Durham-based biotech company Chimerix has placed most of its eggs in one basket, banking on the success of a drug called brincidofovir that treats smallpox infections.
The drug failed to gain Food and Drug Administration approval in late 2015, causing its stock and company value to plummet to the ground almost overnight.
But CEO Michelle Berrey remains confident that brincidofovir, CMX001, will gain FDA approval with a new trial this fall. With the approval, Chimerix will be able to market the drug, gain profit and work on developing other drugs.
Without the approval, the future of the company and its stakeholders could be in serious trouble. But Berrey, along with other analysts and investors, remain confident that CMX001 will prove to be a success.
Background
Chimerix is a biopharmaceutical company located in Durham, North Carolina. It develops antiviral drugs to help patients with compromised immune systems fight infections.
At its inception, Chimerix’s main focus was to create an antiviral drug in the event of a smallpox biological attack from a state of terror. They are working with the Biomedical Advanced Research and Development Authority (BARDA) to develop brincidofovir, or CMX001, to use the drug to treat smallpox as a result of a bioterror attack.
If approved, the drug will protect patients against infection from the five major families of DNA viruses.
Chimerix is designing CMX001 to be safe enough to use even in patients that have just had any sort of stem cell transplant (this includes major organ and bone marrow transplants). It aims to protect patients from viruses that tend to reactive for the first three months after a major operation reverses their dormancy.
One month before its initial public offering, Chimerix announced that the Food and Drug Administration had granted fast track designation to CMX001. The FDA’s fast track program is designed to facilitate and expedite the development and review of new drugs that are expected to treat serious or life-threatening conditions.
FDA fast track drugs must also demonstrate potential to address and cure unmet medical needs. These drugs qualify for priority review. Because there was, and still is, such a high need to combat CMV viruses, the FDA selected Chimerix for the designation. This announcement drew more attention from investors and the biotech industry in general, as the drug was receiving more attention from the FDA.
After the major fast track announcement, Chimerix made its IPO on April 11, 2013, on the NASDAQ. It started off the day with an initial price of $14 per share. By the end of the day, this price soared 34 percent up to $18.79 per share.
Chimerix’s IPO raised over $102 million and was a financial success. It occurred just before the phase 3 trial, the final leg of the study, for the drug CMX001.
The study for CMX001 concluded in December 2015. The FDA did not approve of the drug.
Complications of mistrials by doctors and misdiagnosing of side effects of the drug were partly to blame. CMX001 ultimately failed approval by the FDA because it failed to achieve its primary endpoint in the trial.
Berry attributed the failure to the trial, not the drug itself. Strict protocol was not followed, and it altered the effects of the drug.
The company announced the news on Monday Dec. 28, 2015, after the stock market had reopened after Christmas weekend. Chimerix closed on Thursday, Dec. 24 at $35.57 and a trading volume of 156,001 shares that day. By the end of Monday, shares had plummeted to $6.62 per share. In one day, Chimerix stock lost approximately 82 percent of its value.
In its 2016 10-K, Chimerix said that it had incurred significant losses since its inception. The company said that “we anticipate that we will continue to incur significant losses for the foreseeable future, and we may never achieve or maintain profitability.”
At year end 2015, As of December 2016, it had accumulated deficit of approximately $415.8 million. Stockholder equity nearly halved from 2015 to 2016.
Corporate strategy
The failure of the drug CMX001 to receive FDA approval for the treatment of CMV viruses was serious for the company. However, it was not fatal. Chimerix has continued to operate since December 2015.
Despite the drug’s initial failure, Chimerix is developing it in an intravenous form this time. (The company is also continuing to move forward with its oral formation, and will initiate an oral trial later this year in Europe and possibly the United States.) CEO Michelle Berrey attributes the continuation of the company to numerous factors. Chimerix held a fundraiser in June 2015 to raise money for their studies in kidney transplant recipients.
Once the phase 3 results came back negatively, Berrey made the decision to halt the transplant studies and use the money raised to focus on reviewing the failure of the last leg of the study.
“We didn’t want to go any further until we figured out exactly where the drug had gone wrong,” Berrey said. “That was not the end of Brin-c (CMX001) for us.”
Berrey said that the kidney transplant financing raised $300 million. With that money in their “war chest,” as Berrey called it, Chimerix focused efforts on examining phase 3 results. This revealed several key factors that have kept Chimerix afloat and through redevelopment of CMX001.
Chimerix will conduct the next study starting in the fall of 2017. Berrey said it will take about a year to run the study. The intravenous and oral drugs will be tested on 150 patients. Berrey said that she expects positive results for both studies, which she predicts will increase their stock value.
“I think for our investors, that is what they need to say,” she said. “To see that we’re back in the game, and conducting a pivotal study for oral and IV.”
If CMX001 passes FDA review, Chimerix plans to pursue an antiviral for infections in the brain in late 2018 or 2019.
Staying afloat
When the drug failed, Chimerix did not lose all of its investors. From its inception, Fidelity has kept and maintained a 15 percent ownership of the company. It did not sell its shares after the stock hit in December 2015 and have continued to participate in fundraisers for the company.
“They stayed with us,” Berrey said. “They continue to believe in the inevitable success of our drug and our team, knowing we will get it approved and marketed.”
Berrey says that they have gradually regained some investors since the end of 2015, though she remains confident the company is in a good place financially.
“We’d really like to prove to our investment community that we can get this drug moving forward,” she said. “I want to give them a very specific timeline when we can get Brin-c on the market and get more support.”
The first move Berrey made after the failure of CMX001 was to cut 30 percent of Chimerix’s employees. Though many had been around since the beginning of the company, Berrey said the cuts were necessary to stay in operation.
According to its 10-K, Chimerix employed 132 at the end of December 2015. It now employs about 82.
Next, Berrey focused on cutting down the amount of cash the company was using each quarter. The company had the $300 million from the kidney transplant studies in the bank.
Analyst input
Yigal Nochomovitz is a biotech equity analyst at Citigroup who specializes in the health care sector. He says that Chimerix did not necessarily have a choice in its strategy to stay operational after December 2015, but rather they took vital steps to survive.
He said the company needed to conserve cash and restructure, because it would not be able to raise new capital. So, making cuts and layoffs was the only move in his opinion.
Citigroup currently has a “neutral” rating on Chimerix.
“We need to see more evidence that the IV brincidofovir program will achieve the goals of reduced gastrointestinal toxicity and thus better efficacy before re-considering our view,” Nochomovitz said.
Though Nochomovitz admitted that investors are still skeptical of the assured success of CMX001, he said that he believes that developing an IV is the right strategy and that corporate is on the right path to ensure the success of it.
“It will take some time for the company to regain credibility with investors,” Nochomovitz said. “Positive randomized data for IV brincidofovir in the setting of latent viral prevention in bone marrow transplant patients is likely going to be needed to get investors back in the story.”
Note: This story has been revised from an earlier version.
