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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, 2022
 
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 29, 2022, the number of outstanding shares of the registrant’s common stock, par value $0.001 per share, was 87,622,853.



CHIMERIX, INC.
 
FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2022
 
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, 2022December 31, 2021
ASSETS  
Current assets:  
Cash and cash equivalents$28,086 $15,397 
Short-term investments, available-for-sale14,705 72,970 
Inventories4,126 2,760 
Prepaid expenses and other current assets3,853 4,678 
Total current assets50,770 95,805 
Long-term investments 2,022 
Property and equipment, net of accumulated depreciation205 253 
Operating lease right-of-use assets2,189 2,404 
Other long-term assets399 56 
Total assets$53,563 $100,540 
LIABILITIES AND STOCKHOLDERS' EQUITY  
Current liabilities:  
Accounts payable$1,743 $2,788 
Accrued liabilities16,682 12,933 
Deferred revenue4,846 175 
Note payable 14,000 
Total current liabilities23,271 29,896 
Loan fees250  
Lease-related obligations2,114 2,392 
Total liabilities25,635 32,288 
Stockholders’ equity:  
Preferred stock, $0.001 par value, 10,000,000 shares authorized at June 30, 2022 and December 31, 2021; no shares issued and outstanding as of June 30, 2022 and December 31, 2021
  
Common stock, $0.001 par value, 200,000,000 shares authorized at June 30, 2022 and December 31, 2021; 87,436,180 and 86,884,266 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively
87 87 
Additional paid-in capital961,740 953,782 
Accumulated other comprehensive loss, net(68)(21)
Accumulated deficit(933,831)(885,596)
Total stockholders’ equity27,928 68,252 
Total liabilities and stockholders’ equity$53,563 $100,540 
 
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,
 2022202120222021
Revenues:
Contract and grant revenue$ $390 $ $1,823 
Licensing revenue440 1 455 3 
Total revenues440 391 455 1,826 
Cost of goods sold  114  
Gross Profit440 391 341 1,826 
Operating expenses:    
Research and development18,047 13,798 37,087 25,660 
General and administrative5,840 4,408 11,472 8,544 
Acquired in-process research and development   82,890 
Total operating expenses23,887 18,206 48,559 117,094 
Loss from operations(23,447)(17,815)(48,218)(115,268)
Other (loss) income:
Interest income and other, net(21)52 (17)90 
Net loss(23,468)(17,763)(48,235)(115,178)
Other comprehensive loss:    
Unrealized gain (loss) on debt investments, net5 32 (47)(11)
Comprehensive loss$(23,463)$(17,731)$(48,282)$(115,189)
Per share information:    
Net loss, basic and diluted$(0.27)$(0.21)$(0.55)$(1.38)
Weighted-average shares outstanding, basic and diluted87,436,180 86,225,836 87,263,452 83,231,600 
  
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, 202186,884,266 $87 $953,782 $(21)$(885,596)$68,252 
Share-based compensation— — 3,708 — — 3,708 
Exercise of stock options34,406 — 102 — — 102 
Employee stock purchase plan purchases383,981 — 555 — — 555 
RSU stock issuance133,527 — — — — — 
Comprehensive loss:
Unrealized loss on investments, net— — — (52)— (52)
Net loss— — — — (24,767)(24,767)
Total comprehensive loss(24,819)
Balance, March 31, 202287,436,180 $87 $958,147 $(73)$(910,363)$47,798 
Share-based compensation— — 3,593 — — 3,593 
Comprehensive loss:
Unrealized gain on investments, net— — — 5 — 5 
Net loss— — — (23,468)(23,468)
Total comprehensive loss(23,463)
Balance, June 30, 202287,436,180 $87 $961,740 $(68)$(933,831)$27,928 

5



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 

6



CHIMERIX, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited) 
 Six Months Ended June 30,
 20222021
Cash flows from operating activities:  
Net loss$(48,235)$(115,178)
Adjustments to reconcile net loss to net cash used in operating activities:
  
Depreciation of property and equipment48 105 
Amortization of debt issuance costs100  
Amortization of discount/premium on investments74 402 
Share-based compensation 7,301 5,696 
Fair value of common stock issued related to asset acquisition 43,445 
Note payable related to asset acquisition 14,000 
Gain on sale of investments(1)(2)
Lease-related amortization46 292 
Changes in operating assets and liabilities:  
Accounts receivable 304 
Inventories(1,365) 
Prepaid expenses and other assets917 (1,832)
Accounts payable, accrued liabilities and deferred revenue7,108 2,149 
Net cash used in operating activities(34,007)(50,619)
Cash flows from investing activities:  
Purchases of property and equipment (188)
Purchases of short-term investments(5,258)(100,860)
Purchases of long-term investments (7,554)
Proceeds from sales of short-term investments7,699 2,007 
Proceeds from maturities of short-term investments57,726 23,850 
Net cash provided by (used in) investing activities60,167 (82,745)
Cash flows from financing activities:  
Proceeds from exercise of stock options102 3,648 
Proceeds from employee stock purchase plan556 330 
Proceeds from issuance of common stock, net of commissions 107,842 
Payments of debt issuance costs(129) 
Payment of note payable related to asset acquisition(14,000) 
Net cash (used in) provided by financing activities(13,471)111,820 
Net increase (decrease) in cash and cash equivalents12,689 (21,544)
Cash and cash equivalents:
Beginning of period15,397 46,989 
End of period$28,086 $25,445 
 
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.

The Company’s activities since inception have primarily consisted of performing research and development activities. The Company has recognized modest revenue during 2022, but does not expect to generate substantial revenue until and unless the Company enters into a procurement agreement with the US government for TEMBEXA or successfully commercializes one of its product candidates. The Company is subject to a number of risks and uncertainties similar to those of other life science companies at a similar stage of development, including, among others, the need to obtain adequate additional financing, successful development efforts including regulatory approval of products, compliance with government regulations, successful commercialization of potential products, protection of proprietary technology and dependence on key individuals. If adequate additional financing is not obtained, we may be required to curtail significantly one or more of our research or development programs, and any launch and other commercialization expenses for any of our products that may receive marketing approval.

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, 2021. 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, 2022 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. 

Reclassifications

Certain prior period amounts in the accompanying consolidated financial statements have been reclassified to conform to the current year presentation. These reclassifications had no effect on previously reported net income or stockholders' equity (deficit).

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
8



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, 2022 and December 31, 2021, the Company had cash equivalents including money market funds and short-term investments, including U.S. Treasury securities, whose value is based on quoted market prices. At December 31, 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.
 
At June 30, 2022 and December 31, 2021, the Company had short-term investments including U.S. Treasury securities, commercial paper and 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."
 
9



Below are tables that present information about certain assets measured at fair value on a recurring basis (in thousands):
 
Fair Value Measurements
June 30, 2022
 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$20,030 $20,030 $ $ 
          Total cash equivalents20,030 20,030   
Short-term investments
     U.S. treasury securities9,474 4,488 4,986  
     Commercial paper2,476  2,476  
     Corporate bonds2,755  2,755  
          Total short-term investments14,705 4,488 10,217  
               Total assets$34,735 $24,518 $10,217 $ 
Fair Value Measurements
December 31, 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$11,841 $11,841 $ $ 
          Total cash equivalents11,841 11,841   
Short-term investments
     U.S. treasury securities7,517 2,523 4,994  
     Commercial paper34,887  34,887  
     Corporate bonds30,566  30,566  
          Total short-term investments72,970 2,523 70,447  
Long-term investments
     U.S. treasury securities2,022 2,022   
          Total long-term investments2,022 2,022   
               Total assets$86,833 $16,386 $70,447 $ 
  
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.

At June 30, 2022, the Company’s inventory is related to TEMBEXA, which is being manufactured for the treatment of smallpox for potential delivery to the Strategic National Stockpile (SNS) for the U.S. government and to 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-
10



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 June 30, 2022 consisted of $1.8 million of work-in-process and $2.3 million of 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 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 six months ended June 30, 2022, the Company did not record a reserve for inventory as the Company assumes TEMBEXA will be sold to the U.S. government under a procurement contract with Biomedical Advanced Research and Development Authority (BARDA) or 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. During the three and six months ended June 30, 2022, the Company wrote-off no inventory and $0.1 million of inventory, respectively, deemed to be unsalable to cost of goods sold on the Consolidated Statements of Operations and Comprehensive Loss.

Deferred Loan Costs

On January 31, 2022 (the Effective Date), the Company entered into a Loan and Security Agreement (the Loan Agreement), by and between the Company, as borrower, and Silicon Valley Bank, as the lender (the Lender). The Loan Agreement provides for a four-year secured revolving loan facility (the Credit Facility) in an aggregate principal amount of up to $50.0 million. Proceeds from the Credit Facility may be used for working capital and general corporate purposes. The Company has no obligation to draw down any amount under the Credit Facility, and has not drawn down any amount as of June 30, 2022.

Borrowings under the Credit Facility accrue interest at a floating per annum rate of the greater of (i) 1.50% above the Prime Rate (as defined below) and (ii) 4.75%. Prime Rate is defined as the rate of interest per annum published in The Wall Street Journal or any successor publication thereto as the “prime rate”. If such rate of interest from The Wall Street Journal becomes unavailable, the “Prime Rate” shall mean the rate of interest per annum announced by the Lender as its prime rate in effect. In each case, in the event such prime rate is less than zero, such rate shall be deemed to be zero for purposes of the Loan Agreement. The Company must also pay an unused line fee equal to 0.25% per annum on the unused portion of the Credit Facility, payable quarterly in arrears. Upon the termination of the Loan Agreement for any reason prior to the Maturity Date, the Company will be required to pay to the Lender an early termination fee of $0.5 million. The Loan Agreement also requires the Company to pay the Lender a non-refundable commitment fee of $0.5 million, payable in four equal installments beginning on the Effective Date and each anniversary of the Effective Date thereafter until January 31, 2025. As of June 30, 2022, the Company has recorded current deferred loan costs of $0.1 million in prepaid expenses and other current assets and non-current deferred loan costs of $0.4 million in other long-term assets on the Consolidated Balance Sheets. As of June 30, 2022, the Company has recorded a current loan fee liability of $0.2 million in accrued liabilities and a non-current loan fee liability of $0.3 million in loan fees on the Consolidated Balance Sheets.


Accrued Liabilities

Accrued liabilities consisted of the following (in thousands):
June 30, 2022December 31, 2021
Accrued research and development expenses$9,677 $4,642 
Accrued compensation3,887 5,491 
Accrued legal expenses741 359 
Other accrued liabilities2,377 2,441 
Total accrued liabilities$16,682 $12,933 

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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.

TEMBEXA Procurement Agreements

On June 23, 2022, the Company entered into two TEMBEXA procurement agreements with third parties outside of the United States (Purchasers), pursuant to which the Company is responsible for supplying to the Purchasers, and the Purchasers are responsible for purchasing from the Company, TEMBEXA (brincidofovir) treatment courses for use outside of the United States. There are no material performance obligations outside of delivery in the agreements, therefore revenue related to these procurement agreements will be recognized when the delivery performance obligation is satisfied and any advance payment will be held in deferred revenue until that performance obligation is satisfied. Revenue will be recognized based on price per treatment course as outlined in the 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, 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 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 June 30, 2022, the Company has a deferred revenue balance of $0.2 million related to these grants. For the three and six months ended June 30, 2022, the Company recognized no grant revenue and 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.
 
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
12



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, 2022, 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, 2022 and 2021.

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.

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Note 2. Investments
 
The following tables summarize the Company’s debt investments (in thousands):
 June 30, 2022
 Amortized CostGross Unrealized GainsGross Unrealized LossesEstimated Fair Value
Corporate bonds$2,759 $ $(4)$2,755 
U.S. treasury securities9,521  (47)9,474 
Commercial paper2,493  (17)2,476 
Total investments$14,773 $ $(68)$14,705 
 December 31, 2021
 Amortized CostGross Unrealized GainsGross Unrealized LossesEstimated Fair Value
Corporate bonds$30,571 $2 $(7)$30,566 
Commercial paper34,890 2 (5)34,887 
U.S. treasury securities9,552  (13)9,539 
Total investments$75,013 $4 $(25)$74,992 
 
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, 2022
Less than 12 MonthsGreater than 12 MonthsTotal
Fair ValueUnrealized LossFair ValueUnrealized LossFair ValueUnrealized Loss
Corporate bonds$1,346 $(4)$ $ $1,346 $(4)
Commercial paper2,476 (17)  2,476 (17)
U.S. treasury securities9,474 (47)  9,474 (47)
Total$13,296 $(68)$ $ $13,296 $(68)
Number of securities with unrealized losses6  6 
December 31, 2021
Less than 12 MonthsGreater than 12 MonthsTotal
Fair ValueUnrealized LossFair ValueUnrealized LossFair ValueUnrealized Loss
Corporate bonds$28,362 $(7)$ $ $28,362 $(7)
Commercial paper8,991 (5)  8,991 (5)
U.S. treasury securities$9,539 $(13)$ $ $9,539 $(13)
Total$46,892 $(25)$ $ $46,892 $(25)
Number of securities with unrealized losses18  18 

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, 2022, 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
14



for the three and six months ended June 30, 2022 and 2021. 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, 2022 (in thousands):
Maturing in one year or less$14,705 
     Total debt investments$14,705 
 
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, 2022 was 4.09 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 $0.1 million and $0.2 million, respectively, for the three months ended June 30, 2022 and 2021 and $0.3 million and $0.3 million for the six months ended June 30, 2022 and 2021.

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, 2022, 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, 2022 (in thousands):
Assets
Operating lease right-of-use assets $2,189 
Liabilities
Operating lease short-term liabilities (recorded within Accrued liabilities)$540 
Operating lease long-term liabilities (recorded within Lease-related obligations)2,114 
     Total operating lease liabilities$2,654 

Operating lease payments over the remainder of the lease terms are as follows (in thousands):
Years Ending December 31,As of June 30, 2022
2022360 
2023736 
2024759 
2025781 
2026467 
Total future minimum rental payments$3,103 
     Less amount of lease payments representing interest449 
Total present value of lease payments$2,654 

15



As of December 31, 2021, operating lease payments over the remainder of the lease terms were as follows (in thousands):
Years Ending December 31,As of December 31, 2021
2022637 
2023736 
2024759 
2025781 
2026467 
Total future minimum rental payments$3,380 
     Less amount of lease payments representing interest556 
Total present value of lease payments$2,824 

For the three months ended June 30, 2022 and 2021, the Company made lease payments of approximately $0.2 million and $37,000, respectively, and for the six months ended June 30, 2022 and 2021, the Company made lease payments of approximately $0.3 million and $0.2 million, 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 approximately $0 and $12,000 of income 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 was the recipient of federal research contract funds from BARDA, the primary source of the Company’s prior year 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, 2022 and December 31, 2021, the Company had recorded a provision for potential refundable amounts of $52,000.
 
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, 2022, the common stock reserved for issuance under the 2013 Plan was automatically increased by 3.5 million shares. As of June 30, 2022, there was a total of 1.5 million shares reserved for future issuance under the 2013 Plan. The Company issued no shares and approximately 34,000 shares of common stock pursuant to the exercise of stock options during the three and six months ended June 30, 2022. The Company issued 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.
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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 4.3 million shares of common stock to be purchased under the ESPP, of which 2.3 million shares remained available for purchase as of June 30, 2022. 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, 2022, 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 384,000 and 260,000 shares of common stock pursuant to the ESPP during the six months ended June 30, 2022 and 2021, 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 134,000 shares of common stock pursuant to the vesting of RSUs during the three and six months ended June 30, 2022. The Company issued no shares and 169,000 shares of common stock pursuant to the vesting of RSUs during the three and six months ended June 30, 2021.

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,
 2022202120222021
Research and development expense$1,827 $1,765 $3,730 $3,142 
General and administrative expense1,766 1,347 3,571 2,554 
          Total share-based compensation expense$3,593 $3,112 $7,301 $5,696 

Note 5. Income Taxes
 
The Company estimates an annual effective tax rate of 0% for the year ending December 31, 2022 as the Company incurred losses for the six month period ended June 30, 2022. 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, 2022, the Company had no unrecognized tax benefits that would reduce the Company’s effective tax rate if recognized.

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Note 6. Significant Agreements

Emergent BioSolutions, Inc.

On May 16, 2022 the Company announced it entered into an agreement with Emergent BioSolutions, Inc. (Emergent) for the sale of TEMBEXA worldwide rights (the “Transaction”) for $225 million upfront and additional milestones of up to $100 million to be paid contingent upon execution of optional future procurement awards from the Biomedical Advanced Research and Development Authority (BARDA) following the base period. Subject to closing of the Transaction, the upfront closing payment and the optional future milestone payments may be adjusted based on the final executed procurement contract between the Company and BARDA. The Company is also eligible to receive up to $12.5 million in regulatory milestones associated with the SymBio Pharmaceuticals Ltd. brincidofovir partnership to be assumed by Emergent. The Company may also earn a 20% royalty on future gross profit of TEMBEXA in the United States associated with volumes above 1.7 million treatment courses of therapy during the exclusivity period of TEMBEXA. Outside of the United States, the agreement allows Chimerix to earn a 15% royalty on all gross profit associated with TEMBEXA sales during the exclusivity period of TEMBEXA on a market-to-market basis.

Emergent and the Company both filed a Premerger Notification and Report Form under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”) on May 26, 2022 with respect to the pending acquisition. On June 27, 2022, Emergent, as the acquiring party, withdrew its May 26, 2022 filing, to provide the government with additional time for review, and resubmitted its HSR Act filing on or about June 29, 2022, commencing a new 30-day waiting period under the HSR Act. On July 29, 2022, the waiting period expired. This satisfies the closing condition related to the U.S. antitrust clearance of the Transaction. The Transaction remains subject to satisfaction of other closing conditions including the execution of the BARDA procurement contract and the approval of the pre-novation agreement between Chimerix and Emergent by BARDA. The Company is currently in negotiation with BARDA on the terms of a TEMBEXA procurement contract. Chimerix will continue to lead this negotiation until its conclusion.

Upon closing of the transaction, all TEMBEXA inventory will be transferred to Emergent. As of June 30, 2022, the Company had recorded inventories of $4.1 million.
     
TEMBEXA Procurement Agreements

On June 23, 2022, the Company entered into a Supply Agreement (Supply Agreement) with a third party outside of North America (Purchaser), pursuant to which the Company is responsible for supplying to the Purchaser, and the Purchaser is responsible for purchasing from the Company, TEMBEXA (brincidofovir) treatment courses for use outside of the United States.

Under the terms of the Supply Agreement, the Purchaser has agreed to pay the Company an aggregate purchase price of approximately $9.3 million, to be made in two equal installments. The first installment, payable upon execution of the Supply Agreement, was received in June 2022. At June 30, 2022, the $4.6 million payment is recorded in deferred revenue on the Consolidated Balance Sheet. Deliveries pursuant to the international contract were completed in July 2022, which completed the contract delivery obligations and resulted in $4.7 million payment of the second installment of the purchase price in July 2022.

Additionally, on June 23, 2022, the Public Health Agency of Canada (PHAC) awarded a Contract (PHAC Contract) to the Company, pursuant to which PHAC will purchase up to approximately CAD $33.0 million ($25.3 million) of TEMBEXA treatment courses for use in Canada. The term of the PHAC Contract continues until the deliveries of the TEMBEXA treatment courses under the PHAC Contract are complete. Substantially all of the procurement was delivered and accepted by PHAC in July 2022, completing the performance obligation for those shipments and resulting in approximately $23 million of revenue. References to “CAD” are to the Canadian dollar. The U.S. dollar equivalents listed above in this paragraph were calculated based on an exchange rate of CAD $1.00 to USD $0.7695 as of the close of business on June 23, 2022.

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.

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The fourth option segment ended on September 1, 2021 and the contract has expired in accordance with its terms. For the three and six months ended June 30, 2021, the Company recognized revenue under this contract of $0.3 million and $1.5 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 was being studied for the treatment of acute myeloid leukemia (AML). Under the terms of the license agreement, the Company is responsible for, and bears the future costs of, worldwide development and commercialization of DSTAT. On May 13, 2022, the Company provided Cantex with sixty (60) days advance written notification of its intent to terminate the License and Development Agreement which terminated according to its terms on July 12, 2022.

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 for the Company's TEMBEXA rights, the Company received an upfront payment of $5.0 million in October 2019. In connection with the sale of TEMBEXA worldwide rights to Emergent, Chimerix's rights and obligations under the SymBio license agreement will be assumed by Emergent at closing of the Emergent transaction. The Company could receive up to $12.5 million from Emergent in brincidofovir regulatory milestones related to the SymBio license agreement and will recognize revenue should any of the milestones be achieved.

Ohara Agreement

In 2019, Oncoceutics, Inc., a Delaware corporation (Oncoceutics) which was subsequently acquired by the Company in January 2021, 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 double-digit 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 double-digit tiered royalties based on the aggregate annual net sales of all licensed products, as defined in the agreement, in the CR Sanjiu Territory.

Note 7. DSTAT Contract Close-out

In May 2022, the Company made the decision to discontinue the development of DSTAT for the treatment of AML. On May 13, 2022, the Company provided Cantex with sixty (60) days advance written notification of its intent to terminate the License and Development Agreement which terminated according to its terms on July 12, 2022. As a result, the Company recorded an accrual of expenses to close-out the DSTAT vendor contracts. As of June 30, 2022, on the Consolidated Balance Sheets, the Company has recorded $4.3 million of contract close-out costs in accrued liabilities and $0.2 million of contract close-out costs in accounts payable, which included additional expense of $1.5 million recorded to research and development expenses on the Consolidated Statement of Operations after the decision to discontinue to the DSTAT program. These balances are expected to be fully paid over the next twelve months.

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Note 8. 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 ONC201 and ONC206 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 promissory note totaling $14.0 million was paid to the Oncoceutics' shareholders in January 2022. A $20.0 million milestone payment was paid and expensed to research and development expenses in the fourth quarter of 2021 related to the achievement of the 20% ORR, evaluated by BICR, of ONC201 in H3 K27M-mutant glioma patients.

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.

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Note 9. 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, 2022, 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, 2021 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, 2021, filed with the Securities and Exchange Commission (SEC) on March 1, 2022. 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 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 (“Chimerix,” “we,” “our,” “us” or “the Company”) is a biopharmaceutical company whose mission it is to develop medicines that meaningfully improve and extend the lives of patients facing deadly diseases. The Company is focused on developing imipridones as a potential new class of selective cancer therapies. The most advanced imipridone is ONC201 which is in clinical-stage development for H3 K27M-mutant glioma as its lead indication. In addition, imipridone ONC206 is currently in dose escalating clinical trials.

Recent Developments

TEMBEXA (brincidofovir, BCV)

The FDA granted TEMBEXA tablets and oral suspension approval for the treatment of smallpox. TEMBEXA is approved for adult and pediatric patients and is the first and only smallpox therapy approved for neonates.

On May 16, 2022, we announced entering into an agreement with Emergent BioSolutions, Inc. (Emergent) for the sale of TEMBEXA worldwide rights (the “Transaction”) for $225 million upfront and additional milestones of up to $100 million to be paid contingent upon execution of optional future procurement awards from the Biomedical Advanced Research and Development Authority (BARDA) following the base period. Subject to closing of the Transaction, the upfront closing payment and the optional future milestone payments may be adjusted based on the final executed procurement contract between the Company and BARDA. The Company is also eligible to receive up to $12.5 million in regulatory milestones associated with the SymBio Pharmaceuticals Ltd. brincidofovir partnership to be assumed by Emergent. The Company may also earn a 20% royalty on future gross profit of TEMBEXA in the United States associated with volumes above 1.7 million treatment courses of therapy during the exclusivity period of TEMBEXA. Outside of the United States, the agreement also allows Chimerix to earn a 15% royalty on all gross profit associated with TEMBEXA sales during the exclusivity period of TEMBEXA on a market-to-market basis.

Emergent and the Company both filed a Premerger Notification and Report Form under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”) on May 26, 2022 with respect to the pending acquisition of the Company's exclusive worldwide rights to brincidofovir, including TEMBEXA® and related assets. On June 27, 2022, Emergent, as the acquiring party, withdrew its May 26, 2022 filing, to provide the government with additional time for review, and resubmitted its HSR Act filing on or about June 29, 2022, commencing a new 30-day waiting period under the HSR Act. On July 29, 2022, the waiting period expired. This satisfies the closing condition related to the U.S. antitrust clearance of the Transaction. The Transaction remains subject to satisfaction of other closing conditions including the execution of the BARDA procurement contract and the approval of the pre-novation agreement between Chimerix and Emergent by BARDA.
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Subject to the satisfaction or waiver of the closing conditions, the companies expect the transaction will close during the third quarter of 2022. We are currently in negotiation with BARDA on the terms of a TEMBEXA procurement contract. We will continue to lead this negotiation until its conclusion. We remain on track to deliver the expected TEMBEXA obligations associated with a potential procurement contract in the second half of 2022.

TEMBEXA Procurement Agreements

In late June 2022, we announced entering into TEMBEXA procurement agreements for the procurement of TEMBEXA treatment courses. One agreement was for approximately $25.3 million with Public Health Agency of Canada (PHAC) and an additional international contract was for $9.3 million.

On June 23, 2022, the Company entered into a Supply Agreement (the Supply Agreement) with a third party outside of North America (the Purchaser), pursuant to which the Company is responsible for supplying to the Purchaser, and the Purchaser is responsible for purchasing from the Company, TEMBEXA (brincidofovir) treatment courses for use outside of the United States.

Under the terms of the Supply Agreement, the Purchaser has agreed to pay the Company an aggregate purchase price of approximately $9.3 million, to be made in two equal installments. The first installment, payable upon execution of the Supply Agreement, was received in June 2022. Deliveries pursuant to the international contract were completed in July 2022, which completed the contract delivery obligations and resulted in the $4.7 million payment of the second installment of the purchase price in July 2022.

Additionally, on June 23, 2022, the Public Health Agency of Canada (PHAC) awarded a Contract (the PHAC Contract) to the Company, pursuant to which PHAC will purchase up to approximately CAD $33.0 million ($25.3 million) of TEMBEXA treatment courses for use in Canada. The term of the PHAC Contract continues until the deliveries of the TEMBEXA treatment courses under the PHAC Contract are complete. Substantially all of the procurement was delivered and accepted by PHAC in July 2022, resulting in approximately $23 million of revenue. References to “CAD” are to the Canadian dollar. The U.S. dollar equivalents listed above in this paragraph were calculated based on an exchange rate of CAD $1.00 to USD $0.7695 as of the close of business on June 23, 2022.

Imipridones - ONC201, ONC206 and ONC212

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. ONC201 is an orally administered small molecule dopamine receptor D2 (DRD2) antagonist and caseinolytic protease (ClpP) agonist for the treatment of gliomas that harbor the H3 K27M mutation.

ONC201 - Phase 3 Study (ACTION)

The ACTION study is a randomized, double-blind, placebo-controlled, multicenter international study in newly diagnosed diffuse glioma patients whose tumor harbors an H3 K27M-mutation. Treatment with ONC201 will occur shortly after completion of radiation therapy. The study is designed to enroll 450 patients randomized 1:1:1 to receive ONC201 at one of two dosing frequencies or placebo. Activation of sites is expected to begin by year-end and continue into the first half of next year at up to 120 sites in North America, Europe and Asia Pacific. The first interim analysis is anticipated in early 2025 with final data in 2026.

Participants will be randomized to receive 625mg of ONC201 once per week, 625mg twice per week on two consecutive days, or placebo. The dose will be scaled by body weight for pediatric patients.

The primary endpoint of the study is overall survival (OS). The study will also evaluate progression free survival (PFS) with alpha control for both OS and PFS endpoints. OS will be assessed for efficacy at three alpha-allocated timepoints: two interim assessments by the Independent Data Monitoring Committee (IDMC) at 164 events and 246 events, respectively, and a final assessment at 327 events. The final PFS analysis will be performed after 286 events, with progression assessed using RANO HGG criteria by blinded independent central review (BICR). Secondary endpoints include corticosteroid response, performance status response, change from baseline in quality of life (QoL) assessments and change from baseline in neurologic function as assessed by the Neurologic Assessment in Neuro-Oncology (NANO) scale.

Participants in the study must have a Karnofsky or Lansky performance status, a measure of patients’ ability to perform ordinary tasks, of ≥70 at time of randomization. Key exclusion criteria are the presence of a primary spinal tumor, diffuse intrinsic pontine glioma, evidence of leptomeningeal spread of disease or cerebrospinal fluid dissemination. Stratification factors include age (<21 years, ≥21 years), and an assessment of risk factors including tumor location, tumor size, and number of tumors.
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ONC201 - Results from 50 Patient Cohort of ONC201 in H3 K27M-mutant Glioma

In November 2021, we reported data from the 50-patient cohort for ONC201 for the treatment of H3 K27M mutant glioma at the Society for Neuro-Oncology (SNO) Annual Meetings. The BICR of the 50-patient cohort determined an overall response rate (ORR) to be 20.0% (95% Confidence Interval (CI): 10.0-33.7%) as determined by Response Assessment in Neuro-Oncology Criteria for High Grade Gliomas (RANO-HGG). The median duration of response (mDOR) was 11.2 months (95% CI: 3.8 - not reached) and the median time to response (mTTR) was 8.3 months. The proportion of patients achieving either a RANO-HGG and/or RANO-LGG response was 30% (95% CI: 17.9 – 44.6%). One serious adverse event considered possibly ONC201-related by investigator was reported; however, the event was considered unlikely ONC201-related by sponsor assessment.

ONC206 and ONC212

ONC206 is a second generation imipridone, where pre-clinical models indicate potentially improved, anti-cancer activity relative to ONC201. ONC206 is currently being evaluated in Phase I dose escalation trials in partnership with the National Institutes of Health (NIH) and with the Pacific Pediatric Neuro-Oncology Consortium (PNOC). ONC206 is being considered for development in solid tumors, including potentially adrenal tumors, endometrial cancer and central nervous system (CNS) tumors.

ONC212, which targets GPR132 and ClpP, is in ongoing IND-enabling toxicology studies which are expected to be completed in Q4 2022 with a decision to enter clinical studies expected in the first half of 2023. ONC212 is being explored pre-clinically in hematological malignancies, including AML, in partnership with MD Anderson Cancer Center and in solid tumors, including pancreatic cancer, in partnership with Brown University. A $3.4 million grant awarded to Brown University supports completion of IND-enabling studies and a potential first-in-human clinical trial.

CMX521

Chimerix continues development of CMX521 as a potential prophylactic and treatment of SARS-CoV-2 (COVID-19) infection in collaboration with the Rapidly Emerging Antiviral Drug Development Initiative (READDI) at the University of North Carolina at Chapel Hill (UNC). READDI itself is a global public-private partnership founded at UNC by the UNC Eshelman School of Pharmacy, UNC School of Medicine, Gilling School of Global Public Health, Eshelman Institute for Innovation and the Structural Genomics Consortium. The pre-clinical collaboration is currently focused on determining the potential for CMX521 to be delivered orally (vs inhaled) to the pulmonary system.

Business Development Review

In addition to our prior business development transactions 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 generated modest, non-recurring revenue from product sales. Prior to 2022, 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.

TEMBEXA Procurement Agreements

On June 23, 2022, the Company entered into a Supply Agreement (Supply Agreement) with a third party outside of North America (Purchaser), pursuant to which the Company is responsible for supplying to the Purchaser, and the Purchaser is responsible for purchasing from the Company, TEMBEXA (brincidofovir) treatment courses for use outside of the United States. TEMBEXA is a medical countermeasure for smallpox approved by the U.S. Food and Drug Administration in June 2021.

Under the terms of the Supply Agreement, the Purchaser has agreed to pay the Company an aggregate purchase price of approximately $9.3 million, to be made in two equal installments. The first installment, payable upon execution of the Supply
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Agreement, was received in June 2022. At June 30, 2022, the $4.6 million payment is recorded in deferred revenue on the Consolidated Balance Sheet. Deliveries pursuant to the international contract were completed in July 2022, which completed the contract delivery obligations and resulted in the $4.7 million payment of the second installment of the purchase price in July 2022.

Additionally, on June 23, 2022, the Public Health Agency of Canada (PHAC) awarded a Contract (PHAC Contract) to the Company, pursuant to which PHAC will purchase up to approximately CAD $33.0 million ($25.3 million) of TEMBEXA treatment courses for use in Canada. The term of the PHAC Contract continues until the deliveries of the TEMBEXA treatment courses under the PHAC Contract are complete. Substantially all of the procurement was delivered and accepted by PHAC in July 2022, completing the performance obligation for those shipments and resulting in approximately $23 million of revenue. References to “CAD” are to the Canadian dollar. The U.S. dollar equivalents listed above in this paragraph were calculated based on an exchange rate of CAD $1.00 to USD $0.7695 as of the close of business on June 23, 2022.

BARDA

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 was a cost-plus fixed fee development contract. Under the contract we received $72.5 million in expense reimbursement and $4.6 million in fees, which ended on September 1, 2021 and the contract expired in accordance with its terms. Under the BARDA contract, we recognized revenue of $0.3 million and $1.5 million during the three and six months ended June 30, 2021.

SymBio

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. In exchange for the license to SymBio for our TEM