Chimerix(CMRX) - 2021 Q4 - Annual Report

Part I Item 1. Business Chimerix is a biopharmaceutical company developing medicines for deadly diseases, with an FDA-approved smallpox drug and advanced clinical programs for glioma and AML Company Overview and Pipeline Chimerix, a biopharmaceutical company, has an FDA-approved smallpox product and late-stage clinical programs for glioma and AML - Chimerix develops medicines for deadly diseases, featuring FDA-approved TEMBEXA for smallpox and advanced clinical programs for glioma and AML[18] - In January 2021, Chimerix acquired Oncoceutics, gaining ONC201 for recurrent H3 K27M-mutant glioma and the imipridone platform[25] - The company is developing DSTAT as a first-line therapy for AML in combination with standard chemotherapy, currently in a Phase 3 trial[53] TEMBEXA (brincidofovir, BCV) TEMBEXA, approved by the FDA in June 2021 for smallpox, holds orphan drug exclusivity and is subject to a potential BARDA procurement contract - On June 4, 2021, the FDA approved TEMBEXA for smallpox treatment in adult and pediatric patients[19] - BARDA issued an RFP, intending to negotiate a sole source contract for up to 1.7 million treatment courses of TEMBEXA[22][23] - TEMBEXA has seven years of U.S. orphan drug exclusivity and patent coverage expected until 2034[19] ONC201 and Imipridones ONC201 shows positive efficacy in H3 K27M-mutant glioma, with plans for a Phase 3 trial, and the imipridone pipeline includes ONC206 and ONC212 ONC201 Efficacy Data in Recurrent H3 K27M-mutant Glioma (50-Patient Cohort) | Metric | Result (RANO-HGG) | 95% Confidence Interval | | :--- | :--- | :--- | | Overall Response Rate (ORR) | 20.0% | 10.0-34% | | Disease Control Rate | 40% | 26-55% | | Median Duration of Response (mDOR) | 11.2 months | 3.8 - not reached | | Median Time to Response | 8.3 months | N/A | ONC201 Survival Data | Timepoint | Overall Survival | 95% Confidence Interval | | :--- | :--- | :--- | | 12 months | 57% | 41-70% | | 24 months | 35% | 21-49% | - Achieving the 20% ORR milestone triggered a $20 million payment to former Oncoceutics shareholders in Q4 2021[44] - Chimerix plans to meet with the FDA in H1 2022 to discuss the design for a first-line Phase 3 trial of ONC201 in H2 2022[43] Dociparstat sodium (DSTAT) DSTAT is in a Phase 3 trial for first-line AML, targeting overall survival, with enrollment impacted by COVID-19 and an early assessment planned for 80 patients - DSTAT is in a Phase 3 trial (DASH AML) for newly diagnosed AML patients, evaluating its efficacy with standard chemotherapy[60][61] - The primary endpoint of the DASH AML trial is overall survival (OS), with event-free survival (EFS) as a potential secondary endpoint[62] - Enrollment for the first 80 evaluable patients for early assessment has been slower than anticipated due to COVID-19 and competition[65] Our Strategy Chimerix's strategy centers on commercializing TEMBEXA, advancing ONC201 and DSTAT through clinical trials, and developing its early-stage pipeline - Deliver TEMBEXA to the U.S. Strategic National Stockpile under a potential sole source contract with BARDA[69] - Develop ONC201 for recurrent H3 K27M-mutant glioma, potentially seeking accelerated approval[69] - Advance the Phase 3 DASH AML trial for DSTAT, with an early assessment planned after the first 80 evaluable patients[69] - Continue development of pipeline assets ONC206 and ONC212, and explore the antiviral library, including CMX521[71] Significant Agreements Chimerix holds key agreements with BARDA for TEMBEXA, Cantex for DSTAT, Oncoceutics for its imipridone pipeline, and SymBio for BCV rights - BARDA development contract for TEMBEXA completed in September 2021, providing $72.5 million in reimbursement and $4.6 million in fees, with a new procurement contract for up to 1.7 million courses under negotiation[72][73][75] - Acquired exclusive worldwide rights for DSTAT from Cantex in July 2019 for $30 million cash, 10 million shares, and potential milestones up to $587.5 million[77][79] - Acquired Oncoceutics in January 2021 for approximately $25 million cash, 8.7 million shares, a $14 million promissory note, and up to $360 million in contingent payments, with a $20 million milestone paid in Q4 2021[82][83] - Licensed exclusive worldwide rights for BCV (excluding orthopoxviruses) to SymBio in September 2019 for a $5 million upfront payment and up to $180 million in milestones[80][81] Commercial Operations, Competition, and IP Chimerix focuses TEMBEXA commercialization on government procurement, faces competition for ONC201 and DSTAT, and maintains robust IP protection for its portfolio - Commercialization of TEMBEXA targets the U.S. Strategic National Stockpile, while ONC201 and DSTAT may involve a small U.S. commercial team or partnerships[88][90] - ONC201 faces competition from existing brain cancer therapies, and DSTAT competes with standard AML treatments and targeted agents[95][96] Intellectual Property Portfolio Summary | Product/Platform | Patent Count (Patents/Applications) | Expected U.S. Expiration | | :--- | :--- | :--- | | Antiviral (incl. TEMBEXA) | 80 | 2034 | | DSTAT | 64 | 2033 (potential to 2038) | | Oncoceutics (incl. ONC201) | 404 | 2037 (potential to 2042) | Manufacturing and Government Regulation Chimerix relies on third-party manufacturers for all products and is subject to extensive FDA and global regulations, utilizing expedited programs for key candidates - The company operates a virtual manufacturing model, relying entirely on third-party contract manufacturers for all candidates[109] - Manufacturing processes for TEMBEXA drug substance and tablets have been scaled up, with suspension scale-up planned for 2022[113][114] - U.S. drug development requires extensive preclinical and clinical trials under INDs, adherence to GCP and cGMP standards, and NDA submission for FDA approval[117][119][123] - ONC201 and DSTAT have Fast Track Designation; ONC201, DSTAT, and BCV (for smallpox) also hold Orphan Drug Designation[138][140] Item 1A. Risk Factors The company faces substantial risks including financial losses, dependence on TEMBEXA contract, clinical development success, third-party reliance, and COVID-19 impacts - The company has a history of significant losses, with a net loss of $173.2 million in 2021 and an accumulated deficit of $885.6 million as of December 31, 2021[196][197] - There is no guarantee that a contract with BARDA for TEMBEXA procurement will be finalized on favorable terms or at all[364] - The company's product candidates, ONC201 and DSTAT, are in clinical development and face significant hurdles for regulatory approval and commercial success[231][234] - Reliance on third-party manufacturers and limited supply sources presents risks of delays and disruptions[291][297] - The COVID-19 pandemic poses a risk of significant disruption to preclinical studies, clinical trial enrollment, and supply chains[228][229] Item 1B. Unresolved Staff Comments The company reports that it has no unresolved staff comments from the SEC - None[443] Item 2. Properties Chimerix leases its corporate headquarters and laboratory space in Durham, North Carolina, and a small office in Philadelphia, Pennsylvania - The company's corporate headquarters and laboratory are in Durham, North Carolina, with leases expiring in July 2026[444] - The subsidiary, Oncoceutics, Inc., leases a small office in Philadelphia, Pennsylvania on a month-to-month basis[444] Item 3. Legal Proceedings The company reports that it is not involved in any legal proceedings - None[446] Item 4. Mine Safety Disclosures This item is not applicable to the company - Not applicable[447] Part II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities This section details the company's stock performance, stockholder count, and dividend policy, noting no cash dividends have ever been paid - As of February 25, 2022, there were 82 stockholders of record for the company's common stock[454] - The company has never paid cash dividends and does not intend to in the foreseeable future, retaining funds for growth[455] Item 6. Reserved This item is reserved and contains no information Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Chimerix reported a significant net loss in 2021, driven by R&D expenses and an acquisition charge, but maintains sufficient capital and a new credit facility for future operations Results of Operations Chimerix's net loss significantly increased in 2021 due to higher R&D expenses, an acquired IPR&D charge from the Oncoceutics acquisition, and decreased revenues Results of Operations Comparison (2021 vs. 2020) | Metric | 2021 (in thousands) | 2020 (in thousands) | Change (%) | | :--- | :--- | :--- | :--- | | Total Revenues | $1,979 | $5,372 | (63.2)% | | Research and Development | $73,817 | $36,232 | 103.7% | | General and Administrative | $18,672 | $13,656 | 36.7% | | Acquired in-process R&D | $82,890 | $0 | N/A | | Loss from Operations | ($173,400) | ($44,516) | 289.5% | | Net Loss | ($173,236) | ($43,522) | 298.0% | - The increase in R&D expenses in 2021 was primarily due to a $20 million success milestone payment and a $14.2 million increase in manufacturing and clinical support for ONC201[529][531] - The company recorded $82.9 million in acquired in-process R&D expenses in 2021 related to the Oncoceutics acquisition[533] Liquidity and Capital Resources Chimerix ended 2021 with $90.4 million in capital, sufficient for 12 months, supplemented by a $50 million revolving credit facility secured in January 2022 - The company had $90.4 million in capital available as of December 31, 2021[542] Cash Flow Summary (in thousands) | Activity | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | Net cash used in operating activities | ($99,930) | ($36,038) | ($75,181) | | Net cash (used in) provided by investing activities | ($44,091) | $64,713 | $10,631 | | Net cash provided by financing activities | $112,429 | $1,413 | $345 | - In January 2021, the company raised net proceeds of approximately $107.8 million from a public offering of common stock[545] - In January 2022, the company secured a four-year, $50.0 million revolving loan facility with Silicon Valley Bank[547] Item 7A. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate sensitivity on investments, deemed immaterial due to short-term, low-risk holdings - The primary market risk is interest income sensitivity from U.S. interest rate changes, expected to be immaterial due to the short-term, low-risk investment portfolio[565] - The company maintains cash and cash equivalents at financial institutions exceeding federally insured limits[566] Item 8. Financial Statements and Supplementary Data This section presents the company's consolidated financial statements, along with an unqualified audit opinion from Ernst & Young LLP Report of Independent Registered Public Accounting Firm Ernst & Young LLP issued an unqualified opinion on Chimerix's financial statements and internal controls, identifying accrued R&D expenses as a critical audit matter - Ernst & Young LLP provided an unqualified audit opinion on consolidated financial statements and internal control effectiveness[572][582] - The audit identified "Accrued Research and Development Expenses" as a Critical Audit Matter, due to subjective judgment in estimating expenses when vendor invoicing does not align with service periods[576][578][579] Consolidated Financial Statements The consolidated financial statements show total assets of $100.5 million, a net loss of $173.2 million, and an accumulated deficit of $885.6 million as of December 31, 2021 Consolidated Balance Sheet Data (in thousands) | Account | Dec 31, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Cash and cash equivalents | $15,397 | $46,989 | | Total current assets | $95,805 | $81,658 | | Total assets | $100,540 | $84,723 | | Total current liabilities | $29,896 | $8,533 | | Total liabilities | $32,288 | $11,347 | | Total stockholders' equity | $68,252 | $73,376 | Consolidated Statement of Operations Data (in thousands) | Account | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | Total revenues | $1,979 | $5,372 | $12,519 | | Total operating expenses | $175,379 | $49,888 | $128,502 | | Loss from operations | ($173,400) | ($44,516) | ($115,983) | | Net loss | ($173,236) | ($43,522) | ($112,576) | | Net loss per share | ($2.04) | ($0.70) | ($2.03) | Notes to Consolidated Financial Statements The notes detail accounting policies, including revenue recognition and IPR&D expensing, and provide information on the Oncoceutics acquisition, inventory, and deferred tax assets - The Oncoceutics acquisition was an asset acquisition, resulting in immediate expensing of $82.9 million in acquired in-process R&D[714][716] - TEMBEXA inventory costs began capitalization on June 4, 2021, with a $2.8 million work-in-process balance as of December 31, 2021[620][623] - The company maintains a full valuation allowance against net deferred tax assets due to a history of losses[690] - Total stock-based compensation expense was $12.3 million in 2021, up from $5.6 million in 2020[683] Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - None[731] Item 9A. Controls and Procedures Management concluded that the company's disclosure controls and internal control over financial reporting were effective as of December 31, 2021 - The company's principal executive and financial officers concluded that disclosure controls and procedures were effective as of December 31, 2021[732] - Management concluded that the company's internal control over financial reporting was effective as of December 31, 2021[736] Item 9B. Other Information This item is not applicable - Not applicable[739] Part III Item 10. Directors, Executive Officers and Corporate Governance Information on directors, executive officers, and corporate governance will be incorporated by reference from the 2022 Proxy Statement - Information for this item is incorporated by reference from the company's definitive Proxy Statement, to be filed within 120 days of the fiscal year end[742] Item 11. Executive Compensation Information on executive compensation will be incorporated by reference from the company's 2022 Proxy Statement - Information for this item is incorporated by reference from the company's definitive Proxy Statement[744] Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information on security ownership and related stockholder matters will be incorporated by reference from the company's 2022 Proxy Statement - Information for this item is incorporated by reference from the company's definitive Proxy Statement[745] Item 13. Certain Relationships and Related Transactions, and Director Independence Information on related party transactions and director independence will be incorporated by reference from the company's 2022 Proxy Statement - Information for this item is incorporated by reference from the company's definitive Proxy Statement[746] Item 14. Principal Accounting Fees and Services Information on principal accounting fees and services will be incorporated by reference from the company's 2022 Proxy Statement - Information for this item is incorporated by reference from the company's definitive Proxy Statement[747] Part IV Item 15. Exhibits, Financial Statement Schedules This section lists financial statements and an index of all exhibits filed with the Form 10-K, including material agreements and certifications - This section contains the index of exhibits filed with the Annual Report, including material agreements like the Oncoceutics merger agreement, BARDA contract, and Cantex license agreement[751][752]