Chimerix(CMRX) - 2023 Q4 - Annual Report

PART I Item 1. Business Chimerix develops imipridones for cancer, with lead candidate ONC201 in Phase 3 for H3 K27M-mutant diffuse glioma - Chimerix's primary mission is to develop medicines for deadly diseases, with a current focus on imipridones as selective cancer therapies[232] - The lead product candidate, dordaviprone (ONC201), is in a global Phase 3 clinical trial (the ACTION Study) for H3 K27M-mutant diffuse glioma, a patient population with few treatment options[105][232] - The company's strategy centers on the successful execution of the ONC201 Phase 3 trial, preparing for its commercialization, leveraging external capital for its early-stage pipeline (ONC206, ONC212, CMX521), and exploring in-licensing opportunities to expand its pipeline[449] - Chimerix relies on third-party contract manufacturers for its product supply and does not own or operate its own manufacturing facilities[439][462] - The company's operations are highly regulated by the FDA in the U.S. and other international authorities, covering all stages from research and development to manufacturing and marketing[441][464] Product Pipeline The company's pipeline features lead candidate ONC201 in Phase 3 for glioma, alongside ONC206 and other preclinical programs - ONC201 (dordaviprone) is the lead candidate, currently in the Phase 3 ACTION Study for H3 K27M-mutant diffuse glioma. The study is enrolling approximately 450 patients across 13 countries to evaluate Overall Survival (OS) and Progression-Free Survival (PFS)[72][105] - Recent peer-reviewed publications in Cancer Discovery and the Journal of Clinical Oncology reported promising survival data for ONC201 in patients with H3 K27M-mutant diffuse midline gliomas, showing a median OS of 13.7 months in the recurrent setting compared to 5.1 months in a natural history study[75][76][217] - ONC206, a second-generation imipridone, is in Phase 1 dose escalation trials for patients with advanced central nervous system tumors. It has shown greater potency than ONC201 in preclinical models[96][97][109] - Early-stage pipeline includes ONC212 (targeting GPR132 and ClpP) and CMX521 (an antiviral for SARS-CoV-2), which are in preclinical development and collaborations with academic institutions[86][87][220] Significant Agreements and Commercial Operations The company divested TEMBEXA rights, acquired Oncoceutics for its pipeline, and plans U.S. commercialization of ONC201 - In September 2022, Chimerix sold the worldwide rights to TEMBEXA® to Emergent BioSolutions for a $238 million upfront payment, with potential for up to $136.5 million in future milestones and royalties[410][428] - The acquisition of Oncoceutics in January 2021 brought the imipridone pipeline to Chimerix. The deal included upfront cash and stock, with up to $360.0 million in contingent milestone payments and tiered royalties on future sales of ONC201 and ONC206[452][453] - Chimerix has licensing agreements with Ohara Pharmaceutical for ONC201 in Japan and with CR Sanjiu for ONC201 in Greater China, which include potential milestone payments and royalties[454][455] - The company plans to commercialize ONC201 in the United States with a small, specialized commercial infrastructure and may seek partners for commercialization outside the U.S.[431][456] Intellectual Property The company's success relies on robust patent protection for its imipridone and antiviral portfolios, with ONC201 protection into 2037 - The company's success is significantly dependent on its ability to obtain, maintain, and defend patent protection for its products and technology[460] - As of February 12, 2024, the imipridone patent portfolio includes 441 patents or applications, with protection for ONC201's lead indication expected to extend into 2037 in the U.S.[437][461] - The antiviral patent portfolio includes 26 patents or applications owned or in-licensed by the company[438][493] Item 1A. Risk Factors The company faces risks from financial losses, clinical development uncertainty, third-party reliance, IP challenges, and regulatory and cybersecurity threats - The company has a history of significant net losses, with a net loss of $82.1 million for the year ended December 31, 2023, and an accumulated deficit of approximately $795.5 million. Future profitability is not guaranteed[531][565] - All product candidates are still in clinical development and face a high risk of failure. Success depends on positive trial results, regulatory approvals, and successful commercialization, none of which are certain[148][544] - Chimerix relies on third-party manufacturers for all preclinical, clinical, and potential commercial supplies, exposing it to risks of supply interruption, quality issues, and manufacturing delays[149][633][666] - The company's ability to compete depends on protecting its intellectual property. There are risks that patents may not be granted, may be challenged, or may not provide sufficient protection against competitors[8][689] - The business is subject to extensive and evolving healthcare laws, including anti-kickback statutes and data privacy regulations like GDPR and HIPAA, which could lead to significant penalties if violated[18][30][698] - Cybersecurity threats, including ransomware and phishing attacks, pose a significant risk to the company's information systems and sensitive data, which could lead to operational disruptions, regulatory actions, and financial loss[33][34] Item 1B. Unresolved Staff Comments The company reports that it has no unresolved staff comments from the SEC - There are no unresolved staff comments[39][50][754] Item 1C. Cybersecurity The company integrates cybersecurity risk management into its overall processes, overseen by the Audit Committee, with no material threats to date - Chimerix has established processes to identify, assess, and manage material risks from cybersecurity threats, which are integrated into the company's overall risk management framework[755][756] - The Board of Directors' Audit Committee oversees the cybersecurity risk management processes, receiving quarterly reports from the Senior Director of IT[43][760] - The company utilizes third-party service providers for various functions and has a vendor qualification program to manage associated cybersecurity risks, which includes assessments and contractual obligations[41][71] - To date, the company has not experienced a cybersecurity threat that has had a material effect on its business[757] Item 2. Properties The company leases office and lab space in Durham, NC, totaling 29,250 sq ft, with leases expiring July 2026 - The company leases its corporate headquarters (approx. 21,325 sq. ft.) and laboratory space (approx. 7,925 sq. ft.) in Durham, NC, with leases expiring in July 2026[761] Item 3. Legal Proceedings The company reports no material legal proceedings - There are no legal proceedings to report[762] Item 4. Mine Safety Disclosures This item is not applicable to the company - Not applicable[47][763] PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities CMRX common stock trades on Nasdaq, with no history or plans for cash dividends, and no share repurchases during the period - The company's common stock trades on the Nasdaq Global Market under the ticker symbol "CMRX"[765] - Chimerix has never paid cash dividends and does not anticipate paying them in the foreseeable future, intending to retain earnings for operations and growth[49][765] - The company did not purchase any of its own securities during the period covered by the Annual Report[79] Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Revenue significantly decreased in 2023 to $0.3 million, resulting in an $82.1 million net loss, with $204.5 million capital expected to fund operations for 12 months Results of Operations In 2023, total revenues declined by 99.0% to $0.3 million, leading to a $82.1 million net loss, primarily due to the TEMBEXA sale in 2022 Comparison of Years Ended December 31, 2023 and 2022 (in thousands) | | Years Ended 2023 | December 31, 2022 | Dollar Change | % Change | |---|---|---|---|---| | Total revenues | $324 | $33,824 | $(33,500) | (99.0)% | | Research and development | $68,788 | $71,631 | $(2,843) | (4.0)% | | General and administrative | $24,601 | $22,132 | $2,469 | 11.2% | | Loss from operations | $(93,065) | $(60,386) | $(32,679) | 54.1% | | Gain on sale of business, net | $— | $229,670 | $(229,670) | (100.0)% | | Net (loss) income | $(82,095) | $172,167 | $(254,262) | (147.7)% | - Total revenues decreased by 99.0% in 2023 compared to 2022, primarily due to the completion of international TEMBEXA procurement agreement deliveries in 2022[180] - Research and development expenses decreased by 4.0% in 2023, driven by the discontinuation of the DSTAT program and reduced pipeline development costs, partially offset by increased expenses for the ONC201 Phase 3 study[182][205] - General and administrative expenses increased by 11.2% in 2023, mainly due to a $3.4 million increase in non-cash stock compensation expenses related to a management transition[184][206] - The company reported a net loss of $82.1 million in 2023, a stark contrast to the net income of $172.2 million in 2022, which was primarily driven by a one-time net gain of $229.7 million from the sale of TEMBEXA[180][186] Liquidity and Capital Resources As of December 31, 2023, the company had $204.5 million in capital, sufficient to fund operations for at least 12 months - As of December 31, 2023, the company had approximately $204.5 million in capital available to fund operations and an accumulated deficit of $795.5 million[236] - The company believes its existing cash, cash equivalents, and investments are sufficient to fund operating expenses and capital requirements for at least the next 12 months[242][249] Cash Flow Summary (in thousands) | Cash Flow Activity | Year Ended Dec 31, 2023 | Year Ended Dec 31, 2022 | Year Ended Dec 31, 2021 | |---|---|---|---| | Net cash used in operating activities | $(69,088) | $(46,867) | $(99,930) | | Net cash provided by (used in) investing activities | $70,599 | $70,037 | $(44,091) | | Net cash provided by (used in) financing activities | $308 | $(12,725) | $112,429 | - The company has a $50.0 million secured revolving loan facility with Silicon Valley Bank, of which no amount has been drawn down as of December 31, 2023[239] - Future funding may be required and could be raised through equity offerings, debt financing, or strategic partnerships, which may result in dilution to stockholders or restrictive covenants[241][275] Item 7A. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate sensitivity on its investment portfolio, with a 10% rate change not expected to materially affect results - The primary market risk exposure is interest rate sensitivity on the company's cash, cash equivalents, and available-for-sale investments[278] - Due to the short-term and low-risk nature of the investment portfolio, a 10% change in interest rates is not expected to have a material effect on the fair market value of the portfolio or on operating results[278] - The company does not believe that inflation has had a material effect on its results of operations for the years ended December 31, 2023 or 2022[279] Item 8. Financial Statements and Supplementary Data This section presents the company's audited consolidated financial statements for 2021-2023, with an unqualified opinion from Ernst & Young LLP Consolidated Balance Sheet Data (in thousands) | | Dec 31, 2023 | Dec 31, 2022 | |---|---|---| | Cash and cash equivalents | $27,661 | $25,842 | | Total current assets | $189,110 | $228,138 | | Total assets | $212,774 | $279,341 | | Total current liabilities | $18,443 | $20,415 | | Total liabilities | $19,745 | $22,484 | | Total stockholders' equity | $193,029 | $256,857 | Consolidated Statement of Operations Data (in thousands) | | Year Ended Dec 31, 2023 | Year Ended Dec 31, 2022 | Year Ended Dec 31, 2021 | |---|---|---|---| | Total revenues | $324 | $33,824 | $1,979 | | Total operating expenses | $93,389 | $93,763 | $175,379 | | Net (loss) income | $(82,095) | $172,167 | $(173,236) | | Net (loss) income per share, basic | $(0.93) | $1.97 | $(2.04) | - The independent auditor, Ernst & Young LLP, issued an unqualified opinion on the consolidated financial statements, stating they present fairly, in all material respects, the financial position and results of operations of the company[283] - A critical audit matter identified was the estimation of accrued research and development expenses, which requires significant judgment due to the timing difference between service provision and vendor invoicing[286][287][288] Item 9A. Controls and Procedures Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2023, with no material changes in the last quarter - The principal executive and financial officers concluded that the company's disclosure controls and procedures were effective as of December 31, 2023[821] - Management concluded that the company's internal control over financial reporting was effective as of December 31, 2023, based on the COSO 2013 framework[833] - There were no changes in internal control over financial reporting during the fourth quarter that materially affected, or are reasonably likely to materially affect, these controls[834][865] PART III Items 10-14 Information for Items 10-14, covering governance, compensation, and related matters, is incorporated by reference from the upcoming 2024 Proxy Statement - Information for Item 10 (Directors, Executive Officers and Corporate Governance) is incorporated by reference from the upcoming 2024 Proxy Statement[837] - Information for Item 11 (Executive Compensation) is incorporated by reference from the upcoming 2024 Proxy Statement[838] - Information for Item 12 (Security Ownership), Item 13 (Certain Relationships and Related Transactions), and Item 14 (Principal Accounting Fees and Services) is incorporated by reference from the upcoming 2024 Proxy Statement[846][847][850] PART IV Item 15. Exhibits and Financial Statement Schedules This section lists all financial statements, schedules, and exhibits filed with the Form 10-K, including key corporate documents and SOX certifications - This item lists all financial statements and exhibits filed with the annual report[839][848] - No financial statement schedules are included as the information is either provided elsewhere, not required, or immaterial[852] - Key exhibits include the merger agreement with Oncoceutics, the Asset Purchase Agreement with Emergent BioSolutions, and the Loan and Security Agreement with Silicon Valley Bank[849][854][877]