Shares of Coherus BioSciences (CHRS 5.70%) climbed 14.9% on Tuesday after the company announced a positive revision to the terms of its loan agreement with Pharmakon Advisors.
On the positive fallout of Coherus' recent divestment
In a press release late yesterday, Coherus announced it has entered into an agreement with Pharmakon Advisors to revise the terms of its loan agreement entered in January 2022. After Coherus closes the previously announced divestiture of its noncore ophthalmology business to Sandoz Group, it plans to prepay $175 million of its $250 million principal balance under its loan in the second quarter of 2024. That will leave a balance of $75 million remaining on the loan and reduce Coherus' projected annual interest payments by around 70%.
The news shouldn't be entirely surprising; when Coherus announced the divestiture two weeks ago -- which included a $170 million up-front cash payment from Sandoz plus an additional amount (to be determined at closing) for working capital adjustments and Cimerli product inventory -- CEO Denny Lanfear told investors the company would use the proceeds "to pay down debt, reduce interest costs, and take the opportunity to focus on our core therapeutic area, oncology."
What's next for Coherus stock?
"This will allow us to move forward with a strengthened balance sheet, supporting sustainable revenue growth in our oncology business and better aligning with our sharpened focus as an oncology innovator," Lanfear stated yesterday.
Indeed, after recently receiving U.S. Food and Drug Administration (FDA) approval for its Udenyca Onbody injection system following months of delays, Coherus now has three formats of its Udenyca product in the pegfilgrastim market. The company also recently launched Loqtorzi in the U.S. after receiving FDA approval for the rare cancer treatment in October 2023.
As Coherus continues to deliver on its promises to improve its balance sheet and move forward as a better-positioned oncology specialist, I see no reason the stock can't continue to rally accordingly.
