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Edited Transcript of CMRX earnings conference call or presentation 5-Nov-19 1:30pm GMT

Q3 2019 Chimerix Inc Earnings Call and Operational Updates

Durham Nov 22, 2019 (Thomson StreetEvents) -- Edited Transcript of Chimerix Inc earnings conference call or presentation Tuesday, November 5, 2019 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. - Executive Director of Financial Planning, Analysis & 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

* Kenneth Craig Atkins

Cowen and Company, LLC, Research Division - Research Associate

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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 Third Quarter 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. - Executive Director of Financial Planning, Analysis & IR [2]

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Thank you, operator. Good morning, everyone, and welcome to the Chimerix Third Quarter 2019 Financial and Operating Results Conference Call. This morning, we issued a press release which outlines our third quarter 2019 financial results and an operational update. You can access the press release by going to the Investors section of our website at www.chimerix.com.

With me on today's call are President and Chief Executive Officer, Mike Sherman; Chief Financial and Business Officer, Mike Andriole; Chief Scientific Officer, Randall Lanier; 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 1955 and are subject to risks and 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-Q filed earlier today, its most recently filed reports on 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 forward-looking statements.

With that, I now will return 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. Good morning, everyone, and thanks for joining us. As I reflect on what the organization has accomplished in the 6 months since I joined, I'm really pleased with the new track record of execution we're creating. In that short time, we've completed an objective assessment of all our activities and restructured the organization to maximize resources available to invest in those programs with the potential to have the biggest impact on the largest population of patients with the greatest need.

For the activities we've stopped, we've done that in a -- efficiently and compassionately as we've continued to support patient access to brincidofovir. We've identified and acquired an exciting drug with the potential to fundamentally change the way AML patients are treated immediately following diagnosis, the point at which durable benefited most meaningful and, frankly, elusive to patients.

For brincidofovir, we've aligned with BARDA and the FDA on the remaining experiments to be performed prior to a pre-NDA meeting. We've even aligned on what we'll include in the NDA, so that work is well underway. The final brincidofovir studies, dose-bridging studies, are also underway and going well.

While the opportunities for brincidofovir outside of smallpox do not fit our strategy, we recognize that there may be value there for patients and shareholders. So we identified a partner in SymBio, who is already aggressively pursuing brincidofovir development in other viral indications.

So with 2 Phase III assets in hand, we look forward to the next 6 to 9 months with the same sense of urgency and commitment to disciplined execution we've demonstrated recently. This time frame is rich with patient-focused, value-driving catalysts. For DSTAT, we will meet with the FDA to align on our plans for a pivotal Phase III trial in first-line AML, and we expect to initiate that trial midyear next year.

For brincidofovir, we'll meet with the FDA to discuss our planned NDA submission. Success in that meeting sets the stage for a procurement process to add brincidofovir to the national stockpile as a countermeasure for smallpox. This is not only an important step for national security but can translate to hundreds of millions of dollars of nondilutive funding for the company. To be clear, we're positioning our manufacturing plants to deliver up to $100 million worth of product to the stockpile before the end of 2021. So we're certainly planning and preparing for success.

Before I hand it over to Garrett, let me make a few more observations about the DSTAT program and AML. I'm having a little déjà vu with prior experience in prostate cancer when following the approval of a handful of therapies 5 to 7 years ago, there was this perception that little opportunity remained in that indication. However, in that case, despite the benefit provided by those therapies, the disease would ultimately progress, leaving a new void of options for patients.

Physicians and investors have since recognized the enormous value that remains to first prevent and then treat metastatic prostate cancer. AML presents a similar story. With a flurry of approvals of targeted agents addressing niche populations of patients and then therapies for relapsed and refractory disease, perceptions among some are that the opportunity for new therapies is limited. However, a physician I spoke with recently reminded me that in AML, there's nothing complete about a complete response. While some patients are responding to therapies, these responses are typically short and 5-year survival rates in older patients remain less than 10%. We still have a lot of work to do for these patients.

While others are pursuing highly targeted mechanisms, we believe that in an indication such as AML where there's a tremendous heterogeneity of disease even within a patient, more durable responses and higher cure rates will require mechanisms that are multimodal. And the best chance to apply that multimodal mechanism is in the first line of treatment where the intent is still curative. What excites us about DSTAT mechanistically is that it targets multiple proteins that have been implicated in survival of leukemic blasts and leukemic stem cells and even mechanisms which delay hematologic recovery in these patients. As Garrett will describe in more detail, DSTAT improves the most important clinical parameters for patients: time without disease and overall survival. These are also important regulatory end points.

No matter how we slice the randomized Phase II data for DSTAT, the evidence of more durable responses persist. Delivering that benefit in a therapy that doesn't add material to -- materially to toxicity makes it -- its potential that much more attractive, which, of course, is why we're eager to complete the planning for Phase III and get that trial enrolling.

With that, let me turn the call over to Garrett to discuss the final Phase IIb results of DSTAT and some updates on brincidofovir.

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

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Thank you, Mike, and good morning to all of you. In October, we presented final results from the recently completed Phase IIb randomized controlled trial of DSTAT in AML. The study evaluated DSTAT given as a 4 mg per kg intravenous bolus followed by either 0.125 or 0.25 mg per kg per hour continuous IV infusion for 7 days. These were in combination with standard 7+3 chemotherapy versus that 7+3 chemotherapy alone in 75 subjects greater than 60 years of age with newly diagnosed AML.

An analysis of the intent-to-treat, or ITT, population in this study indicated the patients receiving the high dose, 0.25 mg per kg per hour of DSTAT, exhibited improved hazard ratios for event-free survival, overall survival and relapse-free survival when compared to controlled patients. An analysis of subjects that meet the likely target inclusion criteria for the Phase III study, which will exclude patients with favorable cytogenetics or secondary AML, also showed improved observed hazard ratios for DSTAT high dose versus control.

With a median follow-up of 19.6 months, the hazard for event-free survival was 0.58. Overall survival had a hazard ratio of 0.51 and the relapse-free survival hazard ratio was 0.39, all improved for the high-dose DSTAT arm versus control. These results suggest that durable responses were associated with the addition of DSTAT to standard 7+3 therapy.

Combination treatment with 7+3 therapy and DSTAT did not show significant added toxicity at either dose. The most common serious adverse event in the DSTAT arm was febrile neutropenia. However, there was no increase in the incident of serious or nonserious infectious events on the high-dose DSTAT arm when compared to control. DSTAT also showed no additive hematologic toxicity, which is the case for virtually all other add-on therapies that have been tried with 7+3 chemo but rather showed signs of accelerating platelet and neutrophil recovery following chemotherapy. This may be consistent with its in vitro activity against platelet factor 4. We expect to initiate a Phase III clinical trial of DSTAT for the treatment of AML in mid-2020, subject to discussions with the FDA in early 2020.

On the smallpox front, we are on the cusp of major milestones that build upon announcements that we made earlier this year regarding the statistically significant and clinically meaningful reduction in mortality in our GLP mousepox and rabbitpox studies. I just returned from the 21st annual meeting of the Advisory Committee on Variola Virus Research, which was held at the WHO from the 30th of October to the 1st of November in Geneva, Switzerland. In this, the 40th anniversary of the year that smallpox was eradicated worldwide, the WHO recognized many significant achievements that have been made in antiviral and vaccine countermeasures. However, the WHO highlighted the need for at least one other antiviral with a different mechanism of action in order to facilitate therapy for treatment-emergent resistance or, more importantly, for bioweapons that are engineered to have resistance to the currently available therapies.

Brincidofovir fits that need and is the only agent that could deliver to the strategic national stockpile in the near term, with others very early in development and many years away. We are working diligently on the final reports to support approval and plan a pre-NDA meeting with the FDA in the first quarter of 2020. In the meantime, we continue to provide brincidofovir for treatment of serious orthopoxvirus infections via our expanded access program, including cases that have occurred in the past 3 months. Though uncontrolled, these experiences may help us build the rationale for the licensure of brincidofovir and the inclusion of brincidofovir in the strategic national stockpile.

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. Let me give you some highlights of the financial results we released this morning.

Starting with our balance sheet. At the end of the third quarter of 2019, we remain well capitalized with $116.7 million of capital available to fund operations, no debt and approximately 61.4 million shares of common stock outstanding. The cash balance at the end of the third quarter reflects the upfront payment of $30 million we made to Cantex for the license to DSTAT but does not include the $5 million owed from SymBio, which was classified as a receivable at September 30 due to the timing of the transaction. The company reaffirms its previous guidance of approximately $110 million in cash and cash equivalents at the end of 2019.

Turning to the statement of operations. The only unusual item to highlight is the acquired in-process R&D expense of $65 million for the quarter which is related to the Cantex transaction. This is mainly comprised of the $30 million upfront -- we paid upfront and $34.9 million noncash stock compensation expense related to the 10 million shares of common stock included in the transaction.

Looking forward, as I noted earlier in the year, it has been our goal to meaningfully improve the underlying cash burn rate of the company following our Q2 restructuring announcements. We've been successful in that effort and forecast an ex DSTAT annualized cash burn rate just north of $20 million as we exit the year.

I'd like to finish today by reiterating our confidence in our new strategic direction. The significant progress we have made over the last several months has positioned us well for the balance of the year and beyond. We successfully transitioned our clinical pipeline to deliver a number of near-term value-creating milestones.

As we look toward 2020, key inflection points we plan to reach include a meeting with U.S. regulatory authorities to confirm our pivotal Phase III study protocol for DSTAT in first-line AML; initiation of the DSTAT Phase III pivotal study midyear; submission of the marketing application for brincidofovir as a medical countermeasure for smallpox; and securing a procurement contract with BARDA to add brincidofovir to the U.S. strategic national stockpile and, in the process, transitioning the company to a commercial-stage biotech.

With that, operator, we'll now open the line for 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 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 [2]

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So just on DSTAT. Since the -- you're looking at the standard 7+3 chemotherapy in frontline, it appears that the study should enroll quickly. Just wanted to get your thoughts on -- I know you haven't talked to the FDA yet, but your thoughts on perhaps the number of patients that you'd need for an FDA submission and what could be the timing for completion of the study.

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

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Ed, this is Mike. You kind of hit the first part of the answer. The fact that we haven't talked to the FDA yet will cause me to be somewhat cautious. But I guess I could point to -- there's at least 1 NCI study being conducted in this space that -- I think it's enrolling 570 patients. I don't think that's too far out of the scope of what we would consider. Certainly, as we discuss end points with the FDA, we're exploring opportunities to be as expeditious with that strategy as we can. So I think we'll get through that discussion alignment on the end points, and then we'll have a better opportunity to describe the time lines involved.

I will say that our plan is to use as many sites and in many -- as many countries where standards of care are consistent to be able to enroll that in a really timely manner. So we'll report on that as we've confirmed those end points.

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Edward Patrick White, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [4]

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Great. And maybe a question just on the SymBio agreement, you have milestones for future clinical, regulatory and commercial end point initiations. Are there any milestones for the clinical trial initiations? Or are you going to have to wait for data? I'm just trying to get an idea for timing for some of these upcoming milestones.

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

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Yes. Ed, it's Mike Andriole. We don't forecast any milestones in the coming years related to that milestone package. But it will -- that obviously will start in Japan, the development, and will expand, move away from there.

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Edward Patrick White, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [6]

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Okay. And then just as far as the brincidofovir for smallpox. You're going to meet with the FDA and that sets the stage, you said, for the procurement contract. But you don't need the FDA approval for the procurement contract. So I'm just wondering if you've been meeting with the government in order to see where you stand for the procurement contract. Or is there any update there for the actual decision-makers on the procurement contract? And then also, have you been talking to -- I know you do need FDA approval for sales outside of the U.S. for stockpiling, have you talked to any countries outside of the U.S. for potential procurement contracts yet?

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

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So on the first question, we do stay in close contact with the leadership at BARDA. And while they could -- can trigger the stockpile and independent of the FDA process, they've been pretty -- well, they've been very clear and very consistent that they'd like to get to the other side of that pre-NDA meeting, just to confirm that there's alignment with the FDA to move ahead with the filing. So they're not going to wait until the submission or necessarily, certainly, until approval. But I just want to get alignment with the FDA that we've done the work that's necessary.

I would add that our dialogue with the FDA in the meantime has been as much about kind of preparing for and ensuring alignment on what's to be included in the NDA. And so I view that as positive, at least as it relates to their view on the work that we've done to date. I'll also add that the last time we provided an update, we had not initiated some of the -- these final dose-bridging studies that are required before we go to that pre-NDA meeting. And so the fact that those have initiated and early signs are good in terms of what we're seeing is certainly positive, the work to be done there. But I think that we've, I think, put some risks behind us as we've continued to execute on that.

As it relates to outside the U.S. opportunities for selling brincidofovir for stockpiling or other purposes, our focus, frankly, has been on the U.S., as you can imagine. There have been, I think, various exchanges with other parties outside the U.S., and I think there are opportunities there. I would argue that the largest opportunity, though, is going to be in the U.S. where you've seen contracts, historical contracts in the $400 million to $500 million-plus range. And as I mentioned in my comments previously, we've positioned ourselves to be able to supply up to $100 million into the stockpile should we secure a procurement agreement, so we can deliver that much product before the end of 2021. It ends up being an important mechanism to funding the organization.

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Operator [8]

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And our next question comes from Kenneth Atkins.

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Kenneth Craig Atkins, Cowen and Company, LLC, Research Division - Research Associate [9]

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Just wondering if you could comment on how you anticipate DSTAT would fit into the treatment paradigm for AML. You've kind of hinted at this in your comments about potentially excluding patients with low-risk cytogenetics or secondary AML in the Phase III. Could you just comment on that?

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William Garrett Nichols, Chimerix, Inc. - Chief Medical Officer [10]

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Yes. So as we look at older patients who are fit for chemotherapy, these are patients that are currently treated with 7+3 chemotherapy, there are some additional add-on therapies that are used, some of the targeted therapies. And in patients with favorable cytogenetics, for example, these are patients that typically receive a drug called MYLOTARG, in addition to 7+3 therapy.

As far as the secondary AML or the AML that arises from myelodysplastic syndromes, those patients are licensed to receive VYXEOS, which is the liposomal formulation of 7+3 therapy. So as a -- in order to simplify the study in order to have one standard background therapy of cytarabine 7-day infusion plus 3 days of an anthracycline, either idarubicin or daunorubicin, we would exclude those patients upfront.

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Michael A. Sherman, Chimerix, Inc. - CEO, President & Director [11]

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One of the attractive things about the therapy is that, really, for any patient that -- or any other therapy that could benefit or be augmented by the movement of the leukemic blasts or even the stem cells into circulation where they can be exposed to therapy, this is a viable combination. The overlapping toxicities, given the safety of the drug, should allow us to combine with virtually anything there, and our development plans would be to expand that.

There's also some interesting science suggesting that there's potential to resensitize patients who may be resistant to prior therapies. And so we're going to explore that as both a mechanism to expand the indication opportunity but also to generate data which I think can be catalysts or momentum for the drug in the meantime while the Phase III is enrolling.

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William Garrett Nichols, Chimerix, Inc. - Chief Medical Officer [12]

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Yes. Just to specifically address the VYXEOS population. VYXEOS did improve outcomes in the secondary AML patients compared to standard chemotherapy. The magnitude of the benefit was small, and it was associated with worse or slower hematologic recovery, so those patients also had to stay in the hospital longer, et cetera. There's no reason why DSTAT's mechanism would not be beneficial in patients who are receiving VYXEOS, and we've indeed been approached by a number of physicians who are interested in exploring that combination. Just we're focusing on this first Phase III trial as our near-term deliverable, and then certainly we'll be looking at other combinations in AML and potentially other hematologic malignancies down the road.

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Operator [13]

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

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

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Great. Thanks, everyone, again for joining the call this morning. Before we close, I'd like to highlight a couple of upcoming presentations, we'll be at the Crédit Suisse conference in Phoenix on November 13 and then at the Jefferies conference in London on November 20. So we look forward to seeing some of you there and updating you on our progress in the coming months. Have a good day.

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Operator [15]

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