Chimerix, Inc. (NASDAQ:CMRX) Q1 2023 Earnings Call Transcript May 6, 2023

Operator: Good morning, ladies and gentlemen, and welcome to the Chimerix First Quarter 2023 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.

Michelle LaSpaluto: Thank you. Good morning, everyone, and welcome to the Chimerix First Quarter 2023 Financial and Operating Results Conference Call. This morning, we issued a press release related to our first-quarter operating update. You can access the press release in our Investors section of the Web site. With me on today’s call are President [Technical Difficulty] Officer, Allen Melemed; Chief Financial and Business Officer, Mike Andriole; and Chief Technology Officer, Josh Allen. Before we begin, I would 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 would like to turn the call over to our President and Chief Executive Officer, Mike Sherman.

Mike Sherman: Good morning, everyone, and thanks for joining. 2023 is definitely off to a good start from an execution standpoint. We continue to open action study sites and now have regulatory approval for the protocol in nine countries. The latest approval was received a few weeks ago from the European Union, and we’re activating sites there now. We remain on schedule for our first efficacy analysis in early 2025, which includes an initial overall survival assessment. We are pleased in the meantime to have a strong showing at the American Association for Cancer Research Annual Meeting this year with more than a dozen presentations related to the imipridone platform. Those were presented by the company and our collaborators at Brown University and the University of Michigan.

The presentation by Dr. Carl Koschmann from the University of Michigan was the highlight. He presented clinical evidence of ONC201’s ability to reverse H3K27 trimethyl loss. We’ve described previously the relationship between ONC201’s molecular targets and the H3K27M target population, but this goes a step further. This is the first known example of any therapy reversing H3K27 trimethyl loss. This is a characteristic, which you may know has been linked to tumor growth and poor prognosis. So on top of the durable tumor responses observed in the Phase II data set, the overall survival advantage reported by multiple nonrandomized analysis of patients treated with ON201 compared to all others. This provides additional confidence in the outcome of the ACTION trial.

I’ll let Josh dig a little bit deeper into the science and why it matters in a moment. We also continue to progress ONC206 in the dose escalation studies. We expect the open-label dose escalation to run into the first half of 2024. That will both inform the dosing strategy and create the opportunity to identify other signals of activity. As you recall, last quarter, we reported an investigator-assessed response in a recurrent glioblastoma patient without the H3K27 mutation who received ONC206 at one of the lower doses. This signals the potential for this drug in much larger patient populations compared to the H3K27M glioma indication. With that, I’ll turn the call over to Josh for a deeper review on ONC206’s ability to reverse this trimethyl loss and ONC206 development.

Josh Allen: Thanks, Mike. So I’d first like to expand on one of the novel findings from AACR that Mike alluded to, as it bolsters our confidence in the probability of success of ONC201 for the treatment of H3K27M glioma patients in our ongoing Phase III ACTION study. These findings suggest both in lab models and in patients’ tumors that ONC201 reverses would have thought to be the H3K27M mutations pathogenic hallmark. To put this into context, the H3K27M mutation directly causes sequestration of the PRC2 enzyme that normally carries out trimethylation of Histone H3 at position K27 as a repressive epigenetic mark to tamp down gene expression. Said another way, the H3K27M mutation found in tumors caused global loss of H3K27 trimethylation to drive oncogenic gene expression.

Turning back to the effects of ONC201. We already knew there were certain mechanistic vulnerabilities associated with H3K27M mutant glioma that rationalized hypersensitivity. This new finding demonstrates a reversal of the direct consequence of the mutation as a whole new mechanistic layer and gives us additional confidence in the potential utility of ONC201 in the ACTION study patient population. The reversal of the H3K27 trimethyl loss associated with ONC201 treatment was consistent, persistent, and pervasive across patients in their tumors. While we have documented intra-glioblastoma activity in other patient populations, this new demonstration is particularly reassuring as it indicates consistent biological activity at the recommended Phase II dose in our targeted population.

Furthermore, recent literature demonstrates that removing the H3K27M mutation to increase H3K27 trimethyl in established tumor models corresponds with a significant tumor effect and prolongation of overall survival. All of this data indicates that ONC201 has a direct effect on H3K27M mutant glioma in patients. It also sparks a number of scientific offshoots that are being pursued, not the least of which are the implications for additional indications that exhibit loss of H3K27 trimethyl through several mechanisms other than the H3K27M mutation. We look forward to sharing more as the science unfolds. Now turning quickly back to 206. This program remains on track to complete dose escalation by the first half of 2024. You will recall our prior announcement of a monotherapy objective response in a patient with non-H3K27M recurrent glioblastoma who enrolled early in dose escalation.

This has added to the enthusiasm for the program and further escalation is expected to target dosing on a twice per day, 3 days on, 4 days off schedule. When possible, these studies are collecting archival tumor tissue to enable molecular response signature studies downstream that will be crossed and formed by potential signs of clinical activity in parallel laboratory investigations that are expected to collectively inform a data-driven path forward. With that, I’ll turn the call over to Mike Andriole for a financial update.

Mike Andriole: Thanks, Josh, and good morning, everyone. I’ll provide just a quick update on our financial performance for the quarter and our cash position. For the first quarter of 2023, we reported a net loss of $21.4 million compared with a net loss of $24.8 million for the first quarter of 2022. The majority of our expenses were related to research and development, which decreased to $18.8 million for the first quarter of 2023 compared to $19 million for the same period in 2022. A meaningful portion of our R&D spend recently has been on clinical pharmacology studies needed to support a potential future NDA filing. This investment and the associated clean farm work we are finishing positions us well to prepare for a quick submission following the ACTION study.

Regarding general and administrative expenses, we continue to manage these tightly despite above-average wage inflation over the past year. Those expenses increased slightly to $5.7 million for the first quarter of 2023 compared to $5.6 million for the same period in 2022. Looking forward, we expect the financial impact of our previously announced reduction in force to begin to take effect this quarter. Turning to our cash position. We ended the first quarter of 2023 with approximately $246 million in cash and equivalents. Net burn in Q1 was at the high end of what we expect for the year as Q1 included several nonrecurring items, including severance expense, upfront CRO payments associated with ramping up the action study, and expenses related to TEMBEXA, which we paid in Q1 but won’t be reimbursed by emerging until Q2.

Under our current operational plan, we continue to expect year-end cash of around $200 million, which we expect will be sufficient to fund the organization into 2027, including through the primary endpoint readouts of the Phase III ACTION study, which are expected to occur beginning in early 2025. We also expect cash balances to be sufficient to fund the initiation of efficacy studies for ONC206, should they be pursued following the ongoing dose escalation work during this period. Importantly, we have not included any incremental non-dilutive capital arising from our TEMBEXA agreement with Emergent in this forecast. So any procurement exercises over this period by the U.S. government would generate an additional $31 million milestone per full option exercise.

We also have the potential to receive royalties from international shipments of TEMBEXA volumes during this period. In summary, any proceeds from TEMBEXA demand in the U.S. or internationally would be incremental to our capital plan. And with that overview, I’ll turn the call back to Mike for closing remarks. Mike?

Mike Sherman: Thanks, Mike. Actually, we’ll turn it to the operator, and let’s just open it up for questions.

Q&A Session

Operator: Thank you [Operator Instructions]. Your first question comes from the line of Maury Raycroft from Jefferies.

Operator: Your next question comes from the line of Naureen Quibria from Capital One Securities.

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

Operator: Your next question comes from the line of Troy Langford from TD Cowen.

Operator: There are no further questions at this time. I turn the call back over to Mike Sherman.

Mike Sherman: Great. Well, thanks again for joining us. Thanks to the Chimerix team and our collaborators for the good work that they’re doing and strong execution so far, and I look forward to providing you updates in the coming months. Thank you.

Operator: This concludes today’s conference call. You may now disconnect.