Shares of Coherus BioSciences (CHRS) were sinking 8.6% lower as of 11:14 a.m. ET on Tuesday. The decline followed a nice pop for the stock on Monday after Coherus announced it was selling its Cimerli ophthalmology franchise to Sandoz Group.
This deal with Sandoz will allow Coherus to pocket $170 million in cash. The biotech will also receive additional money for its Cimerli product inventory.
Are investors conflicted about Coherus' Sandoz deal?
It might seem that investors are conflicted about Coherus' deal to sell Cimerli to Sandoz with a big jump on the news followed immediately by a sell-off. That could be the case.
Coherus BioSciences chairman and CEO Denny Lanfear acknowledged that the motivations for divesting Cimerli included reducing debt and interest costs as well as cutting staffing and overhead costs. While the deal should help Coherus over the short term, it also removes a long-term growth driver for the company. Sales for Cimerli skyrocketed 50% year over year in the third quarter of 2023 to $40 million -- over half of Coherus' total Q3 net revenue.
The transaction also reminded investors of the financial challenges that Coherus faces. The company continues to lose money. Its debt totaled nearly $479 million as of Sept. 30, 2023.
Is Coherus Biosciences stock a buy on the pullback?
Coherus will now focus primarily on its oncology programs. It launched Loqtorzi in treating nasopharyngeal carcinoma earlier this month. Last year's acquisition of Surface Oncology also expanded Coherus' pipeline of experimental cancer therapies.
Is the biotech stock a buy on the pullback? I don't think so. There's too much uncertainty for Coherus. More importantly, there are too many other stocks that offer more attractive risk-reward propositions.
