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Edited Transcript of CMRX earnings conference call or presentation 9-May-19 12:30pm GMT

Q1 2019 Chimerix Inc Earnings Call

Durham May 17, 2019 (Thomson StreetEvents) -- Edited Transcript of Chimerix Inc earnings conference call or presentation Thursday, May 9, 2019 at 12:30:00pm 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

* Michelle LaSpaluto

Chimerix, Inc. - Executive Director of Financial Planning, Analysis & IR

* Timothy W. Trost

Chimerix, Inc. - Senior VP, CFO & Corporate Secretary

* 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

* Kenneth Craig Atkins

Cowen and Company, LLC, Research Division - Research Associate

* Victor Rusu

Citigroup Inc, Research Division - Research Analyst

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Presentation

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Operator [1]

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Good morning. Welcome to the Chimerix conference call discussing the financial results of the first quarter of 2019 and an operational update. Please be advised that today's call is being recorded at Chimerix's request.

I would now like to turn the call over to Michelle LaSpaluto from Chimerix.

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Michelle LaSpaluto, Chimerix, Inc. - Executive Director of Financial Planning, Analysis & IR [2]

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Thank you. Earlier today, we issued a press release containing the financial results for the first quarter of 2019 along with positive top line data from our second smallpox animal model efficacy study and an operational update. The press release is available on the company's website. You may also access today's call via webcast on the Investors section of the Chimerix's website. An archive of the webcast will be available approximately 2 hours after the conclusion of the event.

With me on today's call are Mike Sherman, President and Chief Executive Officer; Mike Andriole, Chief Business Officer; Garrett Nichols, Chief Medical Officer; and Tim Trost, Chief Financial Officer.

Before we begin, I'd 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. These forward-looking statements are based on information currently available to Chimerix and are subject to uncertainties. These risks and uncertainties could cause actual results to differ materially from those referred to in the forward-looking statements. These risks and uncertainties are described in details in Chimerix's filings with the Securities and Exchange Commission, including its Form 10-Q filed earlier today in its most recently filed reports on 8-K and other documents subsequently filed with the Securities and Exchange Commission.

At this time, I'd like to turn the call over to our President and Chief Executive Officer, Mike Sherman.

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

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Thanks, Michelle. Good morning, everyone, and thank you for joining the call today.

I joined Chimerix a few weeks ago with the plan to create substantial value for both patients and for investors.

My excitement about this opportunity was based on, first, the company's strong balance sheet; second, a smallpox program advancing towards registration and the potential to yield substantial additional nondilutive capital for the company; and third, a Board of Directors providing latitude in our approach to creating value. Today, I'm pleased to share the initial steps of that plan.

First, let me say my optimism around the smallpox program is [yielding] our announcement this morning of positive survival data from our mousepox study. This constitutes a second animal model for our smallpox program as required by the FDA Animal Efficacy Rule.

Based on these positive and robust data and the strong survival data from our previous rabbit study, we intend to focus our efforts on the execution of the remaining work required to submit marketing applications to the FDA in 2020. And I expect that will be around midyear. With these data, we believe we are also well positioned in our ongoing discussions with BARDA regarding the [potential] for emergency stockpiling of oral brincidofovir as we advance this program towards regulatory approval.

The continued development of brinci for smallpox is important, both as a needed medical countermeasure for the country and as a potential opportunity for nondilutive financing for the company.

Second, we've completed a comprehensive strategic assessment of our other brincidofovir programs and have decided to discontinue all ongoing human clinical trials for the oral and IV formulation. This decision was driven, first, by the low patient accrual rate to date, but also changing patient management techniques and competitive landscape, the cost and timelines required to complete these programs, the regulatory hurdles and the implications for each of those factors on projected long-term value.

We are fortunate to have an ongoing expanded access program where subject to regulatory approval we can transition patients currently enrolled on trials to ensure their care continues to receive the highest priority, and we can minimize the complexity often associated with stopping trials.

Related to this decision, we will also undertake a restructuring, which includes a reduction in staff of more than 50%. This will allow us to preserve substantial capital for new programs while maintaining key capabilities, particularly interested in

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and those capabilities required to execute the remaining work for the smallpox program.

Obviously, it's difficult to make reductions to such a talented and dedicated staff, and we're committed to supporting these employees as they transition to new opportunities.

The organization is now focused on 2 objectives, and I expect this narrower focus to translate to strong execution: first, the completion of the smallpox program and the potential nondilutive financing that could come from BARDA procurement; and second, adding programs to our pipeline that hold great promise to create value for patients and shareholders.

We've already initiated a disciplined and comprehensive search process, which will include multiple therapeutic areas. In the meantime, we've restructured the organization to preserve and maximize the capital we can deploy to pursue those new opportunities.

Let me now turn the call over to Garrett, who will review the data we announced today from our smallpox program.

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

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Thank you, Mike. As many of you know, our development program for oral brincidofovir in smallpox is pursuant to the FDA's Animal Efficacy Rule. This rule allows for the testing of investigational drugs in animal models to support the effectiveness of a drug in diseases in which human clinical studies are not ethical or feasible.

In order to gain regulatory approval, we must demonstrate efficacy in 2 animal models that approximate the clinical course of human smallpox. Our program does include a rabbitpox and a mousepox model. The mousepox model gives it the mousepox virus, also known as the ectromelia virus. Both of these models are associated with very high mortality rates in the absence of treatment.

In March, we announced top line data from our pivotal rabbitpox study, showing that oral brincidofovir significantly improved overall survival compared with placebo. Overall survival was the primary endpoint of the study. Survival was improved even when brincidofovir was started well after these animals have developed serious symptoms of disease.

Today, we reported positive top line data from our second pivotal animal model, the mousepox model. The study, which just completed its in-life phase, was a randomized, double-blind parallel-group study to evaluate the efficacy of 2 different brinci dosing regimens versus a placebo-controlled group in mice that were infected with the mousepox virus.

Mice were randomized to one of the following brinci treatment groups or placebo.

A brinci dose regimen of 20 mg per kg followed by 5 mg per kg and another dose of 5 mg per kg administered at 48-hour intervals with treatment initiation on post-infection days 4, 5, 6 or 7, or a brinci dosing regimen of 10/5/5 mg per kg administered at 48-hour intervals with treatment initiation on post-infection days 4, 5 or 6.

All brinci treatment groups demonstrated a statistically significant survival benefit compared with placebo, regardless of treatment initiation day. Survival was highest in both treatment groups where brinci was administered on Day 4 after infection with the 20/5/5 mg per kg treatment regimen showing 84% survival and the 10/5/5 regimen showing 78% survival. Note that survival in the placebo group was only 13%.

Importantly, the median time to death in animals receiving placebo was just 8.5 days after infection. Because survival was significantly higher in animals treated even on Day 6 or 7 after infection. This indicates that brincidofovir treatment is effective at preventing mortality from mousepox virus even when treatment is initiated well past the midpoint of disease.

Aside from achieving the primary end points of the study, we were particularly pleased with the consistency of the results relative to what one would expect in terms of dose/response and the timing of treatment since many in a true smallpox outbreak may require treatment well after symptoms have already appeared.

Contingent upon final audited results of the animal efficacy studies, along with preparing data necessary to bridge to a recommended human dose, we intend to submit marketing applications in 2020.

Finally, I'd also like to personally express my gratitude to all the patients, doctors and employees who have worked tirelessly on our clinical trials for brincidofovir. Stopping the AdAPT and IV clinical trials was a difficult decision. And ensuring that patient care is our #1 priority, as Mike has mentioned earlier, pending discussions with regulators, we plan to use our existing clinical supply to keep our compassionate use programs open. This will allow the current patients enrolled in AdAPT in addition to other patients with serious adenovirus infections to continue to receive brinci, as promising alternative treatments for adenovirus continue to advance their development.

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

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Timothy W. Trost, Chimerix, Inc. - Senior VP, CFO & Corporate Secretary [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 first quarter of 2019. Starting with our balance sheet at the end of first quarter 2019, we remained well capitalized with approximately $171.6 million in capital to fund operations and no debt. We currently expect to end 2019 with approximately $140 million in capital to fund operations, which will reflect cost related to the closeout of the oral and intravenous clinical trials

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and severance cost from restructuring.

Turning to our statement of operations. The company reported a net loss of $17.7 million or $0.35 per basic and diluted share for the first quarter of 2019 compared with a net loss of $19.8 million or $0.42 per basic and diluted share in the first quarter of 2018.

The smaller loss for the period compared to last year was primarily the result of higher revenues this year associated with the reimbursement of expenses related to our smallpox development program.

Moving forward, we will maintain very tight control over spending. The overarching objectives are to efficiently execute the remaining smallpox work while maximizing the capital available to access and develop a new asset toward value-creating milestones.

You'll note that the $140 million year-end cash assumption implies a significant reduction from our current spend rate, even more significant when one considers there will be some changes -- some charges related to the wind down of active clinical trials.

Mike, let me hand it back to you.

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Michael A. Sherman, Chimerix, Inc. - CEO, President & Director [6]

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Thanks, Tim. I just wanted to make one final comment before opening up for questions. While there are others from the leadership team impacted by the reduction, I know the investment community has a particularly close relationship with our CFO, Tim Trost. Tim will remain CFO through the end of May, and then will be stepping away. Mike Andriole will add the title of CFO to his role.

I know Tim has

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important to me in this transition. So I wanted to just really -- he's also [advantage], to thank him for that and for all his contributions to the company over the years. I really appreciate that, Tim.

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) And our first question comes from the line of Yigal Nochomovitz with Citi.

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Victor Rusu, Citigroup Inc, Research Division - Research Analyst [2]

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This is Victor on for Yigal. As you look to externally expand the pipeline, what types of assets and what therapeutic areas are you looking at?

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Michael T. Andriole, Chimerix, Inc. - Chief Business Officer [3]

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Victor, it's Mike Andriole. I'll probably start by saying that we've got really broad experience on our management team beyond virology. Of course, virology will be an important part of that search process. Something that the organization has historically been outward focused and understanding the art of the possible with external assets in that therapeutic area.

Oncology is another area where as you go around our leadership team, there's a lot of experience from a regulatory perspective, clinical development, medical, where it could make a lot of sense to pursue assets in that therapeutic area.

So the capability we're retaining today is significant to both of those therapeutic areas and that will naturally be our focus. I think it will be opportunistic outside of those areas, but I would highlight those 2.

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Victor Rusu, Citigroup Inc, Research Division - Research Analyst [4]

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Thank you. And maybe one last quick one from us. Are there any more details you can provide on the PK studies or bridging studies between animals and humans?

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William Garrett Nichols, Chimerix, Inc. - Chief Medical Officer [5]

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So this is Garrett Nichols. The type of studies that are necessary are to demonstrate the pharmacokinetics of brincidofovir in the animals in which you demonstrated efficacy and then demonstrate that the exposures that you achieved in humans are in excess of those exposures that were achieved in animals.

There's also some PK/PD modeling work that's required as a part of that process. So those are all data that we are preparing at present and are a substantial part of the requirements of the Animal Efficacy Rule.

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Operator [6]

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And our next question comes from the line of 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 [7]

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Tim, I just want to add to what Mike said. Thank you. It's been a pleasure working with you the past, whatever it was, 5 years. And hopefully, we can still cross again in the future.

So I just want to add to that question about the types of programs you are looking at. Would you be looking at more early-stage programs, later stage? I mean what kind of an impact are we looking for?

And then the BARDA, I was just wondering, Mike, I know that Michelle was very active on the Hill, trying to get the procurement contract, and just wondering if you have initiated your conversations with that and maybe give any kind of update as far as procurement contract goes.

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Michael A. Sherman, Chimerix, Inc. - CEO, President & Director [8]

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Sure. This is Mike. I'll take a stab at both of those. First of all, I have a particular impatience for creating value. And so our focus is likely to be on assets that are -- have a proven mechanism. And I think with the ability to kind of achieve very near-term catalyst. And so I think that would tend to put us in the later-stage development. I think we have the resources and capability to make that happen.

As it relates to BARDA, I was able to meet the leadership of BARDA organization earlier this week, in fact. Obviously, the mouse data was a key part of that conversation. I can say that, that relationship is quite strong. I think they are compelled by the path ahead. And I think the key milestone between here and the procurement conversation is really the pre-NDA meeting which we would expect to have heels of the wrapping up this PK-dose regimen work.

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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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Okay. And just further on BARDA, we've been -- we know that FDA approval doesn't have to come before a BARDA contract. Is there -- do you think that -- can you give us any kind of guidance as for a contract? Would it be after FDA approval? Or what's the sort of time line you're looking for? Could this be a 2020 event?

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

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Yes, that's really what I meant by the milestone of a successful pre-NDA meeting. So indeed, it could come before filing registration, which I had pointed to as a kind of mid-2020 event. So I think those conversations would be able to start before that.

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Operator [11]

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And our next question comes from the line of Kenneth Atkins with Cowen.

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Kenneth Craig Atkins, Cowen and Company, LLC, Research Division - Research Associate [12]

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Could you just speak about what needs to happen in order to negotiate for a stockpiling brinci for smallpox outside of the U.S.? Can you use the data that you currently have and plan to collect for the U.S. filing? Or would you need to collect additional data for that?

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William Garrett Nichols, Chimerix, Inc. - Chief Medical Officer [13]

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So we have previously gone to the EMA for scientific advice on the smallpox program. The difference between the EMA and the FDA is that the EMA does not have an Animal Rule, but they do follow closely and do respect the principles of the Animal Rule.

And certainly as we described the program that we are conducting for smallpox, they were generally supportive of potential approval for brinci in that space. So those are -- that is one opportunity for us. Certainly, as we end up looking rest of world, either one of those approvals could be referenced in terms of the potential procurement.

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Operator [14]

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And ladies and gentlemen, this concludes today's Q&A session. I would now like to turn the call back over to Mike for any closing remarks.

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Michael A. Sherman, Chimerix, Inc. - CEO, President & Director [15]

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Thank you. In closing, let me just reiterate my confidence in the path forward with the smallpox program. This positive mouse model data was a very important milestone and the robustness of that data is compelling.

We've demonstrated some urgency here in the restructuring of the organization. And we're in a strong position to seek additions to our pipeline and that disciplined work is well underway.

So I'd like to thank everyone for your time this morning, and we look forward to updating you in the coming months. Thank you.

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Operator [16]

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Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program, and you may all disconnect. Everyone, have a wonderful day.