Chimerix Inc (CMRX) 2022 Q3 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the Chimerix Third Quarter 2022 Earnings Conference Call. I would now like to introduce you to your host for today's call, Michelle LaSpaluto, Vice President of Strategic Planning and Investor Relations at Chimerix. Please proceed.

Good morning, everyone, and welcome to -- this morning we issued a press release on our third quarter operating update. You can access this press release in our Investors section of the website. With me on today's call, our President and Chief Executive Officer, Mike Sherman; Chief Medical Officer, Allen Melemed; Chief Financial and Business Officer, Mike Andriole; Chief Science Officer, Randall Lanier; and our Chief Technology Officer of Imipridones, Josh Allen. Before we begin, I'd like to remind you that the statements made on today's call include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and are subject to risks and uncertainties and other factors. These risks and uncertainties and other factors could cause actual results to differ materially from those referred to in the forward-looking statements. Please refer to our filings with the SEC for a more complete disclosure of these risks and uncertainties.

At this time, I'd like to turn the call over to our President and Chief Executive Officer, Mike Sherman.

Good morning, everyone, and thanks for joining the call. The third quarter was really a watershed period for Chimerix. We recorded the company's first product revenues, secured substantial non-dilutive funding for our oncology development and gain clarity with the FDA on the design of our ONC201 Phase III ACTION study. Together, these milestones position Chimerix as an oncology-focused company with the financial resources to complete our late-stage program while progressing our pipeline of promising early-stage assets. This is precisely where this management team has deep expertise and a track record of creating value for both patients and shareholders.

Let me begin with a brief recap of our sale of TEMBEXA to Emergent BioSolutions. As a result of some nimble and late-stage negotiations with BARDA, we were able to improve contract terms and increase the aggregate size of the contract and our upfront payment. Chimerix benefits from having a sizable upfront payment while removing the downside risk that BARDA doesn't use the stockpile TEMBEXA beyond the first procurement. Emergent is the industry leader in delivering protections against public health threats through the execution of government procurement. So they're really the ideal partner to maximize the future potential of TEMBEXA. Importantly, Chimerix will continue to benefit through milestones or double-digit royalties, should BARDA exercise future procurement options or additional international sales are recorded.

I'll focus the rest of my comments on ONC201. With the alignment from the FDA on our planned study design, we're excited to be launching the Phase III ACTION study at the Annual Society for Neuro-Oncology or SNO Conference taking place later this month in Tampa, Florida. This is an ideal form to enhance engagement in this study with an audience of the world's leading neuro-oncologists. This is a small tight-knit community of key opinion leaders, who are already aware of ONC201 and its potential, and already creating momentum for the study's launch.

We collaborated with many of these physicians to design a trial with a high probability of success and multiple paths to achieve success quickly. We view the probability of success for the ACTION trial as higher than that of other Phase III neuro-oncology trials. Our Phase II data demonstrated single-agent durable responses in the relapsed setting, which strictly followed FDA's guidance for patient selection. With that approach to patient selection allowed for the isolation of single-agent activity, it undoubtedly made this an even more challenging treatment setting to generate responses. In that context, the durability of this response is even more compelling. Among responders, median time of 8 months to declaration of tumor response plus an additional median of 11 months durability meant that patients, on average, experienced more than 18 months of tumor regression in the disease or life expectancy upon relapse is less than 6 months. Likely driven by this durability, this compelling evidence of change in disease progression among responders included consistent and strong association with other clinical endpoints, including overall survival. To be specific, among responders, no patients died within 24 months. Among non-responders, none survive that long.

Again, this is in a setting where median survival is less than 6 months following relapse. As strong as this Phase II data is, there are a number of aspects to the Phase III trial that we believe will actually enhance our ability to see a positive efficacy signal. Typically, there's an increase in heterogeneity among patients as you move to a larger trial. For the ACTION trial, this is controlled through the selection of the genetically defined target population. Separately, we observed in the Phase II relapsed setting. The response rate was actually the highest among those patients, whose disease was relatively less advanced, meaning their tumor burden tended to be lower and their performance status tended to be better when their recurrence was declared.

In an earlier setting, our Phase III will focus on this very population, providing more time for the drug to have effect. The safety profile of ONC201 has also opened the door for the inclusion of a more frequent dosing arm in the Phase III trial, providing another opportunity for enhanced effect, at the same time addressing the principles of the FDA's Project Optimus. While we launched this important Phase III study, we'll continue to work closely with the FDA to determine if there's a potential accelerated regulatory path based on the strong Phase II results. We have a meeting scheduled with the FDA for this discussion. And in the event we pursue that path and are successful, we'll use the ACTION study as our post-marketing confirmatory study in that filing.

We've been watching recent ODAC meetings closely, as I'm sure many of you have, noting the concerns FDA has highlighted with other drugs in the context of accelerated approval. We believe we're well-positioned to address each of them. Specifically, the FDA concerns expressed to others include, first, clarity of unmet need. In this case, H3 K27M-mutant glioma is considered Grade 4 by W.H.O. and all post-radiation therapies are considered palliative. Post-relapse survival is less than 6 months.

Second, drug safety issues. In our case, ONC201 is very well tolerated. The 211 patient safety analysis was new information for the FDA and was included in our briefing document for this meeting.

Third, the FDA observed with other programs, the need to isolate single agent activity unconfounded by combination drugs or insufficient washout periods. For ONC201, the FDA specifically defined our inclusion criteria to ensure washouts and we confirmed responses to ONC201 monotherapy through blinded independent central assessment.

Fourth, they expressed uncertainty around dose optimization work of other programs. In our case, in addition to Phase I work, our inclusion of a second dose provides dose optimization in the Phase III study.

And finally, they cited poor enrollment in Phase III for other programs. And in our case, we expect to have the ACTION trial well underway and enrolling outside the U.S. during potential review period. While each of these points speak to our positioning for accelerated approval, they also provide evidence for why we have more confidence in Phase III success relative to other programs. With all of that said, we know the FDA has raised the bar for accelerated approval, and so that's why we're seeking additional clarity on their position now that they have more visibility into ONC201 safety and were aligned on the Phase III plan. We'll determine our regulatory path following that meeting and share that with you before year-end, whether we rely on the ACTION trial for first approval or have an opportunity for an accelerated path, we see tremendous value for patients and shareholders.

With that, I'll turn the call over to Mike Andriole for a review of our financial results. Mike?

Thanks, Mike, and good morning, everyone. As Mike mentioned earlier, we successfully executed product sales and monetized TEMBEXA during the third quarter, resulting in $270 million of non-dilutive capital to the organization and an ending cash balance at September 30 of $285 million. Our primary strategic focus remains the development of our lead program, ONC201, which under our current plan is fully funded through all clinical endpoints into a potential commercial launch. Nevertheless, we will continue to exercise discipline in our allocation of capital. For example, we are relying primarily on external non-dilutive sources of capital to fund our earlier-stage pipeline programs. As such, any acceleration of investment in those early programs will follow promising data.

In the meantime, we remain disciplined with spend across the organization as we complete the transition of TEMBEXA's support to Emergent. While the company is focusing its development pipeline on oncology, may also be opportunities to capture value from our legacy antiviral library using external funding. As part of the ongoing collaboration with the Rapidly Emerging Antiviral Drug Development initiative or READDI at the University of North Carolina Chapel Hill, READDI and Chimerix for recent co-recipient of a $2 million grant from the state of North Carolina to fund preclinical development of CMX521 as a potential treatment for SARS-CoV-2 and/or other novel coronaviruses. This funding is sufficient to support development of the program to its next value inflection.

Let me now turn to the financial results for the third quarter ending September 30, 2022. Chimerix recorded net income of $241.4 million and will utilize our net operating losses to offset federal tax liability associated with this income. This net income equates to earnings per share, both basic and diluted of $2.75 for the third quarter of 2022. In comparison, we recorded a net loss for the third quarter of 2021 of $18.6 million or a loss of $0.21 per basic and diluted share.

Research and development expenses increased to $15.3 million for the third quarter of 2022, compared to $13.8 million for the same period in 2021. The main driver of this increase is the ongoing development related to ONC201. General and administrative expenses increased to $5.3 million for the third quarter of 2022, compared to $4.9 million for the same period in 2021.

The sale of TEMBEXA to Emergent was recorded as an approximate $230 million gain on sale. As mentioned earlier, we expect to utilize NOLs to offset any federal tax liability and will incur nominal state tax. In closing, we are in the strongest financial position Chimerix has been in for years. We'll continue to invest in our clinical development programs with financial discipline and are confident that such investment will maximize value for both patients and our shareholders.

With that overview, I'll turn the call back to Mike Sherman for closing remarks. Mike?

Thanks, Mike. What we've described here is really a unique risk/reward opportunity. It starts with durable single agent objective responses in a deadly disease in a very challenging relapse setting, a Phase III trial that further de-risks the clinical outcomes, a far lower commercial risk profile than most oncology programs have and without a financing overhang. As important, this is a management team that's delivered on the same formula before, and that was to the great benefit of both patients and investors.

With that, Operator, we'll open the call to questions.

(Operator Instructions) Your first question comes from the line of Maurice Raycroft with Jefferies.

This is Kevin (inaudible) on for Maurice. Just first question on the meeting with FDA this quarter. Could you just talk about what's new since that you'll discuss with them since your last meeting, you mentioned new safety analyses, progress on the Phase III. Are there -- do you have any expectations on what the FDA might want in terms of historical data or comparator data as well?

Sure, I'll start that, and then I can have Alan and Josh add. Recall that we had received some previous feedback, just highlighting the risks of an accelerated approval process, and we reported that back in May. What was interesting at that point is we really hadn't shared. We hadn't completed the analysis of the 211 patients' safety data set. So it was really premature for any conclusions to be drawn about risk benefit. And so what's -- and the other thing that was not in hand at that point really was a Phase III design that was agreed upon with the FDA. So those are really the 2 primary sort of elements of new information that comprise this briefing document. This is the first briefing document that we put together essentially to make the case for accelerated approval.

And maybe I can hand it over to Allen to highlight a little bit of that safety data, which I think is really important context for how they'll make that risk-benefit tradeoff.

This is Allen Melemed. One of the data we have said previously the FDA was more high-level SAE data. We wanted to have more of a thorough evaluation of all adverse events. And that was including dose discontinuation, dose modification. And you can see in the data that we shared as part of the investigation of brochure that dose modification and dose reductions and discontinuations are really rare. So safety is really not an issue at ONC201. Furthermore, FDA did ask us to do numerous PK studies in order to be supportive of a phase -- NDA submission. And part of this will be an update of the products we have made with these trials to show that we will be ready for FDA submission of FDA deemed just as appropriate.

It's a good point, Allen. A lot of what you hear in these ODAC meetings is a replay of the FDA sort of asking for things or making commentary that sometimes sponsors don't respond to. And in our case, starting with the notion that it was the FDA that defined for us the way we look at responses in this efficacy analysis that we've provided. And then as Allen said, numerous preclinical experiments that have been ongoing over the last 1.5 years, which are responsive to some of the early meetings we had just after acquiring the product, the company. And so being able to show them essentially that we're doing everything that they've asked us to do is part of that dialogue.

That's really helpful. And just as a follow-up for the Phase III, do you have alignment with the FDA on how many pediatric patients should be enrolled? And any general enrollment expectations in that population versus adults?

The protocol includes both pediatric and adults. We don't have specific parameters for what's required for each. Similarly, we have pediatric and adult data in the data set that we have now from the Phase II trial. But again, there's not a specific requirement. We are working with the FDA (inaudible) as everyone is on the sort of diversity objectives for all clinical trials. But that's, I think, differentiated from the pediatric adult split. I would expect that trial to be predominantly adults, but include a meaningful portion of pediatrics as well.

Mike, if I can add one of the reasons we would expect this more to be predominantly don't is that we are specifically excluding a population growth DIPG or Diffuse Intrinsic Pontine Glioma, which is the predominant form in the pediatric space. That is -- they are excluded for several reasons. One of them or 2 of them is that there are several ongoing trials with DIPG right now. And therefore, we didn't want to be in competition with those trials that are going on with several groups.

And I'll hop back in the queue.

Your next question comes from the line of Naureen Quibria with Capital One.

So sticking to ONC201 in the Phase III ACTION study, I was just wondering, can you remind us, are you also including patients who have the mutation outside the midline?

Yes. We are allowing patients with the mutation. The real -- the main criteria to be is they need to have a mutation. They either have received radiation therapy, and they need to be randomized 2 to 6 weeks from the stop of the radiation. So pretty open. Some of the exclusion criteria include, as I mentioned before, patients with DIPG as well as optimal disease.

And Mike mentioned this in the earlier comments about the heterogeneity of the patient in the earlier setting. So can you gauge who might be responders in this earlier setting or not yet?

Can you clarify your question?

I was just wondering if you're able to gauge which patients might actually be responders? Especially in the earlier setting.

The data suggests from our Phase II trial that it is -- those patients who have better performance status have less sort of disease burden, maybe fewer tumors, smaller tumors. All of those things characteristic of what you'd expect to see in the population that we are enrolling. I think there were -- we allowed performance status of below 70 on the scale that we use. And there were 7 patients in the 50 of the Phase II data set, none of those patients respond. Those are the lowest performance status. That performance status is not included in the Phase III trial. And frankly, that's not going to limit necessarily the enrollment much because for the earlier setting, you would expect the performance status to be higher anyway.

So in any event, we do believe that going to that earlier line was essentially during the watch and wait period following radiation gives the best opportunity for ONC201 activity. And as we say, we saw that translate to responses, which led to both survival performance status improvement and even an ability to see an increased reduction in steroid use.

In this population, we are going to be doing a century view before they come on study. So we will evaluate this in a randomized setting. One of the challenges of looking at the responses in the single-arm study is these are so close to radiation. It's hard to identify specifically the results you see is due to your drug itself, radiation or a combination. And therefore, the criteria we utilized in the Phase II study for our IP50 group was very strict to IC50 effect of this. In a randomized setting though, you can see -- did you have an additional effect due to the drug because you have a control on.

That's helpful. And just one more. I was just wondering, you've mentioned in the past that obviously, this mutation is routinely tested for here in the U.S. Would you say that also holds true ex-U.S., would you assume there may be bottlenecks in terms of patient recruitment, if the -- if it's not?

It is widely true. It's true. But Allen, maybe speak to the enrollment window and how we expect that to play out.

Yes. So one of the advantage of the trial designs that we have, and we've actually met with several numerous doctors that the EAN or the European Neurology meeting is since we're allowing time to start screening patients upon their initial startup radiation therapy give a long time to get the testing back. So most patients are -- almost all patients are routinely tested. It's the speed of when you get the test back. And if we had done a trial where you randomize immediately at the after biopsy and prior to radiation, you probably have lost a lot of patients because they wouldn't have gotten essential tissue back and results back. But since we have a longer window to randomize, everyone feel that this is going to be very easy to do because testing in this population in the countries that we're going is standard.

It also will allow for a more referral component of the enrollment. In other words, patients who might start at a community center where they can easily administer the radiation following radiation then those physicians will more likely refer them on to a clinical trial anyway, and they were able to oversee their initial treatment. That will, I think, support enrollment as well.

I'll hop back in.

Your next question comes from the line of Ed White with H.C. Wainwright.

On the ACTION trial, you mentioned that there's going to be interim readouts. I'm curious as to if these readouts would be made public. And could the readouts assess the 2 different doses and perhaps discontinue one dose for faster results?

I'll speak to the disclosures, and then Allen, maybe you can speak to the nature of the stopping points versus others. But we will only be unblinded to data when it is -- when it is final. So for interim or early assessment of overall survival, obviously, there'll be nothing to report. I think that as it relates to Progression-Free Survival, that could actually be the basis if we don't get accelerated approval based on the Phase II data that is incorporated into the Phase III design as an early endpoint for that readout.

So that data will be a single readout and will be final when completed and be the basis for submission, whether we report that out publicly, probably wouldn't, but would report out the high-level endpoint and our intention to move forward with the regulators to review that.

I'll address the question around topic. So we specifically have built in safety analysis that if there is an issue and on the way I'd expect it would be the higher dose is not tolerable that we could stop that arm if it's appropriate according to our guidelines, we're getting to the DMC, independent DMC. Regarding the powering each arm, so we have 625-day-1-day 2, 625 day 1 and then the control. Each arm is independently powered against the control arm. So you actually have multiple shots on all. So you have the first two interim analyses for survival, which if positive, we'll claim significant from this. We have several full analysis for Progression-Free Survival, which is one final, which is also independently powered for each arm.

And just a question on the TEMBEXA. There's $136.5 million of potential milestones. I'm just wondering if you can discuss what potentially triggers these milestones.

There are 4 milestones of $31 million each, Ed, that are individually triggered by options in the procurement agreement between BARDA and Emergent. So should BARDA trigger the next option for additional procurement that would trigger a $31 million milestone payment from Emergent to Chimerix really, at the time of the option, regardless of when that product is actually delivered into the stockpile, that payment would be triggered. So that gets to $124 million and then the remaining $12.5 million are associated with development milestones of the product.

Those are all the questions I had.

Your next question comes from the line of Joseph Thome with Cowen.

Maybe the first one just on -- if I know accelerated approval is the upside scenario here, but in the deck, it looks like you're guiding to an H223 regulatory submission, if that is possible. So I guess, what will be needed outside of the green light from the FDA to prepare this package? Is it the PK information that Allen mentioned? Or is there anything else outstanding that would take some time.

Yes. There's -- we had mentioned this before, some of the Clinpharm work, in particular, there's a little bit of CMC work ongoing that would wrap up in the first half of the year. I think one of the -- just to give an example, I think long QT analysis is one of the final steps in that Clinpharm work that is required. These are all requirements that we identified and documented in our initial meetings. I guess it was a year -- a little bit more than a year ago with the FDA and have been doing that work ever since all of those -- all of that analysis has gone very well so far, including not the least of which was the healthy volunteer dose escalation where we were able to -- it's pretty rare that you can do not a healthy volunteer oncology safety assessment. And in that case, only saw a grade 1 toxicities that emerge. So that work we expect to wrap up in the first half of the year, and that is essentially gating to submission, we would expect if the conversation goes well with the FDA here in this near-term meeting, and we would have a more specific pre-NDA meeting where we would just finalize all of the elements that they expect to see in the NDA, that would happen in the first half of next year.

And then maybe now that you have the cash from TEMBEXA, obviously, it's great to fund the ONC201 trial, but are you thinking about doing any opportunistic BD to kind of expand your footprint in oncology? Or how are you thinking about the pipeline?

Our first priority is to make sure we've got cash and capitalization through all the clinical endpoints for the ACTION study. We feel good about that and then potentially through approval, commercialization in some scenarios, profitability of the company. They're likely to be opportunities to invest further in the pipeline and we'll evaluate any opportunity to enhance shareholder value, whether that's internal or external. But our priority right now is making sure we've got 201 fully funded, and we'll evaluate other opportunities as they arise.

There are no further questions at this time. I would like to turn the call back to Mike Sherman.

Thanks, Angela, and thanks, everyone, for your time today. We look forward to providing additional updates between now and the end of the year. Have a good day.

This concludes today's call. You may now disconnect.