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Item 7. Management’s Discussion and Analysis

2024-03-15 compared with 2023-03-06 · 259 added, 219 removed, 213 unchanged (69% of the section changed)

4 unchanged sentences

For a detailed discussion of these risks and uncertainties, see the “Risk Factors” section in Item 1A of this Form 10-K.

We caution the reader not to place undue

reliance on these forward-looking statements, which reflect management’s analysis only as of the date of this Form 10-K.

We caution the reader not to place undue reliance on these forward-looking statements, which reflect management’s analysis only as of the date of this Form 10-K.

We undertake no obligation to update forward-looking statements, which reflect events or circumstances occurring after the date of this Form 10-K.

This MD&A section generally discusses 2023 and 2022 items and year-to-year comparisons between 2023 and 2022.

Discussions of 2020 items and year-to-year comparisons between 2021 and 2020 that are not included in this Form 10-K can be found in “Management's Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the SEC on February 23, 2022.

We are a commercial-stage biopharmaceutical company focused on the research, development and commercialization of innovative cancer treatments and the commercialization of our portfolio of FDA-approved biosimilars.

Our strategy is to build a leading immuno-oncology franchise funded with cash generated through net sales of our diversified portfolio of FDA-approved therapeutics.

Our commercial portfolio includes three FDA-approved biosimilar products.

Discussions of 2021 items and year-to-year comparisons between 2022 and 2021 that are not included in this Form 10-K can be found in “Management's Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on March 6, 2023.

Our strategy is to build a leading immuno-oncology business funded with cash generated from our diversified portfolio of FDA-approved therapeutics.

As of March 15, 2024, our commercial portfolio includes two FDA-approved biosimilar products.

Our first product, UDENYCA, a biosimilar to Neulasta, a long-acting G-CSF, was launched commercially in the United States in January 2019.

Our second product, CIMERLI, was approved by the FDA in August 2022 as a biosimilar product interchangeable with Lucentis for the treatment of neovascular (wet) age-related macular degeneration, macular edema following retinal vein occlusion, diabetic macular edema, diabetic retinopathy, and myopic choroidal neovascularization.

The FDA also granted CIMERLI 12 months of first interchangeable exclusivity .

We launched CIMERLI commercially in the United States on October 3, 2022.

In December 2021, the FDA-approved YUSIMRY, which we plan to launch in the United States on or after July 1, 2023, pursuant to the terms of an agreement with Humira’s manufacturer, AbbVie.

In addition to our three FDA-approved biosimilar products, we also have an original BLA under review by the FDA for toripalimab.

Toripalimab is being developed for its ability to block PD-1 interactions with its ligands, PD-L1 and PD-L2 by binding to the FG loop on the PD-1, and for enhanced PD-1 receptor internalization (endocytosis function).

We believe blocking PD-1 interactions with PD-L1 and PD-L2 have the potential to promote the immune system’s ability to attack and kill tumor cells.

The original BLA for toripalimab was for the use of toripalimab in combination with gemcitabine and cisplatin for first-line treatment of adults with metastatic or recurrent locally advanced NPC, and for use as a monotherapy in the second- or later-line treatment of patients with recurrent unresectable or metastatic NPC that have progressed on or after a platinum-containing chemotherapy .

On April 29, 2022, we received a CRL from the FDA for the original BLA for toripalimab requesting certain manufacturing process changes that we and Junshi Biosciences believe are readily addressable.

On July 6, 2022, we announced that the FDA accepted the resubmission of the original BLA for toripalimab and announced that the FDA set a PDUFA action date for December 23, 2022.

On December 24, 2022, we announced that we did not receive an action letter from the FDA by the PDUFA action date.

The FDA previously communicated that an on-site inspection of Junshi Biosciences’ manufacturing facility for toripalimab is 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 we and Junshi Biosciences are engaged in ongoing discussions with the FDA about the pre-approval inspection plans.

Since the decision in February 2022 by the FDA to not approve the BLA for sintilimab, the FDA’s current stance is to reject most product candidates that do not have data that is reflective of U.S.

medical practice and/or the U.S.

patient population and in particular with clinical trials conducted in a single country such as China.

However, we believe that our original BLA for toripalimab for NPC is a distinct case because there are no approved immunotherapies for NPC in the United States and the FDA has stated that NPC warrants regulatory flexibility with respect to the sufficiency of single country clinical data.

We plan to launch toripalimab in the United States in the third quarter of 2023, if approved by July 1, 2023.

In January 2023, we and Junshi Biosciences acted to reduce the scope of the ongoing development plan for toripalimab in the United States that is used as part of the calculation for reimbursable research and development expense under the Collaboration Agreement.

In May 2022, we discontinued development of CHS-305, an Avastin biosimilar candidate.

We have built an experienced and robust oncology market access, key account management and medical affairs capability in the United States, which have supported the successful commercialization of UDENYCA and CIMERLI.

We expect to leverage these capabilities as we build and launch our immuno-oncology franchise, continue to grow our ophthalmology product portfolio and launch the commercialization of other biosimilar products.

The FDA approved the PAS for an AI presentation of UDENYCA on March 3, 2023, and on May 22, 2023 we announced the availability of UDENYCA AI for commercial sale.

On December 26, 2023 we announced that the FDA approved the PAS for our third pegfilgrastim presentation, UDENYCA ONBODY.

UDENYCA ONBODY became commercially available in the first quarter of 2024.

Our second product, YUSIMRY (adalimumab-aqvh), a biosimilar to Humira (adalimumab), was launched in the United States in July 2023.

Another product, CIMERLI (ranibizumab-eqrn), was approved by the FDA in August 2022 as a biosimilar product interchangeable with Lucentis (ranibizumab injection) for the treatment of neovascular (wet) age-related macular degeneration, macular edema following retinal vein occlusion, diabetic macular edema, diabetic retinopathy, and myopic choroidal neovascularization.

We launched CIMERLI commercially in the United States in October 2022.

On January 19, 2024, we entered into the Purchase Agreement by and between us and Sandoz.

Pursuant to the terms and subject to the conditions set forth in the Purchase Agreement, on March 1, 2024, we completed the divestiture of our CIMERLI ophthalmology franchise through the sale of our subsidiary, Coherus Ophthalmology LLC, to Sandoz for upfront, all-cash consideration of $170.0 million plus an additional $17.8 million for CIMERLI product inventory and prepaid manufacturing assets.

Such consideration is subject to certain adjustments that will be finalized following the closing pursuant to the Purchase Agreement.

O ur commercial portfolio includes LOQTORZI, a novel PD-1 inhibitor .

On October 27, 2023, we announced that LOQTORZI was approved by the FDA in combination with cisplatin and gemcitabine for the first-line treatment of adults with metastatic or recurrent locally advanced NPC, and as monotherapy for the treatment of adults with recurrent, unresectable, or metastatic NPC with disease progression on or after platinum-containing chemotherapy.

LOQTORZI is an anti-PD-1 antibody that we developed in collaboration with Junshi Biosciences.

We announced the launch of LOQTORZI in the U.S.

on January 2, 2024.

We also have a pipeline of earlier stage clinical and preclinical immuno-oncology programs.

On September 8, 2023, we acquired Surface and took ownership of its assets, including its portfolio of product candidates.

The lead clinical stage product candidate from the Surface Acquisition is casdozokitug (CHS-388, formerly SRF388), an investigational antibody targeting IL-27, an immune regulatory cytokine, or protein that is overexpressed in certain cancers, including hepatocellular, lung and renal cell carcinoma.

IL-27 is a cytokine

secreted by macrophages and antigen presenting cells that plays an important physiologic role in suppressing the immune system, as evidenced by its ability to resolve tissue inflammation.

In addition, one of the subunits of IL-27, EBI3, is highly expressed during pregnancy and its expression is correlated with maternal-fetal tolerance.

Due to its immunosuppressive nature, there is a rationale for inhibiting IL-27 to treat cancer, as this approach will influence the activity of multiple types of immune cells that are necessary to recognize and attack a tumor.

Casdozokitug received orphan drug designation and fast track designation from the FDA for the treatment of HCC in November 2020.

Casdozokitug is currently in two on-going clinical studies, a Phase 1/2 study in patients with advanced solid tumors (clinicaltrials.gov identifier# NCT04374877) and a Phase 2 study in HCC (clinicaltrials.gov identifier# NCT05359861).

Our second clinical-stage product candidate from the Surface Acquisition, CHS-114 (formerly SRF114), is an investigational IgG1 antibody targeting CCR8, a chemokine receptor highly expressed on Treg cells in the TME.

CHS-114 is designed to cause depletion of intra-tumoral Treg cells, important regulators of immune suppression and tolerance, through ADCC, or ADCP, or both, that has shown anti-tumor activity in preclinical models.

We are enrolling patients with advanced solid tumors in North America in a clinical trial evaluating safety and pharmacokinetics of CHS-114 (clinicaltrials.gov identifier# NCT05635643).

We are also pursuing an early-stage development candidate that is in investigational new drug application-enabling studies, CHS-1000, an antibody targeting human ILT4, designed to improve anti-PD-1 clinical benefit by transforming an unfavorable TME to a more favorable TME.

In addition to our internally developed portfolio of product candidates that we obtained in the Surface Acquisition, we have two product candidates, NZV930 and GSK4381562, which are exclusively licensed to Novartis Institutes and GSK, respectively.

We will pay 70% of all milestone- and royalty-based payments that we or our affiliates actually receive from the product candidates licensed to Novartis Institutes and GSK during the ten-year period following the entry into the CVR Agreement to the holders of the CVRs.

We expect to leverage these capabilities as we build and launch our immuno-oncology franchise.

We primarily operate in the United States and partner with companies that operate in other countries.

We have no material direct exposure to Russia and Ukraine;

however, we are monitoring any broader economic impact from Russia’s invasion of Ukraine and the ongoing war between the two nations, including heightened risk of cyberattacks, increased prices of fuel and other commodities, and potential impacts to our partners’ supply chains.

Business Update

On January 9, 2023, we announced that we 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.

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

We 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 we will include in a subsequent filing when such Definitive Agreements are executed.

Surface Acquisition

On September 8, 2023 (the “Acquisition Date”), in accordance with the Agreement and Plan of Merger dated June 15, 2023 (the “Merger Agreement”) by and among us, Crimson Merger Sub I, Inc., a direct, wholly owned subsidiary of the Company (“Merger Sub I”), Crimson Merger Sub II, LLC, a direct, wholly owned subsidiary of the Company (“Merger Sub II,” and together with Merger Sub I, the “Merger Subs”), and Surface, we completed the acquisition of Surface, a clinical-stage I-O company focused on using its specialized knowledge of the biological pathways critical to the immunosuppressive tumor microenvironment for the development of next-generation cancer therapies.

The Surface Acquisition expanded our I-O pipeline with the following:

casdozokitug (CHS-388, formerly SRF388), an investigational, novel IL-27-targeted antibody currently being evaluated in a Phase 2 clinical trial in HCC, and CHS-114 (formerly SRF114), an investigational, CCR8-targeted antibody currently in a Phase 1/2 study as a monotherapy in patients with advanced solid tumors.

On September 8, 2023, we issued to the holders of all outstanding Surface common stock (other than treasury shares, any shares of Surface common stock held directly by us or the Merger Subs immediately prior to the Acquisition Date and shares of Surface common stock issued and outstanding immediately prior to the Acquisition Date and held by any holder properly demanding appraisal for such shares in accordance with Section 262 of the Delaware General Corporation Law) 0.1960 shares of our common stock in exchange for each share of outstanding Surface common stock and certain outstanding Surface employee equity awards.

The exchange ratio was calculated pursuant to the terms of the Merger Agreement and was based on a $5.2831 per share price of our common stock and a nominal total amount of cash in lieu of fractional shares.

Surface shareholders also received one CVR for each share of Surface common stock and employee equity award converted.

Each CVR entitles the holder to receive quarterly contingent payments in the form of cash, stock or a combination of cash and stock at our discretion during the ten-year period following September 8, 2023, for the sum of the following, less any permitted deductions (in accordance with the CVR Agreement):

● 70% of all milestone- and royalty-based payments actually received by us or our affiliates under the GSK Agreement related to the existing program (GSK4381562);

● 70% of all milestone- and royalty-based payments actually received by us or our affiliates under the Novartis Agreement related to the existing program (NZV930);

● 25% of any upfront payment actually received by us or our affiliates pursuant to potential ex-U.S.

licensing agreements for CHS-114;

● 50% of any upfront payment actually received by us or our affiliates pursuant to potential ex-U.S.

licensing agreements for casdozokitug.

We expensed $5.1 million of acquisition-related costs during 2023.

CIMERLI Divestment Transaction

On January 19, 2024, we entered into the Purchase Agreement by and between us and Sandoz.

Such consideration is subject to certain adjustments that will be finalized following the closing pursuant to the Purchase Agreement.

Other Updates

LOQTORZI is an anti-PD-1 antibody that we developed in collaboration with Junshi Biosciences.

We announced the launch of LOQTORZI in the U.S.

on January 2, 2024.

During the year ended December 31, 2023, we donated approximately 36,000 units of UDENYCA in the PFS presentation to the nonprofit organization Direct Relief to benefit cancer patients in low- and middle-income countries requiring increased access for vulnerable patients.

The carrying value of this inventory was written down to zero in the third quarter of 2022, thus there was no charge associated with the donation.

On October 9, 2023, in accordance with the terms of an Optional Stock Purchase Agreement entered with a CMO on September 28, 2023 (the “Optional Stock Purchase Agreement”), we issued 2,225,513 shares of our common stock to the CMO for a price of $3.675 per share, representing an aggregate value of $8.2 million.

The Optional Stock Purchase Agreement gave us the option, in our sole discretion to elect to pay for certain manufacturing services provided by the CMO by either paying cash or issuing shares of our common stock in a private placement offering (the “Stock Service Fee Payment”).

On October 4, 2023, we notified the CMO of our election of the Stock Service Fee Payment.

The price per share of common stock was equal to the volume-weighted average closing trading price per share of common stock on the Nasdaq Global Market over the ten-trading day period ending on and including October 6, 2023.

On November 8, 2022, we filed a registration statement on Form S-3, which was declared effective on November 17, 2022 (the “Registration Statement”) .

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

Also on November 8, 2022, we entered into a sales agreement (“Sales Agreement”) with Cowen and Company, LLC (“Cowen”) pursuant to which we may issue and sell from time to time up to $150.0 million of our common stock through or to Cowen as our sales agent or principal in an at-the-market offering (“ATM Offering”).

Any shares of our common stock offered and sold in the ATM Offering are to be issued pursuant to the Registration Statement and the 424(b) prospectus supplement relating to the ATM Offering dated November 17, 2022.

As of December 31, 2022, we 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, we 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.

In January 2022, we entered into the Loan Agreement with the Collateral Agent and the Lenders that provides for a senior secured term loan facility of up to $300.0 million to be funded in four committed tranches:

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

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

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

and (iv) a Tranche D Loan in an aggregate principal amount of $50.0 million (the “Tranche D Loan” and, together with the Tranche A Loan, the Tranche B Loan, and the Tranche C Loan, the “2027 Term Loans”) that was funded on September 14, 2022.

We have 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 our 2026 Convertible Notes is greater than $50.0 million on October 1, 2025.

The outstanding tranches of 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 sum (the “Adjusted Term SOFR”) 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%.

Interest 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.

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

Also on November 8, 2022, we entered into the Sales Agreement with TD Cowen pursuant to which we may issue and sell from time to time up to $150.0 million of our common stock in the ATM Offering .

On May 15, 2023, pursuant to an Amendment No.

1 to Sales Agreement, we reduced the number of shares that could be issued and sold pursuant to the ATM Offering by $86.25 million, lowering the aggregate offering price under the Sales Agreement from $150.0 million to $63.75 million.

On September 11, 2023, pursuant to Amendment No.

2 to Sales Agreement, we increased the number of shares that could be issued and sold pursuant to its ATM Offering with TD Cowen by $28.75 million, increasing the aggregate offering price under the Sales Agreement from $63.75 million to $92.5 million.

For the ATM Offering program to date as of December 31, 2023, we sold 4,476,645 shares of common stock at a weighted-average price per share of $5.81 for gross proceeds of $26.0 million pursuant to the ATM Offering and received net proceeds of $25.4 million, net of $0.6 million of commissions and fees.

On January 10, 2024, we announced that we had delivered a notice of termination for the TIGIT Program (as defined in the Collaboration Agreement) to Junshi Biosciences pursuant to the Collaboration Agreement.

We had previously notified Junshi Biosciences on January 9, 2022 of our election to exercise the license option for the TIGIT program CHS-006 described in the Collaboration Agreement (the “TIGIT Program”).

After our acquisition of Surface Oncology, Inc.

in September 2023, we disclosed that we would conduct a portfolio prioritization process to allocate resources towards the most promising and competitively positioned product candidates in our pipeline.

We believed it would be in our best interests to terminate future work with Junshi Biosciences on the TIGIT Program.

We plan to continue to wind down work with Junshi Biosciences on the TIGIT Program pursuant to the termination.

Despite the termination of the work with Junshi BioSciences on the TIGIT Program, we will continue to support patients in its current studies involving CHS-006 (clinicaltrials.gov identifier# NCT05061628 and clinicaltrials.gov identifier# NCT05757492).

The Collaboration Agreement remains effective and active for all other purposes as we continue to work together with Junshi Biosciences on the development of LOQTORZI.

On February 5, 2024, we entered into the Consent and Amendment with the Collateral Agent and the Lenders, pursuant to which the Lenders and the Collateral Agent provided certain consents, and released certain assets and subsidiaries of the Company from their obligations under the Loan Agreement and the other loan documents in connection therewith, and the parties thereto agreed to amend the previously disclosed Loan Agreement.

Pursuant to and subject to terms and conditions in the Consent and Amendment, among other things:

(1) the Lenders and the Collateral Agent provided consent to consummation of the transactions contemplated by the Purchase Agreement, and released certain subsidiary of us from our obligation and certain assets subject to the transactions contemplated thereby, (2) the Lenders and the Collateral Agent required us to make a partial prepayment of the principal of the loans outstanding under the Loan Agreement in the amount of $175.0 million upon consummation of the transactions contemplated by the Purchase Agreement, subject to certain conditions and (3) the parties thereto agreed to adjust the minimum net sales covenant level under the Loan Agreement.

Other terms of the Loan Agreement, as amended by the Consent and Amendment, remain generally identical to those under the Loan Agreement.

Upon the closing of the Sale Transaction we became liable to repay $175.0 million of the existing principal balance of $250.0 million of the loans outstanding under the Loan Agreement on April 1, 2024 and we plan to repay $175.0 million and the prepayment premium and makewhole amount of $6.8 million to the Lenders on or before April 1, 2024 pursuant to the Consent and Amendment.

Products and Product Candidates

Our portfolio includes the following products and product candidates:

● UDENYCA is a biosimilar to Neulasta, a long-acting G-CSF.

We launched UDENYCA commercially in the United States in January 2019.

In 2022, 2021 and 2020, we recorded UDENYCA net product sales of $203.8 million, $326.5 million and $475.8 million, respectively.

In addition to the currently marketed PFS presentation and UDENYCA AI, which had its prior approval supplement approved on March 3, 2023, we are also developing additional presentations of UDENYCA, such as a proprietary OBI and an AI .

In October 2021, we announced positive results from a randomized, open-label, crossover study assessing the PK and pharmacodynamic bioequivalence of UDENYCA administered via OBI compared to our currently marketed UDENYCA PFS.

We are planning a 2023 launch of UDENYCA OBI, if approved by the FDA.

We submitted a prior approval supplement to

the FDA for UDENYCA AI in 2022.

The FDA approved the prior approval supplement for UDENYCA AI on March 3, 2023.

Commercial availability of UDENYCA AI is planned for the second quarter of 2023.

● Toripalimab is being developed for its ability to block PD-1 interactions with its ligands, PD-L1 and PD-L2 by binding to the FG loop on the PD-1, and for enhanced PD-1 receptor internalization (endocytosis function).

● UDENYCA, a biosimilar to Neulasta, a long-acting G-CSF, was launched commercially in the United States in January 2019.

The FDA approved the PAS for an AI presentation of UDENYCA on March 3, 2023, and on May 22, 2023 we announced the availability of UDENYCA AI for commercial sale.

On December 26, 2023 we announced that the FDA approved the PAS for our third pegfilgrastim presentation, UDENYCA ONBODY.

UDENYCA ONBODY became commercially available in the first quarter of 2024.

● LOQTORZI was developed for its ability to block PD-1 interactions with its ligands, PD-L1 and PD-L2, by binding to the FG loop on the PD-1 receptor.

We believe blocking PD-1 interactions with PD-L1 and PD-L2 can help to promote the immune system’s ability to attack and kill tumor cells.

More than thirty company-sponsored toripalimab clinical studies covering more than fifteen indications have been conducted by our partner Junshi Biosciences, including in China, the United States, Southeast Asia, and European countries.

Together with Junshi Biosciences, in the third quarter of 2021 we completed the submission of the original BLA for toripalimab to the FDA seeking approval for the use of toripalimab in combination with gemcitabine and cisplatin for first-line treatment of adults with metastatic or recurrent locally advanced NPC , and for use as a monotherapy in the second- or later-line treatment of patients with recurrent unresectable or metastatic NPC that have progressed on or after a platinum-containing chemotherapy.

The FDA issued a CRL for the original BLA for toripalimab requesting certain manufacturing process changes.

On July 6, 2022, we announced that the FDA accepted the resubmission of the original BLA for toripalimab and announced that the FDA set a PDUFA action date for December 23, 2022.

On December 24, 2022, we announced that we did not receive an action letter from the FDA by the PDUFA action date.

The FDA previously communicated that an on-site inspection of Junshi Biosciences’ manufacturing facility for toripalimab is 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 we and Junshi Biosciences are engaged in ongoing discussions with the FDA about the pre-approval inspection plans.

We plan to launch toripalimab in the United States in the third quarter of 2023, if approved by July 1, 2023.

We believe there is potentially a high unmet need in NPC based on the current FDA-approved treatment alternatives and the lack of any approved immunotherapies.

The FDA has granted Breakthrough Therapy designation to toripalimab for the treatment of patients with recurrent or metastatic NPC with disease progression on or after platinum-containing chemotherapy and for toripalimab in combination with chemotherapy (gemcitabine and cisplatin) for the first-line treatment of recurrent or metastatic NPC.

● CHS-006 is an investigational recombinant humanized IgG4κ monoclonal antibody designed to act specifically against human TIGIT that we are developing in collaboration with Junshi Biosciences.

A number of third-party preclinical and clinical studies have demonstrated that activation of the TIGIT pathway could be a crucial underlying mechanism for tumor immune evasion and resistance to PD-1 blockade therapy in some tumor types.

Combination of TIGIT and PD-1/PD-L1 antibodies showed a synergistic potential to enhance antitumor response, to overcome anti-PD-1 resistance and possibly broaden the cancer patient population that can benefit from immunotherapy.

A dose escalation, dose expansion clinical trial (clinicaltrials.gov identifier# NCT05061628) evaluating the safety, tolerability and pharmacokinetic properties of CHS-006 as monotherapy and in combination with PD-1 inhibitor toripalimab in patients with advanced solid tumors is ongoing in China.

The FDA has allowed clinical trials for CHS-006 to proceed in the United States under an IND, and we plan to advance toripalimab in combination with CHS-006 in a clinical trial in North America in the second quarter of 2023.

● We are pursuing an early-stage development candidate designed to improve anti-PD-1 clinical benefit by transforming an unfavorable TME to a more favorable TME.

We expect to submit an IND to the FDA in 2023 for CHS-1000, an antibody targeting ILT4.

● YUSIMRY, a biosimilar of Humira (adalimumab), a monoclonal antibody that can bind to TNF.

LOQTORZI is an anti-PD-1 antibody that we developed in collaboration with Junshi Biosciences.

We announced the launch of LOQTORZI in the U.S.

on January 2, 2024.

● Casdozokitug ( CHS-388, formerly SRF388), is an investigational recombinant human IgG1 monoclonal antibody targeting IL-27, an immune regulatory cytokine, or protein that is overexpressed in certain cancers, including hepatocellular, lung and renal cell carcinoma.

IL-27 is a cytokine secreted by macrophages and antigen presenting cells that plays an important physiologic role in suppressing the immune system, as evidenced by its ability to resolve tissue inflammation.

In addition, IL-27 is highly expressed during pregnancy and its expression is correlated with maternal-fetal tolerance.

Due to its immune regulatory nature, there is a rationale for inhibiting IL-27 to treat cancer, as this approach will influence the activity of multiple types of immune cells that are necessary to recognize and attack a tumor.

Casdozokitug received orphan drug designation and fast track designation from the FDA for the treatment of HCC in November 2020.

Casdozokitug is currently in two on-going clinical studies a Phase 1/2 study in advanced solid tumors (clinicaltrials.gov identifier# NCT04374877) and a Phase 2 study in HCC (clinicaltrials.gov identifier# NCT05359861).

● CHS-114 (formerly SRF114), is an investigational highly specific human afucosylated IgG1 monoclonal antibody selectively targeting CCR8, a chemokine receptor highly expressed on Treg cells in the TME.

CHS-114 is designed as a cytolytic antibody

to cause depletion of intra-tumoral Treg cells, important regulators of immune suppression and tolerance, through ADCC, and/or ADCP.

CHS-114 has shown anti-tumor activity as monotherapy or in combination with anti-PD-1 antibodies in preclinical models.

We are enrolling patients with advanced solid tumors in North America in a clinical trial evaluating safety and pharmacokinetics of CHS-114 (clinicaltrials.gov identifier# NCT05635643).

● We are pursuing an early-stage development candidate, CHS-1000, an antibody targeting human ILT4, designed to improve anti-PD-1 clinical benefit by transforming an unfavorable TME to a more favorable TME.

We plan to submit an IND to the FDA in the second quarter of 2024 for CHS-1000.

● In addition to our internally developed portfolio of product candidates that we obtained in the Surface Acquisition, we also own NZV930 and GSK4381562, which are exclusively licensed to Novartis Institutes and GSK, respectively.

NZV930 is an antibody designed to inhibit CD73, which is a critical enzyme involved in the production of extracellular adenosine, a key metabolite with strong immunosuppressive properties within the TME.

NZV930 aims to reduce the production of immunosuppressive adenosine within the TME.

GSK4381562 is an antibody targeting CD112R, also known as PVRIG, an inhibitory protein expressed on NK and T cells.

GSK4381562 blocks the interaction of CD112R with CD112, its binding partner that is expressed on tumor cells.

GSK4381562 can promote the activation of both NK and T cells, with potential to elicit a strong anti-tumor response and promote immunological memory.

● YUSIMRY, a biosimilar of Humira (adalimumab), is a monoclonal antibody that can bind to TNF.

YUSIMRY provides certain therapeutic benefits for treatment of patients with certain inflammatory diseases characterized by increased production of TNF in the body, including rheumatoid arthritis, juvenile idiopathic arthritis, psoriatic arthritis, ankylosing spondylitis, Crohn’s disease, psoriasis and ulcerative colitis.

In December 2021, the FDA approved YUSIMRY, which we plan to launch in the United States on or after July 1, 2023, pursuant to the terms of an agreement with Humira’s manufacturer, AbbVie Inc.

Based on our current review, we believe the adalimumab market will be very competitive when we are able to launch on July 1, 2023.

Ophthalmology

In December 2021, the FDA approved YUSIMRY, which we launched in the United States in July 2023.

The list price of YUSIMRY at launch represented an approximately 85% discount to the list price of Humira.

YUSIMRY is now available for sale nationwide through select retail, mail order, and specialty pharmacy channels.

Ophthalmology franchise – sold to Sandoz pursuant to the Sale Transaction

● CIMERLI is a Lucentis biosimilar.

In November 2019, we entered into a license agreement with Bioeq for the commercialization of CIMERLI in certain dosage forms in both a vial and PFS presentation.

In November 2019, we entered into a license agreement with Bioeq for the commercialization of CIMERLI in certain dosage forms in both a vial and pre-filled syringe (“PFS”) presentation.

Under the Bioeq Agreement, Bioeq granted to us an exclusive royalty-bearing license to commercialize CIMERLI in the field of ophthalmology (and any other approved labelled indication) in the United States.

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On October 3, 2022, we launched CIMERLI commercially in the United States in both 0.3 mg and 0.5 mg dosage forms.

Discontinued Product Candidates

In January 2020, we 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.

On May 3, 2022, we provided notice of termination of the Innovent Agreement to Innovent to discontinue development of CHS-305, a bevacizumab (Avastin) biosimilar candidate, because regulatory approval of the licensed product could not be reasonably obtained within the agreed time period .

In October 2022, we discontinued development of our preclinical immuno-oncology program, CHS-3318, an antibody targeting CCR8.

On January 19, 2024, we entered into the Purchase Agreement by and between us and Sandoz.

Such consideration is subject to certain adjustments that will be finalized following the closing pursuant to the Purchase Agreement.

License Agreement with Junshi Biosciences

On February 1, 2021, we 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, we 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.

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

We 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.

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

Under the terms of the Collaboration Agreement, we paid $150.0 million upfront for exclusive rights to LOQTORZI 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.

We will have the right to conduct all commercial activities of LOQTORZI in the United States and Canada.

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

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

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

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

Additionally, for each exercised option, we 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 attainment of certain sales thresholds.

Under the Collaboration Agreement, we retain 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, we are responsible for certain associated regulatory and technology transfer costs for toripalimab and other licensed compounds and will reimburse Junshi Biosciences for such costs.

Subsequent joint development consistent with the Collaboration Agreement commenced.

On January 10, 2024, we announced that we had delivered a notice of termination of the TIGIT Program (as defined in the Collaboration Agreement) to Junshi Biosciences pursuant to the Collaboration Agreement.

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

Additionally, we are responsible for certain associated regulatory and technology transfer costs for LOQTORZI and other licensed compounds and will reimburse Junshi Biosciences for such costs.

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

The $35.0 million payment for the option to license CHS-006 was reflected in our first quarter of 2022 financial statements.

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

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

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

As of December 31, 2022, we did not have any outstanding milestone or royalty payment obligations to Junshi Biosciences.

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, we entered into a Stock Purchase Agreement with Junshi Biosciences agreeing, subject to customary conditions, to acquire certain equity interests in us.

Pursuant to the Stock Purchase Agreement, on April 16, 2021,

we issued 2,491,988 unregistered shares of our common stock to Junshi Biosciences, at a price per share of $20.06, for an aggregate amount of approximately $50.0 million in 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.

COVID-19 Update

As a result of the COVID-19 pandemic, we have experienced and may continue to experience disruptions that could severely impact our business, clinical trials and preclinical studies.

See “Risk Factors – Risks Related to COVID-19.” These and other factors arising from the COVID-19 pandemic could result in us not being able to maintain UDENYCA’s market position or increase its penetration against all Neulasta’s dosage forms and could result in our inability to meet development or regulatory milestones for our product candidates, each of which would harm our business, financial condition, results of operations and growth.

Although cases and deaths from the COVID-19 pandemic have generally declined in the United States in the past year, outbreaks of COVID-19 in China recently resulted in a protracted lockdown covering all of Shanghai where our partner Junshi Biosciences has its headquarters.

The lingering impacts of recent outbreaks of COVID-19 in China may impact the timeline to manufacture toripalimab and the FDA has communicated to us the COVID-19 pandemic will impact the FDA’s ability to conduct foreign inspections of our partner’s manufacturing facilities in China.

Until further outbreaks of COVID-19 are controlled, we expect it may continue to adversely impact our sales growth.

In addition, the spread of more contagious and/or deadly variants could cause future outbreaks of COVID-19 and could result in the reinstatement of restrictive orders that could disrupt our business.

While the long-term economic impact and future outbreaks of COVID-19 may be difficult to predict, the pandemic has resulted in, and future outbreaks may continue to cause, significant disruption of global financial markets, which could reduce our ability to access capital and could negatively affect our liquidity and the liquidity and stability of markets for our common stock and our convertible notes.

In addition, a recession, market correction or depression resulting from the world’s ongoing recovery from the COVID-19 pandemic could materially affect our business and the value of our notes and our common stock.

As of December 31, 2023, we have accrued a $25.0 million milestone payment to Junshi Biosciences, of which we expect to pay $12.5 million in the second quarter of 2024 and $12.5 million in the first quarter of 2025, as well as an immaterial royalty obligation.

The additional milestone payments 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.

Financial Operations Overview

Our first FDA-approved product, UDENYCA, was approved in November 2018, and we initiated United States sales of UDENYCA on January 3, 2019.

In December 2021, the FDA-approved YUSIMRY, which we plan 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, which we launched on October 3, 2022.

In December 2021, the FDA-approved YUSIMRY, which we launched in the United States in July 2023.

On August 2, 2022, the FDA approved CIMERLI, which we launched in the United States in October 2022.

On October 27, 2023, we announced that LOQTORZI was approved by the FDA, and we subsequently launched LOQTORZI in the United States in January 2024.

Total net revenues were $257.2 million and $211.0 million in 2023 and 2022, respectively.

On January 19, 2024, we entered into the Purchase Agreement by and between us and Sandoz.

Pursuant to the terms and subject to the conditions set forth in the Purchase Agreement, on March 1, 2024, we completed the Sale Transaction of our CIMERLI ophthalmology franchise through the sale of our subsidiary, Coherus Ophthalmology LLC, to Sandoz for upfront, all-cash consideration of $170.0 million plus an additional $17.8 million for CIMERLI product inventory and prepaid manufacturing assets.

Such consideration is subject to certain adjustments that will be finalized following the closing pursuant to the Purchase Agreement.

Cost of Goods Sold

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

During the third quarter of 2022, we recorded an inventory write-down of $26.0 million for inventory at risk of expiration, and in the year ended December 31, 2021 we recorded a net $5.1 million inventory write-off for inventory that did not meet acceptance criteria.

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.

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

In the fourth quarter of 2023, we recorded a $47.0 million charge for the write-down of slow moving YUSIMRY inventory and the related partial recognition of certain firm purchase commitments in cost of goods sold in the consolidated statements of operations.

On May 2, 2019, we settled a trade secret action brought by Amgen.

As a result, cost of goods sold reflects a mid-single digit royalty on net product revenue, which began July 1, 2019 and continues for five years from then.

Additionally, w e 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, and pursuant to the Genentech Agreement we incur a royalty that is a low single-digit percentage of net sales of CIMERLI that must be paid through the end of 2023.

As a result, cost of goods sold reflects a mid-single digit royalty on UDENYCA net product revenue, which began July 1, 2019 and continues for five years from then.

Additionally, w e 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, and pursuant to the Genentech Agreement we incur a royalty that is a low single-digit percentage of net sales of CIMERLI that was incurred through the end of 2023 but that is no longer owed.

Research and Development Expense

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External costs incurred by product candidate:

Pivotal Clinical Trials (3)

CHS-006 (option terminated)

Clinical Trials (4)

Early-Stage Development (5)

Discontinued projects

Development (5)

Other discontinued projects

Discontinued (6)

Junshi Biosciences upfront and option exercise payments

Other research and development expenses (7)

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Total research and development expenses

(1) Expenses related primarily to development efforts to obtain Prior Approval Supplements (“PAS”) for additional presentations of UDENYCA.

(1) Expenses related primarily to development efforts to obtain PAS for additional presentations of UDENYCA.

(2) YUSIMRY, formerly CHS-1420, was approved by the FDA in December 2021.

Expenses in 2021 primarily related to FDA pre-approval inspections and scaling up process performance qualification production runs.

Expenses in 2022 primarily related to on-going manufacturing efforts for new formulations and clinical studies.

(3) The FDA has granted Priority Review for the toripalimab BLA, as well as Breakthrough Therapy Designation for toripalimab for the treatment of NPC, and the original BLA for toripalimab is currently under review.

In 2022 and 2021, we reimbursed Junshi Biosciences $25.0 million per year for

toripalimab clinical trials that were included in the development plan for toripalimab as described in the Collaboration Agreement and with changes approved by the joint development committee.

(4) In March 2022, we exercised our option to license CHS-006, a TIGIT-targeted antibody, in the United States and Canada from Junshi Biosciences, expanding our 2021 immuno-oncology collaboration agreement.

Expenses in 2022 included our reimbursement for certain costs related to an ongoing CHS-006 clinical trial being conducted by Junshi Biosciences.

(5) We expect to submit an IND to the FDA in 2023 for CHS-1000, an antibody targeting ILT4.

(6) The $1.0 million of expense in 2022 relates to CHS-3318 and CHS-305 which were both discontinued during the year.

The expense in 2021 includes $11.2 million related to CHS-2020 which was discontinued during 2021 and $9.1 million related to CHS-305.

Expenses in 2023 and 2022 primarily related to manufacturing efforts for new formulations and clinical studies.

(3) In October 2023, LOQTORZI was approved by the FDA in combination with cisplatin and gemcitabine for the first-line treatment of adults with metastatic or recurrent locally advanced NPC, and for LOQTORZI as monotherapy for the treatment of adults with recurrent, unresectable, or metastatic NPC with disease progression on or after platinum-containing chemotherapy.

(4) In March 2022, we paid $35.0 million to exercise our option to license CHS-006, a TIGIT-targeted antibody, in the United States and Canada from Junshi Biosciences.

Expenses in 2023 and 2022 included our reimbursement for certain costs related to an ongoing CHS-006 clinical trial being conducted by Junshi Biosciences.

On January 10, 2024, we announced that we delivered a notice of termination of the TIGIT Program (as defined in the Collaboration Agreement) to Junshi Biosciences pursuant to the Collaboration Agreement.

(5) We acquired casdozokitug and CHS-114 in connection with the Surface Acquisition in September 2023.

(6) The $1.0 million of expense in 2022 relates to CHS-3318 and CHS-305 which were both discontinued during 2022.

(7) Amount consists of expenses for other pipeline candidates and CIMERLI, which was approved by the FDA in August 2022.

Selling, General and Administrative Expense

Selling, general and administrative expense consists primarily of personnel costs, allocated facilities costs and other expense for outside professional services, including legal, insurance, human resources, outside marketing, advertising, audit and accounting services, as well as costs associated with establishing commercial capabilities in support of the commercialization of UDENYCA, CIMERLI, YUSIMRY and our product candidate, toripalimab.

Selling, general and administrative expense consists primarily of personnel costs, allocated facilities costs and other expense for outside professional services, including legal, insurance, human resources, outside marketing, advertising, audit and accounting services, acquisition-related costs, as well as costs associated with establishing commercial capabilities in support of the commercialization of UDENYCA, CIMERLI, YUSIMRY and LOQTORZI.

Personnel costs consist of salaries, benefits and stock-based compensation.

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Other Income (Expense), Net

Other income (expense), net consists primarily of interest earned on our cash, cash equivalents and investments in marketable securities, foreign exchange gains (losses) resulting from currency fluctuations, and gains (losses) from disposal of long-lived assets.

Other income (expense), net consists primarily of interest earned on our cash and cash equivalents, non-cash accretion of discount on our investments in marketable securities, foreign exchange gains (losses) resulting from currency fluctuations, and gains (losses) from disposal of long-lived assets.

Results of Operations

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(in thousands)

The decrease in net revenue was primarily due to a decrease in the number of UDENYCA units sold and a reduction in the average net selling price per unit resulting from competition and lower patient enrollment.

The increase in net revenue was primarily due to our three new products:

CIMERLI launched in October 2022 and contributed $118.4 million more in 2023 as compared to 2022, YUSIMRY launched in July 2023 contributing $3.6 million, and LOQTORZI sales to distributors began in December ahead of the January 2024 launch, contributing $0.6 million of net revenue.

This was partially offset by a $76.8 million decline in UDENYCA net revenue as compared to 2022, primarily related to the decline in the average net selling price per unit.

Our net revenue and market penetration may continue to be adversely impacted by pricing trends and competitive dynamics in the overall pegfilgrastim market.

In addition, the COVID-19 pandemic has negatively impacted the pre-filled syringe pegfilgrastim market due to preferences to administer medication at home.

These negative factors were partially offset by our CIMERLI launch in October 2022 which contributed $6.9 million of net revenue in 2022.

We expect our net revenue to increase during 2023, as a result of CIMERLI’s launch in October 2022 and the planned launches in 2023 of toripalimab and YUSIMRY and additional presentations of UDENYCA.

We expect our net revenue to decrease during 2024, as a result of the CIMERLI Sale Transaction that closed on March 1, 2024.

However, we believe this will be partially offset by the continued market share growth of UDENYCA, considering its multiple presentations, as well as the launch of LOQTORZI in the U.S.

as announced on January 2, 2024, and a full year of sales of YUSIMRY.

Cost of Goods Sold

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Cost of goods sold

The increase in cost of goods sold primarily resulted from t he $26.0 million write-down in the third quarter of 2022 of inventory at risk of expiration compared to the $5.1 million net write-off of inventory in 2021 for inventory that did not meet acceptance criteria, partially offset by decreases in the number of UDENYCA units sold, lower royalty costs by $3.0 million as well as the sale of $3.3 million of previously expensed UDENYCA batches that were required to be expensed as research and development prior to the FDA approval of UDENYCA and, therefore, was not reflected in the cost of goods sold in 2021.

We expect our gross margin to decrease during 2023 primarily driven by royalties paid for CIMERLI sales, sales of YUSIMRY in a very competitive market and continued declines in net realized prices of UDENYCA.

This decrease is expected to be partially offset by the $26.0 million write-down of UDENYCA inventory at risk of expiration in 2022.

The increase in cost of goods sold in 2023 compared to 2022 was due to a $47.0 million charge in the fourth quarter of 2023 for the write-down of slow moving YUSIMRY inventory and the related partial recognition of certain firm purchase commitments, a $47.5 million increase in royalty costs and $25.0 million increase in product costs, both driven primarily by CIMERLI sales, $3.0 million in contract modification fees with one of our manufacturers for reducing the number of UDENYCA batches to be produced, and $2.3 million in write-downs, net of recoveries for inventory that was damaged during processing.

These unfavorable factors were offset by the $26.0 million write-down in the third quarter of 2022 of inventory at risk of expiration and due to the sale in the second half of 2023 of certain of those UDENYCA units having no carrying value following the write-down and a total original cost of $9.9 million.

We expect our gross margin to increase during 2024 primarily because 2023 results included a $47.0 million charge for the write-down of slow moving YUSIMRY inventory and the related partial recognition of certain firm purchase commitments, as well as 2023 had a full year of sales of CIMERLI, which was divested March 1, 2024 and had a gross profit share in the low- to mid-fifty percent range reflected in COGS.

Sales generated from our other products after the closing of the Sale Transaction will have a higher average gross margin.

In addition, the mid-single digit royalty on UDENYCA net product revenue expires on June 30, 2024.

Research and Development Expense

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The decrease in research and development expense was primarily due to:

● higher license fees in 2021, including $145.0 million in expense pursuant to the Collaboration Agreement with Junshi Biosciences in February 2021, which was partially offset by a $9.0 million credit related to the fair value of the discount for lack of marketability on the common shares purchased under the Stock Purchase Agreement, as compared to 2022 which included an upfront payment of $35.0 million to exercise our option to license CHS-006, a TIGIT-targeted antibody, in the United States and Canada ;

● a decrease of $22.0 million related to the development of YUSIMRY mainly due to higher costs in 2021 associated with FDA pre-approval inspections and scaling up process performance qualification production runs;

● a decrease of $21.7 million related to the development of additional presentations of UDENYCA;

● a decrease of $11.2 million in CHS-2020 costs related to the discontinuation of its development in the first quarter of 2021;

● a decrease of $8.5 million in costs for the development of bevacizumab (Avastin) biosimilar, a former product candidate which we discontinued development in May 2022;

● a decrease of $1.8 million in co-development costs for toripalimab and CHS-006.

The decrease was partially offset by:

● an increase of $2.7 million for early stage development of an antibody targeting ILT4;

● an increase of $1.8 million in personnel and consulting costs to advance our research and development programs.

We expect our research and development expense in 2023 to be lower than in 2022, excluding potential milestone payments related to our product candidates, because of the reduced scope of the development plan for toripalimab in the United States based on changes approved by us and Junshi Biosciences.

● the first quarter of 2022 including an upfront payment of $35.0 million to exercise our option to license CHS-006, a TIGIT-targeted antibody, in the United States and Canada;

● a decrease of $19.0 million in YUSIMRY costs primarily due to certain manufacturing costs for YUSIMRY being capitalized since mid-2022, as well as completion of key studies in the second half of 2022;

● a decrease of $18.5 million in co-development costs for LOQTORZI and CHS-006 resulting from reducing the scope of the development plan for LOQTORZI in the United States beginning in 2023;

● a decrease of $12.9 million in costs to develop additional presentations of UDENYCA;

● a decrease of $10.0 million in personnel and stock-based compensation expense primarily due to fewer employees;

● a decrease of $4.5 million in facilities, supplies and materials and other infrastructure related expenses to support our research and development programs.

The decrease was partially offset by increases of $4.4 million for development of CHS-1000 and $4.1 million for development of casdozokitug.

We expect our research and development expense in 2024 to be lower than in 2023, as CHS-006 co-development with Junshi Biosciences has been terminated and we continue our focus on cost containment across multiple functions.

Selling, General and Administrative Expense

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Selling, general and administrative

The increase in selling, general and administrative expense was primarily due to the following:

● a net increase of $22.1 million for personnel, consulting, professional services, marketing, advertising and other expenses resulting from an increase in sales force personnel and related commercial functions to support our current and future product sales;

● an increase of $4.1 million in facilities, supplies and materials and other infrastructure related expenses to support our commercial infrastructure for our current and future products ;

● an increase of $3.2 million in travel expenses as a result of curtailed travel in 2021 due to COVID-19.

We expect our selling, general and administrative expense in 2023 to be lower than in 2022 primarily as a result of decreased commercial costs.

The decrease in selling, general and administrative expense was primarily due to lower average headcount, including reductions of $9.9 million in employee and consultant costs and $3.1 million in stock-based compensation.

These decreases were partially offset by increases of $5.9 million in professional services driven by the Surface Acquisition and third-party processing fees.

Excluding the potential impact of any acquisitions or business development transactions that have not been consummated, we expect our selling, general and administrative expense for the full year 2024 to be lower than the full year 2023 primarily as a result of the CIMERLI Sale Transaction, reduced headcount and decreased commercial costs.

Interest Expense

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Interest expense

The increase in interest expense in 2022 was primarily due to a higher average outstanding debt balance and interest rate increases in the United States in 2022, which has led to a higher weighted-average interest rate in 2022 as compared to 2021.

In addition, the increase in interest expense was due to $3.9 million of interest expense related to the 2027 Term Loan discount and debt issuance costs that were allocated to unfunded tranches and subsequently amortized over the respective commitment periods for tranches, including $2.3 million allocated to Tranche B that was fully amortized in the first quarter of 2022.

Our 2027 Term Loans have a variable interest rate component that resets the first day of every quarter, and the total interest rate ranged from 9.25% in the first quarter of 2022 to 12.00% in the fourth quarter of 2022.

The interest rate on the 2027 Term Loans increased to 13.03% for the first quarter of 2023.

As a result of the higher interest rate and higher average outstanding debt balance, we expect higher interest expense in 2023.

The increase in interest expense in 2023 was primarily due to a higher average outstanding debt balance and a higher average interest rate for the 2027 Term Loans.

This was partially offset by $3.9 million of interest expense in 2022 related to the 2027 Term Loans discount and debt issuance costs that were allocated to unfunded tranches and subsequently amortized over the respective commitment periods for tranches, including $2.3 million allocated to Tranche B that was fully amortized in the first quarter of 2022.

Our 2027 Term Loans have a variable interest rate component that resets at the beginning of every quarter, and the total interest rate ranged from 9.25% to 12.00% during 2022 and from 13.03% in the first quarter of 2023 to 13.91% in the fourth quarter of 2023.

The interest rate on the 2027 Term Loans decreased to 13.84% for the first quarter of 2024.

Due to the expected partial prepayment of $175.0 million of principal under the 2027 Term Loans as a result of the CIMERLI Sale Transaction, we expect interest expense to decrease in 2024 compared to 2023.

Loss on Debt Extinguishment

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Other income (expense), net

In 2022 other income (expense), net increased primarily as a result of interest income on our cash, cash equivalents and marketable securities.

The interest rate in 2022 was higher than in 2021 due to several interest rate increases in the United States in 2022.

The net expense in 2021 was due to the realized loss upon liquidating our investments in marketable securities.

In 2023, other income (expense), net changed favorably compared to 2022 primarily due to higher income from investments in marketable securities.

Income Tax Provision (Benefit)

Income tax provision (benefit) consists of the change in deferred tax balances resulting from the recognition of a deferred tax liability related to the Surface Acquisition.

We recognized $0.4 million of income tax benefit for the year ended December 31, 2023.

No income tax provision or benefit was recognized for the year ended December 31, 2022.

Liquidity and Capital Resources

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2027 Term Loans

2025 Term Loan

2026 Convertible Notes

Total debt obligations

(1) The 2027 Term Loans were entered into in January 2022 in connection with the payoff and refinancing of existing debt facilities.

See below for further discussion and “Note 7.

Debt Obligations” in the “Notes to Consolidated Financial Statements” contained in Part II, Item 8 of this Annual Report on Form 10-K.

Although we were profitable in 2020 and 2019, due to our research and development expenditures and decline in revenue beginning in 2021, we have generated significant operating losses in all other years since our inception, including in 2023 and 2022.

We have funded our operations primarily through sales of our common stock, issuance and incurrence of convertible and term debt and sales of UDENYCA.

We entered into the Sales Agreement related to the ATM Offering pursuant to which we may issue and sell from time to time up to $150.0 million of our common stock.

We have funded our operations primarily through sales of our common stock, issuance and incurrence of convertible and term debt and sales of our products.

On January 19, 2024, we entered into the Purchase Agreement by and between us and Sandoz.

Pursuant to the terms and subject to the conditions set forth in the Purchase Agreement, on March 1, 2024, we completed the Sale Transaction for our CIMERLI ophthalmology franchise through the sale of our subsidiary, Coherus Ophthalmology LLC, to Sandoz for upfront, all-cash consideration of $170.0 million plus an additional $17.8 million for CIMERLI product inventory and prepaid manufacturing assets.

Such consideration is subject to certain adjustments that will be finalized following the closing pursuant to the Purchase Agreement.

On February 5, 2024, we entered into a Consent, Partial Release and Third Amendment to the 2027 Term Loans (the “Consent and Amendment”), that among other things:

(1) provided consent to consummation of the transactions contemplated by the Purchase Agreement, and released certain of our subsidiary from our obligation and certain assets subject to the transactions contemplated thereby, (2) required us to make a partial prepayment of $175.0 million of the principal of the 2027 Term Loans outstanding upon consummation of the transactions contemplated by the Purchase Agreement, subject to certain conditions and (3) adjusted the minimum net sales covenant level under the 2027 Term Loans.

On September 8, 2023, we obtained $28.8 million of cash, cash equivalents and marketable securities as part of the Surface Acquisition.

On May 16, 2023, we entered into an underwriting agreement (the “Underwriting Agreement”) with J.P.

Morgan Securities LLC and Citigroup Global Markets Inc., as representatives of the several underwriters named therein (collectively, the “Underwriters”), pursuant to which we issued and sold an aggregate of 11,764,706 shares (the “Firm Shares”) of our common stock, par value $0.0001 per share, to the Underwriters (the “Public Offering”).

Additionally, under the terms of the Underwriting Agreement, we granted the Underwriters an option, for 30 days from the date of the Underwriting Agreement, to purchase up to an additional 1,764,705 shares of common stock (the “Option Shares,” and together with the Firm Shares, the “Shares”), which the Underwriters elected to exercise in full.

The price to the public in the Public Offering was $4.25 per share.

The Underwriters agreed to purchase the Shares from us pursuant to the Underwriting Agreement at a price of $3.995 per share.

On May 18, 2023, we completed the sale and issuance of an aggregate of 13,529,411 Shares, including the exercise in full of the Underwriters’ option to purchase the Option Shares.

We received net proceeds of approximately $53.6 million, after deducting the Underwriters’ discounts and commissions and offering expenses payable by us.

On November 8, 2022, we entered into the Sales Agreement related to the ATM Offering pursuant to which we may issue and sell from time to time up to $150.0 million of our common stock.

On May 15, 2023, pursuant to an Amendment No.

1 to Sales Agreement and in connection with the Public Offering, we reduced the number of shares that could be issued and sold pursuant to its ATM Offering with TD Cowen by $86.25 million, lowering the aggregate offering price under the Agreement from $150.0 million to $63.75 million.

On September 11, 2023, pursuant to an Amendment No.

During the year ended December 31, 2023, 3,559,761 shares were sold pursuant to the ATM Offering.

For the ATM Offering program to date as of December 31, 2023, we sold 4,476,645 shares of common stock at a weighted-average price per share of $5.81 for gross proceeds of $26.0 million and received net proceeds of $25.4 million, net of $0.6 million of commissions and fees.

As of December 31, 2023, we had approximately $66.5 million of our common stock remaining available for sales under the ATM Offering.

The ability to elect to sell shares of our common stock in the ATM Offering from time to time adds to our financial flexibility.

As of December 31, 2023, we had an accumulated deficit of $1.6 billion and cash, cash equivalents, and marketable securities of $117.7 million.

We believe that our available cash, cash equivalents, marketable securities, cash collected from product sales and ATM Offering proceeds will be sufficient to fund our planned expenditures and meet our obligations for at least the twelve months following our financial statement issuance date.

We believe that our available cash, cash equivalents, marketable securities, cash collected from product sales and ATM Offering and Public Offering proceeds received to date will be sufficient to fund our planned expenditures and meet our obligations for at least the twelve months following our financial statement issuance date.

We have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we currently expect.

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(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 that was funded on March 31, 2022, in connection with the full repayment of our 2022 Convertible Notes due in March 2022;

(ii) a Tranche B Loan in an aggregate principal amount of $100.0 million that was funded on March 31, 2022, in connection with the full repayment of our $100.0 million aggregate principal amount 8.2% Convertible Senior Notes due in March 2022 (“2022 Convertible Notes”);

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

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

and (iv) a Tranche D Loan

in an aggregate principal amount of $50.0 million that was funded on September 14, 2022.

We have the right to request an uncommitted additional facility amount of up to $100.0 million that is subject to new terms and conditions.

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

The 2027 Term Loans accrued 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%.

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and proceeds of the Tranche B Loan were drawn in connection with the full repayment of our 2022 Convertible Notes due in March 2022.

2025 Term Loan

As of December 31, 2021, the carrying amount of our $75.0 million aggregate principal 2025 Term Loan was $75.5 million.

In January 2022, we used proceeds from a separate borrowing, Tranche A Loan of the 2027 Term Loans, to voluntarily prepay all amounts outstanding under the 2025 Term Loan, pursuant to the $81.9 million payoff amount which included all costs and fees.

2022 Convertible Notes

As of December 31, 2021, the carrying amount of our $100.0 million aggregate principal amount convertible senior notes due March 31, 2022 was $108.5 million, inclusive of a 9% premium due at maturity or redemption, if not earlier converted.

During the first quarter of 2022, we fully repaid these notes, and in connection with the repayment, drew $100.0 million from the Tranche B Loan of the

2027 Term Loans.

Excluding accrued interest, the payoff amount of the 2022 Convertible Notes was $109.0 million.

As of December 31, 2023, we were in full compliance with these covenants, and there were no events of default under the 2027 Term Loans.

On February 5, 2024, we entered into the Consent and Amendment, that among other things:

2026 Convertible Notes

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These milestone payments and other similar fees are contingent upon future events and therefore are only recorded when it becomes probable that a milestone will be achieved, or other applicable criteria will be met.

Because the achievement of these milestones had not reached the threshold for recognition as of December 31, 2022, such contingencies were not recorded in our financial statements.

With the exception of $25.0 million for a milestone payment to Junshi Biosciences, of which we expect to pay $12.5 million in the second quarter of 2024 and $12.5 million in the first quarter of 2025, as of December 31, 2023, no other milestones were accrued because their probability of achievement had not reached the threshold for recognition.

The following table presents a summary of our active partnerships and collaborations that have contingent regulatory and sales milestones as of December 31, 2023:

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$13.0 million

(1) Excludes the potential aggregate upfront and milestone amounts for the Term Sheet with Klinge Biopharma for the exclusive commercialization rights to FYB203.

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.

(2) The FDA issued a CRL for the original BLA we had submitted for toripalimab requesting a quality process change that we and Junshi Biosciences believe is readily addressable.

On July 6, 2022, we announced that the FDA accepted the resubmission of the original BLA for toripalimab and that the FDA set a PDUFA action date for December 23, 2022.

On December 24, 2022, we announced that we did not receive an action letter from the FDA by the PDUFA action date.

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

If such regulatory approval is achieved, we will be required to pay Junshi Biosciences a milestone payment of $25.0 million.

(3) Upon initiation of the first qualifying clinical trial that contains the optioned TIGIT molecule, we will be required to pay Junshi Biosciences a milestone payment of $20.0 million.

(4) Relates to a milestone contingent upon the launch readiness of a PFS product, if achieved during 2023.

$15.0 million

(1) $290.0 million relates to sales milestones and $65.0 million relates to regulatory milestones, excluding the $25.0 million milestone payment to Junshi Biosciences, of which we expect to pay $12.5 million in the second quarter of 2024 and $12.5 million in the first quarter of 2025.

(2) On January 10, 2024, we announced we delivered a notice of termination of the TIGIT Program so the Potential Aggregate Milestone Amount for CHS-006 anti-TIGIT antibody became $0 as of that date.

Contingent Value Rights

We have recorded a contingent consideration liability for the fair value of the potential payments under the CVR Agreement in connection with the Surface Acquisition.

These potential payments during the ten-year period following September 8, 2023 are only due if we first receive milestone- or royalty-based payments under certain license agreements or upfront payments pursuant to ex-U.S.

licensing agreements.

Payments to CVR holders can be in the form of cash, stock or a combination of cash and stock.

As of December 31, 2023, no payments are due to CVR holders.

For further details, see “Note 6.

Surface Acquisition” in the Notes to Consolidated Financial Statements contained in Part II, Item 8 of this Annual Report on Form 10-K.

Other Commitments

Non-cancelable purchase commitments

We enter into contracts in the normal course of business with CROs for preclinical research studies and clinical trials, research

supplies and other services and products for operating purposes.

We enter into contracts in the normal course of business with CROs for preclinical research studies and clinical trials, research supplies and other services and products for operating purposes.

We have also entered into agreements with several CMOs for the manufacture and clinical drug supply of our commercial and product candidates.

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We lease office and laboratory facilities through arrangements treated as operating leases, and we lease vehicles through finance leases.

Refer to “Note 10.

Leases” in the Notes to Consolidated Financial Statements contained in Part II, Item 8 of this Annual Report on Form 10-K for additional information to our leases.

Our total non-cancelable contractual obligations arising from these agreements as of December 31, 2023 was $9.1 million, with $2.9 million of these obligations due within twelve months.

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The following table summarizes our cash flows for the periods presented:

Year Ended December 31,

(in thousands)

Net cash used in operating activities

Net cash used in investing activities

Net cash provided by (used in) investing activities

Net cash provided by financing activities

Net decrease in cash, cash equivalents and restricted cash

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

Net cash used in operating activities

Cash used in operating activities of $241.1 million in 2022 was primarily due to the net loss of $291.8 million adjusted for the classification of the cash option payment to Junshi Biosciences of $35.0 million to investing activities, non-cash items including stock-based compensation expense of $50.7 million, net inventory write-offs of $26.0 million and other non-cash adjustments of $18.2 million, partially offset by the changes in our operating assets and liabilities of $79.3 million.

Cash used in operating activities of $37.4 million in 2021 was primarily due to the net loss of $287.1 million adjusted for the classification of the upfront license fee payment to Junshi Biosciences of $136.0 million pursuant to the Collaboration Agreement, non-cash items including stock-based compensation expense of $51.4 million, net inventory write-offs of $5.1 million and other non-cash adjustments of $14.8 million, as well as the changes in our operating assets and liabilities of $42.4 million.

Net cash used in investing activities

Cash used in operating activities of $174.9 million for the year ended December 31, 2023 was primarily due to the net loss of $237.9 million adjusted for non-cash items including net inventory write-downs of $52.6 million, stock-based compensation expense of $43.1 million and other non-cash adjustments of $4.1 million, partially offset by the changes in our operating assets and liabilities of $36.8 million.

Cash used in operating activities of $241.1 million in 2022 was primarily due to the net loss of $291.8 million adjusted for the classification of the cash option payment to Junshi Biosciences of $35.0 million to investing activities, non-cash items including stock-based compensation expense of $50.7 million, net inventory write-downs of $26.0 million and other non-cash adjustments of $18.2 million, partially offset by the changes in our operating assets and liabilities of $79.3 million.

Net cash provided by (used in) investing activities

Cash provided by investing activities of $144.6 million in 2023 was primarily due to proceeds from maturities of investments in marketable securities of $144.4 million, proceeds from sale of investments in marketable securities of $13.3 million, and $7.0 million of cash acquired from the Surface Acquisition, partially offset by purchases of investments in marketable securities of $19.5 million and a $1.1 million upfront milestone payment due to the first commercial sale of YUSIMRY.

Cash used in investing activities of $166.9 million in 2022 was primarily due to purchases of investments in marketable securities of $127.4 million, the option fee payment of $35.0 million to license CHS-006 from Junshi Biosciences, a $2.4 million milestone payment to Bioeq related to the launch of CIMERLI, and purchases of property and equipment of $2.0 million.

Cash used in investing activities of $138.4 million in 2021 was primarily due to purchases of investments in marketable securities of $182.5 million, upfront license fee of $145.0 million to Junshi Biosciences pursuant to the Collaboration Agreement, partially offset by a $9.0 million adjustment related to the fair value of the DLOM on our common stock purchased by Junshi Biosciences, and purchases of property and equipment of $1.3 million.

These uses of cash were partially offset by the proceeds from sales and maturities of investments in marketable securities of $181.4 million.

Net cash provided by financing activities

Cash provided by financing activities of $69.6 million in 2023 was primarily due to proceeds of $53.6 million from the Public Offering, net of issuance costs, $18.1 million proceeds from the ATM Offering, net of issuance costs, and $1.8 million proceeds from purchase under the ESPP.

These were partially offset by $3.6 million in tax payments related to net share settlement.

Cash provided by financing activities of $54.3 million in 2022 was primarily due to proceeds of $240.7 million under the 2027 Term Loans, net of debt discount and issuance costs, proceeds of $6.4 million from the ATM Offering, net of issuance costs, and $2.3 million proceeds from purchase under the ESPP.

These were partially offset by fully repaying $109.0 million on the 2022 Convertible Notes and $81.8 million on the 2025 Term Loan (excluding interest which is presented as an operating activity), and $3.7 million in tax payments related to net share settlement of RSUs.

Cash provided by financing activities of $51.9 million in 2021 was primarily due to $50.0 million of gross proceeds from issuance of our common stock to Junshi Biosciences partially offset by $9.0 million related to the fair value of the DLOM on the common stock

purchased by Junshi Biosciences, $10.4 million proceeds from the exercise of stock options and $3.0 million proceeds from purchases under the ESPP , partially offset by $1.8 million in tax payments related to net share settlement of RSUs.

Critical Accounting Estimates

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

Business Combination Accounting and Valuation of Acquired Assets

We completed the Surface Acquisition on September 8, 2023, which was accounted for as a business combination.

We account for acquisitions of entities that include inputs and processes and have the ability to create outputs as business combinations.

Judgment was required in assessing whether the acquired processes or activities, along with their inputs, met the criteria to constitute a business, as defined by U.S.

The acquisition method of accounting requires the recognition of assets acquired and liabilities assumed at their acquisition date fair values.

The excess of the fair value of consideration transferred over the fair value of the net assets acquired is recorded as goodwill, or when there is an excess of the fair values of these identifiable assets and liabilities over the fair value of purchase consideration,

a bargain purchase gain is recorded in the consolidated statements of operations.

The estimations of fair values are based on non-observable inputs that are included in valuation models.

An income approach, which generally relies upon projected cash flow models, is used in estimating the fair value of the acquired intangible assets.

These cash flow projections are based on management's estimates of economic and market conditions including the estimated future cash flows from revenues of acquired assets, the timing and projection of costs and expenses and the related profit margins, tax rates, and discount rate.

During the measurement period, which occurs before finalization of the purchase price allocation, changes in assumptions and estimates that result in adjustments to the fair values of assets acquired and liabilities assumed, if based on facts and circumstances existing at the acquisition date, are recorded on a retroactive basis as of the acquisition date, with the corresponding offset to goodwill or bargain purchase gain.

Product Sales Discounts and Allowances

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Revenue” in the Notes to Consolidated Financial Statements in Part II, Item 8 of this Form 10-K.

Inventory Valuation

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

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

Although we believe that the assumptions we use in estimating potential inventory write-downs are reasonable, if actual market conditions are less favorable than projected by us, 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 our consolidated statement of operations.

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

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.

In 2023, 2022 and 2021, cost of goods sold included inventory write-downs, net of $52.6 million, $26.0 million and $5.1 million, respectively.

As of December 31, 2023, a 10% reduction in the carrying value of inventory we expect to sell in 2024 would be approximately $6.3 million.

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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 7. Management’s Discussion and Analysis