EBS - Chimerix: A Confusing Business Strategy Makes It Unconvincing

• Chimerix has been a developer of antivirals.
• Its key antiviral drug, tembexa, got approved last year and is being sold to a third party.
• The company's pivot to oncology leaves us confused.

I covered Chimerix, Inc. ( CMRX ) last year , when it had just transitioned from an antiviral drug maker to an oncology concern. That transition may not have gone well, seeing that the company is down 75% to date. Surprisingly, the company seems to have done everything right - its smallpox drug brincidofovir ((TEMBEXA)) got approved last year, it started generating some revenue mainly through government contracts, and its oncology drug ONC201 produced strong data in glioma, moving ahead on its way towards a pivotal trial. Despite all that, though, the company is down considerably. One major reason seems to be the FDA's declining accelerated approval to ONC201.

In June last year, Chimerix received the FDA's approval for brincidofovir ((TEMBEXA)). These are tablets and an oral suspension for the treatment of smallpox. Being an oral suspension is important because it is recognized that smallpox drugs may damage the throat, and, therefore, especially for dysphagic people - people who have difficulty swallowing - this drug is useful. The approval, which was for all age groups, was based on animal model trials using the human smallpox virus. This is a little sad to think, because smallpox is a disease that's been eradicated. Yet the consideration of an outbreak - especially from biowarfare - compels governments and establishments to stockpile its antidote to the tune of millions of dollars.

Siga Technologies ( SIGA ) already has a smallpox drug, Tpoxx, approved in 2018, which has a different mechanism of action from Tembexa. Bavarian Nordic, too, has its own smallpox vaccine. Recent monkeypox outbreak across the globe has seen a lot of fresh interest in these medicines, with millions of dollars of new orders coming from governments across the world for them. Smallpox falls in the same category of orthopoxviruses as monkeypox, cowpox and so on. However, the FDA seems to have noted recently that Siga's drug has not been tested in humans - "...conducting randomized, controlled trials to assess TPOXX's safety and efficacy in humans with monkeypox infections is essential," the FDA has said. This applies to Chimerix' drug as well.

Anyway, in November last year, the company announced "positive" data from its ONC201 program. The target disease is recurrent H3 K27M-mutant diffuse midline glioma ((DMG)), a $500mn market. I discussed this in some detail in my previous coverage. Key data dump from the trial :

• Response Assessment in Neuro-Oncology Criteria for High Grade Gliomas criteria:

• Overall response rate ((ORR)): 20% (95% CI: 10 - 34%); including one complete response

• Median duration of response ((DOR)): 11.2 months (95% CI: 3.8 - not reached)

• Median time to response: 8.3 months (range: 1.9 - 15.9)

• Disease control rate: 40% (95% CI: 26 - 55%)

• Progression-free survival: 35% (95% CI: 21 - 49%) at 6 months; 30% (95% CI: 17 - 44%) at 12 months.

• Response Assessment in Neuro-Oncology Criteria for Low Grade Gliomas criteria: ORR 26% (95% CI: 15 - 40%)

• Among evaluable patients (those receiving at least 4mg of dexamethasone daily at baseline), 46.7% achieved at least a 50% confirmed reduction in corticosteroid dose

• Overall survival was 57% at 12 months and 35% at 24 months.

• One serious adverse event was attributed by an investigator as possibly related to ONC201.

This data compares well with historic data in this type of glioma. The disease is often impossible to treat surgically, and recurrence becomes inevitable after first-line radiation. Chemotherapy is ineffective. Compared to a historical 27.5% survival at 12 months, ONC201 saw a survival of 57%. For 24 months, this was 6.4% versus 35%. That data, if proven in a confirmatory phase 3 trial, is very strong. This phase 3 trial will be completed in 2026. There was once a hope that the drug will get accelerated approval, however it has now become clear that the FDA will need a complete phase 3 trial.

A positive development was that government agencies like BARDA began showing interest in Tembexa. To date, the company has signed two international contracts of approximately $35 million, which will occur before their proposed sale of Tembexa to Emergent BioSolutions ( EBS ).

Chimerix got into an agreement to sell Tembexa to EBS under the following terms:

• $225 million upfront at closing

• Up to an additional $100 million in future milestones with the execution of additional CLINs from BARDA1

• 20% royalty on future U.S. gross profit with volumes above 1.7 million courses of therapy

• 15% royalty of all international gross profit

While the cash generated will last them until 2027, the stock went down hugely when this deal was announced in May. Investors, clearly, wanted Chimerix to retain Tembexa for itself.

Financials

CMRX has a market cap of $207mn and a cash balance of $42.8 million. To this has to be added the potentially $325mn in funds from the EBS sale. Research and development expenses were $18.0 million for the second quarter of 2022, while general and administrative expenses were $5.8 million. The company says that, given the EBS sale, this cash should last it till 2027.

Bottom Line

My somewhat scattered study of CMRX doesn't convince me it is a buy. I call my study scattered because the company itself is somewhat scattered. CMRX has been for years a developer of antiviral drugs. A decade ago, it sold a promising HIV antiviral to Merck. After multiple failures, it developed Tembexa, and it promptly sold it to EBS just when the company was going to earn $34mn from Tembexa contracts. Then it goes ahead and buys up an oncology portfolio, where it now has to complete a long trial, using funds got from its core expertise - antivirals. That's the story for CMRX, and I have no idea what to make of it, so I will remain on the sidelines.

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