Shanghai Junshi Biosciences Co. Ltd. could receive an aggregate $1.1 billion from Coherus Biosciences Inc. for the rights to develop and commercialize Junshi’s anti-PD-1 antibody toripalimab in the U.S. and Canada. The deal is powered by Coherus’ core biosimilar business and is designed to steer the company into the business of immuno-oncology.

Coherus is taking the capital and developmental funding it planned for CHS-2020, a biosimilar candidate to Eylea (aflibercept; Regeneron Inc.), and focusing that money on the new toripalimab monotherapy and combinations program. Regeneron brought in $2.29 billion of Eylea revenue in the third quarter of 2020. The injectable, VEGF-targeting drug’s sales were 32% higher than the same quarter in 2019. Eylea starts to lose patent protection in 2023. It was approved for treating age-related wet macular degeneration 2011.

In a conference call with investors, Dennis Lanfear, Coherus’ CEO, said the company had penciled in roughly $200 million in R&D costs for developing CHS-2020, including money for phase III clinical trials over the next two years.

“It really is a question of using our dollars to approach, say, a $30 billion product opportunity as opposed to a $4 billion or $5 billion product opportunity,” Lanfear added.

Toripalimab is approved in China for second-line treatment of unresectable or metastatic melanoma. Coherus said it expects to file a BLA in the U.S. this year for treating nasopharyngeal carcinoma.

“Most notable about this deal is that Coherus is making its foray into novel oncology assets, breaking away from its strategy of being a pure-play biosimilars business,” wrote Mizuho Securities analyst Salim Syed. “Investors have for some time now speculated if Coherus would move into novel oncology assets, so while news, it's not totally unexpected. It may take some time to develop this portion of the business into street models, but the street should interpret this as a positive and potentially start assigning a higher multiple to revenue over time.”

Redwood City, Calif.-based Coherus’ stock (NASDAQ:CHRS) shares rose dramatically soon after the market opened but sagged the remainder of trading to close 6.38% downward at $17.60 per share. Junshi, on the other hand, had a great day on the Hong Kong exchange as shares (HKSE:1877) closed 7.19% upward at HK$82 (US$10.58) each.

Coherus is paying Junshi $150 million up front for the exclusive rights in the U.S. and Canada, options in the territories to Junshi’s anti-TIGIT antibody and its engineered IL-2 cytokine plus certain negotiation rights to two undisclosed preclinical immuno-oncology drug candidates.

Coherus will also pay Junshi Biosciences a 20% royalty on toripalimab’s net sales of and up to an aggregate $380 million in one-time payments for milestones, including up to $290 million for hitting certain sales thresholds.

The option exercise fee for each of the anti-TIGIT antibody and the IL-2 cytokine is $35 million per program.

Coherus will pay Junshi an 18% royalty on net sales and for each option program plus up to an aggregate $255 million in milestones, including up to $170 million in sales thresholds.

In late January, the FDA granted toripalimab fast track designation for first-line treatment of mucosal melanoma and approved Junshi’s IND application for a phase III trial of the agent in combination with Inlyta (axitinib, Pfizer Inc.) vs. Keytruda (pembrolizumab, Merck & Co. Inc.) to treat first-line advanced disease.

Toripalimab, developed independently for treating malignant tumors, was Junshi’s first innovative drug product. There are more than 30 clinical trials being conducted worldwide testing toripalimab as a monotherapy and in combination therapy. In early January, toripalimab was included in the updated National Reimbursement Drug List from China’s NHSA to treat melanoma in the primary format of 80-mg (2-ml)/vial. In December 2018, toripalimab received conditional approval from the NMPA for second-line treatment of unresectable or metastatic melanoma, and Junshi has sought to expand its indications. In December 2020, the agent met the prespecified primary endpoint of progression-free survival at interim analysis of a phase III study in non-small-cell lung cancer.

Biosimilars have been Coherus’s business backbone for years. The company reported third quarter 2020 net sales of its biggest seller, pegfilgrastim biosimilar Udenyca (pegfilgrastim-cbqv), which it commercializes in the U.S., of $113.6 million while reporting a net income of $27.9 million.

In November, Coherus acquired exclusive right to commercialize Bioeq IP AG’s biosimilar candidate to Lucentis (ranibizumab) in the U.S. The agreement called for Coherus to make a mid-single digit million-dollar upfront payment plus other regulatory and launch milestone payments. The two companies said they plan to share the profits “approximately equally.”