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Chimerix, Inc. (NASDAQ:CMRX)

Morgan Stanley Global Healthcare Conference Call

September 9, 2013 1:15 PM ET

Executives

Kenneth I. Moch – President and Chief Executive Office

Analysts

David Friedman – Morgan Stanley & Co. LLC

David Friedman – Morgan Stanley & Co. LLC

All right, I think we’ll get started. Thanks everyone for joining us today. Dave Friedman, Biotech Analyst and I’m joined by Kenneth Moch, who is the President and CEO of Chimerix, we love for this to be interactive. So everyone should please feel free to ask any questions or raise any questions and we’ll make sure we get a mic out here. So thanks very much for joining us and maybe we can just start for those who are not familiar if you can just give a couple of minute overview of the company and your lead asset and maybe just touch on some of the news you guys had out this morning?

Kenneth I. Moch

Sure, so Chimerix is an anti-viral therapeutics company developing small molecules focused on life threatening viral diseases. Our lead compound is called CMX001 recently the generic name was announced which is brincidofovir, the drug is a very powerful broad spectrum anti-viral against what are called double-stranded DNA viruses, we’ve all been exposed to double-stranded DNA viruses there are five families that affect humans, the herpesviruses, including cytomegalovirus, Epstein-Barr virus, the polyomaviruses, the BK virus and JC virus, which some of you will be familiar with JC virus as the virus associated with PML.

Papillomaviruses, which are human words and adenovirus which in healthy to people can be the common cold, but in immunocompromised patients can lead to morbidity and mortality. And there is a family of double-stranded DNA virus is the pox viruses have there is no longer existence in humans, but obviously it’s a threat and we are actually developing CMX001 in conjunction with the U.S. government as the potential medical countermeasure.

But in terms of the commercial setting, we are working on the development of CMX001 as a powerful agent again cytomegalovirus, our initial Phase III clinical trial, the initiation of which was just announced this morning. The SUPPRESS trial is four, the use of CMX001 to prevent the reactivation of cytomegalovirus in zero positive hematopoietic cell transplant patients who are receiving allogeneic or unrelated if you will transplants or non-cell transplants, so that Phase III trial is up and running. It’s the first step in our development program for CMX001 again going back to in fact that we view this is a broad spectrum aging against many double-stranded DNA viruses.

So tomorrow night in Denver at the ICAAC Meeting, we will have a late-breaker, which will provide the data from our Phase II study of CMX001 in adenovirus patients. We announced the top line word form if you will of the data from that trial in August, where we said that the data were fundamentally consistent with the supportive of all that we’ve seen about CMX001’s broad spectrum activity and activity against other viruses.

The data that comes out of ICAAC and we’ll press release that on Wednesday morning. I think we’ll provide much more clarity to people about what we’re seeing and why we’re very enthusiastic about CMX001. As I like to say nothing that we saw was inconsistent with what we’ve seen in the past and all the arrows pointed in the right direction, yes at the starting point for your questions?

David Friedman – Morgan Stanley & Co. LLC

Perfect. So maybe if we can just start quickly on the BARDA sides and sort of a discrete topic you guys have confronting in the past through BARDA to develop the drug for smallpox, what is left to do with that, how long is your existing sort of remaining contracts and then is there sort of revenue opportunity over time associated with this program?

Kenneth I. Moch

Yeah. So let’s start at the end and let’s give a blunt answer which is in our IPO and everything we talk about we consider the relationship with the government BARDA to be purely incremental and purely an upside. A non-quantifiable upside and I think that true for everything with the government. It’s the sovereign right of the United States government to cancel any contracts at any moment.

Okay, so let’s now start with that, that being said smallpox is a category, a bio-terror threat we have been the company was actually founded as a bio-defense company and then I joined about 4.5 years ago we morphed it more towards the commercial aspects of CMX001 but we received now we have got $65 million or over $60 million from the U.S. government both through NIAID and BARDA for the development of CMX001 it’s paid for lot of our development work.

They paid for our compassionate use program, the study 350 this year we’re focusing on certain and the models the development of CMX001 requires that is working two animal models, we are looking at a mouse model and a rabbit model that work will continue because it’s the government I can’t promise you a specific timeline there are lot of different pressures and BARDA is funded and isn’t funded there is no purchase contract associated with it at the end of the day. So we look at it as incremental help in the development efforts for CMX001 but that’s really the way from an investor perspective I would break it at this point in time.

David Friedman – Morgan Stanley & Co. LLC

Okay and so moving on then to CMV and stem cell and the SUPPRESS trial are there one or two or more key differences that you think are in the design of the Phase III that will increase the chances of success versus the design in Phase II where you guys have good data.

Kenneth I. Moch

Yeah. So let’s take that with first the Super Hornet [ph] comment that as an anti-viral based on an existing and already approved anti-viral there is a higher probability of success that is associated with new drugs being developed for the first time without proven activity. So we’ve taken an existing drug called cidofovir which is an IV drug and is highly nephrotoxic and it has a black box warning that says it’s few or one or two doses can lead to nephrotoxicity and or death, we taken that IV nephrotoxic drug and we’ve made it oral and walked around sometimes with tablets but it’s a tablet form very small tablet and we’ve now dosed with that and we’ve been over 900 patients who received CMX001 but Phase II data has been published already you’ve all seen that.

In Phase III there are couple of things that we’ve done differently one because everybody has gotten comfortable including of course the FDA that this drug does not have any mild suppressive characteristics. The FDA has allowed us to do something it hasn’t been done for any of the prior agents developed in the space which is a dose as soon as the patient can take oral medication. So that is a change from Phase II and Phase II we had to wait till the patients being grafted which is two weeks to four weeks after their transplant.

In Phase III as soon as the patient can take oral medication they can take CMX001, we think that’s about 50% of the patients in the first week and 90% by the end of the second week. Why that’s important is you want to start loading CMX001 to these patients as soon as possible because there we’ve seen in the [indiscernible] in terms of reactivation of cytomegalovirus that the soon we get the drug on board more likely you are SUPPRESS hence the name of the trial SUPPRESS the potential for reactivation. So that’s really the key parameter.

We’ve also learned a lot about these patients, so we’re stratifying a high risk versus low risk patients, a high risk patient would be somebody who received cord blood stem cell transplant, T cell depletion will have a major mismatch in the amplified their immune system type between the recipient and the donor and those patients the second you see reactivations cytomegalovirus will go into the current standard of care and that’s the failure.

The low risk patients, there is a threshold of reactivation, they can reactivate, but not cross over that threshold level and if they don’t get above that threshold level, they all stay in the trial. And so those characteristics really we think right in the data set for the Phase III.

So in terms of the commercial opportunity assuming success of the SUPPRESS trial, the current standard of care is preemptive therapy, not preventative therapy, some would say, what seems to be happening is good enough is there really a need for more and so I guess maybe if you can just define a little bit of value proposition, that you believe CMX001 will bring such that it should justify a major change in how stem cell transplants are treated and how those patients are dealt with.

So the current standard of caring, stem cell transplantation is these sort of [indiscernible] Biocide is very powerful against cytomegalovirus. The problem is it is have many, many side effects. We look at those and saw those in our Phase II trial, which are marrow suppression being the key problem, but also there is evidence of nephrotoxicity of the patients from kidney function.

And so when you look at the overall sequela to the drug, the costs and risks of Valcyte, the current standard of care are not just the drug, if everything that goes wrong in these patients. And so our actual equation to our Phase III to what you think about the safety, efficacy pharmacoeconomics, right.

So what we’re doing in the Phase III is that if you sale our drug or you sale placebo in the Phase III, you go on to the current standard of care, which is Valcyte. So we’ll be able to do a very clear comparison of our drug versus placebo and then what happens if we have to go on to Valcyte. Patients will be filed for 14 weeks of on drug and then a 10 week follow-up period to following the patients through basically six months, you’ll be able to very clearly see the costs as well as the effect on the patient in terms of morbidity and mortality.

They tried to make Valcyte, a prevention drug in the 1990 and the problem was that while it suppressed CMV, the side effects of Valcyte were such that have no benefit in terms of patient outcomes, and we think CMX001 breaks that equation. This is the right drug for this patient population.

And the other issue that Valcyte is very specifically focused on CMV only and these patients get many other double-stranded DNA viruses. One of the things that we saw in our Compassionate Use Program was that 70% of the kids and 40% of the adults had more than one double-stranded DNA virus, sometimes three and four double-stranded DNA viruses. And each of those viruses has their own clinical sequela, right. They are the own provinces drugs to these viruses cause. No drug addresses those other double-stranded DNA virus that we think CMX001 does. So these are really important differentiating characteristics versus the current standard of care.

So market size, as you kind of touched on that, they are about 20,000 stem cell transplant recipients U.S. double that number for Europe, there are about 30,000 solid organ transplants. We think that CMX001 has the potential to expand the market particularly in stem cell transplantation, because you got to realize what stem cell transplantation is, it’s a therapy, right. It’s a therapy for patients who have cancer and genetic disorders where the therapy of choices to replace the blood forming system. The problem if you do that you’re immunosuppressed, you get a virus-to-virus can cause morbidity mortality. So we’re stopping the sequelae to the therapy, we do that right more patients will be amenable to having stem cell transplant it will expand the market.

David Friedman – Morgan Stanley & Co. LLC

And in terms of prevention versus preemption, in theory someone could say, “Well, I’ll just use CMX001 as preemption not prevention.” Right you show that it’s active and I want to avoid preventative therapies, because I have to use it in more people. Is there anything about just having the virus reactivate in a person that in and of itself causes problems, such that you really do feel that side effects and everything else that you’ve set aside there is a value of not having reactivation ever occur?

Kenneth I. Moch

Yeah, and I think you’ve said that beautifully, you’re trying to catch the bee before it flies on the window, not once it’s in there. Once you’ve reactivated, there are sequelae to reactivation sequelae to having double-stranded DNA viruses that are bad and trying to predict the timing. So in adenovirus the is the best example you can both CMV the same thing, you can start reactivating and zoom up in terms of your viral load before you can stop and you get disease.

So again what we’re going to learn in the Phase III of the underpinning, the pharmacoeconomic argument on top of the analytical argument. But medically you do not – when we saw this from the adenovirus drug, you just don’t want to have reacted, you don’t want to have the virus.

Once you have the virus, it can do bad things before you can stop it, and it can also get out of control, right. So this is an issue and so having all the evidence suggest that prevention of the double-stranded DNA viruses is going to be better medically then trying to catch it once, it’s reactivated or once you got the virus and trying to stop at them.

David Friedman – Morgan Stanley & Co. LLC

And in terms of the U.S. versus Europe in terms of dynamics around prevention, what drugs they use for preemption in terms of volumes, in terms of risk. Is the U.S. and European markets similarly attractive and how are you going to be approaching Europe?

Kenneth I. Moch

Well, the standards of care are fundamentally similar. The protocols, they did lots of variation, but they’re fundamentally in the same set of protocols. Obviously pricing pressures that existing Europe and the pressure that existing U.S. are different and we’re starting those dialogues now with European regulators to make sure we’re appropriately positioned to bring CMX001 to Europe as appropriate.

Part of it has to be the pharmacoeconomic arguments, because that’s obviously important. And so we saw in the Phase II, where we only file on patients for four weeks after dosing, we saw a very strong outline in the pharmacoeconomic arguments, what happen to patients who were on Valcyte in terms of marrow suppression, hospitalization, other drugs that had to receive like G-CSF, so the whole economic and patient sequela to the standard of care.

Now we’re following patients for 10-weeks, after they stop CMX001 and frankly placebo patients are obvious we’re following for 24-weeks. We’re going to learn a huge amount about the position of this drug and that will dictate how we develop it in terms of the pricing model for Europe. I mean there is no doubt their pressures every companies says that. But underpinning it all as a standard of care, which is pretty similar and that’s going to be good news.

David Friedman – Morgan Stanley & Co. LLC

And then in terms of Europe, are you thinking about partnering or you thinking about trying it on your own, if partnering is that something that you plan to do or would you think is more likely to be done after SUPPRESS data are available?

Kenneth I. Moch

Let’s step back a second, one of the next key hires for Chimerix will be commercial person. We think it is volatile capabilities of Chimerix to market this drug in the United States and North America. There are about 200 transplant centers in the U.S. to pediatric and adult stem cell in solid organ. There is a lot of overlap, the ID docs to work with the infectious diseases obviously a stem cell transplanter is different than a kidney transplanter, but there is still a lot of overlap.

When you look at the sales forces that existed for Genzyme transplant or for Astellas is 30 to 50 people. It’s a small, very concentrated community. So with MS cells and medical cells and then some moment in sales force you can very easily do that in the U.S.

Europe can be on a case-by-case basis. I think that the parameters suggest that with the right marketing capabilities, we can do it ourselves, but that becomes an economic argument, too soon to call the economic argument outcome yet. We certainly had a lot of interest over the course of time and people both for Europe and some for Asia in terms of this broad spectrum antiviral, but I don’t think we could put a parameter against it yet.

David Friedman – Morgan Stanley & Co. LLC

Any question?

Kenneth I. Moch

Everyone shy.

David Friedman – Morgan Stanley & Co. LLC

Okay. So maybe if we can move on, we focused on the stem cell transplant patients here, you guys have had this drug in solid organ transplant patients, maybe if you can just talk about some of the bigger non-stem cell transplant groups of patients that you think would be important over time to study for CMX001.

Kenneth I. Moch

So near-term is obviously wanted to step back. We need a second trial ultimately for traditional approval of the CMX001. We will be talking with the FDA during the fourth quarter to help refine that strategy.

We’re looking at the pediatric arena, what the pediatric plan can be for CMX001, so that will build on our adenovirus data as well as the pediatric patients who were in our compassionate use program. So we have over a 100 pediatric patients. We’ll look at all of that on a combined basis with the agency and talk about the strategy.

We’re also looking at solid organ, particularly CMV and BK virus. The evidence from our Phase II trial in stem cell showed an improvement in estimated GFR, kidney function in the patients and it correlated with whether or not these patients had BK virus in their urine. So we’re going to look at that and see what that looks like in terms of a potential Phase III in the solid organ arena or BK virus is a big deal particularly in kidney patients.

Looking more broadly and a little further away, we are changing our relationship with viruses as we developed drugs that have immunosuppressive characteristics that Tysabri is of course the most prominent example, but there are many other drugs being developed at immunosuppressed patients and can lead to susceptibility to double-stranded DNA virus either through exposure or reactivation.

So a good example of that is that now that we immunized all the kids for chicken pox. We are not getting exposed to some clinical chicken pox, we as adults and so we’re not boosting our immune system and the anxious zoster is dramatically increasing, it’s up six fold in adults and it’s solely migrating down to the younger and younger patient populations.

So we changed our relationship with Zoster by immunizing kids. There are a lots of other double-stranded DNA viruses where we are starting to change our relationship and CMX001 may have a little math and we are certainly looking at that. Those of you know our Chief Medical Officer, Michelle Berrey, some of you may know her from her Pharmasset days. She has been outstanding in developing very focused small clinical trials that can prove the capability of a drug and we’re certainly looking to do that with CMX001 brings to cidofovir.

David Friedman – Morgan Stanley & Co. LLC

Questions? Okay. So is there a way to develop this drug such that you end up with sort of viruses on the label rather than, viruses and patient populations, I mean my assumption is that your initial label with successive SUPPRESS would be CMV prevention in the stem cell transplants, I mean is there a way to disaggregate the viruses from the patients to allow you to potentially have a much broader approach to the market rather than having to run a lot of small to medium-sized studies and a lot of populations all followed up with a larger study in those populations?

Kenneth I. Moch

So the best answer to that is we hope so. So it’s clearly one of the objectives would be to get for the treatment of double-stranded DNA viruses what you’re describing really is a negotiation on label and label evolution over the course of time and that’s obviously choosing to call but as we think about the development on CMX001, we get requests for allowing the drug to be used in small clinical trials in various patient populations with various viruses, we still get approximately 10 requests a week for the compassionate use of CMX001 in a broad number of viral diseased states. Where the FDA ultimately allow us to disaggregate the disease from the virus is not clear but it’s something we’d like to see happen, because that just makes sense.

David Friedman – Morgan Stanley & Co. LLC

And in terms of BK virus, I think one of the interesting things there is trying to understand the mechanism of action given that the virus is a little bit different than some others. So could you just is there been any evolution and you guys thoughts around why the drug might work in BK and how you will potentially be able to demonstrate that in a trial even though maybe the sort of intuitive mechanism might not be there?

Kenneth I. Moch

So yes, there has been progress in understanding the mechanism by which BK virus maybe affected by CMX001 and that’s the work that we are doing internally we are generating some evidence that looks directional at this point in time. I guess that’s the best way of describing it is too soon to call it as gee, this is sensitive.

Separately, the way we view what Michelle Berrey or Hervé Momméja-Marin, our VP of Clinical Research and number of other colleagues who were out of the solid organ transplant meeting at Seattle earlier in the year. And talked with the physicians there about our data relating to the kidney function and BK virus and the takeaway from that was to some extent, clinicians don’t necessarily care about the impact on the virus, they care about the clinical impact of the drug.

And the broad statement would be if we can show an effect on kidney function with CMX001 it doesn’t really make a difference from the clinicians perspective whether or not it was BK virus or some other virus that were affecting or something else that we were affecting as long as the drug has the right safety profile and the right efficacy.

So we need to disaggregate in our mind the need for viral effect where it’s really too cynical because people don’t really understand the clinical course of BK virus very well, would disaggregate that from the clinical impact, which is very important.

David Friedman – Morgan Stanley & Co. LLC

Any Question?

Question-and-Answer Session

Unidentified Analyst

I guess that we ask some simpler questions. For this CMX001, what’s the state that right now we are in Phase II, Phase III or how long the clinical trial we allowed kind of where you think it would get to FDA for NDA application those questions?

Kenneth I. Moch

Sure. So we announced this morning, the initiation of the Phase III SUPPRESS trial. The current published statement is that we think it is a two year trial. So data 2015, obviously we are looking at a rolling submission if you will. So we’re trying to get as much done as early as we can to that fast track designation and we will give more details on the timeline when we see how fast the site start to enroll patients. So we have to get more sites up and running. But we’re a Phase III company with CMX001, 2015 is the target for the Phase III data.

David Friedman – Morgan Stanley & Co. LLC

I have two questions. Correct me if I’m wrong. In your press release for the Phase II data stated that the results were not statistically significant. I’m wondering was the study powered for statistical significance and if not why, first question? Second question is can you talk about the competitive landscape aside from the HCV antiviral?

Kenneth I. Moch

Sure. So let’s go the press release you are talking about the adenovirus press release. So this was a 48 patient trial, 3 arms, 16 patients, CMX001, 100 milligrams twice weekly, which is our Phase III SUPPRESS dose. CMX001, 200 milligrams, once weekly, so the same dose, but combined as opposed to split into twice and then placebo.

The first trial ever run in adenovirus. We screened over 700 patients to find the 48. It took about a year and a half to do so. There was always a possibility as it took in any trial that reaching statistical significance, but there wasn’t ever a probability from our perspective.

So we would very happy with the results of that trial, because we’ve learned a whole heck of a lot about the adenovirus, patient population and about CMX001 and that which is close to doing Phase II. So we did not statistical significance and less seeking off that was the first things they said. But from our perspective, there is a company, it wasn’t the issue.

What we said in the press release was the data we’re consistent with and supportive of everything else we’ve seen and you’ll have to wait until the adenoviruses discussion tomorrow night and the data that comes out on Wednesday morning. You get a flavor for what we felt with the justifications for our excitement.

So the second question was on the competitive landscape. There are a number of other compounds and development Astellas and Vical have a DNA vaccine that is in Phase III in the U.S., Europe and Japan for CMV prevention that vaccine has a mortality endpoint, which is different in our endpoint, which is crossover to preemptive therapy.

Merck has in-license a drug, which was called AI 246, from a company called AiCuris. That completed a Phase II trial. There is a very little data available about that. We think it’s about different mechanism action of prevents by virus budding or drug prevents viral application.

We know from the FDA’s discussions about endpoint that the FDA wants to make sure that when you stop the drug, which will be at 100 days that you don’t have reactivation afterwards, which is why we have to go after six months or drug that you have to take daily then prevents viral budding, we just don’t know what happens when you stop that drug, but we certainly have a concern about that.

Then the last drug that’s in development that we know how active is by Viropharma, it’s failed in a Phase III. They’ve got it back right now in a couple of different trials for treatment of patients who have life threatening, CMV infections to the latter stage, what we think of our drug works and I can get to that point and there are lot of other reasons we have concerned about the clinical positioning, but that’s for something for Viropharma to discuss. So those are the compounds that are the fullest advanced in the CMV space. There is no other drug that we know available in the other double-stranded DNA viruses that are in their commercial setting.

David Friedman – Morgan Stanley & Co. LLC

I think that’s all the time that we have. So thanks everyone for joining us today.

Kenneth I. Moch

Thank you, all.

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