Seeking Alpha
Biotech, healthcare, value, research analyst
Profile| Send Message|
( followers)  

On April 11, 2013, executives from Chimerix (NASDAQ:CMRX) rang the opening bell in celebration of the company's initial public offering on the Nasdaq.

They had a great deal to celebrate as the day wore on. Chimerix closed the day way up. a 34% gain from its IPO of $14 a share. On its first day of trading, the stock soared up $4.79 to $18.79. Chimerix raised over $102 million. The company expects to net about $95 million after paying banking fees and commissions.

What's all the excitement about?

Chimerix is a Durham, North Carolina-based company focused on oral antiviral therapeutics. The company's lipid technology has produced two clinical-stage lipid acyclic nucleoside phosphonates, CMX001 and CMX157. The company has spent approximately $123 million on research and development with most of the funding coming from government research contracts, licensing fees, and private investors.

CMX001

The company's lead investigational drug, CMX001, is about to begin Phase 3 clinical development for the prevention of cytomegalovirus (CMV) infection in adult hematopoietic stem cell transplant (HSCT) recipients.

CMX001 combines Chimerix's Lipid-Antiviral-Conjugate Technology with cidofovir. Cidofovir is an U.S. Food and Drug Administration (FDA) approved intravenous antiviral drug for the treatment of CMV retinitis in patients with acquired immune deficiency syndrome (AIDS). Cidofovir was discovered at the Institute of Organic Chemistry and Biochemistry in Prague, Czechoslovakia. The drug was developed by Gilead Sciences (NASDAQ:GILD) and is marketed under the brand name Vistide by Gilead in the United States, and by Pfizer Inc. (NYSE:PFE) elsewhere. Cidofovir suppresses CMV replication by selective inhibiting viral DNA polymerase which prevents viral replication and transcription.

CMX001 is a broad spectrum, oral nucleotide analog lipid-conjugate, that blocks the replication of double-stranded DNA ((dsDNA)) viruses. dsDNA viruses include:

  • Adenoviruses
  • Cytomegalovirus
  • Epstein-Barr virus
  • Hepatitis B virus
  • Herpes viruses
  • Smallpox
  • Vaccinia
  • Varicella-zoster

CMV is often transmitted in childhood and early adulthood. The virus usually remains latent in individuals with a healthy immune system. However, in immunocompromised patients, such as HSCT or solid organ transplant recipients, CMV and other dsDNA viral infections are associated with significant morbidity, mortality, graft rejection and co-infection with other opportunistic infections. CMV, a human herpesvirus, is the most common infectious pathogen in HSCT, and can result in life-threatening pneumonia or other organ involvement, particularly in the first 100 days following transplant when the immune system is most vulnerable.

Cytomegalovirus

On March 12, 2013, Chimerix announced that the FDA had granted Fast Track designation to CMX001 for the prevention of CMV infection. The agency's fast track program is designed to facilitate the development and expedite the review of new drugs that are intended to treat serious or life-threatening conditions and that demonstrate the potential to address unmet medical needs. Fast track-designated drugs often qualify for priority review, which expedites the FDA review process.

Chimerix completed Phase 2 clinical trials evaluating CMX001's ability to prevent CMV infection in adult HSCT recipients. In the trial, researchers assessed the safety, tolerability and ability of CMX001 to prevent or control CMV infection in 230 HSCT recipients. Researchers found that subjects receiving CMX001 100 mg twice weekly met the primary endpoint of the clinical trial, a statistically significant reduction in CMV viremia or disease at the end of treatment in CMX001-treated subjects versus those who received placebo. The study also showed that three different doses of CMX001 demonstrated statistically significant reductions in the proportion of subjects with CMV viremia 1000 copies/mL at any time during treatment when compared to placebo. In subjects who were CMV viremia negative prior to treatment, four different CMX001 dose regimens demonstrated statistically significant reduction versus placebo.

The company plans to initiate the SUPPRESS study later this year. SUPPRESS is a Phase 3 trial studying CMX001 for the prevention of CMV infection in adult HSCT recipients.

Between 50% and 80% of adults in the United States have had a CMV infection by age 40. Once CMV is in a person's body, the virus stays there for life. CMV is spread through close contact with body fluids. Most people who contract CMV do not become ill or even know that they have been infected. However, CMV infection can be serious in babies and people with weak or compromised immune systems. CMV infection is a major cause of morbidity and mortality after HSCT.

According to the research firm, companiesandmarkets.com, the global CMV infections market has been forecast to increase at a compound annual growth rate (CAGR) of 6.29% over the next eight years, increasing from a valuation of $685.50 million in 2011 to hit a market value of $1.12 billion by 2019.

Companiesandmarkets.com predicts that the CMV market will see the entrance of new drugs that either focus on new mechanisms of action beyond DNA polymerase inhibitors; or are drugs targeting transplant patients, or are prophylactic products. The research firm found that 40% of the pipeline products are being developed for CMV prophylaxis.

GlobalData estimates that the global CMV infections market, comprising the markets in the United States, United Kingdom, France, Germany, Italy, Spain and Japan, was worth $685.50m in 2011 and will grow at a CAGR of 6.29% over the next eight years to reach $1.12 billion by 2019.

Global Data analysts estimated that he CMV prophylactic market was estimated to be worth approximately $423.74 million in 2011 and is forecast to grow at a CAGR of 7.79% to $772.01 million in 2019. The CMV therapeutic market was estimated to be worth $261.76 million in 2011. This market is forecast to grow at a CAGR of 3.51% to reach $344.98 million in 2019.

Chimerix will face some stiff competition to develop the first FDA approved treatment for the prevention of cytomegalovirus in HSCT. For example, Merck & Co (MRK) and Germany's AiCuris have partnered for the development of letermovir, also known as AIC246, an oral, late-stage antiviral candidate being investigated for the treatment and prevention of CMV infection in transplant recipients.

Vical (VICL) and Astellas Pharma (OTCPK:ALPMY) are also developing TransVax, a first-in-class DNA vaccine designed to prevent reactivation of latent cytomegalovirus (CMV) or introduction of the virus through donor cells or tissues in transplant recipients. The product is in late-stage development. Proof-of-concept in achieving CMV viral load reduction has now been shown in susceptible hematopoietic stem cell transplant (HSCT) patients

Adenovirus Disease

CMX001 is also being studied in a Phase 2 trial evaluating the safety and efficacy of the investigational drug as a preemptive treatment for the prevention of adenovirus ((AdV)) disease. The trial is comprised of 48 pediatric and adult HSCT recipients with asymptomatic AdV viremia. Data on the mortality and disease endpoints for this Phase 2 study are expected during the second half of 2013.

Adenoviruses are responsible for respiratory diseases, including pneumonia and bronchitis, as well as other infections, including gastroenteritis and acute diarrheal diseases. In immunocompromised patients who have undergone HSCT, AdV infections are recognized as a significant cause of morbidity and mortality. Immunocompromised pediatric HCT patients are particularly susceptible to serious and/or fatal AdV infections. The FDA has also granted CMX001 Fast Track designation status for the AdV development program.

Since 2009, Chimerix has made CMX001 available under expanded access regulations to over 80 transplant centers worldwide for the treatment of over 430 patients with life-threatening dsDNA viral infections.

Chimerix is also developing CMX001 as a potential medical countermeasure against smallpox under a contract from the Biomedical Advanced Research and Development Authority (BARDA).

If CMX001 obtains regulatory approval, Chimerix intends to build its own sales force and market CMX001 itself. According to the company, approximately 200 institutions perform transplants in the United States, About 75% perform HSCT and 75% perform SOT. As a result, Chimerix believes the company can sell CMX001 in the United States and Canada with a marketing and sales team of approximately 50 employees.

CMX157

Chimerix's second clinical-stage antiviral compound is CMX157, a potent nucleoside analogue with in vitro activity against the human immunodeficiency virus (HIV) and the hepatitis B virus (HBV). CMX157 has the potential to directly address several limitations of current HIV therapies. Chimerix is developing CMX157 for the treatment of HIV and HBV infections, including those caused by multi-drug resistant viruses. A Phase 1 clinical study has been completed demonstrating that the compound is well tolerated and that the active antiviral, TFV-PP, was measurable in peripheral blood mononuclear cells ((PBMCs)) after a single dose and remained detectable for six days, indicating that it may be suitable for once-weekly dosing.

Although HIV therapies have made significant advances in recent years, the virus can develop resistance to all currently marketed drugs. Severe drug side effects and adverse reactions are not uncommon. Tenofovir, marketed by Gilead Sciences as Viread is one of the most widely used antiretrovirals. Tenofovir is part of the Gilead's Truvada (emtricitabine/tenofovir disoproxil fumarate) and Bristol-Myers Squibb's (NYSE:BMY) and Gilead's Atripla (emtricitabine/tenofovir/efavirenz). fixed-dose combinations. Tenofovir has also been associated with renal toxicity and resistance can be conferred by a single mutation.

CMX157, a nucleotide analog, is being developed as an antiviral therapy against HIV. Chimerix believes CMX157 has the potential to be less nephrotoxic than tenofovir based on in vitro data, and could be a best-in-class antiretroviral with the potential to address an estimated worldwide market of $1 billion. In 2012, Atripla had sales of $3.57 billion, Truvada $3.18 billion, and Viread $848.7 million, according to Gilead's fourth quarter/full year 2012 financial statement.

On July 24, 2012, Chimerix annoumced that it granted Merck exclusive worldwide rights to CMX157. Under the terms of the agreement, Merck will be responsible for development and commercialization of CMX157. Chimerix will receive a $17.5 million upfront payment and will be eligible to receive up to $151 million in milestones, as well as royalties on future sales.

Conclusion: Hold

There is a significant need unmet need in the CMV prophylactics and therapeutics market. Current treatment options are associated with adverse events such as hematological and renal toxicity, and myelosuppression, a condition in which bone marrow activity is decreased, resulting in fewer red blood cells, white blood cells, and platelets. No drugs are approved for prevention of CMV in HSCT recipients, primarily due to potential significant, severe side effects.

In addition to CMV, there is a significant commercial opportunity for CMX001 with other dsDNA viruses. MX001 is a second-generation antiviral that is more potent than the parent compound, cidofovir, against other multiple double-stranded DNA viruses, such as variola [smallpox], BK virus, adenovirus and Epstein-Barr virus.

According to the Center for International Blood and Marrow Transplant Research and the Organ Procurement and Transplantation Network, more than 20,000 HSCTs and 28,000 solid organ transplants (SOT) are performed annually in the United States. Similar numbers of transplants are performed annually in Europe, according to the European Group for Blood and Marrow Transplantation and the World Health Organization. More than 65% of stem cell transplant patients are at increased risk of CMV infection due to prior exposure to CMV.

Chimerix is applying its Lipid-Antiviral-Conjugate Technology to existing antiviral drugs to produce new medicines with increased efficacy and tolerability. The company also has exclusive rights to the Chimerix Chemical Library, (formerly the Townsend Chemical Library,) which includes over 10,000 compounds, including many nucleoside analogs. Chimerix scientists have identified potent nucleoside analogue drug candidates against hepatitis C virus (HCV), and compounds with activity against influenza and malaria. The company is currently screening for leads against dengue virus and tuberculosis.

I believe that in addition to CMX001 and CMX157, Chimerix will develop other novel antiviral agents by using its proprietary technology platform and extensive chemical library. I also believe Chimerix could be acquired by a larger pharmaceutical company in the future. I think Chimerix would be a great fit for Gilead Sciences.

In Chimerix's case, I believe the best advice is to be patient and focus on the long term prospects of this company. I hope to invest in this company during a calmer time. On April 11, 2013, Chimerix stock opened at $15.14, hit a low of $15.11 before jumping to a high of $18.79 with over 4.5 million shares traded. On April 12, trading volume dropped dramatically to 175,000. The stock hit a low of $17.59, a high of $18.69, and closed at $18.17. Chimerix stock fell over 3% during after hours trading. My recommendation is to wait for a pull back and buy.

Source: Why Are Investors So Excited About Chimerix's Technology?