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Edited Transcript of CMRX earnings conference call or presentation 25-Feb-20 1:30pm GMT

Q4 2019 Chimerix Inc Earnings Call

Durham Mar 26, 2020 (Thomson StreetEvents) -- Edited Transcript of Chimerix Inc earnings conference call or presentation Tuesday, February 25, 2020 at 1:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Michael A. Sherman

Chimerix, Inc. - CEO, President & Director

* Michael T. Andriole

Chimerix, Inc. - Chief Business Officer & CFO

* Michelle LaSpaluto

Chimerix, Inc. - VP of Strategic Planning & IR

* William Garrett Nichols

Chimerix, Inc. - Chief Medical Officer

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Conference Call Participants

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* Edward Patrick White

H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst

* Philip M. Nadeau

Cowen and Company, LLC, Research Division - MD & Senior Research Analyst

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Presentation

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Operator [1]

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Good morning, ladies and gentlemen, and welcome to the Chimerix Fourth Quarter and Year-end 2019 Earnings Conference Call.

I would now like to introduce you to your host for today's call, Michelle LaSpaluto, Vice President of Strategic Planning and Investor Relations at Chimerix. Please proceed.

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Michelle LaSpaluto, Chimerix, Inc. - VP of Strategic Planning & IR [2]

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Thank you, operator. Good morning, everyone, and welcome to the Chimerix Fourth Quarter and Year-end 2019 Financial and Operating Results Conference Call. This morning, we issued a press release, which outlines the topics we plan to discuss today. You can access the press release as well as the slides that we will be -- as well as slides that's in our Investors section of the website. With me on today's call are President and Chief Executive Officer, Mike Sherman; Chief Financial and Business Officer, Mike Andriole; and Chief Medical Officer, Garrett Nichols.

Before we begin, I would like to remind you that the statements made on today's call include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and are subject to risks, uncertainties and other factors. These risks and uncertainties and other factors could cause actual results to differ materially from those referred to in the forward-looking statements. You are cautioned not to rely on these forward-looking statements. These risks and uncertainties are described in detail in Chimerix filings with the Securities and Exchange Commission, including its Form 10-K filed earlier today, its most recently filed reports on the Form 8-K and other documents subsequently filed with the Securities and Exchange Commission. All forward-looking statements are based on information currently available to Chimerix, and Chimerix assumes no obligation to update any such forward-looking statements.

With that, I would now like to turn the call over to Mike Sherman. Mike?

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Michael A. Sherman, Chimerix, Inc. - CEO, President & Director [3]

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Thanks, Michelle, and good morning, everyone. It's been a little less than a year since taking the helm at Chimerix. And during that time, we've executed on 3 major initiatives to reposition the company. Let me start with a recap of the team's strong execution in those 3 areas. First, we restructured the organization to reduce spending by about 50% in order to preserve resources and maximize the investment we could make in promising new oncology programs. This minimized our cash burn and allowed us to exit the year with approximately $113 million in cash.

Second, we focused the organization on completing the development of brincidofovir as a countermeasure for smallpox. Last year, we completed the FDA's 2 required animal efficacy studies in the rabbit and mouse models. Each of those achieved statistically significant reduction in mortality from orthopoxvirus disease. During that period, I would say, we also enhanced the quality of our engagement with both BARDA and the FDA. Communication has been particularly strong over the last several months with both of those organizations. Early this year, we successfully completed the PK dose bridging studies. This was the gating event to request a pre-NDA meeting with the FDA. That meeting is now scheduled. Our strategy here is to leverage this late-stage program in partnership with BARDA to provide the capital resources to further support our development programs in oncology.

Finally, we in-licensed DSTAT, a potential first-in-class therapy that has the potential to inhibit activities of several key proteins implicated in the survival and viability of AML blasts and leukemic stem cells. Since acquiring rights to DSTAT, we've prepared for and successfully completed an end of Phase II meeting with the FDA. And during that meeting, we reached alignment with the FDA on both our readiness for Phase III and the key design elements of that trial. The FDA has also agreed with our nonclinical and CMC plans. We've captured their feedback in the detailed protocol, which we have submitted to the FDA for final review.

As I've seen in prior companies, when you have a capable team and you approach things objectively, make decisions in an open and collaborative environment, strong execution tends to follow. And we're definitely experiencing that at Chimerix. Speaking of capable teams, I'm pleased to announce the appointment of Dr. Pratik Multani, Chief Medical Officer of ORIC Pharmaceuticals to our Board of Directors. Dr. Multani has a rich history of successful oncology drug development and, as a hematologist, will bring particular expertise to our development of DSTAT. The diversity of experience he's had across multiple oncology platforms will make him particularly valuable as we expand our pipeline of oncology therapies. So we're very excited to have Dr. Multani join our board.

Let me also pass along my thanks to Jim Daly, who served our Board for the past 6 years. Jim is a seasoned biotech executive and valued Board member to a number of companies, and he was instrumental in our repositioning of the company in the last year, been a pleasure working with Jim, and we'll certainly miss him.

Let me now dig a little deeper into our plans for DSTAT. We believe using a therapy with multimodal targeting very early in the treatment of a heterogeneous disease like AML is the right place for this agent. The objective is to make early responses more durable, driving a higher cure rate. That's certainly what was observed in the randomized Phase II trial. The strongest signal came in the form of overall survival advantage. And that was linked to consistently more durable responses. Our initial focus is with the 7+3 combination, but the rationale for the drug also applies to combining with other emerging therapies in this space. Our overall Phase III design is really pretty standard, but we've been creative in one aspect of that design in order to provide access to information early on that further validates the mechanism of action, which led to the survival advantage in the Phase II trial.

Let me expand on our strategy related to that early assessment, and then I'll let Garrett cover the design details. Our trial design includes an early assessment of the first 80 randomized evaluable patients. In particular, we'll have a robust assessment of comparative rates of complete response, or CR, and minimal residual disease, or MRD. We'll also be able to evaluate DSTAT's impact on accelerating hematologic recovery. CR and MRD are the 2 early metrics most predictive of survival advantage. CR is more relevant for event-free survival and MRD for both event-free survival and overall survival. This data is expected to be unblinded and reported publicly. Importantly, enrollment would continue uninterrupted.

This design feature does a few things for us. It provides important additional data validating the mechanism of action and further insight into the probability of success for the final analysis at a point at which the investment in the trial would be approximately $15 million. This allows us to confirm that our ongoing investment is supported by clinical data. Continued access to the maturing information will also provide insight into time-to-event endpoints during the enrollment of the Phase III trial. This includes event-free survival and overall survival. It does all this without materially changing the time to complete the trial.

Now we've also incorporated a feature that provides the independent data monitoring committee discretion to maintain the blinding of the data from this early assessment if what I would call exceptional advantages are observed in rates of CR and/or MRD. This is not a traditional futility. These are thresholds that are so compelling and likely to translate to survival endpoint advantages that it would trump our desire to access more data early. This isn't our baseline assumption, but we incorporate that flexibility to accelerate development based on the strength of the data. Garrett will expand on that in a minute.

Let me briefly touch on the progress we've made with brincidofovir in smallpox. While our longer-term development strategy has shifted to oncology, this program is well positioned to provide substantial ongoing non-dilutive capital to fund that development. Between our current cash position and potential renewable procurement contracts in the neighborhood of $450 million to $550 million, we have a substantial opportunity to fund additional innovation. As you may know, BARDA has a mandate to incorporate a second drug in the strategic stockpile. And with other potentially competitive programs still in very early development, brincidofovir is in a position to benefit from this second sourcing directive for an extended period. As I mentioned, we've submitted a meeting request to the FDA, and a pre-NDA meeting is now scheduled. We expect the minutes from that meeting to be received early in the second quarter, and we intend to announce the results of that meeting after we receive those minutes. We've been in close collaboration with both BARDA and the FDA on the work that has been performed, and we have had their alignment along the way. Depending on the outcome of that meeting, we expect to advance the NDA submission process and to be in a position to submit that NDA midyear. Work on the NDA filing has already begun.

FDA's support to move ahead with the NDA is also an important milestone for the procurement process with BARDA. I look forward to providing an update on that pre-NDA meeting after we receive meeting minutes.

With that, let me turn the call over to Garrett for a more detailed review of our DSTAT pivotal trial design. Garrett?

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William Garrett Nichols, Chimerix, Inc. - Chief Medical Officer [4]

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Thank you, Mike. As Mike mentioned, we had a successful end of Phase II meeting for DSTAT with the FDA earlier this year, in which we achieved alignment on our readiness to enter Phase III of development and on the key elements of a pivotal Phase III clinical trial. We've submitted the protocol to the FDA, and it is currently under review. The proposed Phase III study will be a randomized, double-blind trial of approximately 570 adults with newly diagnosed AML who are considered fit for intensive induction chemotherapy. The trial will include patients who are at least 60 years old, with intermediate or adverse genetic risk profiles and will also include patients between 18 and 60 years old with adverse genetic risk profiles.

Having a broad age range was important to the FDA. The inclusion of younger patients with adverse genetic risk provides consistency in expected outcomes across the age groups. Patients will be randomized 1 to 1 to receive DSTAT in combination with standard cytarabine plus anthracycline chemotherapy during induction and consolidation cycles. Patients on the control arm of the study will receive placebo plus standard therapy alone. Patients with FLT-3 mutations will be allowed into the study and will be allowed to receive midostaurin in addition to their standard chemotherapy regimen. Enrollment will be stratified based on FLT-3 status, age and genetic risk.

The FDA has indicated that event-free survival or overall survival are acceptable endpoints for regulatory approval. EFS is defined as the time from randomization to treatment failure, relapse or death from any cause, whichever occurs first, and treatment failure in the EFS definition is failure to achieve a complete response with hematologic recovery. We intend to allocate alpha to both endpoints, such that the success in either could be the basis for approval. The study is designed to provide greater than 85% power to detect hazard ratios of 0.7 for either overall survival or event-free survival. Other endpoints to be evaluated in the trial include minimal residual disease, relapse-free survival, time to hematologic recovery and induction response or CR/CRI.

In order to supplement the data already reported from the pilot and Phase II trials, the trial design includes an early assessment of the first 80 evaluable patients for comparative CR and MRD rates. We hypothesized that the durable responses and survival advantage that we observed in the randomized Phase 2 trial were driven by a higher rate of MRD-negative disease and/or more complete elimination of leukemic stem cells. We will test for measurable residual disease in the bone marrow biopsy at the completion of induction and/or re-induction therapy using sensitive flow cytometric techniques, which can detect one persistent blast in a background of 10,000 cells.

Patients without measurable residual disease have lower rates of relapse and longer overall survival than those with measurable disease, even if they have achieved a complete response, as assessed by conventional methods. This data will be important to confirm the mechanism behind DSTAT in this disease and can serve to continue to build enthusiasm among physicians around the therapy. Importantly, the independent data monitoring committee will review this blinded data and will have the discretion to maintain blinding of the data from this early assessment, if we see what we would call exceptional advantages in the rates of complete response and/or MRD.

These thresholds would be significant when the expected EFS and/or OS benefit are substantial. As an example, if the DMC observed a 20% advantage in CR and a 20% advantage in MRD-negative rate on the DSTAT arm, they could inform the company that the study should proceed without unblinding the early assessment results, in which case, those patients would contribute to the final efficacy analysis. Otherwise, the data would be unblinded to allow presentation of the early assessment data publicly, and these patients would be included -- or that were included in the early analysis will be replaced by newly enrolled patients for the final analysis.

We plan to continue enrollment while this early assessment is being performed. Because the pace of enrollment is fastest at the end of the trial when all sites are open, we do not expect the addition of 80 evaluable patients to materially impact the time to complete the trial. We have a lot of work ahead of us over the coming months related to the initiation of our Phase III trial. When we initiate this pivotal study later this year, we plan to provide greater granularity on time lines for patient accrual for the early assessment data readout and overall trial completion at that time.

With that, I'll now turn the call over to Mike Andriole for a review of the financials.

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Michael T. Andriole, Chimerix, Inc. - Chief Business Officer & CFO [5]

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Thanks, Garrett, and good morning, everyone. As Michelle mentioned in her introductory remarks, earlier today, we issued a press release containing our financial results for the fourth quarter and full year 2019. Starting with our balance sheet, at the end of 2019, we remain well capitalized with approximately $113 million in capital to fund operations.

Turning to our statement of operations, the company reported a net loss of $3.5 million or $0.06 per basic and diluted share for the fourth quarter of 2019 compared with a net loss of $15 million or $0.29 per basic and diluted share in the fourth quarter of 2018.

R&D expenses were reduced by half to $7.5 million for the fourth quarter of 2019 compared with $15.3 million for the same period in 2018. General and administrative expenses also decreased to $3.1 million for the fourth quarter of 2019 compared to $5 million for the same period in 2018. Loss from operations was $3.9 million for the fourth quarter of 2019 compared to a loss from operations of $15.4 million for the same period in 2018.

Over the past 6 months, we've taken significant steps to reduce our burn, culminating in a 50% reduction in operating expenses from Q1 of 2019 to Q4 of 2019. For 2020, we expect R&D expenses to remain relatively consistent with 2019 as we plan to initiate the Phase III DSTAT trial, make investments in brincidofovir CMC and prepare to submit the brincidofovir new drug application midyear.

We do expect a significant decrease in our G&A expenses compared to 2019, primarily from a reduction in compensation expense. As Mike mentioned, our Phase III study for DSTAT is designed to stage investment with approximately $15 million in spend to generate data in the first 80 evaluable patients, at which point we expect to validate our understanding of DSTAT's mechanism of action and confirm the level of activity we observed in Phase II.

Our current operational plan projects a cash balance of approximately $70 million at the end of 2020. And contingent on the outcome of the upcoming regulatory and procurement interactions associated with brincidofovir for smallpox, we have the potential to be profitable in both 2021 and 2022. In that scenario, we expect our current net operating loss carryforwards to offset future operating income in those periods.

With that, operator, we'll now open the line for any questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from Phil Nadeau with Cowen and Company.

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Philip M. Nadeau, Cowen and Company, LLC, Research Division - MD & Senior Research Analyst [2]

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Congrats on the progress. Just a few follow-up questions on the DSTAT Phase III design, just to make sure that we understand. What CR and MRD rates do you think you need to see at the interim in order for the hypothesis behind DSTAT to be verified? Could you give some sense of the bar that you need to see or the data you need to see to continue moving it forward?

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Michael A. Sherman, Chimerix, Inc. - CEO, President & Director [3]

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Yes. This is Mike. So I think Garrett gave an example of one. And I think we've provided some detail to the DMC for those thresholds. The example he gave was a CR rate of 20 in addition to an MRD rate of 20% above what you would see in the control arm. One thing to note as you look at the past couple of drugs that were approved in the space based on survival advantage of one kind or another, they actually didn't show a significant difference in CR and MRD, I think. So that, I think, highlights how high we set those thresholds.

If you were to have, say, less of one or another of those advantages, in other words, all the advantage came in either CR or MRD, you can imagine it would need to be much higher than that 20% threshold. I'd actually prefer to wait to give any clarity or more specifics on those until after maybe the FDA has finalized those criteria. I don't expect that they would challenge those necessarily, but better always to wait until that's completed.

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Philip M. Nadeau, Cowen and Company, LLC, Research Division - MD & Senior Research Analyst [4]

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Got it. And then appreciating the trial hasn't even started yet, so this may not be easy to answer, but do you have a sense of when the interim could be triggered and when the final data could be available?

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Michael A. Sherman, Chimerix, Inc. - CEO, President & Director [5]

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Yes, I'd like to be able to answer that question as we get the trial initiated. So we're -- we've wrapped up some feasibility work and are in the process of beginning to engage sites on that. And so I think we'll be in a much better position. I do think from -- certainly, from an investor perspective, this notion that as opposed to embarking on a Phase 3 trial of, say, 570 patients, where we're essentially in the dark from a data standpoint during that period, the notion that with a relatively small investment, we'll have access to some really important information that then can report during that trial, including the later endpoints of EFS and OS, it provides some nice continued information flow to investors as we execute that trial. So that's one of the benefits of having that early assessment. We'll come back as we initiate the trial mid this year with a more specific estimate of when that early assessment is likely to happen and when we wrap up the trial.

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Philip M. Nadeau, Cowen and Company, LLC, Research Division - MD & Senior Research Analyst [6]

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Got it. And then just one last question on the statistics. If I interpreted your comments correctly, there's actually no alpha spend on the interim. The penalty, for the lack of a better term, for taking the interim is simply you have to enroll 80 more patients. So the total recruitment goes from 570 to 650. Is that correct? Or is there actually alpha spend on that interim as well?

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Michael A. Sherman, Chimerix, Inc. - CEO, President & Director [7]

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That's accurate. You understand it well.

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Operator [8]

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And the next question comes from Ed White with H.C. Wainwright.

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Edward Patrick White, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [9]

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So I just want to make sure I heard that right. The DSTAT trial, you said it's going to start in the middle of '20?

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Michael A. Sherman, Chimerix, Inc. - CEO, President & Director [10]

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That's right.

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Edward Patrick White, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [11]

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Okay. And do you have sites that are prepared to go in both the U.S. and outside the U.S.? And how should we be thinking about patient populations U.S. versus outside the U.S.?

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Michael A. Sherman, Chimerix, Inc. - CEO, President & Director [12]

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Yes, you can imagine that the start-up process is faster in the U.S. So I would imagine, particularly for that first 80 patient assessment, most of those patients are going to be coming from North America, and then European sites would be coming on a little bit later and would be more important in fueling and driving the rest of the Phase III enrollment. Does that answer your question?

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Edward Patrick White, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [13]

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Yes, it does. And when you are looking at that -- those 80 patients, and if the DMC decides that they're not going to unblind it and release the -- and you don't release the data, will you tell us, tell investors that what's going on that we won't be -- because we're going to be expecting the data, that we won't be seeing the data?

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Michael A. Sherman, Chimerix, Inc. - CEO, President & Director [14]

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That's right. And that's one of the reasons why it's important that it's clear. The thresholds we set on this are higher than your typical, say, futility analysis. I mean, typically, in a Phase III design, you set a threshold where you clear that threshold and continue with the study if there is at least a chance that you'd have success. These thresholds are set that there's enough advantage that you actually have pretty significant confidence that they're going to translate to the regulatory survival endpoints in question.

So if they do keep it blinded, that's certainly good news, and we can clarify it. Part of the reason why clarifying what those thresholds are is meaningful. We gave the example of at least the 20 point in both CR and MRD. And hopefully, we can expand on that after we've had the FDA review the threshold, so that we can clarify if there was less of one or the other, then how big must that differential be.

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Edward Patrick White, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [15]

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Great. And maybe just on smallpox. You had said that you intend to submit in middle of this year. Do you foresee any potential hiccups? I assume that you have all the safety data from the CMV trials and other studies. And -- but I'm just wondering if GI issues could be a concern for approval or how you're thinking about that?

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William Garrett Nichols, Chimerix, Inc. - Chief Medical Officer [16]

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I think that -- this is Garrett. I think that there is -- all of that data has been published, summarized. We will summarize it in more detail in the submission itself. I think that we are in the process of writing all of those modules as we speak. A lot of that information is going and being summarized in the pre-NDA package itself. So it's really to get the FDA's feedback that there are no further experiments that need to be done and that we have completed what is required in order to support the efficacy and the bridging to the human exposure. So those are the key elements that we will be discussing with the FDA at the pre-NDA meeting.

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Michael A. Sherman, Chimerix, Inc. - CEO, President & Director [17]

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Yes, I think it's been, I'd say, somewhat a unique level of communication in terms of the information as both the preclinical work has been completed in these animal models, essentially sharing that data with both BARDA and the FDA. So I think there's good awareness of what that data has looked like all along. And so we believe that we've done what's required to advance to the NDA filing, and this is the final step to get that alignment and go ahead from the FDA. And of course, that then opens the door for the procurement process with BARDA.

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Edward Patrick White, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [18]

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And then just I'm wondering if you've had any meetings recently on The Hill or with BARDA regarding the stockpile? And is smallpox still a priority to get the second product in there? Or is the coronavirus sort of taking center stage and maybe there's other concerns with that, and this is sort of being on the back burner? Just want to get your feeling on what the -- your thoughts on the stockpile and how important this is still.

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Michael A. Sherman, Chimerix, Inc. - CEO, President & Director [19]

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Yes, it's a good question, Ed. I don't think the emphasis or priority that -- importance that BARDA has put on the smallpox countermeasure is any less critical to BARDA than it ever has been. That having been said, you can imagine that BARDA is essentially all hands on deck, managing the coronavirus and potential measures there. I will say that we've required engagement with them in preparing for this pre-NDA meeting. And they have not missed a beat in terms of their support for us in that process.

That having been said, of course, to the extent that there are competing resources that introduces that possibility, but at this point, I have no evidence that anything has changed. The fact that there's potential government funding being allocated to -- that new funding being allocated, and I saw reports of that here recently, is probably also positive. But we'll continue to execute and haven't seen any change in BARDA's support of that in the meantime.

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Edward Patrick White, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [20]

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And just the last question. I was just curious if you've had any discussions or interest from other countries regarding ex-U. S. stockpiling?

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Michael A. Sherman, Chimerix, Inc. - CEO, President & Director [21]

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We've had inquiries over time from other countries. And I think I've said this in the past, while those are opportunities that we would pursue, realistically, I think the material financial opportunity is with the U.S. stockpile. The quantities that are likely to be requested for stockpile in other countries are relatively small. So while we'll look at those opportunities when they come there, they fall behind the U.S.

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Operator [22]

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And I'm not showing any further questions at this time. I would now like to turn the call back over to Mike for any further remarks.

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Michael A. Sherman, Chimerix, Inc. - CEO, President & Director [23]

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Yes. Thanks, everyone, for your attention this morning. I will point out that we've updated our corporate presentation on our website, which includes some of these parameters and design features of the Phase III trial. So feel free to reference that as you look a little more closely. And in the meantime, I thank everyone for your time this morning and look forward to updates in the coming months. Have a good day.

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Operator [24]

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Thank you. Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.