What happened

Shares of Coherus BioSciences (NASDAQ:CHRS) fell over 18% last month, according to data provided by S&P Global Market Intelligence.

The biopharma stock erupted higher in July after Coherus announced that the Committee for Medicinal Products for Human Use (CHMP) -- a European Union regulatory body that makes recommendations to the European Medicines Agency (EMA), which is the equivalent to the U.S. Food and Drug Administration -- would reconsider the company's application for a generic version of Neulasta (pegfilgrastim). That put it on track to getting its first commercial product on the market.

Fast-forward to late September: The company's pegfilgrastim biosimilar did indeed earn EMA marketing approval, and will be sold under the brand name Udenyca. Despite the positive news, Coherus BioSciences stock has continued to drop -- falling nearly 34% in the last six weeks. There's one likely explanation: competition.

A scientist in the lab with a disappointed look on his face.

Image source: Getty Images.

So what

Biosimilars are generic versions of biologic drugs -- but it's virtually impossible to make exact copies of a complex biologic drug. While that makes them much more difficult to manufacture than generic small-molecule drugs, and requires them to go through clinical trials to double-check that the copycats perform as expected, it also makes biosimilars a potentially lucrative opportunity for companies with a well-executed strategy.

That has led to an avalanche of biosimilar marketing applications, including for generic versions of Neulasta, a drug owned by Amgen that posted $4.5 billion in annual global revenue in 2017. Udenyca was the third pegfilgrastim biosimilar approved in the European Union in late September alone. It followed Pelgraz from Accord Healthcare, and Pelmeg from Cinfa Biotech.

Now what

In other words, with so much competition, investors are beginning to wonder if the market opportunity for biosimilars will prove as lucrative as once thought. Will some treatments muscle their way to outsized market share? Or will the market be split relatively evenly among a half-dozen or so brands?

Considering that the answers to those questions are unknown, but will make or break Coherus BioSciences, investors are beginning to price the uncertainty into shares. That just so happened to be timed with a broader stock-market pullback, which made the stock losses even worse. All investors can do is wait and see how the company's first approved drug performs.

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