarter of 2022, the Company recorded a $ 26.0 million write-down of inventory in cost of goods sold in the consolidated statements of operations due to the competitive environment and lower demand for UDENYCA resulting in certain inventory becoming at risk of expiration.

For 2022, this increased the net loss by $ 26.0 million and basic and diluted net loss per share by $ 0.33 .

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.

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

Inventory in the consolidated balance sheets as of December 31, 2022 was related to UDENYCA, YUSIMRY and CIMERLI.

The Company began to capitalize inventory costs associated with UDENYCA and CIMERLI after receiving final regulatory approval in November 2018 and August 2022, respectively, and capitalization of YUSIMRY inventory costs began in the second quarter of 2022 when sales were deemed probable.

Property and Equipment

3 unchanged sentences

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.

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:

5 unchanged sentences

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.

Goodwill represents the excess of the consideration transferred over the fair value of net assets acquired in a business combination.

Goodwill is not amortized but is evaluated for impairment on an annual basis, during the fourth quarter, or more frequently if an event occurs or circumstances change that would more-likely-than-not reduce the fair value of the Company’s single reporting unit below its carrying amount.

The Company’s goodwill balance was $ 0.9 million as of December 31, 2022 and 2021, and no goodwill impairment charges were recognized in 2022, 2021 or 2020.

Acquired in-process research and development (“IPR&D”) that the Company acquires in conjunction with the acquisition of a business represents the fair value assigned to incomplete research projects which, at the time of acquisition, have not reached technological feasibility.

The amounts are capitalized and are accounted for as indefinite-lived intangible assets, subject to impairment testing until completion or abandonment of the projects.

Upon successful completion of each IPR&D project, the Company will make a determination as to the then-useful life of the intangible asset, generally determined by the period in which the substantial majority of the cash flows are expected to be generated, and begin amortization.

The Company evaluates IPR&D for impairment on an annual basis, during the fourth quarter, or more frequently if impairment indicators exist.

The Company’s IPR&D balance was $ 2.6 million as of December 31, 2022 and 2021, and no IPR&D impairment charges were recognized in 2022, 2021 or 2020.

As of December 31, 2022, the Company had a $ 2.4 million definite-lived intangible asset, net related to a 2022 capitalized milestone payment under a license agreement.

This is amortized on a straight-line basis over its estimated economic life of ten years and is reviewed periodically for impairment.

Amortization expense is recorded as a component of cost of goods sold in the consolidated statements of operations and was immaterial in 2022.

Impairment of Long-Lived Assets

10 unchanged sentences

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

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

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.

Payment terms differ by jurisdiction and customer, but payment terms typically range from 30 to approximately 90 days from date of shipment and may be extended during the launch period of a new product.

Product Sales Discounts and Allowances

26 unchanged sentences

The Company pays fees to Customers and GPOs for account management, data management and other administrative services.

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.

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.

Royalty revenue was insignificant for all periods presented and is included in net revenue.

Cost of Goods Sold

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.

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

Through March 31, 2021, a portion of the costs of producing UDENYCA sold was expensed as research and development before the FDA approval of UDENYCA and therefore is not reflected in cost of goods sold.

All the inventory expensed prior to approval of UDENYCA was fully utilized by March 31, 2021;

thus, the costs of producing UDENYCA are fully reflected in cost of goods sold beginning April 1, 2021.

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

1 unchanged sentence

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

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.

Additionally, the Company shares 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.

In 2022, 2021 and 2020, cost of goods sold included inventory write-offs, net of $ 26.0 million, $ 5.1 million and $ 2.2 million, respectively.

Research and Development Expense

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

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

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

1 unchanged sentence

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;

● expense incurred under agreements with collaborators, 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;

● costs associated with manufacturing process development activities, analytical activities and pre-launch inventory manufactured prior to regulatory approval being obtained or deemed to be probable;

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

4 unchanged sentences

● 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

The Company has entered and may continue to enter into license agreements to access and utilize certain technology.

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.

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 asset acquisition and therefore, any acquired IPR&D that does not have an alternative future use is charged to expense at the acquisition date.

1 unchanged sentence

Selling, General and Administrative Expense

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.

Selling, general and administrative expense comprises 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.

6 unchanged sentences

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.

A valuation allowance is established against deferred tax assets when, 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.

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

The Company does not expect its unrecognized tax benefits from prior years to change significantly in 2023.

Operating and Finance Leases

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

The Company determines at an arrangement’s inception whether it is a lease.

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.

Operating leases are included in accrued and 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.

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

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

The terms of vehicles leased under the Company’s fleet agreement (“Vehicle Lease Agreement”) are 36 months .

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

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.

Finance leases are included in property and equipment, net, accrued and other current liabilities, and lease liabilities, non-current in the consolidated balance sheets.

Assets under finance leases are depreciated to operating expenses on a straight-line basis over the lease term.

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.

2 unchanged sentences

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 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 13.

3 unchanged sentences

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.

Other comprehensive (loss) income refers to gains and losses that are recorded as an element of stockholders’ equity (deficit), but are excluded from net (loss) income.

The Company’s other comprehensive (loss) income includes unrealized gain (loss) on available-for-sale securities and foreign currency translation adjustments in 2022, 2021 and 2020.

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 2022.

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.

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

Recent Accounting Pronouncements

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 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 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:

The Company has reviewed 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 sales in the United States of CIMERLI on October 3, 2022.

The Company’s net revenue was as follows:

Year Ended December 31,

(in thousands)

Total net product revenue

Total net revenue

Revenue by significant Customer was as follows:

Year Ended December 31,

McKesson Corporation

1 unchanged sentence

Cardinal Health, Inc.

Total revenue

Product Sales Discounts and Allowances

3 unchanged sentences

(in thousands)

Balance at December 31, 2020

Balances at December 31, 2021

Provision related to sales made in:

1 unchanged sentence

Payments and customer credits issued

Balance at December 31, 2021

Balances at December 31, 2022

Year Ended December 31, 2021

1 unchanged sentence

(in thousands)

Balance at December 31, 2019

Balances at December 31, 2020

Provision related to sales made in:

1 unchanged sentence

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.

Balances at December 31, 2021

Year Ended December 31, 2020

Balances at December 31, 2019

Provision related to sales made in:

Current period

Payments and customer credits issued

Balances 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 and other liabilities, non-current in the accompanying consolidated balance sheets.

Fair Value Measurements

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

The fair value of financial instruments are classified into one of the following categories based upon the lowest level of input that is significant to the fair value measurement :

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

1 unchanged sentence

● 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.

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.

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:

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

Fair Value Measurements

2 unchanged sentences

Financial Assets:

Cash and cash equivalents (money market funds)

Restricted cash (money market funds)

Total financial assets

Financial Liabilities:

Contingent consideration

Fair Value Measurements

Money market funds

Marketable debt securities:

government agency securities

treasury securities

Commercial paper and corporate notes

The financial assets at December 31, 2021 consisted of money market funds and were classified as Level 1.

The cost, unrealized gains or losses, and fair value by investment type are summarized as follows:

December 31, 2022

(in thousands)

Financial Assets:

Cash and cash equivalents (money market funds)

Restricted cash (money market funds)

Total financial assets

Financial Liabilities:

Contingent consideration

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 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 $ 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 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 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.

Unrealized Gain

Unrealized (Loss)

Money market funds

government agency securities

treasury securities

Commercial paper and corporate notes

The Company held 13 positions that were in unrealized loss positions as of December 31, 2022, and aggregated gross unrealized losses on available-for-sale debt securities were not material.

No impairment was recognized in 2022.

Excluding restricted cash and as of December 31, 2022, the remaining contractual maturities of available-for-sale securities were less than one year , and the average maturity of investments upon acquisition was approximately 7 months .

The accrued interest receivable on available-for-sale marketable securities was immaterial at December 31, 2022, and is included in other prepaids and current assets.

There were no investments in marketable securities as of December 31, 2021;

thus, no unrealized gain (loss) was recognized as of December 31, 2021.

Inventory consisted of the following:

3 unchanged sentences

Finished goods

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:

The Company began capitalizing YUSIMRY inventory in the second quarter of 2022 and had $ 23.7 million of such inventory recognized in the consolidated balance sheets at December 31, 2022.

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

As of December 31, 2022 and 2021, the non-current portion of inventory consisted of raw materials, work in process and a portion of finished goods.

The following table presents the inventory balance sheet classifications:

(in thousands)

Inventory, non-current

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;

Prepaid manufacturing of $ 17.9 million as of December 31, 2022 includes prepayments of $ 13.0 million to CMOs for manufacturing services of the Company’s products, which the Company expects to be converted into inventory during 2023;

and prepayments of $ 4.9 million to various CMOs for research and development pipeline programs.

2 unchanged sentences

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.

As a result, the Company recognized $ 11.2 million within research and development expense in 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.

No material expense relating to the discontinuation of CHS-2020 was recognized after March 31, 2021.

Balance Sheet Components

11 unchanged sentences

Property and equipment, net

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

Depreciation and amortization expense related to property and equipment, net was $ 3.6 million, $ 3.5 million, and $ 2.9 million in 2022, 2021 and 2020, respectively.

There were no material impairments of property and equipment in 2022, 2021 and 2020.

As of December 31, 2022 and 2021, the net book value of software implementation costs related to hosting arrangements was $ 3.5 million and $ 1.3 million, respectively, and the amortization expense was immaterial for all periods presented.

Accrued and Other Current Liabilities

1 unchanged sentence

(in thousands)

Accrued manufacturing and clinical

Accrued co-development costs for toripalimab

Accrued other

Accrued commercial and research and development manufacturing

Accrued co-development costs payable to Junshi Biosciences

Lease liabilities, current

Accrued other

Total Accrued and other current liabilities

1 unchanged sentence

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.

On February 1, 2021, the Company entered into 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 paid $ 150.0 million upfront for exclusive rights to toripalimab in the United States and Canada, an option in these territories to Junshi Biosciences’ anti-TIGIT antibody CHS-006, an option in these territories to a 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.

In March 2022, the Company paid $ 35.0 million for the exercise of its option to license CHS-006.

Junshi Biosciences and the Company are jointly developing CHS-006 with each party responsible for the associated development costs as set forth in the Collaboration Agreement.

If the Company exercises its remaining option for the IL-2 cytokine, it will be obligated to pay an additional option exercise fee of $ 35.0 million.

Additionally, for each exercised option, the Company will be obligated to pay Junshi Biosciences an 18 % royalty on net sales, up to $ 85.0 million for the achievement of certain regulatory approvals, and up to $ 170.0 million for the attainment of certain sales thresholds.

Under the Collaboration Agreement, the Company retains the right to collaborate in the development of toripalimab and the other licensed compounds, including CHS-006, 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.

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.

The licensing transaction and the exercise of the option were accounted for as asset acquisitions under the relevant accounting rules.

Research and development expenses recognized for obligations to Junshi Biosciences were $ 68.5 million in 2022, inclusive of the $ 35.0 million option fee, $ 175.4 million in 2021, and $ 5.0 million in 2020 representing the right of first negotiation fee which was fully credited against the total upfront license fee obligation under the Collaboration Agreement.

The first quarter of 2021 included $ 145.0 million for the upfront payment for the exclusive rights to toripalimab and the second quarter of 2021 included a credit of $ 9.0 million for the DLOM, discussed below.

Accrued and other current liabilities in the consolidated balance sheets as of December 31, 2022 and 2021 included $ 8.4 million and $ 1.9 million, respectively, related to the co-development, regulatory and technology transfer costs related to these programs.

A $ 25.0 million milestone payment will be due upon the regulatory approval of toripalimab.

Junshi Biosciences and the Company have not received an action letter from the FDA regarding the BLA for toripalimab in combination with chemotherapy as treatment for recurrent or metastatic nasopharyngeal carcinoma by the Prescription Drug User Fee Action date of December 23, 2022.

The FDA previously communicated that on-site inspections, including Junshi Biosciences’ manufacturing facility for toripalimab, are required before the FDA can approve the original BLA;

however, they were unable to conduct the inspection by December 23, 2022 due to the impact of COVID-19 related restrictions on travel in China.

The BLA for toripalimab remains under review, and Junshi Biosciences and the Company are engaged in ongoing discussions with the FDA about the pre-approval inspection plans.

The Company plans to launch toripalimab in the United States in the third quarter of 2023, if approved by July 1, 2023.

As of December 31, 2022, 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.

The additional milestone payments, option fee for the IL-2 cytokine and

royalties are contingent upon future events and, therefore, will be recorded if and when it becomes probable that a milestone will be achieved, or when an option fee or royalties are incurred.

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.

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.

2 unchanged sentences

Innovent Biologics (Suzhou) Co., Ltd.

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 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.

Following the Company’s option exercise, Innovent’s biosimilar version of rituximab would be deemed an Innovent Licensed Product for all purposes of the License Agreement and Innovent would grant to the Company an exclusive, royalty-bearing license to develop and commercialize Innovent’s biosimilar version of rituximab in the field of treatment, prevention or amelioration of any human diseases and conditions as included in the label of Rituxan.

Innovent will supply the Innovent Licensed Products to the Company in accordance with a manufacturing and supply agreement to be executed by the parties.

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 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.

If the Company exercises its option to acquire Innovent’s biosimilar version of rituximab (Rituxan), it would be required to pay a fee of $ 5.0 million.

Subject to the terms of the License Agreement, if the Company requests Innovent to perform technology transfer for the manufacturing of the Innovent Licensed Products, it would be required to pay up to $ 10.0 million for fees related thereto.

On January 13, 2020, the Company entered into a license agreement with Innovent for the development and commercialization of the bevacizumab Licensed Product in the United States and Canada.

Under the Innovent Agreement, the Company paid Innovent $ 5.0 million upfront and committed to pay 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.

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

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.

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

As of December 31, 2022, 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 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.

On May 3, 2022, the Company provided notice of termination of the Innovent Agreement to Innovent because regulatory approval of the licensed product could not be reasonably obtained within the agreed time period.

In connection therewith, the Company has discontinued development of the bevacizumab Licensed Product.

On November 4, 2019, the Company entered into the Bioeq 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.

1 unchanged sentence

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.

Bioeq will manufacture and supply the Bioeq Licensed Products to the Company in accordance with terms and conditions specified in the Bioeq Agreement and the Bioeq Manufacturing Agreement and will remain in force until the first to occur of the following:

(1) the termination of the Bioeq Agreement;

(2) the exercise of a right to termination by the Company or Bioeq for a material breach of the other party that is not cured in accordance with the Bioeq Manufacturing Agreement;

and (3) the exercise of a right to termination by Bioeq if invoices are not paid in full in accordance with the Bioeq Manufacturing Agreement.

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.

2 unchanged sentences

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 in 2019.

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.

The terms of the Bioeq Agreement include 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 including a € 2.5 million milestone related to the FDA approval of the CIMERLI Section 351(k) BLA that was paid in 2022.

This was recorded as an intangible asset and is being amortized over ten years .

The Company shares 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.

Royalties due to Bioeq were $ 2.9 million as of December 31, 2022.

The remaining milestone payments are contingent upon future events and, therefore, will be recorded when it becomes probable that a milestone will be achieved.

Debt Obligations

A summary of the Company’s debt obligations, including level within the fair value hierarchy (see Note 3), is as follows:

At December 31, 2022

(in thousands)

Unamortized Debt Discount and Debt Issuance Costs

Carrying Value

Financial Liabilities:

2027 Term Loans

2026 Convertible Notes

At December 31, 2021

(in thousands)

Unamortized Exit Fee, Debt Discount and Debt Issuance Costs

Carrying Value

Financial Liabilities:

2026 Convertible Notes

2022 Convertible Notes

2025 Term Loan

The principal amounts outstanding are subject to variable interest rates, which are based on three-month LIBOR plus fixed percentages through March 31, 2023.

Therefore, the Company believes the carrying amount of these obligations approximates fair value.

The fair value is influenced by interest rates, the Company’s stock price and stock price volatility and is determined by prices observed in market trading.

Since the market for trading of the 2026 Convertible Notes is not considered to be an active market, the estimated fair value is based on Level 2 inputs.

The fair value was based on an income approach using 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 were Level 3 inputs.

The lattice model produced 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 was used to discount straight debt cash flows.

2027 Term Loans

The Company entered into the Loan Agreement with BioPharma Credit, PLC, BPCR Limited Partnership, and Biopharma Credit Investments V (Master) LP, acting by its general partner, BioPharma Credit Investments V GP LLC that provides for a senior secured term loan facility of up to $ 300.0 million to be funded in four committed tranches:

(i) the Tranche A Loan in an aggregate principal amount of $ 100.0 million that was funded on January 5, 2022;

(ii) the Tranche B Loan in an aggregate principal amount of $ 100.0 million that was funded on March 31, 2022;

(iii) the Tranche C Loan in an aggregate principal amount of $ 50.0 million that was not funded;

and (iv) the Tranche D Loan in an aggregate principal amount of $ 50.0 million that was funded on September 14, 2022.

The Company has the right to request an uncommitted additional facility amount of up to $ 100.0 million that is 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 the Company’s 2026 Convertible Notes is greater than $ 50.0 million on October 1, 2025.

The 2027 Term Loans accrue interest from inception through March 31, 2023 at 8.25 % plus three-month LIBOR per annum with a LIBOR floor of 1.0 %;

and, starting April 1, 2023, accrue interest at 8.25 % plus the Adjusted Term SOFR which is the sum of three-month SOFR and 0.26161 % per annum, with a floor on Adjusted Term SOFR of 1.0 %.

The interest rate for the fourth quarter of 2022 was 12.00 %.

is payable quarterly in arrears on March 31, June 30, September 30 and December 31 of each year.

Repayment of outstanding principal of the 2027 Term Loans will be made in five equal quarterly payments of principal commencing March 31, 2026.

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.

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 the Company’s 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;

in March 2022, proceeds of the Tranche B Loan were drawn in connection with the full repayment of all amounts outstanding under the 2022 Convertible Notes, as well as all associated costs and expenses pursuant to which a payoff amount of $ 111.1 million was outstanding.

The Loan Agreement contains certain customary representations and warranties.

In addition, the Loan Agreement includes covenants, such as the requirement to maintain minimum trailing twelve-month net sales in an amount that begins at $ 200.0 million for the quarter ending March 31, 2022, increases to $ 210.0 million for the quarter ended March 31, 2024, increases to $ 230.0 million for the quarter ending June 30, 2024, increases to $ 270.0 million for the quarter ending September 30, 2024, and increases to $ 300.0 million for the quarter ended December 31, 2024 and thereafter.

Further, the Loan Agreement includes certain other affirmative covenants and negative covenants, including, covenants and restrictions that among other things, restrict the Company’s 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, the Company’s failure to make any principal or interest payments when due, the occurrence of certain bankruptcy or insolvency events or its breach of the covenants under the Loan Agreement.

Upon the occurrence of an event of default, the Lenders may, among other things, accelerate the Company’s obligations under the Loan Agreement.

A change of control of the Company triggers a mandatory prepayment of the 2027 Term Loans within ten business days.

As of December 31, 2022, the Company was in full compliance with these covenants and there were no events of default under the 2027 Term Loans.

In connection with the closing of Tranche A, the Company incurred $ 7.8 million in debt discounts and issuance costs of which $ 6.8 million related to all the tranches of the 2027 Term Loans and was thus allocated pro rata between the tranches.

The unamortized debt discount and issuance costs allocated to funded tranches are presented as deductions to the 2027 Term Loan balance and are amortized into interest expense using the effective interest method.

The $ 2.3 million allocated to Tranche B was fully amortized over the commitment period prior to funding and recognized as interest expense in the first quarter of 2022.

Until unfunded tranches are drawn, the associated debt discounts and issuance costs are deferred as assets and amortized into interest expense using the straight-line method over the commitment period of the respective tranches.

At the closing dates of Tranche B on March 31, 2022 and Tranche D on September 14, 2022, the Company incurred an additional $ 1.0 million and $ 0.5 million, respectively, in debt issuance costs.

As of December 31, 2022, the total remaining unamortized debt discount and debt offering costs related to Tranches A, B and D of $ 4.5 million will be amortized using the effective interest rate over the remaining term of 4.0 years.

The following table represents the components of interest expense related to the 2027 Term Loans:

Year Ended December 31,

(in thousands)

Stated coupon interest

Amortization of debt discount and debt issuance costs

Total interest expense

Future payments on the 2027 Term Loans as of December 31, 2022 are as follows:

Year ending December 31, (in thousands)

2023 - interest only

2024 - interest only

2025 - interest only

2026 - principal and interest

2027 - principal and interest

Total minimum payments

Less amount representing interest

2027 Term Loans, gross

Less unamortized debt discount and debt issuance costs, net

Net carrying amount of 2027 Term Loans

1.5 % Convertible Senior Subordinated Notes due 2026

In April 2020, the Company issued and sold $ 230.0 million aggregate principal amount of its 1.5 % Convertible Senior Subordinated notes due 2026 (the “2026 Convertible Notes”) in a private offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act.

In April 2020, the Company issued and sold $ 230.0 million aggregate principal amount of its 2026 Convertible Notes in a private offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act.

The net proceeds from the offering were $ 222.2 million after deducting initial purchasers’ fees and offering expenses.

12 unchanged sentences

As of December 31, 2022, the Company was in full compliance with these covenants, and there were no events of default under the 2026 Convertible Notes.

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.

The proceeds received from the issuance of the convertible debt were recorded as a liability in 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 a combination of the initial purchasers, their respective affiliates and other financial institutions (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 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.

1 unchanged sentence

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.

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

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

Unamortized debt discount and debt issuance costs

Total 2026 Convertible Notes

If the 2026 Convertible Notes were converted on December 31, 2022, the holders of the 2026 Convertible Notes would have received common shares with an aggregate value of $ 94.6 million based on the Company’s closing stock price of $ 7.92 as of December 30, 2022.

3 unchanged sentences

Stated coupon interest

Accretion of debt discount and debt issuance costs

Amortization of debt discount and debt issuance costs

Total interest expense

3 unchanged sentences

Year ending December 31, (in thousands)

2026 and beyond

2023 - interest only

2024 - interest only

2025 - interest only

Total minimum payments

1 unchanged sentence

2026 Convertible Notes, principal amount

Less debt discount and debt issuance costs on 2026 Convertible Notes

Less unamortized debt discount and debt issuance costs

Net carrying amount of 2026 Convertible Notes

8.2 % Convertible Notes due 2022

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, 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.

The 2022 Convertible Notes also bear a premium of 9.0 % of their principal amount, which is payable when the 2022 Convertible Notes mature or are repurchased or redeemed by the Company.

On February 29, 2016, the Company issued and sold $ 100.0 million aggregate principal amount, which excluded 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 constituted general, senior unsubordinated obligations of the Company and were guaranteed by certain subsidiaries of the Company.

The 2022 Convertible Notes bore 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 matured on March 31, 2022 .

The 2022 Convertible Notes also had a premium of 9.0 % of the principal amount which was payable when the 2022 Convertible Notes matured or were repurchased or redeemed by the Company.

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.

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 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 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.

The following table summarizes components of the 2022 Convertible Notes:

(in thousands)

Principal amount of the 2022 Convertible Notes

Unamortized debt discount and debt issuance costs

2022 Convertible Notes

Principal amount of the 2022 Convertible Notes - related parties

Unamortized debt discount and debt issuance costs - related parties

2022 Convertible Notes - related parties

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 .

At any time before the close of business on the business day immediately preceding March 31, 2022, the 2022 Convertible Note noteholders could have converted 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 was 44.7387 shares of common stock per $ 1,000 principal amount of the 2022 Convertible Notes, which represented an initial conversion price of approximately $ 22.35 per share of common stock.

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

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

The 2022 Convertible Notes were 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 exceeded 160 % of the conversion price on 20 or more trading days during the 30 consecutive trading days preceding the date on which the Company sent notice of such redemption to the holders of the 2022 Convertible Notes.

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

In March 2022, the Company fully repaid the 2022 Convertible Notes, and a s a result had no continuing obligations associated with them thereafter .

The payoff amount of $ 111.1 million included the repayment of the entire outstanding principal amount, the 9.0 % premium of the outstanding principal amount and accrued and unpaid interest.

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

2 unchanged sentences

Stated coupon interest

Accretion of debt discount and debt issuance costs

Interest expense

Stated coupon interest - related parties

Accretion of debt discount and debt issuance costs - related parties

Interest expense - related parties

Amortization of debt discount and debt issuance costs

Total interest expense

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 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.

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 .

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

The 2025 Term Loan consisted 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 were guaranteed by the Company’s material domestic United States subsidiaries and were secured by a lien on substantially all of the Company’s tangible and intangible property, including intellectual property.

Starting January 1, 2020, the Borrowings under the 2025 Term Loan bore interest at 6.75 % per annum plus three month LIBOR.

Interest was payable quarterly in arrears.

Under the prospective method to account for future cash payments adopted by the Company, the effective interest rate was not constant, and any change in the expected cash flows was recognized prospectively as an adjustment to the effective yield.

If all or any of the Borrowings were prepaid or required to be prepaid under the 2025 Term Loan, then the Company was required to 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 .

In connection with the 2025 Term Loan, the Company paid a fee to the Lender of approximately $ 1.1 million at closing in the form of an original issue discount.

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 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.

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.

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

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

Upon the prepayment or maturity of the Borrowings, the Company was required to pay an additional exit fee in an amount equal to 4.0 % of the total principal amount of the Borrowings.

In January 2022, pursuant to the Company entering into the 2027 Term Loans, the Company voluntarily prepaid all amounts outstanding under the 2025 Term Loan.

The payoff amount of $ 81.9 million included principal repayment in full, accrued interest, a 5.0 % prepayment premium fee of the Borrowings principal amount, and an exit fee of 4.0 % of the Borrowings principal amount.

The prepayment premium fee and unamortized exit fee, debt discount and debt issuance costs, net from the 2025 Term Loan totaled $ 6.2 million and was recorded in loss on debt extinguishment in the consolidated statement of operations for 2022.

As of December 31, 2022, the Company had no continuing obligations associated with the 2025 Term Loan.

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

2 unchanged sentences

Stated coupon interest

Accretion of debt discount and debt issuance costs

Interest expense

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

Less amount representing interest

2025 Term Loan, gross

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

Net carrying amount of 2025 Term Loan

Amortization of debt discount and debt issuance costs

Total interest expense

Commitments and Contingencies

1 unchanged sentence

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)

As of December 31, 2022, the Company’s non-cancelable purchase commitments under the terms of its agreements are as follows:

Year ending December 31, (in thousands)

Total obligations

7 unchanged sentences

However, the Company may record charges in the future as a result of these indemnification obligations.

The Company would assess the likelihood of any adverse judgments or related claims, as well as ranges of probable losses.

The Company assesses the likelihood of any adverse judgments or related claims, as well as ranges of probable losses.

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.

Legal Proceedings

Legal Proceedings and Other Claims

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.

5 unchanged sentences

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 did not have a material accrual for such matters as of December 31, 2021 and established an accrual of approximately $ 4.7 million as of December 31, 2022 that was included in accrued rebates, fees and reserves in the consolidated balance sheets.

In late April of 2022, the Company received a demand letter from Zinc Health Services, LLC (“Zinc”) asserting that Zinc was entitled to approximately $ 14.0 million from the Company for claims related to certain sales of UDENYCA from October 2020 through December 2021.

The Company is continuing to evaluate the claims in the letter.

No legal proceeding has been filed in connection with the claims in the letter and based on currently available information the final resolution of the matter is uncertain.

The Company intends to defend any legal proceeding that may be filed.

The Company established an accrual as of December 31, 2022 that represented its estimated liability to resolve the matter.

Loss contingencies are inherently unpredictable, the assessment is highly subjective and requires judgments about future events and unfavorable developments or resolutions can occur.

The Company regularly reviews litigation matters to determine whether its accrual is adequate.

The amount of ultimate loss may differ materially from the amount accrued to date .

Other than the matter in connection with the demand letter described in this Note 8, there are no 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.

5 unchanged sentences

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.

In 2019, the Company entered into the Vehicle Lease Agreement, pursuant to which the Company currently leases approximately 100 vehicles.

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

1 unchanged sentence

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

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 the leases that commenced prior to January 1, 2019 (adoption date of ASC 842, Leases ), 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.

2 unchanged sentences

Balance Sheet Classification

Operating lease

Operating leases

Other assets, non-current

Finance lease

Finance leases

Property and equipment, net

12 unchanged sentences

Total finance lease liabilities

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.

Other information related to lease term and discount rate is as follows:

Weighted-Average Remaining Lease Term

Operating leases

Finance leases

Weighted-Average Discount Rate

Operating leases

Finance leases

The components of lease expense were as follows:

Year Ended December 31,

(in thousands)

Finance lease cost

Amortization of right-of-use assets

Interest on lease liabilities

Total finance lease cost

Operating lease cost

Total lease cost

Supplemental cash flow information related to leases was as follows:

Year Ended December 31,

(in thousands)

Cash paid for amounts included in measurement of lease liabilities:

Operating cash flows from operating leases

Operating cash flows from finance leases

Financing cash flows from finance leases

Right-of-use assets obtained in exchange for lease obligations:

Operating leases

Finance leases

As of December 31, 2022, the maturities of the lease liabilities were as follows:

Years ending December 31, (in thousands)

Year ending December 31, (in thousands)

Operating leases

4 unchanged sentences

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 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.

At-The-Market Offering

On November 8, 2022, the Company filed a Registration Statement on Form S-3, which was declared effective on November 17, 2022.

Under the Registration Statement, the Company may offer and sell up to $ 150.0 million in the aggregate of its common stock, preferred stock, debt securities, warrants and units from time to time in one or more offerings.

Also on November 8, 2022, the Company entered into a Sales Agreement with Cowen, pursuant to which the Company may issue and sell from time to time up to $ 150.0 million of its common stock through or to Cowen as the Company’s sales agent or principal in the ATM Offering.

As of December 31, 2022, the Company sold 916,884 shares of common stock at a weighted-average price per share of $ 7.30 for gross proceeds of $ 6.7 million pursuant to the ATM Offering and received net proceeds of $ 6.5 million, net of $ 0.2 million of commissions and fees.

In January 2023, the Company settled an additional 295,200 shares at a weighted-average price per share of $ 7.41 for gross proceeds of $ 2.2 million pursuant to the ATM Offering and received net proceeds of $ 2.1 million, net of $ 0.1 million of commissions and fees.

Stock-Based Compensation and Employee Benefits

12 unchanged sentences

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.

If any shares subject to an award granted under the 2014 Plan or the 2016 Plan expire or become forfeited 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.

3 unchanged sentences

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

Options Outstanding

Contractual Terms

Exercise Price

Balances at December 31, 2020

(in thousands)

Outstanding at December 31, 2021

Granted - at fair value

( 1,316,361 )

Forfeited/Canceled

( 2,812,347 )

Balances at December 31, 2021

Additional information related to the status of options as of December 31, 2021 is summarized as follows:

Contractual Terms

Outstanding at December 31, 2022

Exercisable at December 31, 2022

Aggregate intrinsic value represents the value of the Company’s closing stock price on the last trading day of the year in excess of the exercise price multiplied by the number of options outstanding or exercisable.

Information on options outstanding and exercisable as of December 31, 2022 is summarized as follows:

Options Outstanding

Options vested and exercisable

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.

Options Exercisable

Contractual Terms

Range of Exercise Prices

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.

Additional information on options is summarized as follows:

Year Ended December 31,

(in thousands, except weighted-average grant date fair values)

Total intrinsic value of options exercised

Total grant date fair value of options vested

Weighted-average grant date fair value of options granted

As of December 31, 2022, total unrecognized stock-based compensation expense related to unvested stock options was $ 51.5 million, which is expected to be recognized over a weighted-average period of 2.7 years.

Restricted Stock Units

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 Company grants RSUs primarily to its employees.

RSUs are share awards that entitle the holder to receive freely tradable shares of the Company’s 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 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 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 the Company’s common stock on the grant date.

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

5 unchanged sentences

Balances at December 31, 2022

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 $ 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 $ 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.

The total grant-date fair value of RSUs that vested during 2022, 2021 and 2020 was $ 13.6 million, $ 8.4 million and $ 4.1 million, respectively.

The total grant-date fair value of RSUs granted was $ 22.5 million, $ 27.9 million and $ 21.2 million during 2022, 2021 and 2020, respectively.

The estimated weighted-average grant-date fair value per share of RSUs granted during 2022, 2021 and 2020 was $ 13.34 , $ 16.86 and $ 17.86 , respectively.

As of December 31, 2022, total unrecognized stock-based compensation expense related to unvested RSUs was $ 20.3 million, which is expected to be recognized over a weighted-average period of 1.5 years.

Employee Stock Purchase Plan

4 unchanged sentences

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, 2022, there was $ 0.7 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

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

The following table summarizes the classification of stock-based compensation expense in the Company’s consolidated financial statements related to options and RSUs granted to employees and nonemployees:

Year Ended December 31,

4 unchanged sentences

Stock-based compensation expense

Capitalized stock-based compensation expense into inventory

(1) Stock-based compensation capitalized into inventory is recognized as cost of sales when the related product is sold.

Stock-based compensation expense capitalized into inventory

(1) Stock-based compensation capitalized into inventory is recognized as cost of goods sold when the related product is sold.

Valuation Assumptions of Awards Granted to Employees

12 unchanged sentences

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.

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.

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 had limited historical information to develop expectations about future exercise patterns and post-vesting employment termination behavior.

Since January 1, 2021, the Company has used historical data to calculate the expected term.

Expected Volatility:

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

The expected volatility is calculated based on the Company’s daily stock closing prices for a period equal to the expected life of the award.

Risk-Free Interest Rate:

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.

The risk-free interest rate is based on the United States Treasury constant maturity rate at the time of grant using a term equal to the expected life.

Expected Dividends:

3 unchanged sentences

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.

In 2020, 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 $ 2.1 million, $ 1.7 million and $ 0.8 million in 2022, 2021 and 2020, respectively.

6 unchanged sentences

Provision for income taxes

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.

There was no income tax provision in 2022 and 2021 due to the Company’s history of losses and valuation of allowances against the deferred tax assets.

The income tax provision in 2020 of $ 3.5 million is primarily related 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:

17 unchanged sentences

Other accruals

Capitalized research and development

Gross deferred tax assets

7 unchanged sentences

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, 2022 and 2021.

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.

The valuation allowance increased by $ 64.4 million and $ 72.4 million during the years ended December 31, 2022 and 2021, respectively, and decreased by $ 22.7 million during the year ended December 31, 2020.

As of December 31, 2022, the Company had operating loss carryforwards for federal income of $ 591.2 million, which will start to expire in the year 2036 , and various states net operating loss carryforwards of $ 113.2 million, which have various expiration dates beginning in 2031 .

5 unchanged sentences

Therefore, the annual limitation may result in the expiration of certain net operating losses and tax credit carryforwards before their utilization.

The Company files United States, California and other state income tax returns with varying statutes of limitations.

The Company files income tax returns in the United States federal jurisdiction, various United States state jurisdictions, and a foreign jurisdiction 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.

9 unchanged sentences

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,

Year Ended December 31,

(in thousands, except share and per share data)

15 unchanged sentences

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,

4 unchanged sentences

Related Party Transactions

Convertible Notes — Related Parties

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

4 unchanged sentences

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.

Jonathan 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.

There have been no subsequent material related party expenses.

Total liabilities recognized in the consolidated balance sheets with respect to these services were immaterial as of December 31, 2022 and 2021.

Subsequent Events

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.

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:

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.

The parties to the Term Sheet expect to execute the Definitive Agreements contemplated by the Term Sheet and complete the transaction in the first half of 2023.

Under the Term Sheet, the Company will make a total upfront payment of approximately € 30 million, comprised of cash and the Company’s common stock, thirty days after the execution of the Definitive Agreements.

The Company has also agreed to make other regulatory and launch milestone payments and to make royalty payments based on approximately equal sharing of profits from the sale of FYB203 in consideration for the commercialization rights to FYB203 in the United States.

The material terms of the transaction with Klinge Biopharma will be set forth in the Definitive Agreements, which will be included in a subsequent filing by the Company when such Definitive Agreements are executed.

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