Coherus BioSciences Acquires Small Immuno-Oncology Player Surface Oncology For $40M

Coherus BioSciences Inc CHRS has agreed to acquire Surface Oncology Inc SURF, a clinical-stage immuno-oncology (I-O) company developing next-generation immunotherapies that target the tumor microenvironment. 

The Surface acquisition adds two clinical stage assets to Coherus' I-O pipeline: SRF388, currently in Phase 2 trials in lung and liver cancer, and SFR114, currently in a Phase 1/2 study as a monotherapy for advanced solid tumors.

Coherus will issue shares at $5.2831 per share, equivalent to $40 million plus Surface's net cash (currently expected to be between $20 and $25 million). 

Coherus' CEO Denny Lanfear says, "This transaction is well-timed, as it coincides with the accelerating growth of our biosimilar revenues driven by the launch of Cimerliand the near-term launch of Yusimry."

Surface shareholders will also receive CVRs for 70% of milestone and royalty-based value of existing programs with Novartis AG NVS(NZV930) and GSK plc GSK (GSK4381562), as well as CVRs for 25% of upfront payments made under potential ex-US licensing agreements for SRF114 and 50% for SRF388.

The transaction is expected to close in Q3 of 2023. $20 - $25 million in Surface net cash projected at closing will strengthen Coherus' balance sheet and fund ongoing SRF388 and SRF114 clinical trials through year-end 2024.

Surface is implementing a workforce reduction of approximately 50% of its employees.

Pipeline prioritization enabled by the acquisition will focus clinical development activities on competitively positioned I-O programs and reduce budgeted R&D spending by at least $50 million through 2025.

Potential out-licensing of ex-US rights to SRF388 and SRF114 could raise significant non-dilutive capital in 2024 and 2025.

For Q2 2023, Coherus expects to report at least $48 - 53 million of net product revenue from Udenyca and Cimerli. For FY23, Coherus continues to project net revenues above $275 million, including at least $100 million from net sales of Cimerli, with the balance comprising net sales of Udenyca, Yusimry, and toripalimab. 

Price Action: CHRS shares are down 5.75% at $5.08, and SURF shares are up 35.10% at $1.00 during the premarket session on the last check Friday.