Chimerix's (NASDAQ:CMRX) updated analysis of the failed phase 3 SUPPRESS trial was a disappointment. The new bad news is that the trial not only failed to reproduce positive phase 2 results but also failed to show activity against the BK virus. This is important because BK virus infections are a leading cause of kidney injury and a key factor in graft loss. Protection against the BK virus would have differentiated Chimerix's brincidofovir from standard-of-care Valganciclovir in the kidney transplant indication.
Many assumed, due to the heavy use of immunosuppressants in the trial, that activity against the BK virus would not emerge from most slices of the data. But that a post-hoc analysis could be presented to tease out a signal in those patients who were not administered steroids. The company, however, did not present such an analysis, implying that the results were truly disappointing. As a result, Chimerix announced that they are scrapping their two phase 3 kidney transplant trials, downgrading the kidney indication into a phase-2 study, and going back to the FDA to discuss the status of brincidofovir. Based on the wording of the press release, the FDA meeting will include a risk-benefit analysis of brincidofovir with regard to all clinical programs, including the adenovirus and smallpox indications.
Understanding why SUPPRESS failed is now critical. The company previously stated that GI toxicities led to aggressive diagnosis of graft-versus host disease (GVHD) and liberal use of steroids. In a post-hoc analysis Chimerix demonstrated that all-cause mortality for the active arm was in-line with placebo when gastro-intestinal toxicity patients are excluded. Management now suggests that increased exposure due to early administration of the drug was partially to blame for increased GI adverse events.
My analysis for why this trial failed is that diarrhea was rampant in both active and placebo arms. GI tox incidence was 1.3x greater in phase 3 versus phase 2 in both active and placebo arms. This result is completely anomalous. Adverse event rates of GI toxicity were consistently higher in brincidofovir arms (63 to 67% higher than placebo), leading to an unfavorable result.
CMRX shares have a cash per share floor between 5.48 - 6.03, based upon CMRX's Q3 2015 liquidity position of $378mm and a cash burn rate of $25mm/quarter, which may prove conservative given management's prompt closure of their two phase 3 trials (SURPASS and SUSTAIN). Shares are likely to trade at a discount to cash. The upside scenario is cloudy, with only clear paths to market for the adenovirus and smallpox indications.
Stepping back, it is clear that the asset has been significantly derisked and ample data suggest that brindocofovir, while active, is not well-tolerated and does not justify further use of shareholder capital. Much value has been destroyed with brincidofovir. An intravenous formulation may resolve tolerability issues, but the market environment is inhospitable to follow-on equity offerings. Risk that another deal may not get done at favorable economics could impact development of brincidofovir. As an M&A target, Chimerix could be worth more to an acquirer than the current stock price otherwise suggests. If management is stakeholder friendly they should acknowledge that CMRX shareholders have failed to realize a positive return in any offering (issuances at $14.22, $29.00, and $39.75) and that limited access to capital could be harmful to patients. The Chimerix board should consider attracting a larger firm to acquire them, a situation that could benefit both patients and shareholders.
Disclosure: I am/we are long CMRX.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.