Chimerix, Inc.

Good morning, ladies and gentlemen, and welcome to the Chimerics 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 Chimerics. Please proceed. Thank you.

Good morning, everyone, and welcome to this morning we issued a press release on our third quarter operating updates. You can access this press release in our investor section of the website. With me on today's call are President and Chief Executive Officer Mike Sherman, Chief Medical Officer Alan Melamed, Chief Financial and Business Officer Mike Andreou, Chief Science Officer Randall Lanier, and our Chief Technology Officer of Oniprodone, 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 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 gained clarity with the FDA on the design of our Onc201 Phase III Action Study. Together, these milestones positioned 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 choose to stockpile Timbexa 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 Timbexa. 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 forum 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 relapse setting. which strictly followed FDA's guidance for patient selection. 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 these responses is even more compelling. Among responders, median time of eight 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 where life expectancy upon relapse is less than six 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 survivals. To be specific, among responders, no patients died within 24 months. Among non-responders, none survived that long. Again, this is in a setting where median survival is less than six months following relapse. As strong as this phase two data is, there are a number of aspects to the phase three 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 relapse 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 ONC-201 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 Optimist. While we launch this important phase three study, we'll continue to work closely with the FDA to determine if there's a potential accelerated regulatory path based on these strong phase two 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 needs. In this case, H3K27M mutant glioma is considered grade four by WHO. and all post-radiation therapies are considered palliative. Post-relapse survival is less than six months. Second, drug safety issues. In our case, ONG201 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 assessments. Fourth, they expressed uncertainty around dose optimization work of other programs. In our case, in addition to phase one work, our inclusion of a second dose provides dose optimization in the phase three study. And finally, they cited poor enrollment in phase three 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 3 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 we're aligned on a Phase 3 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 Andriel 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 30th 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 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 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 REDI, at the University of North Carolina Chapel Hill, REDI and Chimerics were recent co-recipients 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 30th, 2022. Comerics 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 21 cents 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 ONC 201. 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 Kembexa 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 the durable single-agent objective responses in a deadly disease in a very challenging relapse setting. a phase three 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 this 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.

If you would like to ask a question, simply press star followed by the one on your telephone keypad. Your first question comes from the line of Mari Rakoff with Jefferies. Your line is open.

Hi, good morning. This is Kevin on for Mari. Thanks for taking our questions. Just first question on the meeting with FDA this quarter. Could you just talk about what's new that you'll discuss with them since your last meeting? You mentioned new safety analyses, progress on the phase three. 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 patient 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 three design that was agreed upon with the FDA. So those are really the two primary 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 Alan to highlight a little bit of that safety data, which I think is really important context for how they'll make that risk-benefit trade-off.

Yes, thank you, Mike. This is Alan Milliman. One of the data that we have sent previously to the FDA was more high-level SAE data. We wanted to have more of a thorough evaluation of all adverse events, and that was what included including dose discontinuation, dose modification. And you can see in the data that we shared, and it is also part of the investigational brochure, that dose modification and dose reductions and discontinuation are really rare, so safety is really not an issue upon 201. Furthermore, FDA did ask us to do numerous PK studies in order to be supportive of a phase, a NDA submission. And part of this will be an update of the progress we have made with these trials to show that we will be ready for NFDA submission of FDA deems as appropriate.

Good point, Alan.

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 Alan said, numerous preclinical experiments that have been ongoing over the last year and a half, 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.

Okay, that's really helpful. Thank you, Mike. And, you know, just as a follow-up for the Phase 3, 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 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, incidentally, 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 adult, 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 adult is that we are specifically excluding a population called DIPG or a diffuse intrinsic pontine gliomas, which is the predominant form in the pediatric space. That is, they're excluded for several reasons. One of them, or two of them, is that there are several ongoing trials with the APG right now, and therefore we didn't want to be in competition with those trials that are going on with several groups.

Great. Thank you, and I'll hop back in the queue.

Your next question comes from the line of Noreen Quibria with Capital One. Your line is open.

Thanks. Hi, good morning. So sticking to Onto One and the phase reaction study, I was just wondering, can you remind us, are you also including patients who have the mutation outside the midline?

Alan, go ahead.

Yes, we are allowing patients with the mutation. The main criteria to be is they need to have a mutation, they need to have received radiation therapy, and they need to be randomized two to six weeks from the stop of the radiation. So we're pretty open. Some of the exclusion criteria include, as I mentioned before, patients with DIPG as well as leptomental disease.

Got it. Thanks. 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 think the question's, go ahead.

Oh, I was just wondering if you're able to gauge who, which patients might actually be responders, especially in the earlier setting.

Right. Yeah, 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're enrolling. I think there were, we allowed performance status of below 70 on the scale that we used, and there were seven patients in the 50 of the phase two data set. None of those patients responded. Those are the lowest performance status. That performance status is not included in the phase three 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, which essentially during the watch and wait period following radiation, gives the best opportunity for ONC201 activity. And as I 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.

And can I add that in this population, we are going to be doing a central review before they come on study. So we'll be able to evaluate this in a randomized setting. One of the challenges of looking at the responses in a single-arm study is these are so close to radiation, it's hard to identify specifically if 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 IOP50 group was very strict to IOP50 effect of this. In a randomized study, though, you can see did you have an additional effect due to the drug because you have a control arm.

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

It is widely true in patients. Yeah, go ahead. It's true in Europe as well, but Alan, maybe speak to the enrollment window and how we expect that to play out.

Yeah, so one of the advantages of the trial designs that we have, and we've actually met with numerous doctors at the European Neurology Meeting, is since we're allowing a time to start screening patients upon their initial start of radiation therapy, you have a long time to get the testing back. So Most patients, or almost all patients, are routinely tested. It's the speed of when you get the test back. And if we had done the trial where you randomize immediately after biopsy and prior to radiation, we probably would have lost a lot of patients because they wouldn't have got essential tissues back and results back. So since we have a longer window to randomize, everyone feels that this is going to be very easy to do because testing in this population in the country that we're going is standard.

Okay, great. 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'll, I think, support enrollment as well.

All right. Thank you. I'll hop back in.

Your next question comes from the line of Ed White with HC Wainwright. Your line is open.

Good morning. Thanks for taking my questions. 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 would the readouts assess the two different doses and perhaps discontinue one dose for faster results?

I'll speak to the disclosures, and then Alan maybe can speak to the nature of the the stopping points versus versus others but we we will only be unblinded to data when it is when it is final so for interim or early assessments of oral survival obviously there'll be 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 2 data. That is incorporated into the Phase 3 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.

And thanks, Mike. I'll address the question around stopping. So we specifically have built in safety analyses that if there is an issue, and the only way I'd expect it would be the higher dose is not tolerable, that we could stop that arm if it is appropriate according to guidelines we're getting to the DMC, independent DMC. Regarding the powering, each arm, so we have 625 day one, day two, 625 day one, and then the control. Each arm is independently powered against the control arm. So you actually have multiple shots on call. So you have the first two interim analyses for survival, which if positive, will claim significance of this. We also have a full analysis for progression-based survival, which is one final, which is also independently powered for PHR.

Okay. Thanks, Alan.

And just a question on the Tembex. There's 136.5 million of potential milestones. I'm just wondering if you can discuss what potentially triggers these milestones. Sure, Mike, Andrew, you want to respond to that one?

Sure.

There are four 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 Chimerics. Really, at the time of the option, regardless of when that product's 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.

Okay, thanks, Mike.

Those are all the questions I had. Sure.

Your next question comes from the line of Joseph Thome with Cowan. Your line is open.

Good morning and thank you for taking my questions. 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 Ella mentioned, or is there anything else outstanding that would take some time?

Yeah, 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. Just to give an example, I think a long QT analysis is one of the final steps in in that ClinPharm work that is required. These were all requirements that we identified and documented in our initial meetings. I guess it was a little bit more than a year ago with the FDA and have been doing that work ever since. All of that analysis has gone very well so far, including and not the least of which was the healthy um, healthy volunteer dose escalation where we were able to, it's pretty rare that you can do a healthy volunteer oncology safety assessment. Um, and, and in that case only saw a grade one, uh, toxicities emerge. So, um, that, that work we expect to wrap up in the, in the first half of the year and that essentially gating to, um, to, uh, submission. We would expect if the conversation goes well, uh, with the FDA, um, in this near-term meeting, then 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.

Perfect. And then maybe now that you have the cash from Tembexa, obviously it's great to fund the ONC-201 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? I'd like to respond to that.

Yeah. Hey, Joe. 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, and in some scenarios, profitability of the company. There are 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. Perfect. Thank you very much.

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.