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Chimerix Inc. (NASDAQ:CMRX)

Q1 2014 Earnings Call

May 9, 2014 8:30 AM ET

Executives

Joseph Schepers – Executive Director of IR and Corporate Communications

Michelle Berrey – President, CEO and Chief Medical Officer

Tim Trost – SVP, CFO and Corporate Secretary

Analysts

Katherine Xu – William Blair

Ritu Baral – Canaccord Genuity

Brian Klein – Stifel, Nicolaus

Phil Nadeau – Cowen & Company

Operator

Good morning and welcome to the Chimerix First Quarter 2014 Financial Results Conference Call. (Operator Instructions) At this time I would like to turn the conference call over to the company’s Executive Director of Investor Relations and Corporate Communications, Mr. Joe Schepers. Please go ahead.

Joseph Schepers

Thank you and welcome to Chimerix first quarter financial results conference call. On the call today are Michelle Berrey, President, CEO, and CMO, Tim Trost, CFO; as well as Linda Richardson, Chief Commercial Officer and Mike Rogers, Chief Development Officer. Before we begin, allow me to read Chimerix’s Safe Harbor regarding forward-looking statements.

During the course of this conference call, the company will be making certain forward-looking statements such as statements relating to certain R&D programs, including our Phase 3 SUPPRESS trial or future clinical trials of Brincidofovir also known as CMX001 and related matters. These statements involve risks and uncertainties that may cause actual results to differ materially from those projected in forward-looking statements.

These risks and uncertainties are discussed more fully in Chimerix’s filings with the Securities and Exchange Commission, including without limitation its most recent quarterly report on Form 10-Q, it’s most recently filed reports on Form 8-K and other documents subsequently filed or furnished to the Securities and Exchange Commission. All forward-looking statements made on this call speak only as of the time they are made and Chimerix undertakes no obligation to update these statements to reflect subsequent events or circumstances.

I also want to point out that company issued a press release this morning containing financial results for the first quarter 2014. The press release is available on the company’s website at www.chimerix.com.

At this time, I would like to turn the call over to Michelle Berrey.

Michelle Berrey

Thank you, Joe and thank you all for joining us this morning. This is our first quarterly financial results conference call since I was appointed President and CEO on April 9. In addition to my position as Chief Medical Officer.

It is truly an honor to serve the company in this role and I appreciate the support from my colleagues and our Board of Directors as we move Chimerix forward toward the completion of the Phase 3 SUPPRESS study and the first regulatory submission Brincidofovir.

I am grateful to have the opportunity to work with so many talented and dedicated colleagues who are committed to making a difference in the lives of people facing life-threatening viral infections.

Today I’ll provide a brief overview of some of the key events during the first quarter of 2014. After my remarks, Tim Trost will discuss our first quarter financial results and we will take questions. As Joe mentioned, Mike Rogers and Linda Richardson are also on the call this morning and are also available to answer your questions.

I will begin our overview with the Phase 3 SUPPRESS trial and CMV prevention. Our clinical team remains focused on completing enrollment of SUPPRESS around the end of 2014 which would provide data in mid-2015.

Brincidofovir if approved it will be the first and only product for the prevention of cytomegalovirus or CMV and haematopoietic cell transplant recipients. To underscore the importance of Brincidofovir’s potential to address its high unmet medical need Brincidofovir has received fast track designation by the FDA for CMV in addition to adenovirus and small pox.

Since early March, we’ve been in active discussions with the FDA to design a pivotal trial that would inform the use of Brincidofovir to treat life-threatening adenovirus infections.

We are currently enrolling patients into the pilot portion of this trial. Data from the pilot portions will be submitted to the FDA along with our final study design of the Phase 3 trial in the second half of this year.

The pilot portion of the trial will remain open until the final study design is decided. At this point, we had general agreement with the FDA on a pivotal study that would compare two durations of Brincidofovir treatment. Additional historic data will also be gathered on transplant recipients over the two years prior to the initiation of the Brincidofovir trial in order to verify the high mortality rate for untreated adenovirus infection.

These data will be gathered at the same centers participating in the Phase 3 trial. Positive efficacy and safety data from this trial will potentially inform the first indication for Brincidofovir for the treatment of adenovirus infection. Both the pilot portion and the final pivotal study include pediatric and adult patients.

As we discussed on our fourth quarter financial results conference call in March, we continue in active discussions with the U.S. and European regulators regarding a CMV prevention trial in solid organ transplant recipients with a focus on renal transplants. We expect to have a final study design by the end of 2014.

While there has been dramatic improvements in recent years, less than half of transplanted kidneys are still functioning ten years after transplant, reducing injury to the kidney from viral infections and the drugs used to treat them could make a huge difference in one of our most scarce resources.

A trial in prevention of CMV and renal transplant recipients may provide the correlation of CMV viremia with CMV disease which could be one of several mechanisms for obtaining traditional approval for CMV prevention for Brincidofovir.

At the Blood and Marrow Transplant Tandem Meetings in February, we presented the safety profile of Brincidofovir in over a 100 pediatric patients treated today including children less than two years of age,

We also presented data on adenovirus infections and the potential for Brincidofovir in these patients. These oral presentations suggested that Brincidofovir is well tolerated in highly immuno-compromised pediatric patients and showed rapid antiviral activity against adenovirus, a DNA virus with high mortality rate with no available therapy.

In April, at the European Society for BMT, the company presented a summary of Brincidofovir’s safety data from two placebo controlled studies and an expanded access trial of Brincidofovir. Brincidofovir therapy showed no evidence of negative effects on white blood cell production, an important indication of a successful new hematopoietic cell transplant.

The lack of negative impacts on the white cells has allowed Brincidofovir to begin dosing very soon after the transplant in the Phase 3 SUPPRESS trial. Although we demonstrated it clinically and statistically significant impacts on the rate of CMV reactivation in Phase 2. The mean first day of dosing at day 24 following the transplant meant that Brincidofovir was not dosed early enough to avoid reactivation of CMV another virus as that can begin to cause its action in the early days following HCT.

We believe that this early dosing in the SUPPRESS trial further improves our probability of success for the primary endpoint. During 2014, we plan to continue to present and publish data on Brincidofovir’s favorable safety and tolerability profile and broad spectrum of antiviral activity as well as Brincidofovir is potentially used in multiple patient populations. Several abstracts have been accepted for upcoming scientific meetings.

Lastly in April, we were pleased to announce that Lisa Ricciardi was appointed to our Board of Directors. She has an outstanding global record of achievements in the healthcare industry and we look forward to her contributions to the company.

I’ll now turn the call over to our CFO, Tim Trost for a review of the financial results for the first quarter of 2014.

Tim Trost

Thanks, Michelle. As Joe mentioned in our introductory remarks, earlier today we issued a press release containing our financial results for the first quarter of 2014. Starting first with our balance sheet; Chimerix had $99.9 million in cash and cash equivalents, $8.5 million in debt and approximately $26.9 million outstanding shares of common stock, at March 31, 2014.

Turning to our statement of operations; Chimerix reported a net loss of $10.4 million, or $0.39 per basic and diluted share for the first quarter of 2014. During the same period in 2013, the company recorded a net loss of $9.1 million, or $22.58 per basic and diluted share.

Revenues for the first quarter of 2014 decreased to $780,000 compared to $1.8 million for the same period in 2013 due to a decrease in the first quarter of 2014 and reimbursable expenses associated with the company’s ongoing contracts with the Biomedical Advanced Research and Development Authority or BARDA.

Research and development expenses increased to $8.3 million for the first quarter of 2014 compared to $6.8 million for the same period of 2013. This increase is primarily due to the effect of increased costs related to the Phase 3 SUPRESS trial and growth of the company’s clinical, regulatory and development groups.

We have consistently stated on our previous quarterly conference calls that we expect to increase as we continue to increase activities associated with SUPPRESS and we have now begun to experience this.

We expect a significant increase in R&D expenses for the full year 2014 compared to full year 2013 due not only to the ongoing enrollment on the SUPPRESS trials, but also expenses related to the recently announced adenovirus trial. R&D expenses maybe uneven from quarter-to-quarter.

General and administrative expenses increased to $2.7 million for the first quarter of 2014 compared to $1.5 million for the same period in 2013. The increase relates to costs associated with growth of the administrative group including the starting up of a commercial team under Linda Richardson, as well as continued increased cost of operating as a publicly traded company.

For the full year of 2014, we expect an increase in G&A expenses compared to the full year 2013. Again, this increase is due to growth of our organization and cost of operating as a publicly traded company as well as critical pre-launch activities necessary for the successful commercial launch of Brincidofovir.

Loss from operations was $10.2 million for the first quarter of 2014, compared to a loss from operations of $6.5 million for the same period in 2013. The variance is due primarily to the decrease in revenue from the BARDA contract, along with the increased research and development and general and administrative expenses all as previously discussed.

Interest expense was $196,000 in for the first quarter of 2014, compared to $356,000 in the same period in 2013. The decrease is based upon a decline in our average outstanding loan payable principal balance as we continue to pay down the debt.

For the first quarter of 2014, there was no fair value of warrant charges as all of the outstanding preferred warrants converted to common stock warrants upon the completion of our IPO in April 2013.

For the fourth quarter of 2013 we recorded $2.2 million of expense due to the change in our company valuation at that time. As a reminder, the first quarter 2015 financial results as well as this morning’s announcement are available on the investors section of our website.

I will now like to turn the call over to the operator for questions.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions) our first question comes from Katherine Xu of William Blair. Your line is now open.

Katherine Xu – William Blair

Hi, good morning. I am just wondering for the antivirus pilot study, how many patients do you have right now? And what is the goal of this pilot study? Does that influence the protocol that you are designing for Phase 3? And why there two different durations?

Michelle Berrey

Good morning Katherine. So the adenovirus trial pilot portion was initiated for the main part to provide access while we were finalizing the study design for the pivotal trial. So that pilot portion does not have to have a certain number of patients. It’s really to provide access while the study discussions are ongoing.

Having said that, we will provide the data that are available on those patients to the FDA at the time that we are submitting the final protocol. However, many patients are there. We had initially discussed around 20 patients in the pilot portion. We are leaving that number open.

Again, there is not a certain number of patients that need to be enrolled in order for us to finalize the study design. The majority of the data that are informing the final study design are coming from the 359 and EINB data that were presented at the European BMT Meeting in 2013, which shows the dramatic antiviral declines and the improved mortality rate short-term compared with historic data.

So those historic data are key and are an integral part of the design of our pivotal study which we now have general agreement about because those data has not been as well publicized across adenovirus as for other viral infections.

We do want to have a confirmatory set of data that shows that high mortality rate at the same centers where we are conducting Phase 3. So, because it’s not appropriate to have a placebo control over this high mortality infections because there no other therapies available for treating adenovirus infections while a proposal to the FDA to compare two different durations.

And there are some precedent for a statistical comparison of two durations as a scientifically valid means of evaluating a compound in the Phase 3 setting. I think your other question was about the number of patients in the pilot portion and we are not giving guidance on that at this time. Again, it is not something that critical path for initiation of the adenovirus pivotal trial.

Katherine Xu – William Blair

All right, so the pivotal trial is actually a treatment study, it’s not a prevention study?

Michelle Berrey

That’s correct. That’s correct. So it is intended to be a treatment study four patients were disseminated adenovirus infection and that is the mean group of patients for the statistical comparison and the main source of data for what we consider to be that primary indication or treatment of adenovirus.

Having said that, we will also be enrolling patients who have earlier adenovirus infections meaning they had asymptomatic adenovirus viremia or have localize adenovirus infection. Although those are not a main population for comparisons of two durations of therapy, we may have additional data sufficient in those populations to expand that indication.

Katherine Xu – William Blair

Thank you, and one other question. Do you plan to hire a Chief Medical Officer at some point?

Michelle Berrey

That's a good question. At this point, we are not opening a search for a Chief Medical Officer. We are planning to shore up our resources in the clinical group. But we are comfortable with the leadership that we have in place at the moment with our- and happy with the progress of our clinical trials and the development programs to-date.

Katherine Xu – William Blair

Thank you.

Operator

Thank you. Our next question comes from the line of Ritu Baral of Canaccord. Your line is now open.

Ritu Baral – Canaccord Genuity

Hi guys. Thanks for taking the questions. I think a follow-up to Katherine’s and your explanation, it sounds like you are saying that mortality will either be a primary endpoint or very, very important endpoint in the identified risk, part two of the Phase 3 and also when you look at the two durations, is that where viral load may come in, a comparison of the two durations?

Michelle Berrey

Yes, good morning Ritu. That’s a great question and yes, mortality, whether that is all caused mortality, non-relapse mortality or progression free, meaning adenovirus progression free mortality are so in discussion as the primary endpoint.

But all of those are obviously clinical endpoints, because we don’t have an adenovirus assay, we don’t have as much data on adenovirus viremia and that’s really not an appropriate surrogate even for a primary endpoint.

We are trying to standardize the adenovirus assessments across all of the sites and that’s one of the keys for our historic data is to be able to go back to centers that have serum banks where we can have a consistent assay, silica adenovirus.

But yes, in the instance that we had similar effectiveness demonstrated by both durations of therapy, it is important to have those secondary endpoints that look at viral load. And again, that could be adenovirus burden in the blood or in the respiratory or GI tracks because we aren’t clear at this point what clearance of adenovirus would require in a patient who remains immuno-suppressed will have shedding and no longer needs interventional therapy.

It is your important question that we will be answering within the Phase 3 trial and really the reason that we wanted to stick with that mortality endpoint where we have demonstrated improve mortality in the 350 and EINB data compared with the historic data.

Ritu Baral – Canaccord Genuity

Got it, and will you be picking samples from the GI, from lung as well as plasma for sure in the trial?

Michelle Berrey

Got it, yes.

Ritu Baral – Canaccord Genuity

And how has I guess, standard of care changed over the years? Obviously, that will impact your comparison of historical control to the data that you generate going forward?

Michelle Berrey

Yes, the main reason that we wanted to include those historic data at the same centers, so that we could control for some of those factors. So, we have an increased use of – especially at some centers of T-Cell depletion, for example, we are seeing increasing rates of adenovirus infections with the increasing use of unrelated source for the transplant itself.

We see an increased use of immuno-suppressants because of GVAC. So, with all of those increasing effects on the immune system, we are seeing continued increased reporting of adenovirus and more severe outcomes.

So that the current standard of care for disseminated adenovirus infection at this point is mainly supported with a decrease in immuno-suppressants and with IVID at some centers and really there is no other alternative IV Brincidofovir off-label and we are all aware of the significant adverse effect of IV.

But I think that really speaks to the gravity of disseminated adenovirus infection that compound is considered as sort of a compound of last resort that is still used. It was not considered inappropriate until however, but due to that significant toxicity.

Ritu Baral – Canaccord Genuity

Got it, do you feel comfortable that at least within centers standard of care has not changed that much in the timeframe that you are going back to historical data?

Michelle Berrey

What probably limit the historic data too, the two years prior to availability of the pilot portion of this adenovirus trial and then we will try to do some – as well as group means on sets of data on mortality and risk factors that influence that mortality, but also due as much as we can to match comparisons with similar groups or even similar individuals.

Ritu Baral – Canaccord Genuity

Got it. Thanks for taking the questions.

Michelle Berrey

Thank you.

Operator

Thank you. Our next question comes from the line of Brian Klein of Stifel. Your line is now open.

Brian Klein – Stifel, Nicolaus

Hi, thank you for taking my question and good morning.

Michelle Berrey

Good morning.

Brian Klein – Stifel, Nicolaus

I just wanted to get an update on your plans for the solid organ renal transplant trial, now that you are pursuing a Phase 3 in adenovirus?

Michelle Berrey

Yes, good morning Brian. So the solid organ transplant study was our number two trial. We were trying to get up and running in the first half of 2014 obviously with the focus on adenovirus and the opportunity that we had to initiate that trial and open the dialogue again with the agency pursuing adenovirus really moved to the forefront.

However, we are continuing with that dialogue with the FDA and the European Health Authority and our intention is to have a final study design available in the second half of 2014.

Although initiation of that trial is very likely to be out into 2015, we are initiating our medical advisory group for a solid organ transplant study and have several opportunities to meet with that group over the summer to help lead us to what we have – could be a successful study design that will be clinically relevant and informative for that study.

It is something that has continued to be an area for us not just because of the large population and the unmet medical need in CMV, but also because of the opportunities with the renal transplant patients to demonstrate Brincidofovir’s impact on BK virus infections.

Brian Klein – Stifel, Nicolaus

Great, thank you. And then just one last question, in terms of some of the pre-clinical wok that you’ve done, have you ever looked at co-infections of adenovirus and CMV and with this Brincidofovir can it suppress both of them that they are present at the same time?

Michelle Berrey

Yes, that’s a great question. It’s actually one of the main advantages for Ganciclovir is that broad spectrum of activity and the patient population that we are focusing for even in SUPPRESS those highest risk allogenetic transplant patients, we saw in our Phase 2 study that many of the patients were infected with multiple double stranded DNA viral infections.

And across our 350 and EINB dataset, particularly in the pediatric patients, we had more than half of patients who were infected with two or more double stranded DNA viral infections.

We did have patients who came into the 2 study are preemptive therapy in adenovirus who were actively infected with CMV and currently taking Ganciclovir but continue to have high levels of active CMV replications with a randomization to Ganciclovir, especially on that twice-weekly dose, we saw a rapid declines of their CMV with the combinations that they stayed on Ganciclovir.

But with the addition of Brincidofovir had rapid declines in their CMV levels. So we do have evidence that the drug is not specifically acting on just one viral infection. In addition, we believe that it can prevent reactivation or prevent primary infection in these patients who we know are susceptible to multiple infections simultaneously.

Brian Klein – Stifel, Nicolaus

Great, thank you.

Michelle Berrey

So, great question. Thank you.

Operator

Thank you. (Operator Instructions) Our next comes from the line of Phil Nadeau of Cowen & Company. Your line is now open.

Phil Nadeau – Cowen & Company

Good morning. Thanks for taking my question. First just to follow-up to the last question, Michelle, what endpoints are you considering in the kidney transplant study? Would it be something like graft survival or are there other endpoints that you could examine?

Michelle Berrey

It’s a very good question, some of that depends on whether we continue to require that study for a second confirmatory study for traditional approval and that – without the need to have that as a full approval pivotal study it does give us much more flexibility in endpoints and design.

Again, that’s still something that we are in active discussions. If we have a control on the current standard of care, then we’d likely have a very different endpoint for the study then we would if we are comparing it with these are preemptive therapy which would like a lot more the SUPPRESS design.

So those endpoints would certainly include prevention of CMV infection but also BK graft survival and overall patient survival. We’ve seen it with the solid organ transplant data where you can compare preempted therapy with prevention of CMV just by preventing CMV, you can improve VGFR of individual patients and we believe that because of the indirect effects of CMV.

The cytokines really is the information et cetera as well as many of these viral infections to decrease the immuno-suppressants. So it’s a multi-factorial but we believe that there is many opportunities to show both the efficacy against CMV and other viruses like BK as well as improved safety of the currently available antiviral.

Phil Nadeau – Cowen & Company

Okay, great. And the second question is on, Dermavir we saw the publication yesterday, I’m just curious whether you had a chance to review it and whether you learned anything new from the publication that you did know before?

Michelle Berrey

No I think it was similar data to what we saw them published at the completion of their Phase 2 program now a couple of years ago. So, there is not really significant new data. I would point out that it’s a patient population although we were both studying and may continue to study the high risk allogeneic HCT recipient who are CMV positive.

We are setting the highest risk patients, so patients with higher morbidity the unrelated transplant core blood et cetera and I think that we are the greatest unmet medical need than those patients who are at the highest risk.

So I think the data are very promising and again, publication of Phase 2 study in the New England Journal is a great indication of that unmet medical need. I think we are very comfortable with our safety profile, the review of the FDA virus safety profile which provided us with the opportunities to begin dosing in those first days after transplant and the additional opportunities that we have in the broad spectrum activity against the other double stranded DNA viruses.

Phil Nadeau – Cowen & Company

Okay, great. And then, last question is just on SUPPRESS, can you remind us whether you are seeing new blinded data from SUPPRESS and if you are – whether you’d be going to discuss how you think the diarrhea prophylaxis is working whether it’s controlling the rates of diarrhea as you had hoped it a blinded manner?

Michelle Berrey

So what we are seeing the blinded as a ease from this patient population and we have a DSMB that is meeting regularly with a focus on looking at the potential or (Inaudible) GI profile, the DSMB, as we’ve discussed is only looking at safety, they are not looking at efficacy.

But as we didn’t want them to stop the study short, if we did at that primary endpoint early. So in their review of the safety data to-date, and of course they see unblended data, they have not felt there was a need to have any changes in our current protocol or the FNMP.

Phil Nadeau – Cowen & Company

Great, thanks for taking my questions.

Michelle Berrey

Thanks, Phil.

Operator

Thank you. I am showing no further questions at this time. I’d like to hand the call back over to Ms. Michele Berrey for any closing remarks.

Michelle Berrey

So thank you very much for the attention this morning and for all the great questions and great opportunity for us to share with you, what’s been a pretty busy quarter and beginning for 2014. We are very excited about the ongoing activity with SUPPRESS, with our adenovirus pivotal trial and the opportunity for us to work closely with the FDA to really get this program moving forward very aggressively, and again with the solid organ transplants in the months to come. So again thank you and have a good day.

Operator

Ladies and gentlemen, thank you for participating in today’s conference. This does conclude today’s program. You may all now disconnect. Thank you. Have a great day.

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