Chimerix, Inc.
Q3 2013 Earnings Call Transcript

Published: 14 Nov 2013

[Operator:]

Good morning and welcome to the Chimerix 2013 Third Quarter Earnings Conference Call. Today’s call is being recorded. (Operator Instructions) At this time, I would like to turn the conference over to the company’s Executive Director of Investor Relations and Corporate Communications, Joe Schepers. Please go ahead sir.

[Joseph T. Schepers:]

Thank you and welcome to Chimerix third quarter 2013 conference call. On the call today are Kenneth Moch, President and CEO; Tim Trost, CFO; and Michelle Berrey, Chief Medical 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 the forward-looking statements. These risks and uncertainties are discussed more fully in Chimerix’s filings with the Securities and Exchange Commission, including without limitation it’s most recent quarterly report on Form 10-Q, it’s most recently filed reports on Form 8-K and other documents subsequently filed with 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. Also I want to point out that company issued a press release this morning containing financial results for the quarter ended September 30, 2013. The press release is available on the company website at www.chimerix.com. At this time, I would like to turn the call over to Kenneth Moch.

[Kenneth I. Moch:]

Thank you, Joe, and thank you all for joining us today. Since our last quarterly conference call, Chimerix has achieved a number of significant value creating milestones in the development of brincidofovir as a broad spectrum antiviral that in our opinion based on the growing body of clinical evidence will change the standard of care in hematopoietic cell transplantation, an area of high unmet medical need. Our first milestone during the third quarter was the announcement in September of the initiation of dosing in our Phase 3 SUPPRESS trial of brincidofovir for the prevention of cytomegalovirus or CMV in HCT recipients, also referred to as bone marrow transplant recipients. I would like to personally and publicly congratulate our clinical and regulatory teams under the leadership of Michelle Berrey and Hervé Momméja-Marin, for achieving this critical milestone on time as we promised during our IPO. CMV, a double-stranded DNA virus causes life-threatening infections in patients whose immune systems are compromised after receiving a transplant or other immune suppressing therapies. There are no products approved to prevent CMV in HCT recipients, because of the bone marrow and kidney toxicities of available antivirals, and even with currently available medicines, there is mortality rate of approximately 20% during the first year following the hematopoietic cell transplant procedure that is independent of an addition to the mortality and morbidity from relapse of the underlying disease. This 20% non-relapse death rate, non-relapse mortality rate, is caused by post-transplant complications, including viral infections, in particular, CMV, as well as bacterial and fungal infections and graft failure. It is a tragedy for patients undergoing transplant and is one of the prime reasons that many patients decline to have an HCT to treat their cancer or genetic disorder. Based on the positive Phase 2 study results of brincidofovir and the study design for SUPPRESS, we are optimistic about the likelihood of positive results from the SUPPRESS trial and the potential for brincidofovir to provide a meaningful benefit to patients. Our second milestone during the quarter was the publication of positive – of the positive results of Study 201, our Phase 2 study that evaluated brincidofovir for the prevention of CMV in 230 HCT recipients in the September 26 issue of the New England Journal of Medicine. Publication in the New England Journal is a further indication of the unmet need that exists in the prevention of CMV. A search of Phase 2 studies published in the New England Journal of Medicine over the past decade, reveal that only a few dozen articles have been published on the results of Phase 2 studies. This underscores the importance of brincidofovir and its potential to transform patient care in this area of high unmet medical need. The third milestone for the quarter was the presentation of data from Study 202, our Phase 2 Study of brincidofovir as a preemptive therapy for adenovirus and this was published – this was presented in an oral late breaker session at the Interscience Conference on Antimicrobial Agents and Chemotherapy, otherwise known as ICAAC. In this small exploratory study, brincidofovir showed potential clinical benefit in reducing progression to adenovirus disease and in all-cause mortality. Later during the call, Michelle Berrey will discuss our strategy to build on this broad spectrum activity of brincidofovir for other double-stranded DNA viruses and in other patient populations. In addition to the activities I just described, we continue to work with BARDA, the Biomedical Advanced Research and Development Authority, to advance brincidofovir as a medical countermeasure against another double-stranded DNA virus, smallpox. We expect to begin pharmacokinetic studies in healthy and infected animals during the fourth quarter of 2013. These studies will support the design of pivotal efficacy studies planned for 2014. And this morning, we announced a newly issued composition of matter patent that further expands and strengthens our portfolio of patents that provide exclusivity regarding the making, using or selling of brincidofovir. With the addition of the newly issued patent, composition of matter patent exclusivity in the U.S. is expected to extend to August 2031. We currently have applications related to the U.S. patents that are in various stages of examination in numerous jurisdictions throughout the world and we continue to look at – look for new opportunities to supplement our current portfolio of patents covering brincidofovir. We believe that the extension of our composition of matter patent coverage in the U.S. by an additional 10 years add significant value to the commercial potential of brincidofovir. And finally, on October 23, we completed a secondary offering of approximately of 2.5 million shares of common stock held by certain of our existing shareholders. Chimerix did not issue any shares of common stock and we’ve received no proceeds in connection with this offering. The principal purposes of the offering were to facilitate an orderly distribution shares and to increase our public float. We were quite pleased with the level of interests from high equality institutional investors in our secondary offering. Looking forward, my colleagues and I on the management team are confident and enthusiastic about the company’s future prospects. While the first indication, we are pursuing for brincidofovir is for the prevention of CMV in HCT recipients, our overarching, broad reaching goal is develop brincidofovir as the first broad spectrum antiviral for the prevention and treatment of clinically significant infections, diseases and disorders caused by double-stranded DNA viruses. We as a management team are committed to executing on our clinical and corporate objectives and we will continue to be proactive with the financial community, keeping you apprised of the latest developments at Chimerix. Along these lines, we will be presenting at the Piper Jaffray Conference in New York on December 4 and at the JPMorgan Conference in San Francisco in January. I will now turn the call over to our CFO, Tim Trost, for a review of the financial results for the third quarter 2013. Tim?

[Timothy W. Trost:]

Thanks, Ken. As Joe mentioned in his introductory comments, earlier today, we issued a press release detailing our financial results for the third quarter of 2013. Starting first with our balance sheet at September 30, 2013, reflected a $106.9 million in cash, cash equivalents and short-term investments; $11.3 million in debt and $26 million in outstanding shares of common stock. Turning to the statement of operations and comprehensive loss for the third quarter of 2013 we reported a net loss of $6.7 million or $0.26 per basic and diluted share. During the same period in 2012, we recorded net income of $11.1 million or $6.70 per basic share and $0.11 per diluted share. The third quarter of 2012 was profitable on a standalone basis and therefore included both basic and diluted net income per share. The year-over-year change from a net income to a net loss is due to the one-time payment of $17.5 million related to the exclusive license of CMX157 to Merck in the third quarter of 2012, as well as a decrease in the third quarter of 2013 in reimbursable expenses associated with our ongoing contract with BARDA. Total revenues for the third quarter of 2013 decreased to $912,000, compared to $20.9 million for the same period in 2012. As previously mentioned, we received a one-time upfront payment of $17.5 million from Merck in the third quarter of 2012. Revenues from both quarters included contract revenue from BARDA. Research and development expenses decreased to $5.3 million for the third quarter of 2013, compared to $7.7 million for the same period in 2012. The variance is related to decreased clinical trial and manufacturing expenses, the [latter] [ph] related to BARDA during the third quarter of 2013 as well as a decrease in license fees associated with CMX157. Looking forward, we continue to expect R&D expenses to increase, as we increase activities associated with our Phase 3 SUPPRESS trial. General and administrative expenses increased to $2 million for the third quarter of 2013, compared to $1.8 million for the same period in 2012, primarily due to increased costs associated with operating as a publicly traded company. Interest expense increased to $270,000 for the third quarter of 2013, compared to a $130,000 for the same period in 2012. This increase is due to the larger outstanding loan balance in the third quarter of 2013, as a result of a draw down of a $12 million second tranche of venture debt late in the third quarter of 2012. As a reminder, the third quarter results as well as this morning’s announcement are available on the Investors section of our website. I would now like to turn the call over to our Chief Medical Officer, Michelle Berrey.

[M. Michelle Berrey:]

Thank you, Tim. The third quarter of 2013 was a significant one for Chimerix and for our clinical program. This morning, I’d like to update you on three topics

[Operator:]

At this time, I would like to open up the lines for Q&A. (Operator Instructions) Our first question comes from Katherine Xu with William Blair.

[Katherine Xu:]

Hi. Good morning.

[Kenneth I. Moch:]

Good morning, Katherine.

[Timothy W. Trost:]

Good morning.

[Katherine Xu:]

So first, I’m just wondering whether you could comment on the enrollment of SUPPRESS so far in the opening up the size initial enrollments, any feedback from the field and is it tracking your expectations?

[M. Michelle Berrey:]

Yes. Thank you, Katherine. It’s Michelle. Good morning. The site initiations for SUPPRESS as well as our screening and enrollment are on track and progressing along our internal metrics, which should meet our timeline of data availability in mid 2015. We’ve had no surprises and anticipate things will continue along the current trajectory.

[Katherine Xu:]

Okay. Michelle, can you distinguish for us all-cause mortality and non-relapse mortality? And are one of these or both you’re expecting your endpoints in SUPPRESS?

[M. Michelle Berrey:]

Yes. So non-relapse mortalities are those not specifically attributed to the underlying rationale for the transplant is a secondary endpoint as is all-cause mortality.

[Katherine Xu:]

Great. And then lastly, for the potential renal study, renal transplant study; is it – I don’t know whether you have enough evidence to actually show that you could have a effective endpoint, actually clinical endpoint to demonstrate activity against BK?

[M. Michelle Berrey:]

Xu, it’s a great question on BK virus. We have evidence from the 201 Study, which was our Phase 2 Study for CMV prevention in stem cell transplant recipients that we had an increase in GFR and that was specific for those patients, who evidence a BK infection at baseline or at the time of enrollment in the study. So that was actually post-hoc assessment that was completed as part of our Phase 3 assessment to make sure that we didn’t have any evidence of nephrotoxicity; as we were conducting that analysis, we actually found a dose related improvement in renal function. That clearly was a surprising finding and one that was pursued through multivariate analysis, which showed that those patients with the greatest differential or the greatest improvement in renal function was in patients who were randomized to an active dose of brincidofovir and who had a baseline positive urine or blood for BK virus. The evidence with regard to the levels of BK virus in the blood I would say are not as robust, but clearly, not as significant, because of our desire to rely on clinical endpoints. So as we are conducting the SUPPRESS trial with an endpoint of CMV viremia, that’s considered a surrogate endpoint for actual clinical event, thus the need for a second confirmatory trial. For BK virus, our goal is to go directly to demonstration of improved renal function and potentially improved graft survival in this patient population. The incidence rates for BK virus in patients who received a renal transplant are approximately 20% in the first year. After renal transplant, the rates of progression to BK associated nephropathy in that population are less well described, but clearly those patients who begin to advance to BK nephropathy have a much increased rate of loss of the graft. So I guess the summary of that is we would be actually more interested in demonstration of those clinical endpoints than on any potential surrogate markers for BK virus.

[Katherine Xu:]

Great. Thank you.

[M. Michelle Berrey:]

Thank you.

[Operator:]

Our next question comes from David Friedman with Morgan Stanley.

[David Friedman:]

Question, so just, first question is just to confirm the next trial that you run will be geared towards CMV alone or is there discussion around how to work in potentially some of these other virus targets? And then the second question is, have you considered looking outside of the transplant world, and if so, what are some of those areas of interest? Thanks.

[M. Michelle Berrey:]

Thanks, David. So to address your first question, I’d actually like to go back to the SUPPRESS trial, and then move on to the discussion of other trials. So the SUPPRESS trial again, the primary endpoint is the reduction of CMV viremia, which leads to initiation of CMV specific preemptive therapy. However, there are multiple secondary endpoints within the SUPPRESS trial, which we’ll be collecting prospective data on other double-stranded DNA viruses, including HHV-6, BK virus et cetera. Those viruses are less well described from an epidemiologic perspective. So the absolute reduction is difficult to estimate. But we are collecting both viral specimens blood and body fluids, as well as any potential biopsies. In addition, we are prospectively collecting clinical data. One example of that is the daily assessment of mental status, which has been shown to be a higher rate of complications and in patients who are receiving transplants, often attributed to opioids are prolonged hospitalizations, but which has been shown in prospective data out of Seattle to be highly correlated with reactivation of HHV-6. So the SUPPRESS trial is the largest multi-center prospective placebo-controlled trial to be conducted in HHV-6 infection. So in addition to CMV, certainly, our most important endpoint in this trial, we will be looking at multiple other double-stranded DNA infections, specifically, those clinical endpoints and we do have a possibility of showing statistically significant reductions for many of these other viruses. As I mentioned, the BK virus data from our Phase 2 trial in stem cell transplant recipient did show improved renal function in the stem cell transplant patients and provided us with the first evidence of potential clinical benefit for brincidofovir against BK virus. So that is something that is obviously, also being incorporated in the SUPPRESS trial, but which certainly made the renal transplant population that much more attractive for us as a potential population moving forward for traditional approval. So looking at that population specifically for multiple viral endpoints is something that we’re in active discussions with the FDA.

[David Friedman:]

Great, thank you.

[Operator:]

(Operator Instructions)

[Kenneth I. Moch:]

Hold on.

[M. Michelle Berrey:]

I’m sorry, the second – David’s second question was in other patient populations, we are in discussions with multiple medical advisors and external groups looking at other patient populations, as we’ve discussed, certainly, the numbers of patients – the number of individuals who have both an absolute immunosuppression related to either HCT or a solid organ transplant, as well as those patients with a relative immunosuppression. So the patients who are receiving biologics for autoimmune or other diseases are clearly of interest, as the patients are at increased risk for multiple double-stranded DNA viruses. We are collecting a list of those potential small proof-of-principle trials and anticipate being able to initiate one or more of these small, even investigator initiated trials in the coming 12 to 18 months.

[Kenneth I. Moch:]

Look, who is the next question in?

[Operator:]

Okay. (Operator Instructions) Our next question comes from Marc Frahm with Cowen and Company.

[Marc Frahm:]

Hi, yes. I was wondering if you could talk a little bit more about what the formulation work that’s going to need to be done for pediatric development and then just kind of your current thoughts on that trial design?

[M. Michelle Berrey:]

Good morning. so our pediatric formulation, we have been progressing in those trials to-date with those resolution and prevention, we do anticipate having our final commercial formulation available in the first part of 2014, which would require a relative viral availability study and there would be the only confirmatory PK requirement to follow on that that study to demonstrate the availability of a similar concentration of brincidofovir following the administration of that new formulation. The data available to-date in pediatric subject both PK and safety data would likely be sufficient in order to expand our first indication and since our transplant recipient, an adult only, as will be studied in the SUPPRESS trial to include pediatric transplant recipient. But kind of the disease is similar; there is not a requirement to conduct a second control trial in that patient population. Again, as soon as we have our commercial formulation for feeds in hand will have a Phase 1 study and then confirmatory PK and any recent studies moving forward.

[Marc Frahm:]

Okay, thank you.

[Kenneth I. Moch:]

You are welcome.

[Operator:]

And I’m not showing any further questions at this time, I’d like to turn the conference back over to Kenneth Moch for closing remarks.

[Kenneth I. Moch:]

Yes, just one comment from Tim Trost before we close.

[Timothy W. Trost:]

Yes. Hi, everyone. I just wanted to clarify, I evidently misspoken the – my first sentence out of my mouth, the correct amount on the balance sheet as of September 30, 2013 for cash, cash equivalents and short-term investments is $116.9 million, not $106.9 million, kind of an important clarification. That extra $10 million is important for the record.

[Kenneth I. Moch:]

Thank you, Tim.

[Timothy W. Trost:]

Yes.

[Kenneth I. Moch:]

Well, thank you all for joining us this morning. Obviously, there’s a lot going on at Chimerix and we look forward to keeping you apprised of our progress, either in one-on-one discussions as appropriate at conferences or through these quarterly investor update calls. We appreciate your interest and we look forward to talking with you in the future.

[Operator:]

Ladies and gentlemen, that concludes today’s presentation. Thank you once again, for your participation. You may now disconnect and have a great day.