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We came across a bullish thesis on Coherus BioSciences, Inc. (CHRS) on Substack by Steve Wagner. In this article, we will summarize the bulls’ thesis on CHRS. Coherus BioSciences, Inc. (CHRS)'s share was trading at $1.11 as of Feb 11th.
A scientist holding a vial of the cancer-fighting drug developed by the biotechnology company.
Coherus BioSciences (CHRS) is currently facing a pivotal moment, shifting from a potentially undervalued turnaround opportunity to a more complex situation with both turnaround and arbitrage potential. The company’s future hinges on several key factors, including its clinical pipeline, particularly its oncology assets, and the anticipated divestment of its Udenyca franchise. Despite recent challenges, including the disappointing Q4 performance, CHRS remains undervalued for a commercial-stage biotech, especially when considering its progress and prospects in the oncology field.
One of the recent highlights for Coherus is the promising Casdozo readout. While some might view the data as underwhelming, the results indicate strong potential. In combination with atezolizumab and bevacizumab, Casdozo demonstrated a higher overall response rate (38%) compared to the standard of care (SOC) at the same stage (27%). This, coupled with a notable complete response rate of 17.2%, shows substantial promise. Additionally, the treatment extended progression-free survival to 8.1 months compared to 6.8 months with the SOC, an important indicator in oncology trials. This data suggests that Casdozo could become a key asset for Coherus, especially with the expansion of ongoing trials testing combinations with toripalimab.
Turning to valuation, CHRS’s current market capitalization of roughly $130M presents a compelling case for further investigation. Applying a Reverse Discounted Cash Flow (RDCF) model, CHRS’s intrinsic value appears significantly higher, with projections indicating a fair value of around $6.48 per share. This analysis factors in the expected revenue growth from the Loqtorzi franchise, the company’s promising oncology pipeline, and a modest $200M cash position. By 2027-2028, CHRS is expected to reach break-even free cash flow (FCF), with strong growth in FCF thereafter, driven by Loqtorzi’s market expansion. With projected FCF reaching $240M by 2033, the company’s long-term outlook supports a much higher valuation than its current stock price reflects, suggesting significant upside potential.
In addition to the RDCF model, a Sum-of-the-Parts (SOTP) approach also points to substantial undervaluation. The estimated total valuation of Coherus, considering its pipeline and cash reserves, is approximately $630M—more than four times the current market cap. This includes a risk-adjusted value for its pipeline assets, such as Loqtorzi, Casdozo, and CHS-114, which could significantly drive future revenue. With $200M in cash reserves and projected cash burn of around $70M over the next two years, the SOTP model suggests a compelling upside of 385%, assuming the divestment of Udenyca. Even with conservative projections, the stock’s fair value should be at least $2.00 per share, making it clear that CHRS is currently being overlooked.