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Summary

  • CMRX's brincidofovir is a novel anti-viral drug for preventing cytomegalovirus infections in hematopoeitc cell transplant patients.
  • There is no drug approved for this indication.
  • Cytomegalovirus infections can result in graft rejection, hospitilizations and death.
  • I think that brincidofovir could gain approval in 2016 and my model projects potential sales of $800 million by 2021.

Chimerix (NASDAQ:CMRX) is a company focused on infectious disease. Its lead product is brincidofovir that is in late stage development for preventing cytomegalovirus infections in immuno-compromised patients who recently underwent hematopoietic cell transplants (NASDAQ:HCT). We all like to revisit previous investment successes and analyze the factors involved. Trius was a great success for me as I recommended it at a price of $5.03 on June 1, 2012, and Cubist (CBST) acquired the Company on September 11, 2013, for a price of $13.50 and a contingent value right that could be worth as much as $2.00 by my calculations. As I came across Chimerix, I found a lot of similarities:

I like the fundamental outlook of Chimerix very much, but I am starting coverage with a Neutral rating. The company came public in April 2014 at a price of $14.00 and was trading at about $20.00 when I began my research. At that price I would have initiated coverage with a Buy. In the last couple of days before I issued my report, the stock moved up over 25% to $25.48 as a result of some favorable news on compassionate use for its lead drug brincidofovir. This brought the market capitalization to $667 million which is above my comfort zone. I will be looking for an entry point on this stock.

The basis for my enthusiasm for the company's fundamentals is prospects for its lead drug in its initial indication for the prevention of cytomegalovirus infections in patients who have just undergone hematopoietic cell transplants (HCT). Topline phase 3 data from the SUPPRESS trial should be available in mid-2015 and I believe that the probability for success is high. I believe that this single trial could be sufficient for approval and if so, brincidofovir could be introduced in the US in 2016.

I project that brincidofovir can reach sales of $800 million by 2021 and based on this, the stock price target for that time frame is $62 to $82. There is not enough clinical data supporting use in other indications to warrant making sales estimates at this time. However, I think that there is an additional opportunity for brincidofovir in solid organ transplants which could have the same or greater sales potential as the HCT indication. It will also be studied in other disease states. I am also not including any value for any pipeline products or new indications in my sales projections.

The financial condition of the company is solid as it ended the year with $110 million. There should be no need to raise capital until after the topline data report in 2015 although opportunistically the company might choose to do so.

The reason for the 25% move in the two days before I issued my initiation report stemmed from a compassionate use request for brincidofovir. The parents of a gravely ill child, Joseph Hardy, who was suffering from an adenoviral infection, pleaded for the boy to be given brincidofovir on a compassionate basis. Initially, the company was reluctant to supply the drug as responding to this request could trigger hundreds of other requests. While this is good for patients in the short term, widespread usage of the drug in compassionate use might interfere with or prevent later clinical trials in adenovirus so that we could never determine in a well-controlled trial if the drug is effective and how effective it is.

The CEO of Chimerix, Ken Moch, was taking a battering in the lay press for being cruel, heartless and indifferent for not immediately making the product available. The situation was resolved when the FDA allowed Chimerix to immediately launch a pilot trial of open-label brincidofovir for adenovirus infections in immunocompromised patients. The Hardy boy was the first patient provided the therapy with dosing starting on March 12.

This resolution caused the stock price to surge by 25%. However, this issue has certain disadvantages. Chimerix now may be asked to include hundreds of patients in this compassionate use environment. This is costly and the information gained may have limited use for registrational purposes since it is unblinded and as previously mentioned, it could interfere or prevent development in a randomized, well-controlled clinical trial. Also, using the drug to treat desperately ill patients may result in some disappointing outcomes.

For those who want to do extensive due diligence on the Company, there is additional information on my website, SmithOnStocks.com.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Source: Chimerix: A Company Focused On Infectious Viral Diseases With Investment Characteristics Similar To Trius