Chimerix(US:CMRX)2023-03-01 16:00Part I Business Chimerix is a biopharmaceutical company focused on developing imipridones as cancer therapies, with its lead candidate ONC201 in a Phase 3 trial for H3 K27M-mutant glioma, following the strategic sale of TEMBEXA in 2022 - The company's primary mission is to develop medicines for deadly diseases, with a current focus on imipridones like ONC201 for treating H3 K27M-mutant glioma22 - In September 2022, Chimerix sold its worldwide rights for TEMBEXA to Emergent for an upfront payment of $238 million. The deal includes potential future milestone payments up to $136.5 million and royalties on sales362 - The company launched the Phase 3 ACTION study for ONC201 in November 2022, a pivotal trial for patients with newly diagnosed H3 K27M-mutant glioma, with interim data expected in early 20252425 - The company's strategy involves executing the ONC201 Phase 3 study, preparing for its potential commercialization, maintaining financial flexibility, and seeking to in-license other development programs363364 Imipridone Platform (ONC201, ONC206, ONC212) The imipridone platform represents a potential new class of selective cancer therapies, with lead candidate ONC201 in a Phase 3 trial for H3 K27M-mutant glioma, and earlier-stage candidates ONC206 and ONC212 in development - The Phase 3 ACTION study for ONC201 is a randomized, placebo-controlled trial enrolling 450 patients to evaluate two dosing frequencies against a placebo, with primary endpoints of Overall Survival (OS) and Progression-Free Survival (PFS)25 - A Blinded Independent Central Review (BICR) of Phase 2 data for ONC201 in recurrent H3 K27M-mutant glioma showed a 20.0% Overall Response Rate (ORR) by RANO-HGG criteria and a 30% response rate when including RANO-LGG criteria348349351 - ONC206 is in first-in-human clinical trials for adults with recurrent primary CNS tumors and a separate dose-escalating trial for pediatric patients330 Antiviral Programs (CMX521 and Chemical Library) The company maintains an antiviral program focused on CMX521 for SARS-CoV-2 and a proprietary chemical library for future pandemic threats - CMX521 is an antiviral candidate for SARS-CoV-2 being developed with READDI at UNC, supported by a ~$1.7 million grant from North Carolina to fund prodrug synthesis and animal studies359 - The Chimerix Chemical Library contains over 10,000 compounds, including approximately 3,500 nucleoside analogs, which are being screened for activity against SARS-CoV-2 and other potential pandemic viruses360 TEMBEXA (brincidofovir, BCV) Asset Sale Chimerix completed the sale of its FDA-approved smallpox therapy, TEMBEXA, to Emergent BioSolutions for $238 million upfront cash plus potential milestones and royalties - Chimerix sold its exclusive worldwide rights to TEMBEXA to Emergent for $238 million upfront362391 - The company is eligible for significant contingent payments, including up to $124 million in milestones from BARDA procurement options and royalties on future gross profits90391 - Prior to the sale, Chimerix secured international procurement agreements for TEMBEXA, including a $9.3 million supply agreement and a contract with Canada's Public Health Agency (PHAC) for up to $25.3 million, which generated $32.0 million in procurement revenue in 2022149370396 Intellectual Property Chimerix protects its technology through patents and trade secrets, with its imipridone patent portfolio including 416 patents or applications as of February 2023 Imipridone Patent Portfolio (as of Feb 15, 2023) | Description | Count | | :--- | :--- | | Total patents or applications | 416 | | Issued US and foreign patents (ONC201) | 213 | | Pending US and foreign applications (ONC201) | 65 | - Patent protection for ONC201's lead indication is expected to last until 2037 in the U.S., with a potential extension to 2042 with full patent term restoration434 Government Regulation The company's operations are subject to extensive regulation by the FDA and similar authorities abroad, covering all stages from R&D to manufacturing and marketing - The drug development and approval process in the U.S. is lengthy and complex, requiring preclinical testing, an effective IND, and adequate and well-controlled clinical trials (Phase 1, 2, and 3) to establish safety and efficacy before an NDA can be submitted to the FDA411414442 - ONC201 has been granted Orphan Drug Designation for treating malignant glioma, which may provide seven years of market exclusivity for that indication if it is the first to receive FDA approval353420483 - The company utilizes expedited FDA programs, including Fast Track designation for ONC201, which is intended to facilitate the development and expedite the review of drugs for serious conditions with unmet medical needs353453 Risk Factors An investment in Chimerix involves a high degree of risk, including a history of significant financial losses, heavy dependence on ONC201's success, and the need for future financing - The company has a history of significant losses and anticipates future losses, with 2022 profitability due to the one-time sale of TEMBEXA and not indicative of ongoing operational profitability542509198 - The company's future success is highly dependent on the successful clinical development, regulatory approval, and commercialization of ONC201, which is still in development and may not succeed35173176 - Chimerix relies on third-party manufacturers for its drug supply and CROs for clinical trials, exposing it to risks of supply disruption, quality issues, and trial delays if these third parties fail to perform36533572 - The company may need additional financing to fund operations, and failure to secure funding could force delays or elimination of development programs204 Unresolved Staff Comments The company reports that it has no unresolved staff comments from the SEC - There are no unresolved staff comments717 Properties Chimerix leases approximately 21,325 square feet of office space for its corporate headquarters and 7,925 square feet of laboratory space in Durham, North Carolina, with both leases expiring in July 2026 - The company leases its corporate headquarters (21,325 sq. ft.) and laboratory space (7,925 sq. ft.) in Durham, NC, with leases expiring in July 2026475545 Legal Proceedings The company reports no material legal proceedings - There are no material legal proceedings to report719 Mine Safety Disclosures This item is not applicable to the company - Not applicable720 Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's common stock trades on The Nasdaq Global Market under 'CMRX', with no cash dividends ever paid or planned, and no equity repurchases during the period - The company's common stock trades on The Nasdaq Global Market under the symbol CMRX10 - Chimerix has never declared or paid cash dividends and does not plan to in the foreseeable future696 - The company made no purchases of its equity securities during the reporting period724754 Management's Discussion and Analysis of Financial Condition and Results of Operations Management's discussion highlights the company's shift to an oncology-focused pipeline after the 2022 TEMBEXA sale, which generated $33.8 million in revenue and a $229.7 million net gain, resulting in a $172.2 million net income - The sale of TEMBEXA to Emergent for $238 million upfront was a key event in 2022, providing significant capital and allowing the company to focus on its oncology pipeline735 Financial Results Comparison (2022 vs. 2021) | Metric | 2022 | 2021 | | :--- | :--- | :--- | | Total Revenues | $33.8M | $2.0M | | R&D Expenses | $71.6M | $73.8M | | G&A Expenses | $22.1M | $18.7M | | Net Income (Loss) | $172.2M | ($173.2M) | - The company believes its existing cash, cash equivalents, and investments of approximately $266.0 million will fund operations and capital requirements for at least the next 12 months834836 Results of Operations For 2022, total revenues significantly increased to $33.8 million due to TEMBEXA procurement, while R&D expenses slightly decreased, and a $229.7 million net gain from the TEMBEXA sale led to a $172.2 million net income, reversing a $173.2 million net loss in 2021 - Total revenues increased by $31.8 million in 2022, driven by $32.0 million in procurement revenue from international TEMBEXA agreements825149 - R&D expenses decreased by $2.2 million (3.0%) in 2022, mainly due to a $20.0 million milestone payment made in 2021 not recurring, and a $4.8 million decrease in DSTAT costs, which offset a $20.3 million increase in ONC201 program expenses82644859 - General and administrative expenses increased by $3.5 million (18.5%) in 2022, primarily due to higher compensation and a $1.8 million increase in legal and consulting expenses related to the TEMBEXA transactions45798 - The company recorded a net gain of $229.7 million in 2022 from the sale of TEMBEXA829159 - There was no acquired in-process research and development (IPR&D) expense in 2022, compared to $82.9 million in 2021 related to the Oncoceutics acquisition860828 Liquidity and Capital Resources As of December 31, 2022, Chimerix had approximately $266.0 million in capital, significantly bolstered by $234.0 million in proceeds from the TEMBEXA sale, and management believes current capital is sufficient for at least the next 12 months Cash Flow Summary (in thousands) | Activity | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Net Cash Used in Operating Activities | $(46,867) | $(99,930) | $(36,038) | | Net Cash Provided by (Used in) Investing Activities | $70,037 | $(44,091) | $64,713 | | Net Cash (Used in) Provided by Financing Activities | $(12,725) | $112,429 | $1,413 | - Net cash used in operating activities was $46.9 million in 2022, primarily reflecting net income of $172.2 million offset by a non-cash gain of $229.7 million on the sale of TEMBEXA53 - Net cash provided by investing activities was $70.0 million in 2022, driven by $234.0 million in proceeds from the TEMBEXA sale, offset by net purchases of investments872 - Net cash used in financing activities was $12.7 million in 2022, mainly due to a $14.0 million note payment related to the Oncoceutics acquisition55 Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate sensitivity on its investment portfolio, but due to the short-term, low-risk nature of its investments, a 10% rate change is considered immaterial - The company's main market risk exposure is to interest rate changes affecting its investment portfolio, but due to the short-term, low-risk nature of the investments, the impact of a 10% rate change is considered immaterial844 - Inflation is not considered to have had a material effect on the company's results of operations for the years ended December 31, 2022 or 2021845 Financial Statements and Supplementary Data This section contains the company's audited consolidated financial statements for 2022, 2021, and 2020, with an unqualified auditor's opinion and accrued R&D expenses identified as a critical audit matter - The independent auditor, Ernst & Young LLP, issued an unqualified opinion on the consolidated financial statements and the effectiveness of internal control over financial reporting as of December 31, 202291162851 - The primary critical audit matter identified was the accounting for accrued research and development expenses, which involves significant management judgment in estimating costs for services that have been rendered but not yet invoiced6397849 Consolidated Financial Statements The consolidated financial statements show a significant improvement in financial position in 2022, with total assets increasing to $279.3 million and net income of $172.2 million, reversing prior year losses Consolidated Balance Sheet Data (in thousands) | Account | Dec 31, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Cash and cash equivalents | $25,842 | $15,397 | | Total current assets | $228,138 | $95,805 | | Total assets | $279,341 | $100,540 | | Total current liabilities | $20,415 | $29,896 | | Total liabilities | $22,484 | $32,288 | | Total stockholders' equity | $256,857 | $68,252 | Consolidated Statement of Operations Data (in thousands) | Account | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Total revenues | $33,824 | $1,979 | $5,372 | | Total operating expenses | $93,763 | $175,379 | $49,888 | | Gain on sale of business, net | $229,670 | $— | $— | | Net income (loss) | $172,167 | $(173,236) | $(43,522) | Notes to Consolidated Financial Statements The notes provide detailed disclosures on the TEMBEXA sale, the Oncoceutics acquisition, a 2022 restructuring, and the company's tax situation, including a full valuation allowance against deferred tax assets - The sale of TEMBEXA to Emergent included an upfront cash payment of ~$238 million and eligibility for up to ~$124 million in milestones tied to BARDA procurement options, plus royalties, with the company recording a net gain of $229.7 million on the sale90267268 - The 2021 acquisition of Oncoceutics was accounted for as an asset acquisition, resulting in an immediate expense of $82.9 million for acquired in-process research and development (IPR&D)276304332 - In December 2022, the company initiated a restructuring that included a reduction of 20 full-time employees, recording one-time termination benefit expenses of $1.9 million278307334 - As of Dec 31, 2022, the company had federal and state net operating loss carryforwards of approximately $394.8 million and $394.4 million, respectively, with a full valuation allowance recorded against deferred tax assets due to uncertainty of realization237234 Changes in and Disagreements With Accountants on Accounting and Financial Disclosure The company reports no changes in or disagreements with its accountants on any matter of accounting principles or practices, or financial statement disclosure - None reported309 Controls and Procedures Management concluded that the company's disclosure controls and procedures and internal control over financial reporting were effective as of December 31, 2022, with no material changes during the last fiscal quarter - Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2022310 - Based on the COSO 2013 framework, management concluded that internal control over financial reporting was effective as of December 31, 2022338 - No changes in internal control over financial reporting occurred during the last fiscal quarter that materially affected, or are reasonably likely to materially affect, these controls313 Other Information This item is not applicable - Not applicable314 Part III Part III of the 10-K, covering Items 10 through 14, incorporates information by reference from the company's definitive proxy statement for its 2023 Annual Meeting of Stockholders Directors, Executive Officers and Corporate Governance Information required by this item, including details on directors, executive officers, and the company's Code of Business Conduct and Ethics, will be incorporated by reference from the company's 2023 Proxy Statement - The required information is incorporated by reference from the registrant's 2023 Proxy Statement316 Executive Compensation Information required by this item regarding executive compensation will be incorporated by reference from the company's 2023 Proxy Statement - The required information is incorporated by reference from the registrant's 2023 Proxy Statement341 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information required by this item, concerning security ownership by certain beneficial owners and management, as well as matters related to equity compensation plans, will be incorporated by reference from the company's 2023 Proxy Statement - The required information is incorporated by reference from the registrant's 2023 Proxy Statement342 Certain Relationships and Related Transactions, and Director Independence Information required by this item regarding related party transactions and director independence will be incorporated by reference from the company's 2023 Proxy Statement - The required information is incorporated by reference from the registrant's 2023 Proxy Statement318 Principal Accounting Fees and Services Information required by this item concerning fees paid to the principal accountant and the audit committee's pre-approval policies will be incorporated by reference from the company's 2023 Proxy Statement - The required information is incorporated by reference from the registrant's 2023 Proxy Statement941 Part IV Exhibits, Financial Statement Schedules This section lists the financial statements, financial statement schedules, and exhibits filed as part of the Form 10-K, including certifications by the CEO and CFO - This section includes the financial statements (filed under Item 8) and a list of all exhibits filed with the annual report952960 - Key exhibits filed include the Oncoceutics Merger Agreement, the Asset Purchase Agreement with Emergent, loan agreements, and executive employment letters951932954 - Certifications of the Principal Executive Officer and Principal Financial Officer pursuant to Sarbanes-Oxley Sections 302 and 906 are included as exhibits962933955