What happened

Shares of Coherus BioSciences (CHRS -1.22%) gained nearly 49% last month, according to data provided by S&P Global Market Intelligence. The company announced a global settlement with AbbVie that will allow the small-cap biopharma to commercialize a biosimilar to Humira, which was developed as CHS-1420. The pair had previously sparred over patents related to formulating the antibody.

The settlement gives Coherus Biosciences a license to the formulation patents, although it won't be able to sell CHS-1420 in the United States until December 2023. Additionally, it will have to provide royalties to AbbVie on all domestic sales just for using the patent portfolio. Given the size of the market, investors seem to think that won't matter in the end. Are they right?

A man sitting with his laptop as cash money falls around him.

Image source: Getty Images.

So what

Humira treats immune diseases such as rheumatoid arthritis. It's the world's best-selling drug right now and the second-most-successful drug franchise of all time ranked by lifetime sales. The franchise generated $75 billion in total revenue from its launch on the last day of 2002 through 2017, according to FiercePharma. That number is likely closer to $90 billion after 2018 and will continue to grow for the foreseeable future. Humira is projected to become the first drug ever to hit annual sales of $20 billion before most of its U.S. patents expire in late 2023.

It will still generate significant sales after 2023, although it will have to share the market with biosimilar developers such as Coherus BioSciences. The recent licensing deal doesn't mean the small-cap biopharma is done visiting courtrooms, however.

After securing the licensing deal with AbbVie, Coherus BioSciences announced it was suing Amgen for infringing on its patents. Unfortunately, that's become an all-too-common tactic for biosimilar developers in the United States. The move is likely intended to stave off Amgen for a few quarters or years to give CHS-1420 a head start in the massive U.S. market and to possibly wrangle royalty payments from the biotech giant.

Check out the latest Coherus earnings call transcript.

Now what

Coherus BioSciences went all in on the potentially lucrative market for biosimilars. While that's been a popular investment theme in the last five years or so, the first biosimilars didn't hit the market until late 2018 -- and the competition is fierce. Considering the business reported an operating loss of $144 million through the first nine months of 2018, there's a lot of pressure for biosimilars to live up to their lofty expectations. Investors will get their first signs of the success -- or stumbles -- of the strategy as revenue totals for the company's Neulasta biosimilar trickle in throughout 2019.