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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 September 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 October 31, 2021, the number of outstanding shares of the registrant’s common stock, par value $0.001 per share, was 86,862,426.


CHIMERIX, INC.
 
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 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) 
 September 30, 2021December 31, 2020
ASSETS  
Current assets:  
Cash and cash equivalents$26,174 $46,989 
Short-term investments, available-for-sale96,384 31,973 
Accounts receivable53 340 
Inventories1,595 — 
Prepaid expenses and other current assets4,327 2,356 
Total current assets128,533 81,658 
Long-term investments2,035 — 
Property and equipment, net of accumulated depreciation264 214 
Operating lease right-of-use assets2,509 2,825 
Other long-term assets60 26 
Total assets$133,401 $84,723 
LIABILITIES AND STOCKHOLDERS' EQUITY  
Current liabilities:  
Accounts payable$1,792 $1,283 
Accrued liabilities10,498 7,250 
Note payable14,000 — 
Total current liabilities26,290 8,533 
Lease-related obligations2,525 2,814 
Total liabilities28,815 11,347 
Stockholders’ equity:  
Preferred stock, $0.001 par value, 10,000,000 shares authorized at September 30, 2021 and December 31, 2020; no shares issued and outstanding as of September 30, 2021 and December 31, 2020
— — 
Common stock, $0.001 par value, 200,000,000 shares authorized at September 30, 2021 and December 31, 2020; 86,848,426 and 62,816,039 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively
87 63 
Additional paid-in capital950,597 785,673 
Accumulated other comprehensive loss, net— — 
Accumulated deficit(846,098)(712,360)
Total stockholders’ equity104,586 73,376 
Total liabilities and stockholders’ equity$133,401 $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 September 30,Nine Months Ended September 30,
 2021202020212020
Revenues:
Contract and grant revenue$105 $1,591 $1,928 $4,158 
Licensing revenue2 18 5 94 
Total revenues107 1,609 1,933 4,252 
Operating expenses:    
Research and development13,820 10,018 39,480 27,545 
General and administrative4,887 3,151 13,431 9,466 
Acquired in-process research and development— — 82,890 — 
Total operating expenses18,707 13,169 135,801 37,011 
Loss from operations(18,600)(11,560)(133,868)(32,759)
Other income:
Interest income and other, net40 149 130 912 
Net loss(18,560)(11,411)(133,738)(31,847)
Other comprehensive loss:    
Unrealized gain (loss) on debt investments, net11 (97)— (2)
Comprehensive loss$(18,549)$(11,508)$(133,738)$(31,849)
Per share information:    
Net loss, basic and diluted$(0.21)$(0.18)$(1.59)$(0.51)
Weighted-average shares outstanding, basic and diluted86,335,357 62,242,456 84,277,555 62,009,941 
  
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 
Share-based compensation— — 3,431 — — 3,431 
Exercise of stock options74,588 — 130 — — 130 
Employee stock purchase plan purchases283,094 1 424 — — 425 
RSU stock issuance241,000 — — — — — 
Comprehensive loss:
Unrealized loss on investments, net— — — 11 — 11 
Net loss— — — — (18,560)(18,560)
Total comprehensive loss(18,549)
Balance, September 30, 202186,848,426 $87 $950,597 $— $(846,098)$104,586 

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 
Share-based compensation— — 1,282 — — 1,282 
Exercise of stock options20,592 1 62 — — 63 
Employee stock purchase plan purchases159,879 — 197 — — 197 
RSU stock issuance276,833 — — — — — 
Comprehensive loss:
Unrealized loss on investments, net— — — (97)— (97)
Net loss— — — — (11,411)(11,411)
Total comprehensive loss(11,508)
Balance, September 30, 202062,629,722 $63 $783,758 $33 $(700,685)$83,169 

6


CHIMERIX, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited) 
 Nine Months Ended September 30,
 20212020
Cash flows from operating activities:  
Net loss$(133,738)$(31,847)
Adjustments to reconcile net loss to net cash used in operating activities:
  
Depreciation of property and equipment143 309 
Amortization of discount/premium on investments648 (268)
Share-based compensation 9,127 4,000 
Fair value of common stock issued related to asset acquisition43,445 — 
Note payable related to asset acquisition14,000 
Gain on sale of investments(2)(1)
Gain on sale of equipment— (10)
Lease-related amortization314 (47)
Changes in operating assets and liabilities:  
Accounts receivable288 855 
Inventories(1,595)— 
Prepaid expenses and other assets(2,005)1,284 
Accounts payable and accrued liabilities3,468 (1,268)
Net cash used in operating activities(65,907)(26,993)
Cash flows from investing activities:  
Purchases of property and equipment(193)(60)
Proceeds from sale of property and equipment— 10 
Purchases of short-term investments(105,355)(58,895)
Purchases of long-term investments(9,594)— 
Proceeds from sales of short-term investments2,007 1,498 
Proceeds from maturities of short-term investments45,850 104,602 
Net cash (used in) provided by investing activities(67,285)47,155 
Cash flows from financing activities:  
Proceeds from exercise of stock options3,780 641 
Proceeds from employee stock purchase plan754 426 
Proceeds from issuance of common stock, net of commissions107,843 — 
Net cash provided by financing activities112,377 1,067 
Net (decrease) increase in cash and cash equivalents(20,815)21,229 
Cash and cash equivalents:
Beginning of period46,989 16,901 
End of period$26,174 $38,130 
 
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 biopharmaceutical company whose mission it is to develop medicines that meaningfully improve and extend the lives of patients facing deadly diseases. In June 2021, the U.S. Food and Drug Administration (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 in development for recurrent H3 K27M-mutant glioma. 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 nine months ended September 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 September 30, 2021 and December 31, 2020, the Company had cash equivalents including money market funds, whose value is based on quoted market prices. At September 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 September 30, 2021, the Company had long-term investments including U.S. Treasury securities, whose value is based on quoted market prices. Accordingly, these securities are classified as Level 1.
 
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At September 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. 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
September 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$20,165 $20,165 $— $— 
          Total cash equivalents20,165 20,165 — — 
Short-term investments
     U.S. treasury securities7,534 7,534 — — 
     Commercial paper51,277 — 51,277 — 
     Corporate bonds37,573 — 37,573 — 
          Total short-term investments96,384 7,534 88,850 — 
Long-term investments
     U.S. treasury securities2,035 2,035 — — 
          Total long-term investments2,035 2,035 — — 
               Total assets$118,584 $29,734 $88,850 $— 
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 $— 
  
Inventories

The Company considers regulatory approval of product candidates to be uncertain and product manufactured prior to regulatory approval may not be sold unless regulatory approval is obtained. As such, the manufacturing costs for product candidates incurred prior to regulatory approval are not capitalized as inventory but are expensed as research and development costs. The Company begins capitalization of these inventory related costs once regulatory approval is obtained. The Company primarily uses actual costs to determine its cost basis for inventories.

9


At September 30, 2021, the Company’s inventory is related to TEMBEXA, which is being manufactured for the treatment of smallpox and potential delivery to the Strategic National Stockpile (SNS) for the U.S. government and other government agencies. TEMBEXA was approved by the FDA on June 4, 2021, at which time the Company began to capitalize inventory costs associated with TEMBEXA. Prior to FDA approval of TEMBEXA, all costs related to the manufacturing of TEMBEXA were charged to research and development expense in the period incurred as there was no alternative future use.

The Company values its inventories at the lower of cost or estimated net realizable value. The Company determines the cost of its inventories, which includes amounts related to materials, manufacturing costs, shipping and handling costs on a first-in, first-out (FIFO) basis. Work-in-process includes all inventory costs prior to packaging and labelling, including raw material, active product ingredient, and drug product. Finished goods include packaged and labelled products. The Company's inventories at September 30, 2021 consisted of $1.6 million of work-in-process and no finished goods.

The Company’s assessment of market value requires the use of estimates regarding the net realizable value of its inventory balances, including an assessment of excess or obsolete inventory. The Company’s determination that a valuation reserve might be required, in addition to the quantification of such reserve, requires it to utilize significant judgment. The Company determines excess or obsolete inventory based on multiple factors, including an estimate of the future demand for its products, product expiration dates and current sales levels. The Company’s assumptions of future demand for its products are inherently uncertain and if the Company were to change any of these judgments or estimates, it could cause a material increase or decrease in the amount of inventory reserves that the Company reports in a particular period. In addition, the Company's inventory may experience expiration of its shelf-life stability. During the nine months ended September 30, 2021, the Company did not record a reserve for inventory as the Company assumes TEMBEXA will be sold to the US government under a procurement contract with Biomedical Advanced Research and Development Authority (BARDA) or could be sold to other governmental agencies. Should no procurement contract be secured in the future, the Company may reserve part or all of our inventory balance, which would be included in cost of sales.

Accrued Liabilities

Accrued liabilities consisted of the following (in thousands):
September 30, 2021December 31, 2020
Accrued research and development expenses$3,276 $1,375 
Accrued compensation4,502 4,473 
Accrued legal expenses213 651 
Other accrued liabilities2,507 751 
Total accrued liabilities$10,498 $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 received $72.5 million in expense reimbursement and $4.6 million in fees over the performance of one base segment and four option segments. Exercise of each option segment was solely at the discretion of BARDA. The Company assessed the services in accordance with the authoritative guidance and concluded that there was a potential of five separate contracts (one base segment and four option segments) within this agreement, each of which had a single performance obligation. All option segments (one through four) were exercised, as well as the base segment. The transaction price for each segment, based on the transaction price as defined in
10


each segment contract, was allocated to the single performance obligation for each contract. The transaction price was recognized over time by measuring the progress toward complete satisfaction of the performance obligation. For reimbursable expenses, this occurred as qualifying research activities were conducted based on invoices from company vendors. For the fixed fee, the progress toward complete satisfaction was estimated based on the costs incurred to date relative to the total estimated costs per the terms of each contract. The Company typically invoiced BARDA monthly as costs were incurred. Any amounts received in advance of performance were recorded as deferred revenue until earned. The base segment and first option segment were completed prior to adoption of ASC 606. The second and third option segments were completed on August 20, 2020. The fourth option segment was completed on September 1, 2021 and the contract has expired in accordance with its terms.

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, of which the federal grant programs ended in the third quarter of 2021. At September 30, 2021, the Company has a deferred revenue balance of $0.2 million related to these grants. Additionally, for the three and nine months ended September 30, 2021, the Company recognized $18,000 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 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 September 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
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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 nine months ended September 30, 2021 and 2020.

Use of Estimates

The preparation of financial statements in conformity with 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.

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):
 September 30, 2021
 Amortized CostGross Unrealized GainsGross Unrealized LossesEstimated Fair Value
Corporate bonds$37,579 $1 $(7)$37,573 
U.S. treasury securities9,568 2 (1)9,569 
Commercial paper51,272 7 (2)51,277 
Total investments$98,419 $10 $(10)$98,419 
 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 
 
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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):

September 30, 2021
Less than 12 MonthsGreater than 12 MonthsTotal
Fair ValueUnrealized LossFair ValueUnrealized LossFair ValueUnrealized Loss
Corporate bonds$27,554 $(7)$— $— $27,554 $(7)
Commercial paper10,491 (2)— — 10,491 (2)
U.S. treasury securities7,034 (1)— — 7,034 (1)
Total$45,079 $(10)$— $— $45,079 $(10)
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 

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 September 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 nine months ended September 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 September 30, 2021 (in thousands):
Maturing in one year or less$96,384 
Maturing after one year through two years2,035 
     Total debt investments$98,419 
 
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 September 30, 2021 was 4.84 years.

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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 $0.2 million and $0.2 million, respectively, for the three months ended September 30, 2021 and 2020 and approximately $0.5 million and $0.6 million for the nine months ended September 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 September 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 September 30, 2021 (in thousands):
Assets
Operating lease right-of-use assets $2,509 
Liabilities
Operating lease short-term liabilities (recorded within Accrued liabilities)$416 
Operating lease long-term liabilities (recorded within Lease-related obligations)2,525 
     Total operating lease liabilities$2,941 

Operating lease payments over the remainder of the lease terms are as follows (in thousands):
Years Ending December 31,As of September 30, 2021
2021 (1)$97 
2022715 
2023736 
2024759 
2025781 
All remaining years467 
Total future minimum rental payments$3,555 
     Less amount of lease payments representing interest614 
Total present value of lease payments$2,941 

(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 five 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 September 30, 2021 and 2020, the Company made lease payments of approximately $122,000 and $181,000, respectively, and for the nine months ended September 30, 2021 and 2020, the Company made lease payments of approximately $292,000 and $538,000, respectively.

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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 nine months ended September 30, 2021, the Company recognized $0 and approximately $12,000 of income, respectively, and for the three and nine months ended September 30, 2020, the Company recognized approximately $18,000 and $53,000 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 September 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, the Company 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 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 September 30, 2021, there was a total of 2.2 million shares reserved for future issuance under the 2013 Plan. The Company issued approximately 75,000 and 826,000 shares of common stock pursuant to the exercise of stock options during the three and nine months ended September 30, 2021, respectively. The Company issued 21,000 and 263,000 shares of common stock pursuant to the exercise of stock options during the three and nine months ended September 30, 2020, respectively.

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 2.3 million shares remained available for purchase as of September 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
15


each six-month purchase interval. The Company issued approximately 283,000 and 160,000 shares of common stock pursuant to the ESPP during the three months ended September 30, 2021 and 2020, respectively. The Company issued approximately 543,000 and 337,000 shares of common stock pursuant to the ESPP during the nine months ended September 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 241,000 shares and approximately 410,000 shares of common stock pursuant to the vesting of RSUs during the three and nine months ended September 30, 2021, respectively. The Company issued 277,000 shares and approximately 440,000 shares of common stock pursuant to the vesting of RSUs during the three and nine months ended September 30, 2020, respectively.

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 September 30,Nine Months Ended September 30,
 2021202020212020
Research and development expense$1,853 $625 $4,995 $2,090 
General and administrative expense1,578 657 4,132 1,910 
          Total share-based compensation expense$3,431 $1,282 $9,127 $4,000 

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 nine month period ended September 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 September 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 agreed to 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, the Company received $72.5 million in expense reimbursement and $4.6 million in fees.

The fourth option segment ended on September 1, 2021 and the contract has expired in accordance with its terms. For the three months ended September 30, 2021 and 2020, the Company recognized revenue under this contract of $0.1 million and $1.6
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million, respectively, and for the nine months ended September 30, 2021 and 2020, the Company recognized revenue under this contract of $1.6 million and $4.2 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), 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. for ONC201 in Japan. 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, Hong Kong, Macau and Taiwan (CR Sanjiu Territory). 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.

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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 September 30, 2021, the Company has recorded an estimated liability of $0.2 million related to closing payment adjustments. Additionally, as of September 30, 2021, the Company has 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 (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 September 30, 2021, and events which occurred subsequently but were not recognized in the financial statements.

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In accordance with the terms of the merger agreement between Chimerix and Oncoceutics, Inc., the achievement of the 20% overall response rate (ORR) via Blinded Independent Central Review (BICR) will result in a success milestone payment of $20 million to the former Oncoceutics, Inc. shareholders to be paid prior to year-end.

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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 (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 t