Expert Financial Analysis and Reporting

Investment Thesis in Brief

I am recommending purchase of Chimerix at the current price. The failure of brincidofovir in the phase 3 SUPPRESS trial for prevention of cytomegalovirus infections in hematopoietic stem cell patients has caused investors to write off the company and has resulted in a depressed stock price. To illustrate, I estimate that the Company has about $320 million of cash and that liquidation of the Company would result in cash per share of $6.68 which compares to the current stock price of $5.67.

Management hypothesizes that the failure in SUPPRESS was due to trial conduct issues as opposed to ineffectiveness of the drug; as explained later in this report; I find their argument plausible. They are formulating a broad scale development program that will likely be spearheaded by another trial aimed at CMV prevention in the same patient population as SUPPRESS; there also would be additional trials for other viral infections.

We may not see topline results for a new CMV prevention study until 2020. However, if it is successful, I argue in this report for a price target of $30 in 2020 and I think the chances for success are good. The very solid financial condition (current cash of about $320 million) should fund all or most expenses through 2020. I do not see the need for an ongoing string of equity financings that we usually see with companies that have suffered a major clinical trial setback. This is a very important factor in my investment thinking.

There is an imminent and important catalyst for the stock that is the reporting of results for brincidofovir in the AdVise trial in patients with severe, life threatening adenoviral infections. I see the US addressable market potential for this indication as perhaps $150 million or more.  Depending on the trial results, there could be either an FDA approval or an FDA requirement for another trial. (I think that chances for bad results in this trial are diminishingly small.) It all depends on the data. I give the odds as better than 50/50 that brincidofovir will be approved and I estimate that the stock could more than double if approval is gained. I see the downside as perhaps $4 if the FDA asks for another study. We should see the results of AdVise in April or May and the FDA decision on the path forward in 2H, 2016.

Another potential catalyst in 2H, 2016 could be a BARDA decision on whether to stockpile brincidofovir for the treatment of smallpox if this were to occur as a result of either a terrorist attack or a laboratory mishap. This could result in sales of $100 to $440 million over a four year period. I don’t have a firm view on the possibility of this occurring.

Definitions of Key Words

This section defines a number of words, phrases and acronyms that I have used in this report that may be useful for investors who may not have already done extensive research on Chimerix. Those who are familiar with the Company may want to skip this section and go on to the body of the report.

Virus: A virus is a small, non- bacterial, infectious agent that replicates only inside the living cells of other organisms. When not inside an infected cell or in the process of infecting a cell, viruses exist in the form of independent particles called virions that have two or three parts: (1) genetic material made from either DNA or RNA, (2) a protein coat, called the capsid, which surrounds and protects the genetic material; and in some cases (3) an envelope of lipids that surrounds the protein coat when virions are outside a cell. The virus hijacks DNA of infected cell to make more virions which go on to infect other cells. The average virion is about one one-hundredth the size of the average bacterial cell.

Double stranded DNA virus (dsDNA): Genetic information for this type of virus is replicated by double stranded DNA. Other type of viruses have different replication strategies.

Brincidofovir: This drug is a nucleotide analogue that is effective against dsDNA viruses. It is the only drug of Chimerix in clinical trials. It was developed by adding a lipid tail to an approved anti-viral drug- Gilead’s Vistide (cidofovir).This greatly improved the efficacy and safety of Vistide by enabling more cidofovir to be released within cells and leaving less in the blood stream where it can cause side effect issues. While this sounds like a drug delivery mechanism, the technology results in a new molecular entity that has composition of matter patent protection which in the case of brincidofovir extends until 2034.

Hematopoietic stem cell transplant (HSCT): This procedure transplants multipotent hematopoietic stem cells, usually derived from bone marrow, peripheral blood, or umbilical cord blood. The source of the stem cells may be autologous (the patient’s own stem cells are used) or allogeneic (the stem cells come from a donor). It is a hematological procedure most often performed for patients with certain cancers of the blood or bone marrow, such as multiple myeloma, lymphomas or leukemias. In this procedure, the recipient’s immune system is usually destroyed with radiation or chemotherapy before the transplantation. Stem cells are then transplanted with the objective of creating a new immune system. Infection and graft-versus-host disease are major complications of allogeneic HSCT.

Graft versus host disease (GVHD): This is a complication that can occur after an allogeneic (from another person) stem cell or bone marrow transplant. With GVHD, the newly transplanted donor cells attack cells in the transplant recipient’s body.

Cytomegalovirus (CMV): A dsDNA (herpes) virus which is a member of the herpes family. About two-thirds of Americans experience a CMV infection in their lifetime that seldom causes major issues but remains latent for life. In immune-suppressed patients like HSCT patients, CMV can be reactivated and cause severe morbidity and mortality.

Adenovirus (ADV): This is a dsDNA virus that causes the common cold. However, in immune-suppressed HCT patients it can lead to serious disseminated infections that have a high rate of mortality. There is no effective treatment.

BK-virus: A particularly dangerous dsDNA virus that when it occurs in solid organ transplant patients, can destroy the transplanted organ.

Smallpox: A dsDNA virus that has been eradicated from the global population, but could be released through terrorism or accidental release from government research facilities.

SUPPRESS: A placebo controlled, double blind phase 3 trial designed to show that brincidofovir could reduce the incidence of CMV infection (reactivation) in allogeneic HSCT patients. It was announced in December 2015 that this trial failed to reach its primary endpoint which was a crushing blow.

AdVise: An open label, phase 3 trial of brincidofovir in adenoviral infections. Topline results are expected in April, 2016.

SUSTAIN and SURPASS: Phase 3 trials of brincidofovir designed to show that the drug could prevent reactivation of CMV infections in kidney transplant patients and improve the functioning and longevity of the donated kidney. These trials began in mid-2015, but enrollment was halted in December, 2015 pending in-depth analysis of the SUPPRESS data. The trials now have been terminated.

Background Perspective on Brincidofovir and Chimerix

Clinical Trials

Chimerix’s only drug in human clinical trials is the anti-viral drug brincidofovir whose mechanism of action allows it to target a group of viruses that have two complimentary strands of DNA; hence their classification as double stranded DNA (dsDNA) viruses. The family of dsDNA viruses is very broad; initial human studies of brincidofovir have been as follows:

• Preventing cytomegalovirus (a herpes virus) infections in patients who have received allogeneic hematopoietic stem cell transplants.
• Treating adenovirus infections in severely immunocompromised patients for whom the mortality rate in disseminated infections is 50% to 80%.
• Preventing cytomegalovirus and BK-virus infections in kidney transplant patients; these are important causes of transplant rejections.
• Preventing or treating smallpox infections caused by accidental release or terrorism. For ethical reasons, only studies on animals are allowed, but drugs can be approved on this basis of successful trials in two animal models.
• In actuality, many patients treated are infected with more than one dsDNA virus. Brincidofovir may offer broad spectrum coverage in these cases.

About Brincidofovir

Brincidofovir was derived from the Company’s proprietary lipid technology that improves the efficacy and safety of cidofovir, an approved and marketed anti-viral agent. It delivers more of the active agent cidofovir to cells thereby improving efficacy and less to the blood stream which reduces side effects. While this sounds like a drug delivery mechanism, the technology results in a new molecular entity that has composition of matter patent protection which in the case of brincidofovir lasts potentially through 2034. Gilead currently markets cidofovir as Vistide; it is indicated for the treatment of CMV retinitis in patients with AIDS. Serious kidney toxicities sharply limit its use.

Investors View on the Company and Stock

Investors initially were extremely excited about Chimerix and have poured over $500 million into the Company since it came public on April 11, 2013. At its peak price of $57.43 on August 15, 2015, the market value of the Company was $2.1 billion. This extreme high point was reached at the high point of the Ebola (a dsDNA virus) scare as investors speculated that brincidofovir might have a role in treating Ebola. This report looks at the reasons why the stock has since plummeted to $5.16 and has a market capitalization of $238 million.

Company is Very Well Financed

I project that the Company will have about $320 million of cash at the close of 1Q, 2016 or $6.89 per share. At the current price, if the Company were to liquidate all of its balance sheet assets and liabilities at the stated balance sheet values, this would amount to $6.68 per share which is more than the current stock price. This strong cash position is a key issue in my investment thinking as a very large cash balance can fund the Company possibly into 2020. Investors do not have to worry about an ongoing series of financings at the current market capitalization in order to execute planned clinical trials.

Detailed Investment Thesis

1. Management Remains Confident in and Committed to a Broad Development Program for Brincidofovir

Plans for Broad Clinical Development are Being Formulated

Chimerix has stated that it remains committed to moving brincidofovir forward as a preventative therapy for CMV in allogeneic hematopoietic stem cell (HSCT) and kidney transplant recipients. They plan a broad update on the clinical development and regulatory strategies for each potential indication during the second half of 2016 following discussions with FDA. So management has the intention and the money to move forward a large clinical development strategy for brincidofovir that in terms of viral disease, targets essentially the same indications as before.

Investors are Skeptical

The market has essentially written off brincidofovir as a failed product after the phase 3 SUPPRESS trial failed to meet its end point. The disappointing result was announced after the close on December 24^, 2015 when the stock closed at $35.57. The stock plunged on December 28, 2015 (the next trading day) at $6.62. If the stock market is right, management is just throwing money away on a failed drug. It is not uncommon in biotechnology to see managements stubbornly refuse to give up on a drug that has failed in a clinical trial as did brincidofovir in the phase 3 SUPPRESS trial. On the other hand, if management really does see a clear path forward for clinical development, there could be enormous upside.

The key question for investors is whether management is stubbornly refusing to give up on a failed product or if this really is a viable strategy. In the former case, investors would watch as the money is wasted on futile clinical trials and over time the stock price would erode steadily. However, if management’s strategy is correct and brincidofovir can be developed as a broad spectrum anti-viral agent in certain life threatening viral infections, it could be a novel product within biotechnology with blockbuster potential. I think that at the current market valuation, there is asymmetric upside in the event of success that warrants the risk of failure.

Looking at the Results of SUPPRESS Suggests a Potential Path Forward

In spite of the failure of brincidofovir in the SUPPRESS phase 3 trial to demonstrate prevention of CMV infections in allogeneic hematopoietic stem cell (HCT) patients, management believes there is a clear path forward for developing the drug. They have hypothesized (reasonably in my judgment) that the failure of SUPPRESS may have been due to the conduct of the trial and not the drug. Here is why they make this argument.

The limiting side effect of brincidofovir is diarrhea. Unfortunately, diarrhea is also a signal for the emergence of graft versus host disease in HCT patients which can cause rejection of the transplant. GVHD is treated by giving steroids and other agents which have the effect of suppressing the immune system. In this trial when diarrhea occurred, physicians were instructed to temporarily stop giving brincidofovir to see if the diarrhea would subside or lessen in which case treatment should be continued.

In analyzing results of the trial, Chimerix found that a meaningful number of physicians did not follow the trial protocol and when diarrhea occurred they began steroids immediately. As a result, many patients in the brincidofovir may have unnecessarily received steroids and other immunosuppressive agents. The resultant immune suppression made these patients much more susceptible to infections than the control group. Management has done some other analyses that support this hypothesis. However, this is a hypothesis and from the standpoint of regulatory agencies, the trial is a failure.

So What Does Chimerix Propose To Do?

In the SUPPRESS trial, the dosage form was oral. In early 2015 before the results of the SUPPRESS trial were known, Chimerix started the development of an IV dosage form. The theory is that this dosage avoids having the drug initially pass through the gastrointestinal tract and this will largely eliminate the diarrhea. This effect has been seen in animal studies. The first in human trials will start in 2H, 2016 and if the results suggest meaningful reduction of the incidence of diarrhea , Chimerix believes that it could begin a pivotal phase 3 trial in late 2017, probably replicating the design of SUPPRESS.

When Could A New Phase 3 Trial Be Completed?

The SUPPRESS trial began enrollment in September 2013, completed enrollment in June 2015 and announced topline results in December 2015. If these same timelines were met in a new phase 3 trial of IV brincidofovir, we might see the trial start in say November 2017, complete enrollment in August 2019 and present topline data in April 2020. This is a long time to wait, but I think that there is a good chance that the results could be positive.

Implications for the Stock Price if 2020 Topline Results are Positive

What could this mean from a stock standpoint? In December 2015, investors were anticipating that the phase 3 SUPPRESS trial would be successful and the market capitalization of Chimerix was $1.6 billion (46.1 million shares times $35.57).

Let’s speculate that in April 2020 topline results are positive and investors value the stock as they did in December 2015. Actually the market capitalization then was based on anticipation of positive results and here I am hypothesizing the same market capitalization with actual positive results; it would likely be meaningfully higher. The current number of shares outstanding is 46.1 million and Chimerix has a very strong cash position so that it may not need to issue any more shares. Again in an effort at conservatism let’s estimate that the number of shares outstanding increases to 56.1 million shares. In the event of all of these things happening, the release of positive topline data in April 2020 would produce a price of $29 per share. April of 2020 seems a long way off, but this is a pretty significant upside.

Chimerix is Well Capitalized and The Patent Life is Long

There are two major questions investors must ask if they are to give any value to what seems to be a distant 2020 event. The first is what is the financial condition of the Company? Will they be forced to do a series of financings at the currently distressed price in order to complete the development program in which the number of shares could balloon enormously. The Company ended 2015 with $344 million of cash. Assuming that they would want to have say $50 million of cash in April 2020 at the time of the release of positive topline data, they could finance an annual burn of $70 million. The Company hasn’t given guidance on future burn, but I note that they had an operating cash burn of $47 million in 2014 and $100 million in 2015. The great importance of this is there is no requirement for massive share issuance and resultant dilution.

The second question to ask is if they bring the product to market in say 2021 is there enough patent life to realize a significant commercial return. The answer is yes because the patent life is through 2034.2.

2.The Critical Stock Market Event in 2016 will be Results of the AdVise Trial

Objective of the AdVise Trial

The AdVise trial is aimed at treatment (not prevention) of adenoviral infections. The adenovirus causes the common cold and in patients with normal immune systems, the symptoms are relatively benign. However, in patients with compromised immune systems such as HCT patients, the infections can be extremely dangerous. Some historical studies suggest that the mortality rate can be as high as 80%. There are obviously no effective treatments for this type of infection.

Trial Design

After discussions with the FDA, Chimerix concluded that it would be unethical to conduct a pivotal trial with a control arm. Hence, a design was settled on in collaboration with the FDA in which about 200 patients with adenoviral infections would be treated in an open label trial with mortality as an endpoint. Concurrent with AdVise, Chimerix has done an historical study (study 305) of outcomes of similar patients treated at the same centers participating in AdVise achieved with standard of care. The intent is to use Study 305 as a control group. In planning this study, it was assumed that with success in SUPPRESS this single open label trial could be sufficient for approval.

Will diarrhea be a problem in AdVise as it was in SUPPRESS? I don’t think so. SUPPRESS was a prevention trial that enrolled patients shortly after their transplant and at a time when they are at great risk of GVHD. AdVise is a a trial that is aimed at treatment as opposed to prevention and patients receive the drug much later following transplant. In many cases, the adenoviral infection is actually the result of the use of steroids and other immunosuppressive drugs to treat GVHD. This is a very different treatment situation.

How Will FDA View Trial Results?

In addition to the uncertainty of the outcome of AdVise in comparison to study 305 patients, the failure of SUPPRESS raises the important question of whether the FDA would approve brincidofovir just on the results of AdVise. The obvious answer is that it will probably depend on the data. I would also point out that brincidofovir has been used to treat another 500 patients with adenoviral infections on a compassionate use basis which could provide additional important information.

Possible Outcome for AdVise

I know that your next question is what do I think will happen? Chimerix provided an update in December 2015 and at that time, all-cause mortality at day 90 remained less than 40% for approximately 100 HCT recipients with disseminated adenovirus infection. So how good is this? Historical studies have suggested mortality rates of 50% to 80%, but these studies were too small to be conclusive. Study 305 is intended to give a much better insight into mortality from standard of care. It is difficult to say, but if standard of care comes in at say 60% or more, I would think that a 40% rate of mortality in AdVise would be quite encouraging.

Another reason to hope that the results will be good is what we can infer from the compassionate use program that has treated around 500 patients. Management recently reported that there were 60 requests for compassionate use in January and February of 2016 or roughly one per day. This suggests to me that there is good word of mouth on the effectiveness of brincidofovir in disseminated adenoviral infections.

When Will We See Results and Then What Happens?

The results from AdVise are currently being analyzed and it is anticipated that study 305 results will be available in April. I would expect these results to be release in April or May. Assuming the results are not disastrous (unlikely in my opinion), Chimerix will then meet with the FDA in 2H 2016 to determine the path forward.

Possible Implications for the Stock

I am essentially ruling out the disaster scenario in which the trial is a complete failure. I think the interim look at 100 patients and the broad demand to compassionate use suggests to me that the drug is active in treating adenoviral infections, but the question is how much so. Depending on the data, there seem to be two reasonable possibilities for FDA action. The agency could: (1) recommend that Chimerix file for approval or (2) ask Chimerix to do a confirmatory trial.

In the event of point (1) occurring, I think that we could see a dramatic increase in the stock price. As a guess, I would say perhaps $12 which would only be a $550 million market capitalization. In the event of point (2) in which Chimerix has to do a second trial, I think that it would start in say 1Q, 2017. The AdVise trial started enrollment in May 2014, completed enrollment in August 2015 and will have topline data in April 2016. If this confirmatory trial were to follow the same timeline it might start in February 2017, complete enrollment in May 2018 and announce topline results in December 2018. I think that if a confirmatory control is requires that this would be taken as a moderate negative and the stock might trade to $4 per share (obviously another guess).

I think that there is better than a 50/50 chance that brincidofovir can be approved based on results in AdVise alone. With a 50% chance of success and a resultant estimated price target of $12 and a 50% chance of a $4 price target, the probability adjusted price target for Chimerix in 2H, 2016 is $8.00 per share, which is quite attractive relative to the current price of xx. Hence the reason for my Buy on the stock.

3. Small Pox Opportunity

BARDA Negotiations

In April of 2015, BARDA posted a notice of intent to award a sole source of procurement contract to Chimerix to stockpile brincidofovir in the national strategic reserve. This would be for the treatment or prevention of smallpox in the event of a terrorist attack or accidental release from research stockpiles. If finalized, this could result in the procurement of drug having $100 to $435 million of value over a 60 month period.

A proposal was submitted to BARDA in August of 2015, but political wrangling over the federal budget made funding uncertain and Chimerix was not able to complete negotiations. In September of 2015 BARDA did award Chimerix $15 million for clinical studies. The federal budget is approved there will be money for BARDA in fiscal 2016 (year ending September) and negotiations can now be restarted.  Chimerix is hopeful that they can complete final negotiations in the second half of 2016 that could allow Chimerix to provide drug to the stockpile in the latter part of 2017 or early 2018.

Clinical Studies

Obviously, it would be unethical to infect humans with smallpox and then conduct drug trials to determine efficacy. In cases such as this, FDA may grant drug approval on the basis of two well conducted trials in animal models. This is called the animal rule.

Chimerix recently presented the full data from a rabbit pox efficacy model which is a well-accepted animal model for smallpox. The results were encouraging as there was 100% survival when brincidofovir was begun immediately upon confirmation of infection. This confirmation was based on the appearance of fever rather than the appearance of a rash. There was also statistically significant improved survival even when the dosing began 24 or 48 hours after confirmation of infection. Rabbit pox progresses almost twice as fast as small pox so that it may be the case that results in humans would be better.

A second animal efficacy study in mice should be completed in the fourth quarter of 2016 enabling discussions with the FDA approval on the treatment of smallpox. I am not sure as how important the failure in the SUPPRESS trial will be for FDA decision making. The FDA may or may not require additional studies. The discussions with BARDA for the procurement of brincidofovir for the strategic national stockpile could reopen in parallel in 2H, 2016

Stock Implications

I think that a positive decision by BARDA would have a positive, perhaps very positive impact on the stock. However, I am not confident in gauging what BARDA’s decision might be and for the time being, I am not including this in my investment thinking.

4. Summarizing My Thinking on the Stock Price

The overwhelming driver of the stock price in 2016 will be the results of the AdVise trial and as I have just argued the probability adjusted stock price is estimated at $8.00.

The company believes that it has hypothesized the reason why the SUPPRESS trial failed (mistaking brincidofovir induced diarrhea for GVHD and that an IV dosage form can solve this issue. If this is correct, the promise of brincidofovir can be rekindled and with successful results in April 2020, I have argued that the stock price could be $30 per share if that occurs.

A Detailed Look at the SUPPRESS Trial

 Perspective

Clinical trials generally fail for one of two reasons. The first is that the drug is ineffective or unsafe. The second is that the trial was improperly designed and/or executed. Management believes that flawed execution may have been the reason for the failure of SUPPRESS. This leads them to believe that there is a path forward for development of brincidofovir in CMV prevention in allogeneic stem cell transplant patients.

 Design of SUPPRESS

The original brincidofovir clinical development program planned several trials against infections caused by dsDNA viruses. The lead program was the phase 3 SUPPRESS trial which randomized  452 hematopoietic stem cell transplant patients who following transplant were treated for 14 weeks with brincidofovir (n=303) or control (n=149). On December 24, 2015, the Company disclosed that SUPPRESS had failed to meet the primary endpoint of incidence of CMV viremia (presence of CMV virus in the blood) at 24 weeks post treatment which was 10 weeks after treatment ended.

Discouraging Results from SUPPRESS

For the primary endpoint of viremia at 24 weeks after beginning treatment, 51.2% of brincidofovir patients had viremia versus 52.3% of the control arm, showing no advantage.  In addition, results for the secondary endpoint of all-cause mortality trended strongly against brincidofovir (although not statistically significant). There was 15.5% mortality in the brincidofovir arm versus 10.1% in the control which was p=0.12. These results were obviously unexpected and quite discouraging on their face.

Chimerix’s Explanation for these Unexpected Poor Results

Management hypothesizes that these disturbing results may have been due to physicians not following the trial protocol. The major side effect of brincidofovir is diarrhea. However, diarrhea is also a signal of graft versus host disease and transplant physicians are trained to promptly administer steroids when GVHD occurs. The use of steroids suppresses the immune system and makes patients more susceptible to infections. I would hasten to point out that the actual data trumps hypothetical analyses like this and for the foreseeable future and until proven otherwise, regulatory agencies can only regard this as a failed trial.

Management states that in the brincidofovir arm physicians in 36% of diarrhea cases did not properly follow the protocol for differentiating brincidofovir associated diarrhea from GVHD- associated diarrhea. Management believes that this resulted in physicians inappropriately over-prescribing steroids in the brincidofovir arm. This resulted in brincidofovir patients being more immunosuppressed and ultimately more susceptible to infections (including CMV) and also more at risk of death.

This is a reasonable hypothesis and if it is correct suggests there is a path forward for brincidofovir. The Company has developed an intravenous formulation that they believe will reduce the incidence of diarrhea relative to the oral formulation used in SUPPRESS. This is because the initial dose given IV bypasses the gastrointestinal tract.

Where Do We Go From Here?

Chimerix is developing an intravenous formulation of brinicidofovir that might provide a path forward. Preclinical testing indicates that this route of administration mitigates much of brincidofovir's gastrointestinal side effects.  Management believes the IV formulation could reduce the potentially erroneous use of steroids and other immune-suppressants that was seen in the SUPPRESS trial. At some point in the future, this could lead to another trial for preventing cytomegalovirus infections in hematopoietic stem cell transplant patients.

SUPPRESS Demonstrates Anti-viral Activity

Chimerix suggests that brincidofovir showed antiviral activity as measured by the significantly lower rate of detectable CMV in the blood compared to placebo throughout the 24 weeks of study. The Company believes that the failure to meet the primary endpoint was due to the use of high dose steroids in the setting of presumed graft-versus-host-disease. The study confirmed many of the key attributes of brincidofovir in this study, including its high barrier to resistance and its lack of bone marrow and kidney toxicity.

Some patients were heavily immunosuppressed on the brincidofovir regimen, as the use of steroids was eight-fold higher through the first 100 days after transplantation. This could account for some of the reason of the decreased efficacy. Brincidofovir still had a very potent antiviral effect in the first 14 weeks and indeed it was carried through the full 24 weeks of study where patients who were treated with brincidofovir had lower rates of CMV reactivation overall and that was still statistically significant with a p-value of 0.01 through week 24.

Path Forward for the Prevention and Treatment of CMV in Stem Cell Transplant Recipients.

Management remains committed to moving brincidofovir forward for the prevention and treatment of CMV in stem cell and solid organ transplant recipients. Key to their strategy is reducing the incidence of diarrhea in patients on brincidofovir through the use of intravenous therapy and to better educate physicians in differentiating diarrhea caused from brincidofovir from diarrhea caused by diarrhea caused by GVHD. This could significantly reduce what management believed was inappropriate dosing of steroids in SUPPRESS.

IV Formulation Development Timelines

An IV formulation of brincidofovir is progressing with first in human trials expected to begin in 2H, 2016. The development timelines for the IV formulation should be significantly shortened based of the extensive database obtained through studies of the oral dosage form. An example is that they blood levels needed to achieve efficacy. Because of this, the IV formulation could enter late stage human studies in 2H, 2017. These trials might include starting patients on the IV formulation and then switching at some point to an oral.

Details on AdVise

 Overview

The most rapid potential path to approval for brincidofovir is now based on achieving positive results of the Advice trial for the treatment of serious adenoviral infections. This is an open label study in which patients treated will be compared to historical controls. The Company based on discussions with the FDA concluded that because of the high mortality rate in adenoviral infections that it would be unethical to do a controlled trial. In April 2016, they will report topline data on this trial on the primary endpoints that occur at 180 days. Topline results should be released then and Chimerix will present the data (assuming good results) to the FDA to see if it will be sufficient for approval; we should hear about the results of these discussions in 2H, 2016.

Trial Design of AdVise

AdVise is an open label trial that evaluates brincidofovir in over 200 pediatric and adult patients who had undergone allogeneic stem cell transplantation and were at high risk for developing adenovirus infections as a result of profound and persistent immunodeficiency. The study was started in March 2015 and enrollment was completed in August of 2015. Patients were treated for 90 days with brincidofovir and then followed for another 90 days. Patients were divided into three cohorts, A, B, or C, based on their underlying immunodeficiency and extent of disease.

• Cohort A enrolled allogeneic stem cell transplant recipients with limited adenovirus infection. The primary endpoint is time to progression of disease or mortality at 180 days after the beginning of treatment.
• Cohort B is comprised of about 100 allogeneic stem cell transplant recipients with disseminated adenovirus disease. Mortality in these patients may be as high as 50% to 80% with current standard of care. The primary endpoint is survival at 180 days after the beginning of treatment.
• Cohort C represents other immunocompromised patients with severe adenovirus disease, including autologous stem cell transplant recipients, solid organ transplant recipients and other immunocompromised patients. The primary endpoint is time to progression of disease or mortality at 180 days after the beginning of treatment.

The literature does not have persuasive data on outcomes in patients currently treated with best available care. Remember there are no drugs approved for this indication. In order to get a better understanding of the outcome of current treatment, Chimerix is also conducting Study 305 to obtain clinical outcomes data in patients considered matched controls; these are from the same medical centers as AdVise patients because treatment strategies for conditioning and immunosuppression can vary from center to center. The company will compare data from the AdVise trial and the Study 305 historical matched controls and present these to the FDA to determine the regulatory pathway for brincidofovir in the treatment of adenovirus.

In December 2015, Chimerix provided an update on Cohort B. At day 90, the all-cause mortality was less than 40% for the approximately 100 stem cell transplant recipients with disseminated adenovirus infection. The Company considered this as promising as the literature sites mortality rates ranging from 50 % to 80%.

In April 2016, 180 day survival data from pediatric and adult stem cell transplant recipients enrolled in Cohorts A and B will be compared with outcomes from matched historical controls of study 305. Chimerix plans to meet with FDA and other regulators during the summer of 2016 to review these data and to discuss any additional requirements for a proposed submission for brincidofovir for the treatment of adenovirus.

Diarrhea May Not Be the Important Issue that it was in SUPPRESS

If management is correct, the issue with diarrhea which they believe caused the SUPPRESS trial to fail will not be an issue in AdVise. For one thing, treatment in AdVise is started at 60 days post-transplant versus 15 in SUPPRESS. Accordingly, a lot of susceptible patients will already have developed graft versus host disease, and already be on immunosuppressive therapy such as steroids. The development of GVHD is actually an important risk factor for developing adenovirus disease in the first place. Also, many of the patients already have developed diarrhea when treatment is begun because the predominant clinical manifestation of adenovirus enteritis is diarrhea.

In severe adenovirus infection physicians tend to manage patients by decreasing immunosuppression in an attempt to get the adenovirus infection under control. So they may taper immunosuppression which is the opposite of what occurred in SUPPRESS. In the Advice trial it potentially could be the case that patients that are treated with brincidofovir tend to experience decreased rates of diarrhea over time. The bottom line of this argument is that physicians in SUPPRESS were incorrectly diagnosing diarrhea caused by brincidofovir with that caused by GVHD and began steroid and other immunosuppressive therapy. This had the effect of making brincidofovir patients more susceptible to infection. In AdVise, the exact opposite could be occurring as steroids are probably being tapered.

Precedents for Approval of Brincidofovir in Adenovirus

One of the key questions asked by investors is if brincidofovir could be approved on the basis of one open label phase 3 study that is compared to matched controls. Other drugs have been approved on the basis of matched controls. On March 6, 2015 the FDA approved Cresemba (isavuconazonium sulfate), a new antifungal drug product used to treat adults with invasive aspergillosis and invasive mucormycosis. The approval of Cresemba to treat invasive aspergillosis was based on a clinical trial involving 516 participants randomly assigned to receive either Cresemba or voriconazole, another drug approved to treat invasive aspergillosis.

The approval based on this controlled study was then followed by approval to treat invasive mucormycosis based on a single-arm clinical trial involving 37 participants treated with Cresemba which was compared with the natural disease progression associated with untreated mucormycosis. Both the controlled and open label studies showed Cresemba was safe and effective in treating these serious fungal infections. The endpoint of overall mortality also works in favor of approval as obviously this is a very hard endpoint.

Future Kidney Transplant Studies

 CMV and BK Virus in Kidney Transplant Patients

CMV is a significant cause of morbidity in kidney transplant patients. It is a contributing factor that results in ten-year graft survival rates of lower than 50%.  An even more dangerous infection is caused by the BK virus as approximately one fifth of kidney transplant recipients have BK viremia in the first year post-transplant. BK viremia-associated disease results in graft loss in more than two thirds of infected patients. This was the rationale to begin two phase 3 trials of brincidofovir, SUSTAIN and SURPASS, for the prevention of CMV in kidney transplant patients in the second half of 2015. Based on phase 2 data, there was the hope that it would also reduce viremia due to BK virus.

 At the time of SUPPRESS' top-line data release, Chimerix halted enrollment in the phase 3 SUSTAIN and SURPASS trials for brincidofovir in kidney transplant patients pending findings about BK viremia. BK-virus infections are a major cause of morbidity in kidney transplant patients. There was a hope that the full SUPPRESS data would show an impact on BK-viremia. If so, this would hold the promise that brincidofovir could reduce the rate of kidney transplant failures. However, in SUPPRESS, brincidofovir was not shown to prevent infection with non-CMV DNA viruses, such as BK virus. Again, the hypothesis is that higher use of steroids and other immunosuppressive therapies in the subjects who received brincidofovir.

Data From SUPPRESS Leads to Suspension of SUSTAIN and SURPASS

Brincidofovir’s activity against other DNA viruses was an important secondary endpoint from SUPPRESS. To determine the effect on other viruses, Chimerix analyzed banked plasma from subjects during the first eight weeks following transplant for BK virus. There was a positive trend for decreased BK virus in the blood or BK viremia in favor of brincidofovir versus placebo with 13% developing viremia on brincidofovir versus 20% on placebo with a log-rank P-Value of 0.06.

This finding maybe particularly relevant in kidney transplant recipients in whom BK viremia is associated with BK virus nephropathy, with high risk of failure of the new kidney allograft, a phase 2 study of brincidofovir in kidney transplant recipients at high risk of BK virus associated disease is underdevelopment based on the observed decreased incidents of BK viremia from the SUPPRESS study.

Next Step is Phase 2 Trial

The Company is developing plans for phase 2 trials in kidney transplant patients at high risk of BK virus infection due high levels of immunosuppression. BK virus is actively screened for in these patients either in the blood or in the urine. Both signal the potential for the development of BK virus associated nephropathy. There is nothing to do for those patients so a study that randomized patients in either brincidofovir or placebo could be contemplated in a phase 2 design.

Endpoints of a Trial

BK neuropathy is relatively infrequent adverse event and would be likely chosen as a phase 3 endpoint rather than phase 2. There are intermediate endpoints that proceed BK nephropathy such as virus in the urine would be better for phase 2.  There are several options other than BK neuropathy.

Research Pipeline

Chimerix plans to bring a new molecule, CMX669, into clinical development in late 2016 or early 2017. The clinical program will focus on treating CMV and BK-virus as with brincidofovir. CMX669 has a different profile than brincidofovir, it does not have as broad a spectrum of activity but in vitro studies suggest it is more potent against CMV and BK virus. It has a shorter half-life that allows obtaining steady state blood levels more quickly which could be an advantage. They have not seen evidence of GI side effects in preclinical models. This is promising as pre-clinical studies with oral brincidofovir did give an indication of the likely GI side effects. In addition to CMX669, a potential new clinical candidate for norovirus could be advanced in late 2016.

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