What happened

Shares of Coherus Biosciences (NASDAQ:CHRS) opened Monday down 31.6% on sky-high volume. The drugmaker's stock is getting pummeled as the result of the U.S. Food and Drug Administration rejecting the company's Biologics License Application for drug candidate CHS-1701, which is a biosimilar version of Amgen's (NASDAQ:AMGN) blockbuster white-cell booster Neulasta.

The FDA cited a need to reanalyze existing data and more manufacturing information on CHS-1701 as the reasons for the rejection. As of 9:44 a.m. EDT, Amgen's shares were up 1.54% on the back of this positive regulatory development.

Falling stock chart

Image source: Getty Images.

So what

With sales of roughly $4.6 billion in 2016, Neulasta generated about 21% of Amgen's total annual revenue last year. So, if Coherus were able to break into this highly lucrative market with its biosimilar, the drugmaker should be able to haul in at least $500 million at peak from this single product -- depending on competition from other companies and the evolution of pricing points for Neulasta biosimilars along the way. That's a tidy sum for a company currently sporting a market cap of $732 million. 

Now what

Today's news isn't all doom and gloom for Coherus. The FDA, after all, isn't requiring any additional clinical trials that may require a costly capital raise at shareholders' expense, according to the company's press release. So under a best-case scenario, Coherus might be able to turn around this failed regulatory application within just a matter of months, and still have CHS-1701 on the market sometime in 2018. In other words, this steep sell-off is probably overdone, and may represent an attractive buying opportunity.

Amgen, for its part, gets a few more months of reprieve from biosimilars for one of its key products, which is obviously great news. The biotech, after all, still hasn't totally established a dominant commercial footprint for its next generation of products, which are designed to offset any declines in top sellers like Neulasta.