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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 10-Q
(Mark One)
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2021
 
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from                  to                
 
Commission file number: 001-35867
 
CHIMERIX, INC.
(Exact Name of Registrant as Specified in Its Charter)  
Delaware 33-0903395
(State or Other Jurisdiction of Incorporation or Organization) (I.R.S. Employer Identification No.)
  
2505 Meridian Parkway, Suite 100
  
Durham, North Carolina
 27713
(Address of Principal Executive Offices) (Zip Code)
 
(919) 806-1074
(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.001 per shareCMRXThe Nasdaq Global Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes x   No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer  o
 
Accelerated filer o
Non-accelerated filer ☒
 
Smaller reporting company 
 
Emerging growth company 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o




Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes   No x
 
As of July 31, 2021, the number of outstanding shares of the registrant’s common stock, par value $0.001 per share, was 86,249,744.



CHIMERIX, INC.
 
FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2021
 
INDEX
  
 Page
 
 

Unless otherwise mentioned or unless the context indicates otherwise, as used in this prospectus, the terms “Chimerix,” “the Company,” “we,” “us” and “our” refer to Chimerix, Inc., a Delaware corporation. We have obtained a registered trademark for Chimerix® and TEMBEXA® in the United States. All other trademarks or trade names referred to in this Quarterly Report on Form 10-Q are the property of their respective owners.


2



PART I - FINANCIAL INFORMATION
 
ITEM 1.    CONSOLIDATED FINANCIAL STATEMENTS
 
CHIMERIX, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
(unaudited) 
 June 30, 2021December 31, 2020
ASSETS  
Current assets:  
Cash and cash equivalents$25,445 $46,989 
Short-term investments, available-for-sale106,584 31,973 
Accounts receivable36 340 
Prepaid expenses and other current assets4,185 2,356 
Total current assets136,250 81,658 
Long-term investments7,535  
Property and equipment, net of accumulated depreciation298 214 
Operating lease right-of-use assets2,612 2,825 
Other long-term assets30 26 
Total assets$146,725 $84,723 
LIABILITIES AND STOCKHOLDERS' EQUITY  
Current liabilities:  
Accounts payable$1,457 $1,283 
Accrued liabilities9,465 7,250 
Note payable14,000  
Total current liabilities24,922 8,533 
Lease-related obligations2,654 2,814 
Total liabilities27,576 11,347 
Stockholders’ equity:  
Preferred stock, $0.001 par value, 10,000,000 shares authorized at June 30, 2021 and December 31, 2020; no shares issued and outstanding as of June 30, 2021 and December 31, 2020
  
Common stock, $0.001 par value, 200,000,000 shares authorized at June 30, 2021 and December 31, 2020; 86,249,744 and 62,816,039 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively
86 63 
Additional paid-in capital946,612 785,673 
Accumulated other comprehensive loss, net(11) 
Accumulated deficit(827,538)(712,360)
Total stockholders’ equity119,149 73,376 
Total liabilities and stockholders’ equity$146,725 $84,723 
 
The accompanying notes are an integral part of the consolidated financial statements.



3



CHIMERIX, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(in thousands, except share and per share data)
(unaudited)
 Three Months Ended June 30,Six Months Ended June 30,
 2021202020212020
Revenues:
Contract and grant revenue$390 $1,396 $1,823 $2,567 
Licensing revenue1 6 3 76 
Total revenues391 1,402 1,826 2,643 
Operating expenses:    
Research and development13,798 8,578 25,660 17,527 
General and administrative4,408 3,110 8,544 6,315 
Acquired in-process research and development  82,890  
Total operating expenses18,206 11,688 117,094 23,842 
Loss from operations(17,815)(10,286)(115,268)(21,199)
Other income:
Interest income and other, net52 270 90 763 
Net loss(17,763)(10,016)(115,178)(20,436)
Other comprehensive loss:    
Unrealized gain (loss) on debt investments, net32 141 (11)95 
Comprehensive loss$(17,731)$(9,875)$(115,189)$(20,341)
Per share information:    
Net loss, basic and diluted$(0.21)$(0.16)$(1.38)$(0.33)
Weighted-average shares outstanding, basic and diluted86,225,836 62,042,778 83,231,600 61,892,407 
  
The accompanying notes are an integral part of the consolidated financial statements.

 
4



CHIMERIX, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(in thousands)
(unaudited) 
Common Stock
SharesAmountAdditional
Paid-in Capital
Accumulated Other
Comprehensive
Gain (Loss)
Accumulated
Deficit
Total 
Stockholders’
Equity (Deficit)
Balance, December 31, 202062,816,039 $63 $785,673 $ $(712,360)$73,376 
Share-based compensation— — 2,584 — — 2,584 
Exercise of stock options710,132 1 3,529 — — 3,530 
Employee stock purchase plan purchases259,837 — 330 — — 330 
RSU stock issuance168,752 — — — — — 
Issuance of common stock related to asset acquisition8,723,769 9 43,436 — — 43,445 
Issuance of common stock, net of issuance costs of $7.2 million
13,529,750 13 107,829 — — 107,842 
Comprehensive loss:
Unrealized loss on investments, net— — — (43)— (43)
Net loss— — — — (97,415)(97,415)
Total comprehensive loss(97,458)
Balance, March 31, 202186,208,279 $86 $943,381 $(43)$(809,775)$133,649 
Share-based compensation— — 3,112 — — 3,112 
Exercise of stock options41,465 — 119 — — 119 
Comprehensive loss:
Unrealized gain on investments, net— — — 32 — 32 
Net loss— — — — (17,763)(17,763)
Total comprehensive loss(17,731)
Balance, June 30, 202186,249,744 $86 $946,612 $(11)$(827,538)$119,149 

5



Common Stock
SharesAmountAdditional
Paid-in Capital
Accumulated Other
Comprehensive
Gain (Loss)
Accumulated
Deficit
Total 
Stockholders’
Equity (Deficit)
Balance, December 31, 201961,590,013 $62 $778,693 $35 $(668,838)$109,952 
Share-based compensation— — 1,326 — — 1,326 
Employee stock purchase plan purchases177,193 — 229 — — 229 
RSU stock issuance163,133 — — — — — 
Comprehensive loss:
Unrealized loss on investments, net— — — (46)— (46)
Net loss— — — — (10,420)(10,420)
Total comprehensive loss(10,466)
Balance, March 31, 202061,930,339 $62 $780,248 $(11)$(679,258)$101,041 
Share-based compensation— — 1,391 — — 1,391 
Exercise of stock options242,079 — 578 — — 578 
Comprehensive loss:
Unrealized gain on investments, net— — — 141 — 141 
Net loss— — — — (10,016)(10,016)
Total comprehensive loss(9,875)
Balance, June 30, 202062,172,418 $62 $782,217 $130 $(689,274)$93,135 

6



CHIMERIX, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited) 
 Six Months Ended June 30,
 20212020
Cash flows from operating activities:  
Net loss$(115,178)$(20,436)
Adjustments to reconcile net loss to net cash used in operating activities:
  
Depreciation of property and equipment105 216 
Amortization of discount/premium on investments402 (277)
Share-based compensation 5,696 2,717 
Fair value of common stock issued related to asset acquisition43,445  
Note payable related to asset acquisition14,000  
Gain on sale of investments(2) 
Lease-related amortization292 (43)
Changes in operating assets and liabilities:  
Accounts receivable304 866 
Prepaid expenses and other assets(1,832)809 
Accounts payable and accrued liabilities2,149 (2,546)
Net cash used in operating activities(50,619)(18,694)
Cash flows from investing activities:  
Purchases of property and equipment(188)(11)
Purchases of short-term investments(100,860)(27,652)
Purchases of long-term investments(7,554) 
Proceeds from sales of short-term investments2,007 1,498 
Proceeds from maturities of short-term investments23,850 80,652 
Net cash (used in) provided by investing activities(82,745)54,487 
Cash flows from financing activities:  
Proceeds from exercise of stock options3,648 578 
Proceeds from employee stock purchase plan330 229 
Proceeds from issuance of common stock, net of commissions107,842  
Net cash provided by financing activities111,820 807 
Net (decrease) increase in cash and cash equivalents(21,544)36,600 
Cash and cash equivalents:
Beginning of period46,989 16,901 
End of period$25,445 $53,501 
 
The accompanying notes are an integral part of the consolidated financial statements.

 
 
7



CHIMERIX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
 
Note 1. The Business and Summary of Significant Accounting Policies
 
Description of Business

Chimerix is a development-stage biopharmaceutical company dedicated to accelerating the advancement of innovative medicines that make a meaningful impact in the lives of patients living with cancer and other serious diseases. In June 2021, the U.S. FDA approved TEMBEXA (brincidofovir) for the treatment of smallpox as a medical countermeasure. Our two most advanced clinical-stage development programs are ONC201 and dociparstat sodium (DSTAT). ONC201 is currently being investigated in a number of clinical studies for recurrent H3 K27M-mutant glioma and an efficacy analysis by blinded independent central review, potentially sufficient for accelerated approval in the United States, when considered with the totality of the other safety and efficacy data, is expected in the fourth quarter of 2021. DSTAT is in Phase 3 development as a potential first-line therapy in acute myeloid leukemia (AML).

Basis of Presentation

The accompanying unaudited consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information, the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements and should be read in conjunction with the Company’s audited financial statements and notes thereto included in its Annual Report on Form 10-K for the year ended December 31, 2020. In the opinion of the Company’s management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of its financial position, operating results and cash flows for the periods presented have been included. Operating results for the three and six months ended June 30, 2021 are not necessarily indicative of the results that may be expected for the full year, for any other interim period or for any future year. 
 
Fair Value of Financial Instruments

The carrying amounts of certain financial instruments, including accounts receivable, accounts payable and accrued expenses approximate their fair values due to the short-term nature of such instruments.
 
For assets and liabilities recorded at fair value, it is the Company’s policy to maximize the use of observable inputs and minimize the use of unobservable inputs when developing fair value measurements, in accordance with the fair value hierarchy. Fair value measurements for assets and liabilities where there exists limited or no observable market data are based primarily upon estimates and are often calculated based on the economic and competitive environment, the characteristics of the asset or liability and other factors. Therefore, fair value measurements cannot be determined with precision and may not be realized in an actual sale or immediate settlement of the asset or liability. Additionally, there may be inherent weaknesses in any calculation technique and changes in the underlying assumptions used, including discount rates and estimates of future cash flows, could significantly affect the calculated current or future fair values. The Company utilizes fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures.
 
The Company groups assets and liabilities at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. The determination of where an asset or liability falls in the hierarchy requires significant judgment. These levels are:
 
Level 1 — Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access.
Level 2 — Valuations based on quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, and models for which all significant inputs are observable, either directly or indirectly.
Level 3 — Valuations based on inputs that are unobservable and significant to the overall fair value measurement.

At June 30, 2021 and December 31, 2020, the Company had cash equivalents including money market funds, whose value is based on quoted market prices. At June 30, 2021 and December 31, 2020, the Company had short-term investments, including U.S. Treasury securities, whose value is based on quoted market prices. At June 30, 2021, the Company had long-term
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investments including U.S. Treasury securities, whose value is based on quoted market prices. Accordingly, these securities are classified as Level 1.
 
At June 30, 2021, the Company had short-term investments, including commercial paper, and corporate bonds, and on December 31, 2020, the Company had short-term investments including corporate bonds. At June 30, 2021, the Company had long-term investments including U.S. Treasury securities. As quoted prices are not available for these securities, they are valued using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security’s credit rating, prepayment assumptions and other factors such as credit loss assumptions. Accordingly, these securities are classified as Level 2.
 
There was no material re-measurement to fair value of financial assets and liabilities that are not measured at fair value on a recurring basis. For additional information regarding the Company's investments, please refer to Note 2, "Investments."
 
Below are tables that present information about certain assets measured at fair value on a recurring basis (in thousands):
 
Fair Value Measurements
June 30, 2021
 TotalQuoted Prices in
Active Markets
for Identical Assets
(Level 1)
Significant Other
Observable Inputs
(Level 2)
Significant
Unobservable Inputs
(Level 3)
Cash equivalents
     Money market funds$21,151 $21,151 $ $ 
          Total cash equivalents21,151 21,151   
Short-term investments
     U.S. treasury securities8,012 8,012   
     Commercial paper57,760  57,760  
     Corporate bonds40,812  40,812  
          Total short-term investments106,584 8,012 98,572  
Long-term investments
     Certificates of deposit    
     U.S. treasury securities7,535 2,543 4,992  
          Total long-term investments7,535 2,543 4,992  
               Total assets$135,270 $31,706 $103,564 $ 
Fair Value Measurements
December 31, 2020
 TotalQuoted Prices in
Active Markets
for Identical Assets
(Level 1)
Significant Other
Observable Inputs
(Level 2)
Significant
Unobservable Inputs
(Level 3)
Cash equivalents
     Money market funds$1,503 $1,503 $ $ 
          Total cash equivalents1,503 1,503   
Short-term investments
     U.S. treasury securities28,715 28,715   
     Corporate bonds3,258  3,258  
          Total short-term investments31,973 28,715 3,258  
               Total assets$33,476 $30,218 $3,258 $ 
  
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Accrued Liabilities

Accrued liabilities consisted of the following (in thousands):
June 30, 2021December 31, 2020
Accrued research and development expenses$3,620 $1,375 
Accrued compensation4,093 4,473 
Accrued legal expenses242 651 
Other accrued liabilities1,510 751 
Total accrued liabilities$9,465 $7,250 

Revenue Recognition

Policy

The Company’s revenues generally consist of (i) contract and grant revenue - revenue generated under federal and private foundation grants and contracts, and (ii) collaboration and licensing revenue - revenue related to non-refundable upfront fees, royalties and milestone payments earned under license agreements. Revenue is recognized in accordance with the criteria outlined in Accounting Standards Codification (ASC) 606 issued by the Financial Accounting Standards Board (FASB). Following this accounting pronouncement, a five-step approach is applied for recognizing revenue, including (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when, or as, the entity satisfies a performance obligation.

Biomedical Advanced Research and Development Authority (BARDA)

In February 2011, the Company entered into a contract with BARDA for the advanced development of TEMBEXA as a medical countermeasure in the event of a smallpox release. Under the contract, the Company may receive up to $75.8 million in expense reimbursement and $5.3 million in fees over the performance of 1 base segment and 4 option segments. Exercise of each option segment is solely at the discretion of BARDA. The Company assessed the services in accordance with the authoritative guidance and concluded that there is a potential of 5 separate contracts (1 base segment and 4 option segments) within this agreement, each of which has a single performance obligation. At present, all option segments (1 through 4) have been exercised, as well as the base segment. The transaction price for each segment, based on the transaction price as defined in each segment contract, is allocated to the single performance obligation for each contract. The transaction price is recognized over time by measuring the progress toward complete satisfaction of the performance obligation. For reimbursable expenses, this occurs as qualifying research activities are conducted based on invoices from company vendors. For the fixed fee, the progress toward complete satisfaction is estimated based on the costs incurred to date relative to the total estimated costs per the terms of each contract. The Company typically invoices BARDA monthly as costs are incurred. Any amounts received in advance of performance are recorded as deferred revenue until earned. The base segment and first option segment were completed prior to adoption of ASC 606. The Company is currently performing under the fourth option segment of the contract during which the Company may receive up to a total of $4.6 million in expense reimbursement and fees. The second and third option segments were completed on August 20, 2020. The fourth option segment is scheduled to end on September 1, 2021.

Grant Revenue

Grant revenue under cost-plus-fixed-fee grants from the federal government and private foundations is recognized as allowable costs are incurred and fees are earned. As a result of its acquisition of Oncoceutics, Inc. (Oncoceutics), the Company became the beneficiary of two federal grant programs and two grant programs with private foundations. At June 30, 2021, there is $0.1 million remaining to be funded on the federal grants. At June 30, 2021, the Company has a receivable balance of $2,000 and a deferred revenue balance of $0.2 million related to these grants. Additionally, for the three and six months ended June 30, 2021, the Company recognized $0.1 million and $0.4 million of grant revenue related to these grants, respectively.

SymBio Pharmaceuticals

On September 30, 2019, the Company entered into a license agreement with SymBio Pharmaceuticals Limited (SymBio) under which the Company granted SymBio exclusive worldwide rights to develop, manufacture and commercialize TEMBEXA for all human indications, excluding the prevention and treatment of orthopoxviruses, including smallpox. The Company assessed the agreement in accordance with the authoritative guidance and concluded that the SymBio contract includes multiple
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performance obligations. The SymBio contract has one fixed transaction amount of a $5.0 million upfront payment received in October 2019 and several variable transaction amounts, up to $180 million, due to the Company at certain regulatory and commercial milestones, along with low double-digit percent royalties based on net sales of TEMBEXA. All variable transaction amounts are fully constrained, therefore the allocated transaction price is $5.0 million. The majority of the transaction price of the contract has been allocated to the combined performance obligation of the granting of the license to TEMBEXA and associated technology transfer which was recognized when the technology transfer was completed in the fourth quarter of 2019. The revenue from regulatory and commercial milestones and royalties from net sales will be recognized upon the occurrence of the triggering events or when those transaction amounts are no longer fully constrained.
 
Research and Development Prepaids and Accruals

As part of the process of preparing financial statements, the Company is required to estimate its expenses resulting from its obligation under contracts with vendors and consultants and clinical site agreements in connection with its research and development efforts. The financial terms of these contracts are subject to negotiations which vary contract to contract and may result in payment flows that do not match the periods over which materials or services are provided to the Company under such contracts.

The Company’s objective is to reflect the appropriate research and development expenses in its financial statements by matching those expenses with the period in which services and efforts are expended. The Company accounts for these expenses according to the progress of its research and development efforts. The Company determines prepaid and accrual estimates through discussion with applicable personnel and outside service providers as to the progress or state of communication of clinical trials, or other services completed. The Company adjusts its rate of research and development expense recognition if actual results differ from its estimates. The Company makes estimates of its prepaid and accrued expenses as of each balance sheet date in its financial statements based on facts and circumstances known at that time. Although the Company does not expect its estimates to be materially different from amounts actually incurred, its understanding of status and timing of services performed relative to the actual status and timing of services performed may vary and may result in the Company reporting amounts that are too high or too low for any particular period. Through June 30, 2021, there had been no material adjustments to the Company’s prior period estimates of prepaid and accruals for research and development expenses. The Company’s research and development prepaids and accruals are dependent upon the timely and accurate reporting of contract research organizations and other third-party vendors.
 
Basic and Diluted Net Loss Per Share of Common Stock 

Basic net loss per share of common stock is computed by dividing net loss by the weighted-average number of shares of common stock outstanding during the period, excluding the dilutive effects of non-vested restricted stock, stock options, and employee stock purchase plan purchase rights. Diluted net loss per share of common stock is computed by dividing net loss by the sum of the weighted-average number of shares of common stock outstanding during the period plus the potential dilutive effects of non-vested restricted stock, stock options, and employee stock purchase plan purchase rights outstanding during the period calculated in accordance with the treasury stock method, but are excluded if their effect is anti-dilutive. Because the impact of these items is anti-dilutive during the periods of net loss, there was no difference between basic and diluted loss per share of common stock for the three and six months ended June 30, 2021 and 2020.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. In addition to estimates discussed in other sections of this Quarterly Report on Form 10-Q, the most significant estimates in the Company’s consolidated financial statements relate to the valuation of stock options and the valuation allowance for deferred tax assets resulting from net operating losses. These estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates.

Segments

The Company operates in only one segment, pharmaceuticals.

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Impact of Recently Issued Accounting Standards

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which amends the impairment model by requiring entities to use a forward-looking approach on expected losses to estimate credit losses on certain financial instruments, including trade receivables and available-for-sale debt securities. The new guidance was originally due to become effective for the Company beginning in the first quarter of 2020, however the FASB in November 2019 issued ASU 2019-10 which moved the effective date for smaller reporting companies to the first quarter of 2023. The Company is currently evaluating the potential impact that this standard may have on its consolidated financial statements.

Note 2. Investments
 
The following tables summarize the Company's debt investments (in thousands):
 June 30, 2021
 Amortized CostGross Unrealized GainsGross Unrealized LossesEstimated Fair Value
Corporate bonds$40,821 $2 $(11)$40,812 
U.S. treasury securities15,554 1 (8)15,547 
Commercial paper57,755 6 (1)57,760 
Total investments$114,130 $9 $(20)$114,119 
 December 31, 2020
 Amortized CostGross Unrealized GainsGross Unrealized LossesEstimated Fair Value
Corporate bonds$3,256 $2 $ $3,258 
U.S. treasury securities28,717 1 (3)28,715 
Total investments$31,973 $3 $(3)$31,973 
 
The following tables summarize the Company's debt investments with unrealized losses, aggregated by investment type and the length of time that individual investments have been in a continuous unrealized loss position (in thousands, except number of securities):

June 30, 2021
Less than 12 MonthsGreater than 12 MonthsTotal
Fair ValueUnrealized LossFair ValueUnrealized LossFair ValueUnrealized Loss
Corporate bonds$30,714 $(11)$ $ $30,714 $(11)
Commercial paper10,493 (1)  10,493 (1)
U.S. treasury securities4,992 (8)  4,992 (8)
Total$46,199 $(20)$ $ $46,199 $(20)
Number of securities with unrealized losses16  16 
December 31, 2020
Less than 12 MonthsGreater than 12 MonthsTotal
Fair ValueUnrealized LossFair ValueUnrealized LossFair ValueUnrealized Loss
U.S. treasury securities$16,598 $(3)$ $ $16,598 $(3)
Total$16,598 $(3)$ $ $16,598 $(3)
Number of securities with unrealized losses6  6 

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The Company periodically reviews available-for-sale debt investments for other-than-temporary declines in fair value below the cost basis and whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company evaluates, among other things, the duration and extent to which the fair value of a security is less than its cost; the financial condition of the issuer and any changes thereto; and the Company’s intent to sell, or whether it will more likely than not be required to sell, the security before recovery of its cost basis. At June 30, 2021, the Company did not intend to sell, and was not more likely than not to be required to sell, the available-for-sale debt investments in an unrealized loss position before recovery of the cost basis of the securities, which may be at maturity. There were no such declines in value for the three and six months ended June 30, 2021 and 2020. Unrealized gains and losses on debt investments are recorded to unrealized (loss) gain on debt investments, net in the Consolidated Statements of Operations and Comprehensive Loss. Realized gains and losses on debt investments are recorded based on specific identification to interest income and other, net in the Consolidated Statements of Operations and Comprehensive Loss. The Company recognizes interest income on an accrual basis in interest income in the Consolidated Statements of Operations and Comprehensive Loss.

The following table summarizes the scheduled maturity for the Company's debt investments at June 30, 2021 (in thousands):
Maturing in one year or less$106,584 
Maturing after one year through two years7,535 
     Total debt investments$114,119 
 
Note 3. Commitments and Contingencies
 
Leases

The Company leases its facilities under long-term operating leases that expire at various dates through 2026. The Company generally has options to renew lease terms on its facilities, which may be exercised at the Company's sole discretion. In addition, certain lease arrangements may be terminated prior to their original expiration date at the Company's discretion. The Company evaluates renewal and termination options at the lease commencement date to determine if it is reasonably certain to exercise the option and has concluded on all operating leases that it is not reasonably certain that any options will be exercised. The weighted-average remaining lease term for the Company's operating leases as of June 30, 2021 was 5.09 years.

Expense related to leases is recorded on a straight-line basis over the lease term. Lease expense under operating leases, including common area maintenance fees, totaled approximately $172,000 and $173,000, respectively, for the three months ended June 30, 2021 and 2020 and $317,000 and $366,000 for the six months ended June 30, 2021 and 2020, respectively.

The discount rate implicit within the Company's leases is generally not determinable and therefore the Company determines the discount rate based on its incremental borrowing rate based on the information available at commencement date. As of June 30, 2021, the operating lease liabilities reflect a weighted-average discount rate of 7.89%.

The following table sets forth the operating lease right-of-use assets and liabilities as of June 30, 2021 (in thousands):
Assets
Operating lease right-of-use assets $2,612 
Liabilities
Operating lease short-term liabilities (recorded within Accrued liabilities)$351 
Operating lease long-term liabilities (recorded within Lease-related obligations)2,654 
     Total operating lease liabilities$3,005 

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Operating lease payments over the remainder of the lease terms are as follows (in thousands):
Years Ending December 31,As of June 30, 2021
2021 (1)$219 
2022715 
2023736 
2024759 
2025781 
All remaining years467 
Total future minimum rental payments$3,677 
     Less amount of lease payments representing interest672 
Total present value of lease payments$3,005 

(1)The Company entered into the Ninth Amendment of its lease for the Company's headquarters in Durham, North Carolina, which extended the term of the lease by 65 months to July 31, 2026. As part of the amendment, the Company is entitled to receive a rent abatement of the first 5 months of the new lease term which began on March 1, 2021. Additionally, the Ninth Amendment grants the Company a refurbishment allowance, which the Company expects to receive in 2021 after the refurbishment has been completed.

As of December 31, 2020, operating lease payments over the remainder of the lease terms were as follows (in thousands):
Years Ending December 31,As of December 31, 2020
2021$260 
2022715 
2023736 
2024759 
2025781 
Thereafter467 
Total future minimum rental payments$3,718 
     Less amount of lease payments representing interest792 
Total present value of lease payments$2,926 

For the three months ended June 30, 2021 and 2020, the Company made lease payments of approximately $37,000 and $180,000, respectively, and for the six months ended June 30, 2021 and 2020, the Company made lease payments of approximately $170,000 and $357,000, respectively.

Sublease

The Company subleased 3,537 square feet of its office space under a non-cancelable operating lease that expired in February 2021. For the three and six months ended June 30, 2021, the Company recognized $0 and approximately $12,000 of income, respectively, and for the three and six months ended June 30, 2020, the Company recognized approximately $18,000 and $35,000 of income, respectively, in Interest income and other, net on the Consolidated Statement of Operations and Comprehensive Loss. As this lease has terminated, there are no future minimum rentals payments to be received.

Significance of Revenue Source

The Company is the recipient of federal research contract funds from BARDA, the primary source of the Company's contract and grant revenue. Periodic audits are required under the Company’s BARDA agreement and certain costs may be questioned as appropriate under the BARDA agreement. At June 30, 2021 and December 31, 2020, the Company had recorded a provision for potential refundable amounts of $52,000 and $38,000, respectively.
 
Note 4. Equity Transactions and Share-based Compensation

Common Stock

On January 20, 2021, we entered into an underwriting agreement (the Underwriting Agreement) with Jefferies LLC and Cowen and Company, LLC, as representatives of the several underwriters named therein (collectively, the Underwriters), relating to the
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issuance and sale of 11,765,000 shares (the Shares) of the Company’s common stock, par value $0.001 per share (the Common Stock). The price to the public in this offering was $8.50 per share, and the Underwriters agreed to purchase the Shares from the Company pursuant to the Underwriting Agreement at a price of $7.99 per share. Under the terms of the Underwriting Agreement, the Company granted the Underwriters a 30-day option to purchase up to 1,764,750 additional shares of Common Stock at the public offering price. The net proceeds to the Company from this offering were approximately $107.8 million, as the Underwriters’ option to purchase additional shares was exercised in full, after deducting underwriting discounts and commissions and estimated offering expenses payable by the Company. The offering closed on January 25, 2021.

Stock Options

The Company maintains a 2013 Equity Incentive Plan (the 2013 Plan), which provides for the grant of incentive stock options (ISOs), non-statutory stock options (NSOs), stock appreciation rights, restricted stock awards, restricted stock unit (RSU) awards, performance-based stock awards, and other forms of equity compensation (collectively, stock awards), all of which may be granted to employees, including officers, non-employee directors and consultants of the Company and its affiliates. Additionally, the 2013 Plan provides for the grant of performance cash awards. The number of shares of common stock reserved for future issuance automatically increases on January 1 of each calendar year by 4% of the total number of shares of capital stock outstanding on December 31 of the preceding calendar year, or a lesser number of shares determined by the Company’s board of directors. On January 1, 2021, the common stock reserved for issuance under the 2013 Plan was automatically increased by 2.5 million shares. As of June 30, 2021, there was a total of 2.2 million shares reserved for future issuance under the 2013 Plan. The Company issued approximately 41,000 and 752,000 shares of common stock pursuant to the exercise of stock options during the three and six months ended June 30, 2021, respectively. The Company issued 242,000 shares of common stock pursuant to the exercise of stock options during each of the three and six months ended June 30, 2020.

Employee Stock Purchase Plan

The Company maintains a 2013 Employee Stock Purchase Plan (ESPP), which provides for the issuance of shares of common stock pursuant to purchase rights granted to the Company’s employees or to employees of any of its designated affiliates. The Company has reserved a total of 3.9 million shares of common stock to be purchased under the ESPP, of which 2.6 million shares remained available for purchase as of June 30, 2021. The number of shares of common stock reserved for issuance automatically increases on January 1 of each calendar year, by the lesser of (a) 1% of the total number of shares of common stock outstanding on December 31 of the preceding calendar year, (b) 422,535 shares, or (c) a number determined by the Company’s board of directors that is less than (a) and (b). On January 1, 2021, the common stock reserved for issuance under the ESPP was automatically increased by an additional 422,535 shares.

The ESPP provides for an automatic reset feature to start participants on a new twenty-four month participation period in the event that the common stock market value on a purchase date is less than the common stock value on the first day of the twenty-four month offering period. Eligible employees may authorize an amount up to 15% of their salary to purchase common stock at the lower of a 15% discount to the beginning price of their offering period or a 15% discount to the ending price of each six-month purchase interval. The Company issued approximately 260,000 and 177,000 shares of common stock pursuant to the ESPP during the six months ended June 30, 2021 and 2020, respectively. Compensation expense for shares purchased under the ESPP related to the purchase discount and the “look-back” option and were determined using a Black-Scholes option pricing model.

Restricted Stock Units

The Company has issued RSUs to certain employees which vest based on service criteria. When vested, the RSU represents the right to be issued the number of shares of the Company's common stock that is equal to the number of RSUs granted. The grant date fair value for RSUs is based upon the market price of the Company's common stock on the date of the grant. The fair value is then amortized to compensation expense over the requisite service period or vesting term. The Company issued no shares and approximately 169,000 shares of common stock pursuant to the vesting of RSUs during the three and six months ended June 30, 2021, respectively. The Company issued no shares and approximately 163,000 shares of common stock pursuant to the vesting of RSUs during the three and six months ended June 30, 2020, respectively.

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Stock-based Compensation

For awards with only service conditions and graded-vesting features, the Company recognizes compensation expense on a straight-line basis over the requisite service period. Total share-based compensation expense recognized related to stock options, the ESPP and RSUs was as follows (in thousands): 
 Three Months Ended June 30,Six Months Ended June 30,
 2021202020212020
Research and development expense$1,765 $725 $3,142 $1,465 
General and administrative expense1,347 666 2,554 1,252 
          Total share-based compensation expense$3,112 $1,391 $5,696 $2,717 

Note 5. Income Taxes
 
The Company estimates an annual effective tax rate of 0% for the year ending December 31, 2021 as the Company incurred losses for the six month period ended June 30, 2021, and is forecasting an estimated net loss for both financial statement and tax purposes for the year ending December 31, 2021. Therefore, no federal or state income taxes are expected and none have been recorded at this time. Income taxes have been accounted for using the liability method in accordance with FASB ASC 740.

Due to the Company's history of losses since inception, there is not enough evidence at this time to support that the Company will generate future income of a sufficient amount and nature to utilize the benefits of its net deferred tax assets. Accordingly, the deferred tax assets have been reduced by a full valuation allowance, since the Company cannot currently support that realization of its deferred tax assets is more likely than not. However, the Company feels its deferred tax assets may be used upon the Company becoming profitable.
 
At June 30, 2021, the Company had no unrecognized tax benefits that would reduce the Company’s effective tax rate if recognized.

Note 6. Significant Agreements
     
Biomedical Advanced Research and Development Authority (BARDA)

In February 2011, the Company entered into a contract with BARDA for the advanced development of TEMBEXA as a medical countermeasure in the event of a smallpox release. Under the contract, BARDA will reimburse the Company, plus pay a fixed fee, for the research and development of TEMBEXA as a broad-spectrum therapeutic antiviral for the treatment of smallpox infections. The contract consists of an initial performance period, referred to as the base performance segment, plus up to four extension periods, referred to as option segments, of which all have been exercised. Under the contract as currently in effect, the Company may receive up to $75.8 million in expense reimbursement and $5.3 million in fees.

The Company is currently performing under the fourth option segment of the contract during which the Company may receive up to a total of $4.6 million in expense reimbursement and fees. The second and third option segments were completed on August 20, 2020. The fourth option segment is scheduled to end on September 1, 2021. Of the $75.8 million in expense reimbursement and $5.3 million in fees that the Company may receive, approximately $78.9 million in expense reimbursement and fees has been awarded. As of June 30, 2021, of the total funding the Company had invoiced an aggregate of $77.0 million with respect to the base performance segment and the four option segments. For the three months ended June 30, 2021 and 2020, the Company recognized revenue under this contract of $0.3 million and $1.4 million, respectively, and for the six months ended June 30, 2021 and 2020, the Company recognized revenue under this contract of $1.5 million and $2.6 million, respectively.

Cantex Pharmaceuticals, Inc.

In July 2019, the Company entered into a License and Development Agreement with Cantex Pharmaceuticals, Inc. (Cantex) pursuant to which the Company acquired exclusive worldwide rights to develop and commercialize, for any and all uses, a glycosaminoglycan compound known as DSTAT, which is currently being studied for the treatment of acute myeloid leukemia. Under the terms of the license agreement, the Company is responsible for, and bears the future costs of, worldwide development and commercialization of DSTAT. In connection with the transaction, Cantex assigned to the Company all of its rights under its DSTAT supply agreements, including its bulk API agreement with Scientific Protein Laboratories LLC (SPL),
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including subsequent amendments, pursuant to which SPL will exclusively produce DSTAT for the Company through December 2040.

The license agreement obligates the Company to pay Cantex regulatory milestone payments of up to $202.5 million upon receipt of product approvals in the United States, the European Union and Japan, and sales milestone payments of up to $385.0 million upon achievement of specified net sales levels. The Company also agreed to pay Cantex tiered royalties based on percentages of net sales beginning at 10% and not to exceed the high-teens.

SymBio Pharmaceuticals

On September 30, 2019, the Company entered into a license agreement with SymBio under which the Company granted SymBio exclusive worldwide rights to develop, manufacture and commercialize TEMBEXA for all human indications, excluding the prevention and treatment of orthopoxviruses, including smallpox. Under the terms of the license agreement, SymBio will be responsible for, and bear the future costs of, worldwide development and commercialization of TEMBEXA in the licensed indications. Either party may terminate the license agreement upon the occurrence of a material breach by the other party (subject to standard cure periods). SymBio may also terminate the license agreement without cause on a country-by-country basis upon ninety days' prior notice.

In exchange for the license to SymBio under the Company's TEMBEXA rights, the Company received an upfront payment of $5.0 million in October 2019. In addition, the Company is eligible to receive up to $180.0 million in clinical, regulatory and commercial milestones worldwide, as well as low double-digit percent royalties based on net sales of TEMBEXA. Since entering into the license agreement in September 2019, the Company has recognized all of the $5.0 million upfront payment.

Ohara Agreement

In 2019, Oncoceutics, Inc., a Delaware corporation (Oncoceutics) entered into a license, development and commercialization agreement with Ohara Pharmaceutical Co., Ltd. The Company is entitled to receive up to $2.5 million in nonrefundable regulatory milestone payments. The Company is entitled to tiered royalties based on the aggregate annual net sales of all products, as defined in the agreement, in Japan.

CR Sanjiu Agreement

In December 2020, Oncoceutics entered into a license, development and commercialization agreement with China Resources Sanjiu Medical & Pharmaceutical Co., Ltd. (CR Sanjiu). Oncoceutics granted CR Sanjiu an exclusive royalty bearing license to develop and commercialize ONC201 in China. The Company is entitled to receive up to $5.0 million in nonrefundable regulatory milestone payments. The Company is entitled to tiered royalties based on the aggregate annual net sales of all licensed products, as defined in the agreement, in China.

Note 7. Oncoceutics Acquisition

On January 7, 2021, the Company, Ocean Merger Sub, Inc., a Delaware corporation and wholly-owned subsidiary of the Company (Merger Sub), Oncoceutics and Fortis Advisors, LLC solely in its capacity as representative of the securityholders of Oncoceutics (the Securityholders’ Representative), entered into an Agreement and Plan of Merger (the Merger Agreement). Concurrently with the execution of the Merger Agreement, Merger Sub merged with and into Oncoceutics (the Merger) whereupon the separate corporate existence of Merger Sub ceased, with Oncoceutics continuing as the surviving corporation of the Merger as a wholly-owned subsidiary of the Company.

As consideration for the Merger, the Company (a) paid an upfront cash payment of approximately $25.0 million, subject to certain customary adjustments, (b) issued an aggregate of 8,723,769 shares of the Company's common stock, (c) issued a promissory note to the Securityholders' Representative in the principal amount of $14.0 million (the Seller Note), to be paid in cash, subject to the terms and conditions of the Merger Agreement and the Seller Note, upon the one year anniversary of the closing of the Merger, and (d) agreed to make contingent payments up to an aggregate of $360.0 million based on the achievement of certain development, regulatory and commercialization events as set forth in the Merger Agreement, as well as additional tiered royalty payments based upon future net sales of ONC 201 and ONC 206 products, subject to certain reductions as set forth in the Merger Agreement, and a contingent payment in the event the Company receives any proceeds from the sale of a rare pediatric disease priority review voucher based on Oncoceutics' products. The closing payment may be adjusted after the closing, pursuant to procedures set forth in the Merger Agreement, in connection with the finalization of the cash, transaction expenses, debt and working capital amounts at closing. As of June 30, 2021, the Company has recorded an estimated liability of $0.2 million related to closing payment adjustments. Additionally, as of June 30, 2021, the Company has
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recorded an estimated receivable of $0.6 million related to the repayment of certain severance amounts due from the Oncoceutics' shareholders.

The Company accounted for the Oncoceutics acquisition as an asset acquisition as the majority of the value of the assets acquired related to the ONC201 acquired in-process research and development (IPR&D) asset. In accordance with Accounting Standards Codification, or ASC, Subtopic 730-10-25, Accounting for Research and Development Costs, the up-front payments to acquire a new drug compound, as well as future milestone payments when paid or payable, are immediately expensed as acquired IPR&D in transactions other than a business combination provided that the drug has not achieved regulatory approval for marketing and, absent obtaining such approval, has no alternative future use. Therefore, the portion of the purchase price that was allocated to the IPR&D assets acquired was immediately expensed. Other assets acquired and liabilities assumed, were recorded at fair value.

The following represents the consideration paid and purchase price allocation for the acquisition of Oncoceutics (in thousands, except for per share data):

Cash$23,836 
One-year closing anniversary payment14,000 
Shares common stock issued as consideration8,723,769 
Stock price per share on effective date4.98 
Value of estimated common stock consideration43,445 
Total consideration$81,281 
Net assets acquired$(1,310)
IPR&D assets expensed82,591 
Total purchase price allocated$81,281 
Transaction costs expensed to IPR&D(1)
$299 
Total IPR&D expensed$82,890 

(1) As a result of the asset acquisition accounting, the transaction costs associated with the acquisition should be included in the costs of the assets acquired. The primary asset acquired, the IPR&D asset, was expensed and the transaction related costs were included with and expensed with this asset. The transaction costs primarily included financial advisor fees, legal expenses and auditor expenses. Additionally, there were $0.6 million of expenses related to this acquisition recorded in the fourth quarter of 2020 to general and administrative expenses in the Consolidated Statements of Operations and Comprehensive Loss.

Note 8. Subsequent Events

The Company has evaluated subsequent events through the issuance date of these financial statements to ensure that this filing includes appropriate disclosure of events both recognized in the financial statements as of June 30, 2021, and events which occurred subsequently but were not recognized in the financial statements.


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ITEM 2.     MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited consolidated financial statements and related notes included in this Quarterly Report on Form 10-Q and the audited financial statements and notes thereto as of and for the year ended December 31, 2020 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, both of which are contained in our Annual Report on Form 10-K for the year ended December 31, 2020, filed with the Securities and Exchange Commission (SEC) on February 25, 2021. Past operating results are not necessarily indicative of results that may occur in future periods.
 
Forward-Looking Statements
The information in this discussion contains forward-looking statements and information within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, which are subject to the “safe harbor” created by those sections. These forward-looking statements include, but are not limited to, statements concerning our strategy, future operations, future financial position, future revenues, projected costs, prospects and plans and objectives of management. The words “anticipates,” “believes,” “estimates,” “expects,” “intends,” “may,” “plans,” “projects,” “will,” “would” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements that we make. These forward-looking statements involve risks and uncertainties that could cause our actual results to differ materially from those in the forward-looking statements, including, without limitation, the risks set forth in Part II, Item IA, “Risk Factors” in this Quarterly Report on Form 10-Q and in our other filings with the SEC. The forward-looking statements are applicable only as of the date on which they are made, and we do not assume any obligation to update any forward-looking statements.
 
OVERVIEW

Chimerix is a development-stage biopharmaceutical company dedicated to accelerating the advancement of innovative medicines that make a meaningful impact in the lives of patients living with cancer and other serious diseases. In June 2021, the U.S. Food and Drug Administration granted approval of TEMBEXA (brincidofovir) tablets and oral suspension TEMBEXA for the treatment of smallpox as a medical countermeasure. Our two most advanced clinical-stage development programs are ONC201 and dociparstat sodium (DSTAT). ONC201 is currently being investigated in a number of clinical studies for recurrent H3 K27M-mutant glioma and an efficacy analysis by blinded independent central review, potentially sufficient for accelerated approval in the United States, when considered with the totality of the other safety and efficacy data, is expected in the fourth quarter of 2021. DSTAT is in Phase 3 development as a potential first-line therapy in acute myeloid leukemia (AML).

Recent Developments

TEMBEXA (brincidofovir, BCV)

On June 4, 2021, the FDA granted TEMBEXA approval for the treatment of smallpox. TEMBEXA is available in tablets and oral suspension. It is approved for adult and pediatric patients, including neonates. TEMBEXA was developed as a medical countermeasure for the treatment of smallpox under an ongoing collaboration with Biomedical Advanced Research and Development Authority (BARDA). On July 19, 2021, the FDA confirmed that, following the recent approval, TEMBEXA is entitled to seven years’ orphan exclusivity for the treatment of smallpox beginning with the June 4, 2021 marketing approval. In addition to orphan exclusivity, TEMBEXA patent coverage is expected to extend to 2034.

On March 24, 2021, BARDA issued a Small Business Sources Sought Notice (SSN) seeking information on availabilities and capabilities for procuring, stockpiling, and investing in the development of FDA-approved smallpox antiviral(s) with alternative mechanism(s) of action to TPOXX. We responded to the SSN with information on our relevant capabilities, experience and interest.

Imipridones and ONC201

Imipridones are a potential new class of selective cancer therapies. Clinical trials of ONC201 in glioma patients with the H3 K27M-mutation are underway at several locations in the U.S. Based on discussions with the FDA, we plan to integrate data from ongoing ONC201 clinical studies into a registration cohort with the potential for an NDA submission seeking accelerated approval. The efficacy analysis by Blinded Independent Central Review (BICR) is expected to take place in the fourth quarter
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of 2021. The BICR of radiographic imaging will enable clinical efficacy analyses of the first 50 patients with recurrent H3-K27M-mutant diffuse glioma who received single agent ONC201. These analyses will include overall response rate and key supportive endpoints, such as durability of response and other measures of clinical benefit. If favorable, these data may form the basis for an NDA submission seeking accelerated approval of ONC201 in the United States.

In addition, Phase 1 clinical trials for ONC206, our second imipridone product candidate, and IND-enabling work for our third imipridone candidate, ONC212, remain ongoing.

Dociparstat for First-Line Acute Myeloid Leukemia (AML)

During 2020, we conducted an end of Phase 2 meeting with the FDA related to our development of DSTAT in AML, which informed the design of the Phase 3 trial. We are currently enrolling in our 570-subject Phase 3 Dociparstat in AML with Standard Chemotherapy (DASH AML) study of DSTAT for the treatment of AML. The multicenter, randomized, double-blind, placebo-controlled, parallel-group study will evaluate the efficacy and safety of DSTAT in combination with standard intensive induction and consolidation chemotherapy for the treatment of newly-diagnosed AML patients. Chimerix expects to unblind data following enrollment of the first 80 evaluable patients in this study to assess complete response rates and minimal residual disease rates between the study arm and the control arm. This analysis is expected to take place in the second half of 2022.

Dociparstat for the Treatment of Acute Lung Injury (ALI) in COVID-19 Patients

In June 2021, we terminated enrollment of the third cohort of the Phase 2 portion of the study of DSTAT for the treatment of ALI in COVID-19 patients, due to enrollment delays and the changing COVID-19 disease landscape. DSTAT was generally safe and well tolerated with no discontinuations for adverse events on DSTAT.

Business Development Review

In addition to our transactions with Cantex Pharmaceuticals, Inc. (Cantex), SymBio Pharmaceuticals Limited (SymBio) and Oncoceutics, Inc. (Oncoceutics), management is continuing to conduct a review and assessment of potential transaction opportunities with the goal of building our product candidate pipeline, including, but not limited to, licensing, merger or acquisition transactions, issuing or transferring shares of common stock, or the license, purchase or sale of specific assets, in addition to other potential actions aimed at maximizing stockholder value. There can be no assurance that this review will result in the identification or consummation of any additional transaction.

FINANCIAL OVERVIEW

Revenues

To date, we have not generated any revenue from product sales. All of our revenue to date has been derived from government grants and a contract and the receipt of up-front proceeds under our collaboration and license agreements.

In February 2011, we entered into a contract with BARDA, a U.S. governmental agency that supports the advanced research and development, manufacturing, acquisition, and stockpiling of medical countermeasures. The contract originally consisted of an initial performance period, referred to as the base performance segment, which ended on May 31, 2013, plus up to four extension periods, referred to as option segments, which have all been exercised. The contract is a cost-plus fixed fee development contract. Under the contract as currently in effect, we may receive up to $75.8 million in expense reimbursement and $5.3 million in fees if all remaining option segments are exercised. We are currently performing under the fourth option segment of the contract during which we may receive up to a total of $4.6 million in expense reimbursement and fees. The second and third option segments were completed on August 20, 2020. The fourth and final option segment is scheduled to end on September 1, 2021. As of June 30, 2021, of the total funding the Company had invoiced an aggregate of $77.0 million with respect to the base performance segment and the four option segments. Under the BARDA contract, we recognized revenue of $0.3 million and $1.4 million during the three months ended June 30, 2021 and 2020, respectively, and we recognized revenue of $1.5 million and $2.6 million during the six months ended June 30, 2021 and 2020, respectively.

Following the acquisition of Oncoceutics, Chimerix has continued the on-going work pursuant to two separate U.S. government grants and two separate private foundation grants awarded to Oncoceutics. At June 30, 2021, there is $0.1 million remaining to be funded on a federal grant. At June 30, 2021, the Company has a receivable balance of $2,000 and a deferred revenue balance of $0.2 million related to these grants. Additionally, for the three and six months ended June 30, 2021, the Company has recognized $0.1 million and $0.4 million of grant revenue related to these grants, respectively.
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In September 2019, we entered into a license agreement with SymBio for worldwide rights to develop, manufacture and commercialize TEMBEXA in all human indications, excluding the use for treatment of orthopoxviruses, including smallpox. Under the contract, we received a $5.0 million upfront payment in October 2019 and could receive up to an additional $180.0 million in potential regulatory and commercial milestones. Since the license agreement was entered into in September 2019, we have recognized all of the $5.0 million of revenue related to the upfront payment. The revenue from regulatory and commercial milestones and royalties from net sales will be recognized upon occurrence of the triggering events.
 
In the future, we may generate revenue from a combination of product sales, license fees, milestone payments and royalties from the sales of products developed under licenses of our intellectual property. We expect that any revenue we generate will fluctuate from quarter to quarter as a result of the timing and amount of license fees, milestone and other payments, and the amount and timing of payments that we receive upon the sale of our products, to the extent any are successfully commercialized. If we fail to complete the development of any product candidates in a timely manner or obtain regulatory approval for them, our ability to generate future revenue, and our results of operations and financial position, would be materially adversely affected.
 
Research and Development Expenses

Since our inception, we have focused our resources on our research and development activities, including conducting preclinical studies and clinical trials, manufacturing development efforts and activities related to regulatory filings for our product candidates. We recognize research and development expenses as they are incurred. Costs for certain development activities are recognized based on an evaluation of the progress to completion of specific tasks using information and data provided to us by our vendors. We cannot determine with certainty the duration and completion costs of the current or future clinical studies of any product candidates. Our research and development expenses consist primarily of:
 
fees paid to consultants and contract research organizations (CROs), including in connection with preclinical and clinical trials, and other related clinical trial fees, such as for investigator grants, patient screening, laboratory work, clinical trial database management, clinical trial material management and statistical compilation and analysis;
salaries and related overhead expenses, which include stock option, restricted stock units and employee stock purchase program compensation and benefits, for personnel in research and development functions;
payments to third-party manufacturers, which produce, test and package drug substance and drug product (including continued testing of process validation and stability);
costs related to legal and compliance with regulatory requirements; and
license fees for and milestone payments related to licensed products and technologies.
 
The table below summarizes our research and development expenses for the periods indicated (in thousands). Our direct research and development expenses consist primarily of external costs, such as fees paid to investigators, consultants, central laboratories and CROs, in connection with our clinical trials, preclinical development, and payments to third-party manufacturers of drug substance and drug product. We typically use our employee and infrastructure resources across multiple research and development programs.
 Three Months Ended June 30,Six Months Ended June 30,
 2021202020212020
Direct research and development expenses$6,608 $4,261 $11,873 $9,208 
Research and development personnel costs - excluding stock-based compensation4,628 2,913 9,090 5,516 
Research and development personnel costs - stock-based compensation1,765 725 3,142 1,465 
Indirect research and development expenses797 679 1,555 1,338 
Total research and development expenses$13,798 $8,578 $25,660 $17,527 
 
The successful development of product candidates is highly uncertain. At this time, we cannot reasonably estimate the nature, timing or costs of the efforts that will be necessary to complete the development of any product candidates or the period, if any, in which material net cash inflows from any product candidates may commence. This is due to the numerous risks and uncertainties associated with our business, as detailed in Part II, Item IA, “Risk Factors” in this Quarterly Report on Form 10-Q and in our other filings with the SEC.

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TEMBEXA (Brincidofovir, BCV)

We developed TEMBEXA for the treatment of smallpox. FDA marketing approval for TEMBEXA was received on June 4, 2021. Under our cost-plus-fixed fee BARDA contract, we incurred expenses in connection with the development of orthopoxvirus animal models, the demonstration of efficacy and pharmacokinetics of TEMBEXA in the animal models, the conduct of clinical studies for subjects with DNA viral infections, the manufacture and process validation of bulk drug substance and TEMBEXA 100 mg tablets and TEMBEXA 10 mg/mL oral suspension, and submission of the NDAs to the FDA. In addition, we have incurred additional supportive costs for the development of TEMBEXA for smallpox that we are not seeking reimbursement for from BARDA. We have incurred costs related to the manufacturing of TEMBEXA for a possible procurement contract. These costs were expensed as incurred until the June approval. Going forward, costs related to the manufacturing of TEMBEXA will be recorded and shown as inventory on the Consolidated Balance Sheets.

Imipridones program

In January 2021, we acquired Oncoceutics. In connection with the transaction, we recorded $82.9 million of acquired in-process research and development expenses for the three months ended March 31, 2021, which included $25.0 million for an upfront payment to Oncoceutics, $43.4 million related to the fair value of 8,723,769 shares common stock issued to Oncoceutics, a $14.0 million promissory note due on the one-year anniversary of the acquisition, and $0.3 million related to transaction costs consisting primarily of legal and professional fees. As we continue to develop and prepare Oncoceutics’ lead compound, ONC201, for a U.S. regulatory approval, we expect to incur significant research and development expense. We also plan to incur development expenses in connection with the continued development of other Oncoceutics compounds, including ONC206 and ONC212.

Dociparstat sodium (DSTAT)

As we continue to focus on the development of DSTAT for treatment of AML patients, we expect research and development expense to increase with the ongoing and planned clinical trials. We are currently enrolling our Phase 3 DASH AML trial.

General and Administrative Expenses

General and administrative expenses consist primarily of salaries and related costs for employees in executive, finance, marketing, investor relations, information technology, legal, human resources and administrative support functions, including share-based compensation expenses and benefits. Other significant general and administrative expenses include costs related to accounting and legal services, costs of various consultants, director and officer liability insurance, occupancy costs and information systems.
 
Interest Income and Other, Net

Interest income and other, net consists primarily of interest earned on our cash, cash equivalents and short-term and long-term investments.
 
Share-based Compensation  

The Financial Accounting Standards Board authoritative guidance requires that share-based payment transactions with employees be recognized in the financial statements based on their fair value and recognized as compensation expense over the vesting period. Total consolidated share-based compensation expense of $3.1 million and $1.4 million was recognized in the three months ended June 30, 2021 and 2020, respectively, and $5.7 million and $2.7 million was recognized in the six months ended June 30, 2021 and 2020, respectively. The share-based compensation expense recognized included expense for stock options, RSUs and employee stock purchase plan purchase rights.
 
We estimate the fair value of our share-based awards to employees and directors using the Black-Scholes pricing model. This estimate is affected by our stock price as well as assumptions including the expected volatility, expected term, risk-free interest rate, expected dividend yield, expected rate of forfeiture and the fair value of the underlying common stock on the date of grant. 

For performance-based RSUs, we begin to recognize the expense when it is deemed probable that the performance-based goal will be achieved. We evaluate the probability of achieving performance-based goals on a quarterly basis.
 
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CRITICAL ACCOUNTING POLICIES AND SIGNIFICANT JUDGMENTS AND ESTIMATES
 
Our management’s discussion and analysis of financial condition and results of operations is based on our unaudited consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. On an ongoing basis, we evaluate these estimates and judgments. We base our estimates on historical experience and on various assumptions that we believe to be reasonable under the circumstances. These estimates and assumptions form the basis for making judgments about the carrying values of assets and liabilities and the recording of revenues and expenses that are not readily apparent from other sources. Actual results and experiences may differ materially from these estimates. In addition, our reported financial condition and results of operations could vary if new accounting standards are enacted that are applicable to our business.

We discussed accounting policies and assumptions that involve a higher degree of judgment and complexity in Note 1 to our consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC on February 25, 2021. There have been no material changes during the six months ended June 30, 2021 to our critical accounting policies, significant judgments and estimates disclosed in our Annual Report on Form 10-K for the year ended December 31, 2020.

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RESULTS OF OPERATIONS 

Comparison of the Three Months Ended June 30, 2021 and June 30, 2020

The following table summarizes our results of operations for the three months ended June 30, 2021 and June 30, 2020, together with the changes in those items (in thousands, except percentages): 
 
 Three Months Ended June 30,Dollar Change% Change
 20212020Increase/(Decrease)
Revenues:
Contract and grant revenue$390 $1,396 $(1,006)(72.1)%
Licensing revenue(5)(83.3)
Total revenues391 1,402 (1,011)(72.1)%
Operating expenses:    
Research and development13,798 8,578 5,220 60.9 %
General and administrative4,408 3,110 1,298 41.7 %
Total operating expenses18,206 11,688 6,518 55.8 %
Loss from operations(17,815)(10,286)(7,529)73.2 %
Other income:
Interest income and other, net52 270 (218)(80.7)%
Net loss$(17,763)$(10,016)$(7,747)77.3 %

Contract and Licensing Revenue

For the three months ended June 30, 2021, total contract and licensing revenue decreased to $0.4 million compared to $1.4 million for the three months ended June 30, 2020. The decrease of $1.0 million, or 72.1%, is primarily attributable to a decrease in reimbursable expenses under our contract with BARDA, offset by ONC201.

Research and Development Expenses

For the three months ended June 30, 2021, our research and development expenses increased to $13.8 million compared to $8.6 million for the three months ended June 30, 2020. The increase of $5.2 million, or 60.9%, is primarily related to the following:

an increase of $2.9 million in research and development expenses related to our ongoing clinical trials in patients, preparation of data for the efficacy analysis by Blinded Independent Center Review of ONC201 in recurrent H3 K27M-mutant glioma patients, and the development and manufacture of ONC201 and ONC206 drug substance and drug product;
an increase of $2.8 million in compensation expenses, of which $1.0 million is related to non-cash stock compensation, to support development of our current pipeline; and
an increase of $0.7 million in clinical trial expenses related to DASH AML, our Phase 3 clinical trial to assess DSTAT for first-line treatment of AML as sites were activated and patients were randomized in 2021; offset by
a decrease of $0.7 million related to the conduct and curtailment of the Phase 2 trial to assess DSTAT for acute lung injury in COVID-19 patients; and
a decrease of $0.5 million in brincidofovir program expenses primarily related to the conclusion of program with an approval of TEMBEXA in June 2021.

General and Administrative Expenses

For the three months ended June 30, 2021, our general and administrative expenses increased to $4.4 million compared to $3.1 million for the three months ended June 30, 2020. The increase of $1.3 million, or 41.7%, is primarily related to the following:

an increase of $0.7 million in non-cash compensation expense; and
an increase of $0.6 million in consulting, legal and operational expenses with the growth of the company’s infrastructure.

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Interest Income and Other, Net

For the three months ended June 30, 2021, our interest income and other, net decreased to $52,000 compared to $0.3 million for the three months ended June 30, 2020. This decrease is attributable to amortization of our investment premium balances offsetting interest earned.

Comparison of the Six Months Ended June 30, 2021 and June 30, 2020

The following table summarizes our results of operations for the six months ended June 30, 2021 and June 30, 2020, together with the changes in those items (in thousands except percentages): 
 
 Six Months Ended June 30,Dollar Change% Change
 20212020Increase/(Decrease)
Revenues:
Contract and grant revenue$1,823 $2,567 $(744)