Filed Pursuant to Rule 424(b)(4)
Registration No. 333-187145

PROSPECTUS

    7,320,000 Shares

COMMON STOCK

 

Chimerix, Inc. is offering 7,320,000 shares of its common stock. This is our initial public offering and no public market currently exists for our shares. The initial public offering price of our common stock is $14.00 per share.

 

Our common stock has been approved for listing on the Nasdaq Global Market under the symbol CMRX.

We are an emerging growth company as that term is used in the Jumpstart Our Business Startups Act of 2012 and, as such, have elected to comply with certain reduced public company reporting requirements for this prospectus and future filings.

 

Investing in our common stock involves risks. See “Risk Factors” beginning on page 10.

 

PRICE $14.00 A SHARE

 

		Price to Public				Underwriting Discounts and Commissions(1)				Proceeds to Company
Per Share			$14.00				$0.98				$13.02
Total			$102,480,000				$7,173,600				$95,306,400

Chimerix, Inc. has granted the underwriters the right to purchase up to an additional 1,098,000 shares of common stock to cover over-allotments.

Aisling Capital III, L.P. has agreed to purchase an aggregate of $15.0 million in shares of our common stock in this offering at the initial public offering price.

The Securities and Exchange Commission and state securities regulators have not approved or disapproved these securities, or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The underwriters expect to deliver the shares of common stock to purchasers on April 16, 2013.

 

MORGAN STANLEY		COWEN AND COMPANY

 

WILLIAM BLAIR		LAZARD CAPITAL MARKETS

April 10, 2013

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		Page
Prospectus Summary			1
Risk Factors			10
Special Note Regarding Forward-Looking Statements			39
Market, Industry and Other Data			40
Use of Proceeds			41
Dividend Policy			42
Capitalization			43
Dilution			45
Selected Financial Data			47
Management’s Discussion and Analysis of Financial Condition and Results of Operations			49
Business			70
Management			112

		Page
Executive and Director Compensation			120
Certain Relationships and Related Party Transactions			138
Principal Stockholders			142
Description of Capital Stock			145
Shares Eligible for Future Sale			151
Material U.S. Federal Income Tax Consequences to Non-U.S. Holders of our Common Stock			153
Underwriters			156
Legal Matters			161
Experts			161
Where You Can Find Additional Information			161
Index to Financial Statements			F-1

  

 

Neither we nor any of the underwriters has authorized anyone to provide you with information different from, or in addition to, that contained in this prospectus or any free writing prospectus prepared by or on behalf of us or to which we may have referred you in connection with this offering. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. Neither we nor any of the underwriters is making an offer to sell or seeking offers to buy these securities in any jurisdiction where or to any person to whom the offer or sale is not permitted. The information in this prospectus is accurate only as of the date on the front cover of this prospectus and the information in any free writing prospectus that we may provide you in connection with this offering is accurate only as of the date of that free writing prospectus. Our business, financial condition, results of operations and future growth prospects may have changed since those dates.

Through and including May 5, 2013 (25 days after the commencement of this offering), all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This delivery is in addition to a dealer’s obligation to deliver a prospectus when acting as an underwriter and with respect to their unsold allotments or subscriptions.

This prospectus includes statistical and other industry and market data that we obtained from industry publications and research, surveys and studies conducted by third parties. Industry publications and third-party research, surveys and studies generally indicate that their information has been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. While we believe these industry publications and third-party research, surveys and studies are reliable, we have not independently verified such data.

For investors outside the United States: neither we nor any of the underwriters has done anything that would permit this offering or possession or distribution of this prospectus or any free writing prospectus we may provide to you in connection with this offering in any jurisdiction where action for that purpose is required, other than in the United States. You are required to inform yourselves about and to observe any restrictions relating to this offering and the distribution of this prospectus and any such free writing prospectus outside of the United States.

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PROSPECTUS SUMMARY

This summary highlights information contained in other parts of this prospectus. Because it is only a summary, it does not contain all of the information that you should consider before investing in shares of our common stock and it is qualified in its entirety by, and should be read in conjunction with, the more detailed information appearing elsewhere in this prospectus. You should read the entire prospectus carefully, especially “Risk Factors” and our financial statements and the related notes, before deciding to buy shares of our common stock. Unless the context requires otherwise, references in this prospectus to “Chimerix”, the “Company”, “we”, “us” and “our” refer to Chimerix, Inc.

Overview

Chimerix is a biopharmaceutical company committed to the discovery, development and commercialization of novel, oral antiviral therapeutics that are designed to transform patient care in areas of high unmet medical need. Our proprietary lipid technology has given rise to two clinical-stage compounds, CMX001 and CMX157, which have demonstrated the potential for enhanced antiviral activity and safety in convenient, orally administered dosing regimens. We have worldwide rights to our lead product candidate, CMX001, and anticipate beginning the Phase 3 SUPPRESS study in 2013 for the prevention of cytomegalovirus (CMV) infection in hematopoietic stem cell transplant (HSCT) recipients. We intend to develop CMX001 as the first broad-spectrum antiviral against double-stranded DNA (dsDNA) viruses. Our second clinical-stage compound, CMX157, is a Phase 1 product candidate for the treatment of HIV and was licensed to Merck, Sharp & Dohme Corp. (Merck) in 2012.

CMX001 is an orally administered drug that utilizes our proprietary lipid technology to deliver high intracellular concentrations of a potent antiviral compound, cidofovir-diphosphate (CDV-PP). Following oral dosing, CMX001 is absorbed through the gut, remains intact in the plasma, and is readily taken up by and delivered into cells. Once inside cells, CMX001 is converted into CDV-PP, which acts as an alternative substrate that interferes with the enzymes necessary for viral replication. When CDV-PP is selected by critical enzymes as a substrate over the normal cellular substrate (i.e. nucleotides), the result is diminished enzymatic activity and therefore diminished viral replication.

CMX001 is similar to the drug cidofovir in that both drugs are converted into CDV-PP once inside cells. Although cidofovir is approved for administration in an intravenous formulation, Vistide, it requires a high plasma concentration to deliver a therapeutic level of cidofovir into cells and its use is limited due to the risk of kidney damage. In contrast, oral administration of CMX001 results in significantly lower plasma concentrations, higher levels of drug inside cells, and a lower risk of kidney toxicity.

Double-stranded DNA viral infections such as CMV are commonly transmitted in childhood and early adulthood, and generally remain latent in individuals with a functioning immune system. However, in immunocompromised patients, such as HSCT or solid organ transplant (SOT) recipients, CMV and other dsDNA viral infections are associated with significant morbidity, mortality, graft rejection and co-infection with other opportunistic infections. CMV, a human herpesvirus, is the most common infectious pathogen in HSCT, and can result in life-threatening pneumonia or other organ involvement, particularly in the first 100 days following transplant when the immune system is most vulnerable. In vitro, CMX001 has shown broad-spectrum antiviral activity against all families of dsDNA viruses that cause human disease, including herpesviruses, adenoviruses (AdV), polyomaviruses such as BK virus (BKV), papillomaviruses and orthopoxviruses.

In the HSCT setting, there are three paradigms for addressing viral infections: prevention, preemptive therapy and treatment of disease. Prevention is the administration of an antiviral to at-risk patients to avoid reactivation of a latent virus. Preemptive therapy is the initiation of antiviral(s) only after detection of a specific virus in the blood (viremia) in an asymptomatic patient. Treatment is the watch-and-wait approach of initiating antiviral therapy after the virus is detected in an organ system where clinical signs or symptoms are present.

No drugs are approved for prevention of CMV in HSCT recipients, primarily due to significant renal and hematological side effects. We believe that a safe and well-tolerated antiviral with demonstrated efficacy in prevention settings would provide a new standard of care for immunocompromised patients. In HSCT, a safe

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and effective therapy for CMV prevention could potentially replace the current practice of frequent monitoring for CMV viremia and initiation of anti-CMV preemptive therapy following detection. In addition, we believe that an antiviral that could reduce the frequency of other dsDNA viruses and avoid increasing the risk of other opportunistic infections could provide measureable clinical and pharmacoeconomic benefits for patients and the health care system.

Chimerix demonstrated the potential of CMX001 in a 230-patient Phase 2 dose-escalation study for the prevention of CMV reactivation in HSCT recipients. In this study, CMX001 or placebo was administered to HSCT recipients from stem cell engraftment through Week 13 post-transplant. A reduction of more than 50% in risk of CMV infection was observed for the subjects who received CMX001 in 100 mg doses twice weekly (BIW). Ten percent of subjects (five of 50 subjects) in the CMX001 100 mg BIW cohort met the primary endpoint, CMV disease or a positive quantitative blood test for CMV at the end of the dosing period, versus 37% of subjects (22 of 59 subjects) in the placebo cohort (p=0.002, where the p-value is the statistical probability of a result not due to chance alone). CMX001’s dose-limiting toxicity was diarrhea, which was addressed with a Safety Monitoring and Management Plan (SMMP) incorporated in the final Phase 2 cohort and in subsequent studies, and which will be implemented in SUPPRESS. There was no evidence of kidney, hematologic or bone marrow toxicity in this study.

The results of this Phase 2 study, together with CMX001’s overall preclinical and clinical profile, which includes a safety database of more than 800 subjects exposed to CMX001 in controlled and uncontrolled clinical studies, support the progression to a Phase 3 study of CMX001 for the prevention of CMV infection in high-risk HSCT recipients. Discussions with the FDA have resulted in an agreed population, endpoint and study design for which we have received a “Study May Proceed” letter. We remain in active discussions with the FDA regarding final protocol specifics and anticipate initiation of dosing in 2013. The primary endpoint is a composite endpoint of either (i) CMV disease, or (ii) initiation of anti-CMV preemptive therapy triggered by a positive test for CMV in the blood (viremia), and will be assessed through Week 24 post-transplant. We intend to enroll 540 at-risk (i.e., with latent CMV infection) HSCT recipients who will be randomized to receive one of two twice-weekly doses of CMX001 or placebo. Secondary endpoints include pharmacoeconomic data and the incidence of disease and reactivation of other herpesviruses, AdV, and BKV.

We intend to submit a new drug application (NDA) under an accelerated approval pathway seeking regulatory approval to market CMX001 in the United States and equivalent applications outside the United States. We have received Fast Track designation from the FDA for the CMV, AdV and smallpox indications for CMX001.

We believe that there is a significant commercial opportunity for an antiviral such as CMX001 with broad-spectrum activity against dsDNA viruses. According to the Center for International Blood and Marrow Transplant Research and the Organ Procurement and Transplantation Network, more than 20,000 HSCTs and 28,000 SOTs are performed annually in the United States, with similar numbers of transplants performed annually in Europe according to the European Group for Blood and Marrow Transplantation and the World Health Organization. More than 65% of stem cell transplant patients are at increased risk of CMV infection due to prior exposure to CMV (i.e., seropositive). Outside the transplant population, many factors are influencing the epidemiology of dsDNA viral infections, including the use of potent immunosuppressive therapies in autoimmune and other diseases. Since 2009, Chimerix has made CMX001 available under expanded access regulations to over 80 transplant centers worldwide for the treatment of over 430 patients with life-threatening dsDNA viral infections and no satisfactory alternative treatment options, reflecting the unmet medical need in this therapeutic area. Our CMX001 Compassionate Use Program consists of the emergency investigational new drug (EIND) program which has provided treatment to 230 individuals and Study 350, the expanded access study which enrolled 215 patients meeting similar inclusion criteria as the EINDs.

If CMX001 obtains regulatory approval, we intend to build our own sales force and to commercialize CMX001. In the United States, approximately 200 institutions perform transplants, of which approximately 75% perform HSCT and 75% perform SOT. As a result, we believe we can commercialize CMX001 for prevention of CMV in HSCT recipients in the United States and Canada with a relatively small marketing and specialty sales force infrastructure of approximately 50 employees.

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We are also evaluating the potential for CMX001 as a preemptive therapy for AdV infections. In December 2012, we completed enrollment of a Phase 2 placebo-controlled study of preemptive therapy for AdV viremia in 48 pediatric and adult HSCT recipients. Data on the mortality and disease endpoints for this Phase 2 study are expected during the second half of 2013. Future clinical development for CMX001 may include a Phase 3 CMV prevention study in pediatric HSCT recipients, as well as the possible development of CMX001 for BKV infection in HSCT and SOT recipients.

CMX157, our second clinical stage compound, is an oral nucleotide compound in Phase 1 development for the treatment of HIV infection. In July 2012, we granted Merck an exclusive worldwide license to develop and commercialize CMX157 for all human uses. Merck is responsible for all development and marketing activities for CMX157 on a worldwide basis.

Our Strategy

Our strategy is to discover, develop, and commercialize novel oral antiviral therapeutics in areas of significant unmet medical need. Key elements of our strategy include:

We may enter into additional collaborations to implement our strategy.

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Our Product Candidates

The following chart depicts our product candidates, their indications, and their current stage of development:

Risks Associated with Our Business

Our business is subject to numerous risks, as more fully described in the section entitled “Risk Factors” immediately following this prospectus summary. You should read these risks before you invest in our common stock. We may be unable, for many reasons, including those that are beyond our control, to implement our business strategy. In particular, risks associated with our business include:

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Corporate Information

We were incorporated in Delaware in April 2000. Our principal executive offices are located at 2505 Meridian Parkway, Suite 340, Durham, North Carolina 27713, and our telephone number is (919) 806-1074. Our corporate website address is www.chimerix.com. Information contained on or accessible through our website is not a part of this prospectus, and the inclusion of our website address in this prospectus is an inactive textual reference only.

We have obtained a registered trademark for Chimerix® in the United States. This prospectus contains references to our trademarks and to trademarks belonging to other entities. Solely for convenience, trademarks and trade names referred to in this prospectus, including logos, artwork and other visual displays, may appear without the ® or ^TM symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensor to these trademarks and trade names. We do not intend our use or display of other companies’ trade names or trademarks to imply a relationship with, or endorsement or sponsorship of us by, any other companies.

We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012. We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of this offering, (b) in which we have total annual gross revenue of at least $1.0 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our common stock that is held by non-affiliates exceeds $700.0 million as of the prior June 30th, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period. We refer to the Jumpstart Our Business Startups Act of 2012 in this prospectus as the “JOBS Act,” and references in this prospectus to “emerging growth company” shall have the meaning associated with it in the JOBS Act.

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THE OFFERING

Aisling Capital III, L.P. has agreed to purchase an aggregate of $15.0 million in shares of our common stock in this offering at the initial public offering price.

The number of shares of our common stock to be outstanding after this offering is based on 16,014,083 shares of common stock outstanding as of December 31, 2012, and the issuance of 1,076,002 shares of common stock underlying shares of our Series F preferred stock issuable immediately prior to the closing of this offering in respect of the accumulated dividends on our Series F preferred stock through the date immediately preceding the date of this prospectus, and excludes:

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Unless otherwise indicated, all information contained in this prospectus assumes:

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SUMMARY FINANCIAL DATA

The following summary financial data should be read together with our financial statements and related notes, “Selected Financial Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” appearing elsewhere in this prospectus. Our historical results are not necessarily indicative of the results that may be expected in the future and results of interim periods are not necessarily indicative of the results for the entire year.

We derived the following summary statement of operations data for the years ended December 31, 2010, 2011 and 2012 from our audited financial statements and related notes appearing elsewhere in this prospectus.

		Year Ended December 31,
Statement of Operations Data:		2010				2011				2012
		(in thousands, except share and per share data)
Revenues:
Collaboration and licensing revenues		$	—			$	55			$	17,445
Contract and grant revenues			1,715				12,046				16,275
Total revenues			1,715				12,101				33,720
Operating expenses:
Research and development			19,413				27,695				27,821
General and administrative			7,606				9,398				8,682
Total operating expenses			27,019				37,093				36,503
Loss from operations			(25,304	)			(24,992	)			(2,783	)
Interest income (expense), net			(154	)			(212	)			(776	)
Fair value adjustment to warrant liability			—				(385	)			(847	)
Other income			1				—				—
Net loss			(25,457	)			(25,589	)			(4,406	)
Accretion of redeemable convertible preferred stock			—				(9,565	)			(4,357	)
Net loss attributable to common stockholders		$	(25,457	)		$	(35,154	)		$	(8,763	)
Basic and diluted net loss per common share(1)		$	(17.52	)		$	(23.49	)		$	(5.75	)
Shares used to calculate net loss per common share(1)			1,453				1,496				1,525
Pro forma net loss per common share, basic and diluted (unaudited)(2)										$	(0.47	)
Shares used to calculate pro forma net loss per common share, basic and diluted (unaudited)(2)											9,369

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		As of December 31, 2012
		Actual				Pro Forma(3)				Pro Forma as Adjusted(4)
						(unaudited)
						(in thousands)
Balance Sheet Data:
Cash and cash equivalents		$	19,906			$	19,906			$	113,058
Short-term investments, available-for-sale			9,849				9,849				9,849
Working capital			23,931				23,931				117,083
Total assets			32,031				32,031				125,183
Loan payable(5)			14,620				14,620				14,620
Redeemable convertible preferred stock warrant liability			7,512				—				—
Redeemable convertible preferred stock			107,723				—				—
Total stockholders’ equity (deficit)			(101,031	)			14,204				107,356

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RISK FACTORS

An investment in shares of our common stock involves a high degree of risk. You should carefully consider the following information about these risks, together with the other information appearing elsewhere in this prospectus, before deciding to invest in our common stock. The occurrence of any of the following risks could have a material adverse effect on our business, financial condition, results of operations and future growth prospects. In these circumstances, the market price of our common stock could decline, and you may lose all or part of your investment.

Risks Related to Our Financial Condition and Need for Additional Capital

We have incurred significant losses since our inception. We anticipate that we will continue to incur significant losses for the foreseeable future, and we may never achieve or maintain profitability.

We are a biopharmaceutical company focused primarily on developing our lead product candidate, CMX001. We have incurred significant net losses in each year since our inception, including net losses of approximately $25.5 million, $25.6 million and $4.4 million for the fiscal years ended 2010, 2011 and 2012, respectively. As of December 31, 2012, we had an accumulated deficit of $101.0 million.

To date, we have financed our operations primarily through the sale of equity securities and, to a lesser extent, through government funding, licensing fees and debt. We have devoted most of our financial resources to research and development, including our preclinical development activities and clinical trials. We have not completed development of any product candidates. We expect to continue to incur significant and increasing losses and negative cash flows for the foreseeable future. The size of our losses will depend, in part, on the rate of future expenditures and our ability to generate revenues. In particular, we expect to incur substantial and increased expenses as we:

To become and remain profitable, we must succeed in developing and eventually commercializing products with significant market potential. This will require us to be successful in a range of challenging activities, including discovering product candidates, completing preclinical testing and clinical trials of our product candidates, obtaining regulatory approval for these product candidates, and manufacturing, marketing and selling those products for which we may obtain regulatory approval. We are only in the preliminary stages of some of these activities.

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To date, we have not completed Phase 3 clinical trials or obtained regulatory approval for any of our product candidates, and none of our product candidates have been commercialized. We may never succeed in developing or commercializing any of our product candidates. If our product candidates are not successfully developed or commercialized, or if revenues from any products that do receive regulatory approvals are insufficient, we will not achieve profitability and our business may fail. Even if we successfully obtain regulatory approval to market our product candidates in the United States, our revenues are also dependent upon the size of markets outside of the United States, as well as our ability to obtain market approval and achieve commercial success outside of the United States.

Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to become and remain profitable would depress the value of our company and could impair our ability to raise capital, expand our business, diversify our product offerings or continue our operations. A decline in the value of our company could cause you to lose all or part of your investment.

Our ability to generate future revenues from product sales is uncertain and depends upon our ability to successfully develop, obtain regulatory approval for, and commercialize our product candidates.

Our ability to generate revenue and achieve profitability depends on our ability, alone or with collaborators, to successfully complete the development, obtain the necessary regulatory approvals and commercialize our product candidates. We do not anticipate generating revenues from sales of our product candidates for the foreseeable future, if ever. Our ability to generate future revenues from product sales depends heavily on our success in:

Conducting preclinical testing and clinical trials is a time-consuming, expensive and uncertain process that takes years to complete, and we may never generate the necessary data required to obtain regulatory approval and achieve product sales. Our anticipated development costs would likely increase if we do not obtain favorable results or if development of our product candidates is delayed. In particular, we would likely incur higher costs than we currently anticipate if development of our product candidates is delayed because we are required by the United States Food and Drug Administration (FDA) to perform studies or trials in addition to those that we currently anticipate. Because of the numerous risks and uncertainties associated with pharmaceutical product development, we are unable to predict the timing or amount of any increase in our anticipated development costs.

In addition, our product candidates, if approved, may not achieve commercial success. Our commercial revenues, if any, will be derived from sales of products that we do not expect to be commercially available for several years, if at all. Even if one or more of our product candidates is approved for commercial sale, we anticipate incurring significant costs in connection with commercialization. As a result, we cannot assure you that we will be able to generate revenues from sales of any approved product candidates, or that we will achieve or maintain profitability even if we do generate sales.

If we fail to obtain additional financing, we could be forced to delay, reduce or eliminate our product development programs, seek corporate partners for the development of our product development programs or relinquish or license on unfavorable terms, our rights to technologies or product candidates.

Developing pharmaceutical products, including conducting preclinical studies and clinical trials, is a time-consuming, expensive and uncertain process that takes years to complete. We expect our research and

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development expenses to substantially increase in connection with our ongoing activities, particularly as we advance our clinical programs for CMX001.

We estimate that the net proceeds from this offering will be approximately $93.2 million, after deducting underwriting discounts and commissions and estimated offering expenses payable by us. Based upon our current operating plan, we believe that the net proceeds from this offering, together with our existing cash, cash equivalents and short-term investments, will enable us to fund our operating expenses and capital requirements at least through mid-2015. However, changing circumstances beyond our control may cause us to consume capital more rapidly than we currently anticipate. For example, our clinical trials may encounter technical, enrollment or other difficulties that could increase our development costs more than we expected, or because the FDA requires us to perform studies or trials in addition to those that we currently anticipate. We may need to raise additional funds if we choose to initiate clinical trials for our product candidates other than CMX001. In any event, we will require additional capital to obtain regulatory approval for, and to commercialize, our product candidates.

Securing additional financing may divert our management from our day-to-day activities, which may adversely affect our ability to develop and commercialize our product candidates, including CMX001. In addition, we cannot guarantee that future financing will be available in sufficient amounts or on terms acceptable to us, if at all. If we are unable to raise additional capital when required or on acceptable terms, we may be required to:

If we are unable to raise additional capital in sufficient amounts or on terms acceptable to us, we will be prevented from pursuing development and commercialization efforts, which will have a material adverse effect on our business, operating results and prospects and on our ability to develop our product candidates.

Raising additional capital may cause dilution to our existing stockholders, restrict our operations or require us to relinquish rights to our technologies or product candidates.

Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaborations, strategic alliances, licensing arrangements and other marketing and distribution arrangements. We do not have any committed external source of funds. Under our collaboration and license agreement with Merck, we are entitled to receive milestone and royalty payments if specified events occur, but that agreement is terminable by Merck at any time upon 90 days written notice or, in certain circumstances, immediately upon written notice.

In order to raise additional funds to support our operations, we may sell additional equity or debt securities, enter into collaborations, strategic alliances, or licensing arrangements or other marketing or distribution arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a stockholder. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures, and declaring dividends, and will impose limitations on our ability to acquire, sell or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business.

If we raise additional funds through collaborations, strategic alliances, or licensing arrangements or other marketing or distribution arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates, or grant licenses on terms that may not be favorable to us. If we are unable to expand our operations or otherwise capitalize on our business

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opportunities, our business, financial condition and results of operations could be materially adversely affected and we may not be able to meet our debt service obligations. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or commercialization efforts, or grant others rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

We may be required to repay the outstanding indebtedness under our loan agreement if a material adverse change occurs with respect to us, which could have a materially adverse effect on our business.

As of December 31, 2012, we had $15.0 million of indebtedness outstanding under our loan and security agreement with Silicon Valley Bank (SVB) and MidCap Financial SBIC, L.P. (MidCap). Under the loan agreement, an event of default will occur if, among other things, a material adverse change in our business, operations or condition occurs, or a material impairment of the prospect of our repayment of any portion of the amounts we owe under the loan agreement occurs. An event of default would allow the lenders to, among other things, accelerate the loan and take certain action with respect to the collateral securing our obligations under the loan agreement. We may not have enough available cash or be able to raise additional funds through equity or debt financings to repay such indebtedness at the time any such event of default occurs. In this case, we may be required to delay, limit, reduce or terminate our product development or commercialization efforts or grant to others, rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves. Our business, financial condition and results of operations could be materially adversely affected as a result.

Risks Related to Clinical Development and Regulatory Approval

We depend on the success of our lead product candidate, CMX001, which is still under clinical development, and may not obtain regulatory approval or be successfully commercialized.

We have not marketed, distributed or sold any products. The success of our business depends upon our ability to develop and commercialize our lead product candidate, CMX001, which has completed a Phase 2 clinical trial for the prevention of CMV infection in HSCT patients. We plan to initiate a Phase 3 clinical trial for CMX001 for the prevention of CMV infection in adult HSCT patients. We intend to use this trial as a basis to submit a new drug application (NDA) to the FDA under the accelerated approval pathway seeking regulatory approval to market CMX001 in the United States and equivalent applications outside the United States. We also intend to conduct a separate Phase 3 clinical trial for the prevention of CMV infection in pediatric HSCT recipients. There is no guarantee that our Phase 3 clinical trials will be completed or, if completed, will be successful. The success of CMX001 will depend on several factors, including the following:

If we do not achieve one or more of these factors in a timely manner or at all, we could experience significant delays or an inability to successfully commercialize CMX001, which would materially harm our business.

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We have never obtained regulatory approval for a drug and we may be unable to obtain, or may be delayed in obtaining, regulatory approval for CMX001.

We have never obtained regulatory approval for a drug. It is possible that the FDA may refuse to accept our NDA for substantive review or may conclude after review of our data that our application is insufficient to obtain regulatory approval of CMX001. If the FDA does not accept or approve our NDA, it may require that we conduct additional clinical, nonclinical or manufacturing validation studies and submit that data before it will reconsider our application. Depending on the extent of these or any other FDA required studies, approval of any NDA or application that we submit may be delayed by several years, or may require us to expend more resources than we have available. It is also possible that additional studies, if performed and completed, may not be considered sufficient by the FDA to approve our NDA.

Any delay in obtaining, or an inability to obtain, regulatory approvals would prevent us from commercializing CMX001, generating revenues and achieving and sustaining profitability. If any of these outcomes occur, we may be forced to abandon our development efforts for CMX001, which would have a material adverse effect on our business and could potentially cause us to cease operations.

We depend on the successful completion of clinical trials for our product candidates, including CMX001. The positive clinical results obtained for our product candidates in prior clinical studies may not be repeated in future clinical studies.

Before obtaining regulatory approval for the sale of our product candidates, including CMX001, we must conduct extensive clinical trials to demonstrate the safety and efficacy of our product candidates in humans. Clinical testing is expensive, difficult to design and implement, can take many years to complete and is uncertain as to outcome. A failure of one or more of our clinical trials can occur at any stage of testing. The outcome of preclinical testing and early clinical trials may not be predictive of the success of later clinical trials, and interim results of a clinical trial do not necessarily predict final results. Moreover, preclinical and clinical data are often susceptible to varying interpretations and analyses, and many companies that have believed their product candidates performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain marketing approval for their products.

We have completed a Phase 2 clinical study of CMX001 for the prevention of CMV infection in HSCT patients and have an ongoing Phase 2 study of CMX001 as preemptive therapy for AdV infection in HSCT patients. In addition, we have completed an initial Phase 1 study with CMX157. However, we have never conducted a pivotal Phase 3 clinical trial. The positive results we have seen to date in our Phase 2 clinical trial of CMX001 for the prevention of CMV in HSCT patients do not ensure that later clinical trials, such as our planned Phase 3 clinical trials, will demonstrate similar results. Product candidates in later stages of clinical trials may fail to show the desired safety and efficacy characteristics despite having progressed satisfactorily through preclinical studies and initial clinical testing. A number of companies in the pharmaceutical and biotechnology industries, including those with greater resources and experience than us, have suffered significant setbacks in Phase 3 clinical development, even after seeing promising results in earlier clinical trials.

We may experience a number of unforeseen events during, or as a result of, clinical trials for our product candidates, including CMX001, that could adversely affect the completion of our clinical trials, including:

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Negative or inconclusive results of our Phase 3 clinical trial of CMX001, which we refer to as SUPPRESS, or any other clinical trial we conduct, could cause the FDA to require that we repeat or conduct additional clinical studies. Despite the results reported in earlier clinical trials for CMX001, we do not know whether SUPPRESS or any other clinical trials we may conduct will demonstrate adequate efficacy and safety to result in regulatory approval to market our product candidates, including CMX001. If later stage clinical trials do not produce favorable results, our ability to obtain regulatory approval for our product candidates, including CMX001, may be adversely impacted.

We are developing CMX001 to treat patients who are extremely ill, and patient deaths that occur in our clinical trials could negatively impact our business even if they are not shown to be related to CMX001.

We are developing our lead product candidate, CMX001, for the prevention of CMV infection in HSCT patients and we plan on initiating SUPPRESS, which will focus on the prevention of CMV in high-risk HSCT patients. These patients receive HSCT as a potential cure or remission for many cancers and genetic disorders.

To prepare for their transplant, such patients receive a pre-transplant conditioning regimen, which involves high-dose chemotherapy and may also include radiation therapy. The conditioning regimen suppresses the patient’s immune system and/or own bone marrow in order to prevent it from attacking the newly transplanted cells. Generally, patients remain at high risk during the first 100 days following their transplant and can readily acquire infections during that period, which can be serious and even life threatening due to their weakened immune systems. As a result, it is likely that we will observe severe adverse outcomes during our Phase 3 trial for CMX001, including patient death. If a significant number of study subject deaths were to occur, regardless of whether such deaths are attributable to CMX001, our ability to obtain regulatory approval for CMX001 may be adversely impacted and our business could be materially harmed.

Delays in clinical trials are common and have many causes, and any delay could result in increased costs to us and jeopardize or delay our ability to obtain regulatory approval and commence product sales.

Clinical testing is expensive, difficult to design and implement, can take many years to complete, and is uncertain as to outcome. We may experience delays in clinical trials at any stage of development and testing of our product candidates. We plan to initiate SUPPRESS in 2013. Our planned clinical trials may not begin on time, have an effective design, enroll a sufficient number of subjects, or be completed on schedule, if at all.

Events which may result in a delay or unsuccessful completion of clinical trials, including our Phase 3 clinical trial for CMX001, include:

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For example, due to the specialized indication and patient population being studied in our Phase 3 clinical trial of CMX001, the number of study sites available to us is relatively limited, and therefore enrollment of suitable patients to participate in the trial may take longer than is typical for studies involving other indications. This may result in a delay or unsuccessful completion of our Phase 3 clinical trial of CMX001.

If initiation or completion of any of our clinical trials for our product candidates, including our Phase 3 clinical trial of CMX001, are delayed for any of the above reasons, our development costs may increase, our approval process could be delayed, any periods during which we may have the exclusive right to commercialize our product candidates may be reduced and our competitors may have more time to bring products to market before we do. Any of these events could impair our ability to generate revenues from product sales and impair our ability to generate regulatory and commercialization milestones and royalties, all of which could have a material adverse effect on our business.

Our product candidates may cause adverse effects or have other properties that could delay or prevent their regulatory approval or limit the scope of any approved label or market acceptance.

Adverse events (AEs) caused by our product candidates could cause us, other reviewing entities, clinical study sites or regulatory authorities to interrupt, delay or halt clinical studies and could result in the denial of regulatory approval. For example, subjects enrolled in our Phase 2 clinical trials for CMX001 have reported gastrointestinal and liver-related AEs and safety laboratory value changes. Furthermore, CMX001 is related to the approved drug cidofovir (CDV), a compound which has been shown to result in significant renal toxicity and impairment following use. There is also a risk that our other product candidates may induce AEs, many of which may be unknown at this time. If an unacceptable frequency and/or severity of AEs are reported in our clinical trials for our product candidates, our ability to obtain regulatory approval for product candidates, including CMX001, may be negatively impacted.

Furthermore, if any of our approved products cause serious or unexpected side effects after receiving market approval, a number of potentially significant negative consequences could result, including:

Any of these events could prevent us from achieving or maintaining market acceptance of the affected product candidate and could substantially increase the costs of commercializing our product candidates.

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After the completion of our clinical trials, we cannot predict whether or when we will obtain regulatory approval to commercialize CMX001 and we cannot, therefore, predict the timing of any future revenue from CMX001.

We cannot commercialize our product candidates, including CMX001, until the appropriate regulatory authorities, such as the FDA, have reviewed and approved the product candidate. The regulatory agencies may not complete their review processes in a timely manner, or we may not be able to obtain regulatory approval for CMX001. Additional delays may result if CMX001 is brought before an FDA advisory committee, which could recommend restrictions on approval or recommend non-approval of the product candidate. In addition, we may experience delays or rejections based upon additional government regulation from future legislation or administrative action, or changes in regulatory agency policy during the period of product development, clinical studies and the review process. As a result, we cannot predict when, if at all, we will receive any future revenue from commercialization of any of our product candidates, including CMX001.

Even if we obtain regulatory approval for CMX001 and our other product candidates, we will still face extensive regulatory requirements and our products may face future development and regulatory difficulties.

Even if we obtain regulatory approval in the United States, the FDA may still impose significant restrictions on the indicated uses or marketing of our product candidates, including CMX001, or impose ongoing requirements for potentially costly post-approval studies or post-market surveillance. For example, the labeling ultimately approved for our product candidates, including CMX001, will likely include restrictions on use due to the specific patient population and manner of use in which the drug was evaluated and the safety and efficacy data obtained in those evaluations. In addition, the label for CMX001 may be required to include a boxed warning, or “black box,” regarding CMX001 being carcinogenic, teratogenic and impairing fertility in animal studies, as well as a contraindication in patients who have had a demonstrated clinically significant hypersensitivity reaction to CMX001 or CDV or any component of the formulation. The CMX001 labeling may also include warnings or black boxes pertaining to gastrointestinal or liver-related AEs or safety laboratory value changes.

CMX001 and our other product candidates will also be subject to additional ongoing FDA requirements governing the labeling, packaging, storage, distribution, safety surveillance, advertising, promotion, record-keeping and reporting of safety and other post-market information. The holder of an approved NDA is obligated to monitor and report AEs and any failure of a product to meet the specifications in the NDA. The holder of an approved NDA must also submit new or supplemental applications and obtain FDA approval for certain changes to the approved product, product labeling or manufacturing process. Advertising and promotional materials must comply with FDA rules and are subject to FDA review, in addition to other potentially applicable federal and state laws. Furthermore, promotional materials must be approved by the FDA prior to use for any drug receiving accelerated approval, the pathway we are pursuing for CMX001 in the United States.

In addition, manufacturers of drug products and their facilities are subject to payment of user fees and continual review and periodic inspections by the FDA and other regulatory authorities for compliance with current good manufacturing practices (cGMP), and adherence to commitments made in the NDA. If we, or a regulatory agency, discover previously unknown problems with a product, such as quality issues or AEs of unanticipated severity or frequency, or problems with the facility where the product is manufactured, a regulatory agency may impose restrictions relative to that product or the manufacturing facility, including requiring recall or withdrawal of the product from the market or suspension of manufacturing.

If we fail to comply with applicable regulatory requirements following approval of our product candidate, a regulatory agency may:

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Any government investigation of alleged violations of law could require us to expend significant time and resources in response and could generate negative publicity. The occurrence of any event or penalty described above may inhibit our ability to commercialize CMX001 and our other product candidates and inhibit our ability to generate revenues.

Even if we obtain FDA approval for CMX001 or any of our other products in the United States, we may never obtain approval for or commercialize CMX001 or any of our other products outside of the United States, which would limit our ability to realize their full market potential.

In order to market any products outside of the United States, we must establish and comply with numerous and varying regulatory requirements on a country-by-country basis regarding safety and efficacy. Approval by the FDA does not ensure approval by regulatory authorities in other countries or jurisdictions. In addition, clinical trials conducted in one country may not be accepted by regulatory authorities in other countries, and regulatory approval in one country does not guarantee regulatory approval in any other country. Approval processes vary among countries and can involve additional product testing and validation and additional administrative review periods. Seeking foreign regulatory approval could result in difficulties and costs for us and require additional preclinical studies or clinical trials which could be costly and time consuming. Regulatory requirements can vary widely from country to country and could delay or prevent the introduction of our products in those countries. We do not have any product candidates approved for sale in any jurisdiction, including international markets, and we do not have experience in obtaining regulatory approval in international markets. If we fail to comply with regulatory requirements in international markets or to obtain and maintain required approvals, or if regulatory approvals in international markets are delayed, our target market will be reduced and our ability to realize the full market potential of our products will be unrealized.

Our relationships with customers and payors will be subject to applicable anti-kickback, fraud and abuse and other healthcare laws and regulations, which could expose us to criminal sanctions, civil penalties, contractual damages, reputational harm and diminished profits and future earnings.

Healthcare providers, physicians and others play a primary role in the recommendation and prescription of any products for which we obtain marketing approval. Our future arrangements with third-party payors and customers may expose us to broadly applicable fraud and abuse and other healthcare laws and regulations that may constrain the business or financial arrangements and relationships through which we market, sell and distribute our products for which we obtain marketing approval. Restrictions under applicable federal and state healthcare laws and regulations, include the following:

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Efforts to ensure that our business arrangements with third parties will comply with applicable healthcare laws and regulations will involve substantial costs. It is possible that governmental authorities will conclude that our business practices may not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations. If our operations are found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, damages, fines, exclusion from government funded healthcare programs, such as Medicare and Medicaid, and the curtailment or restructuring of our operations. If any of the physicians or other providers or entities with whom we expect to do business are found to be not in compliance with applicable laws, they may be subject to criminal, civil or administrative sanctions, including exclusions from government funded healthcare programs.

Recently enacted and future legislation may increase the difficulty and cost for us to obtain marketing approval of and commercialize our product candidates and affect the prices we may obtain.

In the United States and some foreign jurisdictions, there have been a number of legislative and regulatory changes and proposed changes regarding the healthcare system that could prevent or delay marketing approval of our product candidates, restrict or regulate post-approval activities and affect our ability to profitably sell any products for which we obtain marketing approval.

In the United States, the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (Medicare Modernization Act) changed the way Medicare covers and pays for pharmaceutical products. The legislation expanded Medicare coverage for drug purchases by the elderly and introduced a new reimbursement methodology based on average sales prices for physician administered drugs. In addition, this legislation provided authority for limiting the number of drugs that will be covered in any therapeutic class. Cost reduction initiatives and other provisions of this legislation could decrease the coverage and price that we receive for any approved products. While the Medicare Modernization Act applies only to drug benefits for Medicare beneficiaries, private payors often follow Medicare coverage policy and payment limitations in setting their own reimbursement rates. Therefore, any reduction in reimbursement that results from the Medicare Modernization Act may result in a similar reduction in payments from private payors.

More recently, in March 2010, the Health Care Reform Law was enacted to broaden access to health insurance, reduce or constrain the growth of healthcare spending, enhance remedies against fraud and abuse, add new transparency requirements for health care and health insurance industries, impose new taxes and fees on the health industry and impose additional health policy reforms. The Health Care Reform Law revises the definition of “average manufacturer price” for reporting purposes, which could increase the amount of Medicaid drug rebates to states. Further, the new law imposes a significant annual fee on companies that manufacture or import branded prescription drug products. New provisions affecting compliance have also been enacted, which may affect our business practices with health care practitioners. We will not know the full effects of the Health Care Reform Law until applicable federal and state agencies issue regulations or guidance under the new law. Although it is too early to determine the effect of the Health Care Reform Law,

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the new law appears likely to continue the pressure on pharmaceutical pricing, especially under the Medicare program, and may also increase our regulatory burdens and operating costs.

Legislative and regulatory proposals have been made to expand post-approval requirements and restrict sales and promotional activities for pharmaceutical products. We are not sure whether additional legislative changes will be enacted, or whether the FDA regulations, guidance or interpretations will be changed, or what the impact of such changes on the marketing approvals of our product candidates, if any, may be.

Risks Related to Our Reliance on Third Parties

We rely on third-party manufacturers to produce our preclinical and clinical drug supplies, and we intend to rely on third parties to produce commercial supplies of any approved product candidates.

We do not own or operate, and we do not expect to own or operate, facilities for product manufacturing, storage and distribution, or testing. In the past we have relied on third-party manufacturers for supply of our preclinical and clinical drug supplies. We expect that in the future we will continue to rely on such manufacturers for supply of drug supplies that will be used in clinical trials of our product candidates, including CMX001, and for commercialization of any of our product candidates that receive regulatory approval.

Our reliance on third-party manufacturers entails risks to which we would not be subject if we manufactured our product candidates ourselves, including:

Any of these events could lead to clinical study delays, failure to obtain regulatory approval or impact our ability to successfully commercialize our products. Some of these events could be the basis for FDA action, including injunction, recall, seizure, or total or partial suspension of production.

We rely on limited sources of supply for the drug component for our lead product candidate, CMX001, and any disruption in the chain of supply may cause delay in developing and commercializing CMX001.

We are currently transferring the drug substance manufacturing process to our selected contractor that will produce the commercial supply of drug substance and are currently evaluating manufacturers to optimize tablet and suspension formulation production to meet forecasted commercial demand. It is our expectation that

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only one supplier of drug substance and one supplier of drug product will be qualified as vendors with the FDA. If supply from an approved vendor is interrupted, there could be a significant disruption in commercial supply of CMX001. An alternative vendor would need to be qualified through an NDA supplement which could result in further delay. The FDA or other regulatory agencies outside of the United States may also require additional studies if a new drug substance or drug product supplier is relied upon for commercial production.

These factors could cause the delay of clinical trials, regulatory submissions, required approvals or commercialization of CMX001, and cause us to incur additional costs. Furthermore, if our suppliers fail to deliver the required commercial quantities of active pharmaceutical ingredient on a timely basis and at commercially reasonable prices, and we are unable to secure one or more replacement suppliers capable of production at a substantially equivalent cost, our clinical trials for CMX001 may be delayed, which could inhibit our ability to generate revenues.

Manufacturing issues may arise that could increase product and regulatory approval costs or delay commercialization of CMX001.

We have validated the drug substance production process for CMX001 at a manufacturer at a scale of 100 kg, and have validated the manufacturing of clinical trial material at a 165 kg commercial scale. However, we are currently conducting stability studies and analyses that may reveal previously unknown impurities which could require resolution in order to proceed with our planned clinical trials and obtain regulatory approval for the commercial marketing of CMX001. In the future, we may identify significant impurities, which could result in increased scrutiny by the regulatory agencies, delays in clinical program and regulatory approval for CMX001, increases in our operating expenses, or failure to obtain or maintain approval for CMX001.

We depend on the continuation of our current collaboration with Merck, who will develop and commercialize CMX157.

In July 2012, we entered into a collaboration and licensing arrangement with Merck, whereby Merck is responsible for the future development and commercialization of CMX157. Under this arrangement, Merck is responsible for conducting preclinical studies and clinical trials and obtaining required regulatory approvals for CMX157 and manufacturing and commercializing CMX157. Our right to receive milestone and royalty payments under the licensing agreement depends on the achievement of certain development, regulatory and commercial milestones by Merck.

As a result, the development and commercialization of CMX157 would be delayed, and our ability to receive potential milestone and royalty payments under the license agreement with Merck, would be adversely affected if Merck:

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Furthermore, disagreements with Merck could lead to litigation or arbitration, which would be time-consuming and expensive. If any of these issues arise, it may delay the development and commercialization of CMX157 and, ultimately, impair our ability to generate revenues from regulatory and commercialization milestones and royalties based on further development and sales of CMX157.

We rely on third parties to conduct, supervise and monitor our clinical studies, and if those third parties perform in an unsatisfactory manner, it may harm our business.

We rely on contract research organizations (CROs) and clinical trial sites to ensure the proper and timely conduct of our clinical trials. While we have agreements governing their activities, we have limited influence over their actual performance. We have relied and plan to continue to rely upon CROs to monitor and manage data for our ongoing clinical programs for CMX001 and our other product candidates, as well as the execution of nonclinical studies. We control only certain aspects of our CROs’ activities. Nevertheless, we are responsible for ensuring that each of our studies is conducted in accordance with the applicable protocol, legal, regulatory and scientific standards and our reliance on the CROs does not relieve us of our regulatory responsibilities.

We and our CROs are required to comply with the FDA’s guidance, which follows the International Conference on Harmonization Good Clinical Practice (ICH GCP), which are regulations and guidelines enforced by the FDA for all of our product candidates in clinical development. The FDA enforces the ICH GCP through periodic inspections of trial sponsors, principal investigators and clinical trial sites. If we or our CROs fail to comply with the ICH GCP, the clinical data generated in our clinical trials may be deemed unreliable and the FDA may require us to perform additional clinical trials before approving our marketing applications. For example, upon inspection, the FDA may determine that our Phase 3 clinical trial for CMX001, SUPPRESS, does not comply with the ICH GCP. In addition, our Phase 3 clinical trials for CMX001 will require a sufficiently large number of test subjects to evaluate the safety and effectiveness of CMX001. Accordingly, if our CROs fail to comply with these regulations or fail to recruit a sufficient number of subjects, we may be required to repeat these Phase 3 clinical trials, which would delay the regulatory approval process.

Our CROs are not our employees, and we cannot control whether or not they devote sufficient time and resources to our ongoing clinical and nonclinical programs. These CROs may also have relationships with other commercial entities, including our competitors, for whom they may also be conducting clinical studies, or other drug development activities which could harm our competitive position. We face the risk of potential unauthorized disclosure or misappropriation of our intellectual property by CROs, which may reduce our trade secret protection and allow our potential competitors to access and exploit our proprietary technology. If our CROs do not successfully carry out their contractual duties or obligations, fail to meet expected deadlines, or if the quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to our clinical protocols or regulatory requirements or for any other reasons, our clinical trials may be extended, delayed or terminated, and we may not be able to obtain regulatory approval for, or successfully commercialize CMX001 or our other product candidates. As a result, our financial results and the commercial prospects for CMX001 and any other product candidates that we develop would be harmed, our costs could increase, and our ability to generate revenues could be delayed.

Risks Related to Commercialization of Our Product Candidates

The commercial success of CMX001 and our other product candidates will depend upon the acceptance of these products by the medical community, including physicians, patients and health care payors.

If any of our product candidates, including CMX001, receive marketing approval, they may nonetheless not gain sufficient market acceptance by physicians, patients, healthcare payors and others in the medical community. If these products do not achieve an adequate level of acceptance, we may not generate significant product revenues and we may not become profitable. The degree of market acceptance of any of our product candidates, including CMX001, will depend on a number of factors, including:

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If any of our product candidates, including CMX001, is approved but does not achieve an adequate level of acceptance by physicians, patients and health care payors, we may not generate sufficient revenue and we may not become or remain profitable.

If we are unable to establish sales and marketing capabilities or enter into agreements with third parties to market and sell our product candidates, we may be unable to generate any revenue.

We currently do not have an organization for the sales, marketing and distribution of pharmaceutical products and the cost of establishing and maintaining such an organization may exceed the cost-effectiveness of doing so. In order to market any products that may be approved, including CMX001, we must build our sales, marketing, managerial and other non-technical capabilities or make arrangements with third parties to perform these services. We may enter into strategic partnerships with third parties to commercialize our product candidates outside of the United States, including for CMX001. We intend to build our own sales force and to commercialize CMX001, but we will also consider the option to enter into strategic partnerships for our product candidates in the United States.

Our strategy for CMX001 is to develop a hospital-directed sales force and/or collaborate with third parties to promote the product to healthcare professionals and third-party payors in the United States. Our future collaboration partners, if any, may not dedicate sufficient resources to the commercialization of our product candidates or may otherwise fail in their commercialization due to factors beyond our control. If we are unable to establish effective collaborations to enable the sale of our product candidates to healthcare professionals and in geographical regions, including the United States, that will not be covered by our own marketing and sales force, or if our potential future collaboration partners do not successfully commercialize our product candidates, our ability to generate revenues from product sales, including sales of CMX001, will be adversely affected.

Building an internal sales force involves many challenges, including:

If we are unable to build our own sales force or negotiate a strategic partnership for the commercialization of CMX001 in the United States, we may be forced to delay the potential commercialization of CMX001, reduce the scope of our sales or marketing activities for CMX001 or undertake the commercialization activities for CMX001 at our own expense. If we elect to increase our expenditures to fund commercialization activities ourselves, we will need to obtain additional capital, which may not be available to us on acceptable terms, or at all. If we do not have sufficient funds, we will not be able to bring CMX001 to market or generate product revenue.

If we are unable to establish adequate sales, marketing and distribution capabilities, whether independently or with third parties, we may not be able to generate sufficient product revenue and may not

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become profitable. We will be competing with many companies that currently have extensive and well-funded marketing and sales operations. Without an internal team or the support of a third party to perform marketing and sales functions, we may be unable to compete successfully against these more established companies.

In addition, there are risks involved with both establishing our own sales and marketing capabilities and entering into arrangements with third parties to perform these services. For example, recruiting and training a sales force is expensive and time-consuming and could delay any product launch. If the commercial launch of a product candidate for which we recruit a sales force and establish marketing capabilities is delayed or does not occur for any reason, we would have prematurely or unnecessarily incurred these commercialization expenses. This may be costly, and our investment would be lost if we cannot retain or reposition our sales and marketing personnel.

If we obtain approval to commercialize any products outside of the United States, a variety of risks associated with international operations could materially adversely affect our business.

If our product candidates are approved for commercialization, we intend to enter into agreements with third parties to market those product candidates outside the United States, including for CMX001. We expect that we will be subject to additional risks related to entering into international business relationships, including:

We have no prior experience in these areas. In addition, there are complex regulatory, tax, labor and other legal requirements imposed by both the European Union and many of the individual countries in Europe with which we will need to comply. Many U.S.-based biopharmaceutical companies have found the process of marketing their own products in Europe to be very challenging.

We face significant competition from other biotechnology and pharmaceutical companies and our operating results will suffer if we fail to compete effectively.

The biotechnology and pharmaceutical industries are intensely competitive. We have competitors both in the United States and internationally, including major multinational pharmaceutical companies, biotechnology companies and universities and other research institutions.

Currently the only approved antiviral treatment for CMV in HSCT patients is Cytovene® (ganciclovir), although other antivirals, such as Valcyte® (valganciclovir), Foscavir® (foscarnet), Zovirax® (acyclovir) and Vistide® (cidofovir) are used. Ganciclovir, foscarnet and cidofovir are currently generically available and we expect Valcyte to become generically available in the near-term. We are aware of several companies that are working specifically to develop drugs that would compete against CMX001, including Merck’s development

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of letermovir, Viropharma Incorporated’s development of maribavir and Vical Incorporated’s and Astellas Pharma US, Inc.’s development of TransVax. Many of our competitors have substantially greater financial, technical, commercial and other resources, such as larger research and development staff, stronger intellectual property portfolios and experienced marketing and manufacturing organizations. Additional mergers and acquisitions in the biotechnology and pharmaceutical industries may result in even more resources being concentrated in our competitors.

Competition may increase further as a result of advances in the commercial applicability of technologies and greater availability of capital for investment in these industries. Our competitors may succeed in developing, acquiring or licensing, on an exclusive basis, drug products that are more effective or less costly than CMX001 or any other drug candidate that we are currently developing or that we may develop.

We will face competition from other drugs currently approved or that will be approved in the future for the same indications. Therefore, our ability to compete successfully will depend largely on our ability to:

The availability of our competitors’ products could limit the demand, and the price we are able to charge, for CMX001 and any other product candidate we develop. We will not achieve our business plan if the acceptance of CMX001 is inhibited by price competition or the reluctance of physicians to switch from existing drug products to CMX001, or if physicians switch to other new drug products or choose to reserve CMX001 for use in limited circumstances. The inability to compete with existing or subsequently introduced drug products would have a material adverse impact on our business, financial condition and prospects.

Established pharmaceutical companies may invest heavily to accelerate discovery and development of novel compounds or to in-license novel compounds that could make our product candidates, including CMX001, less competitive. In addition, any new product that competes with an approved product must demonstrate compelling advantages in efficacy, convenience, tolerability and safety in order to overcome price competition and to be commercially successful. Accordingly, our competitors may succeed in obtaining patent protection, receiving FDA approval or discovering, developing and commercializing medicines before we do, which would have a material adverse impact on our business.

Hospital formulary approval and reimbursement may not be available for CMX001 and our other product candidates, which could make it difficult for us to sell our products profitably.

Obtaining hospital formulary approval can be an expensive and time consuming process. We cannot be certain if and when we will obtain formulary approval to allow us to sell our product candidates, including CMX001, into our target markets. Failure to obtain timely formulary approval will limit our commercial success.

Furthermore, market acceptance and sales of CMX001, or any other product candidates that we develop, will depend in part on the extent to which reimbursement for these products and related treatments will be available from government health administration authorities, private health insurers and other organizations. Government authorities and third-party payors, such as private health insurers, hospitals and health maintenance organizations, decide which drugs they will pay for and establish reimbursement levels. Government authorities and third-party payors, such as private health insurers and health maintenance organizations, decide which medications they will pay for and establish reimbursement levels. A primary trend

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in the U.S. healthcare industry and elsewhere is cost containment. Government authorities and these third-party payors have attempted to control costs by limiting coverage and the amount of reimbursement for particular medications. Increasingly, third-party payors are requiring that companies provide them with predetermined discounts from list prices and are challenging the prices charged for medical products. We cannot be sure that reimbursement will be available for any product that we commercialize and, if reimbursement is available, what the level of reimbursement will be. Reimbursement may impact the demand for, or the price of, any product for which we obtain marketing approval. Obtaining reimbursement for our products may be particularly difficult because of the higher prices often associated with products administered under the supervision of a physician. We cannot be sure that reimbursement will be available for CMX001, or any other product candidates. Also, reimbursement amounts may reduce the demand for, or the price of, our products. If reimbursement is not available, or is available only to limited levels, we may not be able to successfully commercialize CMX001, or any other product candidates that we develop.

There have been a number of legislative and regulatory proposals to change the healthcare system in the United States and in some foreign jurisdictions that could affect our ability to sell any future products profitably. These legislative and regulatory changes may negatively impact the reimbursement for any future products, following approval. The availability of generic treatments may also substantially reduce the likelihood of reimbursement for any future products, including CMX001. The application of user fees to generic drug products will likely expedite the approval of additional generic drug treatments. We expect to experience pricing pressures in connection with the sale of CMX001 and any other product candidate that we develop, due to the trend toward managed healthcare, the increasing influence of health maintenance organizations and additional legislative changes.

In addition, there may be significant delays in obtaining reimbursement for approved products, and coverage may be more limited than the purposes for which the product is approved by the FDA or regulatory authorities in other countries. Moreover, eligibility for reimbursement does not imply that any product will be paid for in all cases or at a rate that covers our costs, including research, development, manufacture, sale and distribution. Interim payments for new products, if applicable, may also not be sufficient to cover our costs and may not be made permanent. Payment rates may vary according to the use of the product and the clinical setting in which it is used, may be based on payments allowed for lower cost products that are already reimbursed, and may be incorporated into existing payments for other services. Net prices for products may be reduced by mandatory discounts or rebates required by government healthcare programs or private payors and by any future relaxation of laws that presently restrict imports of products from countries where they may be sold at lower prices than in the United States. Third-party payors often rely upon Medicare coverage policy and payment limitations in setting their own reimbursement policies.

Our inability to promptly obtain coverage and profitable payment rates from both government funded and private payors for any of our product candidates, including CMX001, could have a material adverse effect on our operating results, our ability to raise capital needed to commercialize products and our overall financial condition.

We may expend our limited resources to pursue a particular product candidate or indication and fail to capitalize on product candidates or indications that may be more profitable or for which there is a greater likelihood of success.

The success of our business depends primarily upon our ability to identify, develop and commercialize product candidates. Because we have limited financial and managerial resources, we focus on research programs and product candidates for specific indications. As a result, we may forego or delay pursuit of opportunities with other product candidates or other indications that later prove to have greater commercial potential. Our research programs may initially show promise in identifying potential product candidates, yet fail to yield product candidates for clinical development for a number of reasons, including:

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If any of these events occur, we may be forced to abandon our development efforts for a program or programs, which would have a material adverse effect on our business and could potentially cause us to cease operations. Research programs to identify new product candidates require substantial technical, financial and human resources. We may focus our research efforts and resources on potential programs or product candidates that ultimately prove to be unsuccessful.

If we do not accurately evaluate the commercial potential or target market for a particular product candidate, we may relinquish valuable rights to that product candidate through collaboration, licensing or other royalty arrangements in cases in which it would have been advantageous for us to retain sole development and commercialization rights.

Risks Related to Our Intellectual Property

If we are unable to obtain or protect intellectual property rights related to our products and product candidates, we may not be able to compete effectively in our market.

We rely upon a combination of patents, trade secret protection and confidentiality agreements to protect the intellectual property related to our products and product candidates. The strength of patents in the biotechnology and pharmaceutical field involves complex legal and scientific questions and can be uncertain. The patent applications that we own or in-license may fail to result in issued patents with claims that cover the products in the United States or in other countries. If this were to occur, early generic competition could be expected against CMX001, CMX157 and other product candidates in development. There is no assurance that all of the potentially relevant prior art relating to our patents and patent applications has been found, which can invalidate a patent or prevent a patent from issuing based on a pending patent application. Even if patents do successfully issue, third parties may challenge their validity, enforceability, scope or ownership, which may result in such patents, or our rights to such patents, being narrowed or invalidated. Furthermore, even if they are unchallenged, our patents and patent applications, may not adequately protect our intellectual property or prevent others from designing around our claims. If the patent applications we hold or license with respect to CMX001 and CMX157 fail to issue or if their breadth or strength of protection is threatened, it could dissuade companies from collaborating with us to develop, and threaten our ability to commercialize, our products. We cannot offer any assurances about which, if any, patents will issue or whether any issued patents will be found not invalid and not unenforceable, will go unthreatened by third parties or will adequately protect our products and product candidates. Further, if we encounter delays in regulatory approvals, the period of time during which we could market CMX001 and CMX157 under patent protection could be reduced. Since patent applications in the United States and most other countries are confidential for a period of time after filing, and some remain so until issued, we cannot be certain that we or our licensors were the first to file any patent application related to CMX001, CMX157 or our other product candidates. Furthermore, if third parties have filed such patent applications, an interference proceeding in the United States can be provoked by a third party or instituted by us to determine who was the first to invent any of the subject matter covered by the patent claims of our applications. An unfavorable outcome could require us to cease using the related technology or to attempt to license it from the prevailing party, which may not be possible.

In addition to the protection afforded by patents, we rely on trade secret protection and confidentiality agreements to protect proprietary know-how that is not patentable, processes for which patents are difficult to enforce and other elements of our drug discovery and development processes that involve proprietary know-how, information or technology that is not covered by patents. Although we expect all of our employees to assign their inventions to us, and all of our employees, consultants, advisors and any third parties who have access to our proprietary know-how, information or technology to enter into confidentiality agreements, we cannot provide any assurances that all such agreements have been duly executed, that such agreements provide adequate protection and will not be breached, that our trade secrets and other confidential proprietary information will not otherwise be disclosed or that competitors will not otherwise gain access to our trade secrets or independently develop substantially equivalent information and techniques. If we are unable to prevent material disclosure of the non-patented intellectual property related to our technologies to third parties,

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and there is no guarantee that we will have any such enforceable trade secret protection, we may not be able to establish or maintain a competitive advantage in our market, which could materially adversely affect our business, results of operations and financial condition.

Further, the laws of some foreign countries do not protect patents and other proprietary rights to the same extent or in the same manner as the laws of the United States. As a result, we may encounter significant problems in protecting and defending our intellectual property abroad. We may also fail to pursue or obtain patents and other intellectual property protection relating to our products and product candidates in all foreign countries.

Finally, certain of our activities and our licensors’ activities have been funded, and may in the future be funded, by the U.S. federal government. When new technologies are developed with U.S. federal government funding, the government obtains certain rights in any resulting patents, including a nonexclusive license authorizing the government to use the invention for non-commercial purposes. These rights may permit the government to disclose our confidential information to third parties and to exercise “march-in” rights to use or allow third parties to use our patented technology. The government can exercise its march-in rights if it determines that action is necessary because we fail to achieve practical application of the U.S. government-funded technology, because action is necessary to alleviate health or safety needs, to meet requirements of federal regulations or to give preference to U.S. industry. In addition, U.S. government-funded inventions must be reported to the government, U.S. government funding must be disclosed in any resulting patent applications, and our rights in such inventions may be subject to certain requirements to manufacture products in the United States.

Third-party claims of intellectual property infringement may prevent or delay our development and commercialization efforts or otherwise affect our business.

Our commercial success depends in part on our avoiding infringement and other violations of the patents and proprietary rights of third parties. There is a substantial amount of litigation, both within and outside the United States, involving patent and other intellectual property rights in the biotechnology and pharmaceutical industries, including patent infringement lawsuits, interferences, oppositions and inter party reexamination proceedings before the United States Patent and Trademark Office (U.S. PTO) and its foreign counterparts. Numerous U.S. and foreign issued patents and pending patent applications, which are owned by third parties, exist in the fields in which we and our collaborators are developing product candidates. As the biotechnology and pharmaceutical industries expand and more patents are issued, and as we gain greater visibility and market exposure as a public company, the risk increases that our product candidates or other business activities may be subject to claims of infringement of the patent and other proprietary rights of third parties.

Third parties may assert that we are employing their proprietary technology without authorization. There may be third-party patents or patent applications with claims to materials, formulations, methods of manufacture or methods for treatment related to the use or manufacture of CMX001 and CMX157 and/or our other product candidates. Because patent applications can take many years to issue, there may be currently pending patent applications which may later result in issued patents that our product candidates may infringe. In addition, third parties may obtain patents in the future and claim that use of our technologies infringes upon these patents. If any third-party patents were held by a court of competent jurisdiction to cover the manufacturing process of any of our product candidates, any molecules formed during the manufacturing process or any final product itself, the holders of any such patents may be able to block our ability to commercialize such product candidate unless we obtained a license under the applicable patents, or until such patents expire. Similarly, if any third-party patent were held by a court of competent jurisdiction to cover aspects of our formulations, processes for manufacture or methods of use, including combination therapy, the holders of any such patent may be able to block our ability to develop and commercialize the applicable product candidate unless we obtained a license or until such patent expires. In either case, such a license may not be available on commercially reasonable terms or at all. In addition, we may be subject to claims that we are infringing other intellectual property rights, such as trademarks or copyrights, or misappropriating the trade secrets of others, and to the extent that our employees, consultants or contractors use intellectual property or proprietary information owned by others in their work for us, disputes may arise as to the rights in related or resulting know-how and inventions.

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Parties making claims against us may obtain injunctive or other equitable relief, which could effectively block our ability to further develop and commercialize one or more of our product candidates. Defense of these claims, regardless of their merit, would involve substantial litigation expense and would be a substantial diversion of employee resources from our business. In the event of a successful infringement or other intellectual property claim against us, we may have to pay substantial damages, including treble damages and attorneys’ fees for willful infringement, obtain one or more licenses from third parties, pay royalties or redesign our affected products, which may be impossible or require substantial time and monetary expenditure. We cannot predict whether any such license would be available at all or whether it would be available on commercially reasonable terms. Furthermore, even in the absence of litigation, we may need to obtain licenses from third parties to advance our research or allow commercialization of our product candidates, and we have done so from time to time. We may fail to obtain any of these licenses at a reasonable cost or on reasonable terms, if at all. In that event, we would be unable to further develop and commercialize one or more of our product candidates, which could harm our business significantly. We cannot provide any assurances that third-party patents do not exist which might be enforced against our products or product candidates, resulting in either an injunction prohibiting our sales, or, with respect to our sales, an obligation on our part to pay royalties and/or other forms of compensation to third parties.

We license certain key intellectual property from third parties, and the loss of our license rights could have a materially adverse effect on our business.

We are a party to a number of technology licenses that are important to our business and expect to enter into additional licenses in the future. For example, we rely on an exclusive license to certain patents, proprietary technology and know-how from The Regents of the University of California (UC), which we believe cover CMX001 and CMX157. If we fail to comply with our obligations under our agreement with UC or our other license agreements, or we are subject to a bankruptcy, the licensor may have the right to terminate the license, in which event we would not be able to develop or market products covered by the license, including in the case of the UC license, CMX001 and CMX157, which would have a materially adverse effect on our business.

We may be involved in lawsuits to protect or enforce our patents, the patents of our licensors or our other intellectual property rights, which could be expensive, time consuming and unsuccessful.

Competitors may infringe or otherwise violate our patents, the patents of our licensors or our other intellectual property rights. To counter infringement or unauthorized use, we may be required to file legal claims, which can be expensive and time-consuming. In addition, in an infringement proceeding, a court may decide that a patent of ours or our licensors is not valid or is unenforceable, or may refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover the technology in question. An adverse result in any litigation or defense proceedings could put one or more of our patents at risk of being invalidated or interpreted narrowly and could put our patent applications at risk of not issuing. The initiation of a claim against a third party may also cause the third party to bring counter-claims against us.

We may not be able to prevent, alone or with our licensors, misappropriation of our intellectual property rights, particularly in countries where the laws may not protect those rights as fully as in the United States. Our business could be harmed if in a litigation the prevailing party does not offer us a license on commercially reasonable terms. Any litigation or other proceedings to enforce our intellectual property rights may fail, and even if successful, may result in substantial costs and distract our management and other employees.

Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. There could also be public announcements of the results of hearings, motions or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have a material adverse effect on the price of our common stock.

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Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.

Periodic maintenance fees on any issued patent are due to be paid to the U.S. PTO and foreign patent agencies in several stages over the lifetime of the patent. The U.S. PTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other similar provisions during the patent application process. While an inadvertent lapse can in many cases be cured by payment of a late fee or by other means in accordance with the applicable rules, there are situations in which noncompliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. Non-compliance events that could result in abandonment or lapse of a patent or patent application include, but are not limited to, failure to respond to official actions within prescribed time limits, non-payment of fees and failure to properly legalize and submit formal documents. If we or our licensors that control the prosecution and maintenance of our licensed patents fail to maintain the patents and patent applications covering our product candidates, we may lose our rights and our competitors might be able to enter the market, which would have a material adverse effect on our business.

Risks Related to Our United States Government Contracts and Grants

All of our immediately foreseeable future revenues to support the development of CMX001 for the treatment of smallpox are dependent upon our contract with BARDA, and if we do not receive all of the funds under the BARDA contract we anticipate that we will suspend or terminate our smallpox program.

Substantially all of our revenues that support the development of CMX001 for the treatment of smallpox have been derived from prior government grants and our current contract with BARDA. Our contract with BARDA is for the development of CMX001 for the treatment of smallpox. It is divided into a base segment and four option segments. We are currently performing the base segment of the contract. BARDA has the right, exercisable in its sole discretion, to extend the contract for successive option segments following the base segment. We anticipate renegotiating certain aspects of the smallpox animal plan to take into account recent guidance from the FDA for development of CMX001 under the FDA’s Animal Efficacy Rule. There can be no assurance that we will reach agreement with BARDA on the most appropriate development pathway or that the FDA will ultimately agree with the experiments which we perform or the appropriateness of the results of these experiments for licensure of CMX001 for smallpox. We do not anticipate continuing this program without ongoing support from BARDA.

Additionally, the contract provides for reimbursement of the costs of the development of CMX001 for the treatment of smallpox that are allowable under the Federal Acquisition Regulation (FAR), plus the payment of a fixed fee. It does not include the manufacture of CMX001 for the Strategic National Stockpile. There can be no assurances that this contract will continue, that BARDA will extend the contract for successive option segments following the base segment, that any such extension would be on favorable terms, or that we will be able to enter into new contracts with the United States government to support our smallpox program. Changes in government budgets and agendas may result in a decreased and de-prioritized emphasis on supporting the discovery and development of CMX001 for the treatment of smallpox. In such event, BARDA is not required to continue funding our existing contract. Any such reduction in our revenues from BARDA or any other government contract could materially adversely affect our financial condition and results of operations. In addition, if we do not receive all of the funds under the BARDA contract, we anticipate that we will suspend or terminate our program for the development of CMX001 for the treatment of smallpox.

Unfavorable provisions in government contracts, including our contract with BARDA, may harm our business, financial condition and operating results.

United States government contracts typically contain unfavorable provisions and are subject to audit and modification by the government at its sole discretion, which will subject us to additional risks. For example, under our contract with BARDA, the U.S. government has the power to unilaterally:

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The U.S. government also has the right to terminate the BARDA contract if termination is in the government’s interest, or if we default by failing to perform in accordance with the milestones set forth in the contract. Termination-for-convenience provisions generally enable us to recover only our costs incurred or committed (plus a portion of the agreed fee) and settlement expenses on the work completed prior to termination. Except for the amount of services received by the government, termination-for-default provisions do not permit recovery of fees.

In addition, we must comply with numerous laws and regulations that affect how we conduct business with the United States government. Among the most significant government contracting regulations that affect our business are:

Furthermore, we may be required to enter into agreements and subcontracts with third parties, including suppliers, consultants and other third-party contractors, in order to satisfy our contractual obligations pursuant to our agreements with the U.S. government. Negotiating and entering into such arrangements can be time-consuming and we may not be able to reach agreement with such third parties. Any such agreement must also be compliant with the terms of our government contract. Any delay or inability to enter into such arrangements or entering into such arrangements in a manner that is non-compliant with the terms of our contract, may result in violations of our contract.

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As a result of these unfavorable provisions, we must undertake significant compliance activities. The diversion of resources from commercial programs to these compliance activities, as well as the exercise by the U.S. government of any rights under these provisions, could materially harm our business.

Our business is subject to audit by the U.S. government, including under our contract with BARDA, and a negative audit could adversely affect our business.

United States government agencies such as the Department of Health and Human Services (DHHS), routinely audit and investigate government contractors and recipients of federal grants, including our contract with BARDA. These agencies review a contractor’s performance under its contracts, cost structure and compliance with applicable laws, regulations and standards.

The DHHS can also review the adequacy of, and a contractor’s compliance with, its internal control systems and policies, including the contractor’s purchasing, property, estimating, compensation and management information systems. Any costs found to be improperly allocated to a specific contract will not be reimbursed, while such costs already reimbursed must be refunded. If an audit uncovers improper or illegal activities, we may be subject to civil and criminal penalties and administrative sanctions, including:

In addition, we could suffer serious reputational harm if allegations of impropriety were made against us by the U.S. government, which could adversely affect our business.

Agreements with government agencies may lead to claims against us under the Federal False Claims Act, and these claims could result in substantial fines and other penalties.

The biopharmaceutical industry is, and in recent years has been, under heightened scrutiny as the subject of government investigations and enforcement actions. Our BARDA contract is subject to substantial financial penalties under the Federal Civil Monetary Penalties Act and the Federal Civil False Claims Act (False Claims Act). Under the False Claims Act’s “whistleblower” provisions, private enforcement of fraud claims against businesses on behalf of the U.S. government has increased due in part to amendments to the False Claims Act that encourage private individuals to sue on behalf of the government. These whistleblower suits, known as qui tam actions, may be filed by private individuals, including present and former employees. The False Claims Act provides for treble damages and up to $11,000 per false claim. If our operations are found to be in violation of any of these laws, or any other governmental regulations that apply to us, we may be subject to penalties, including civil and criminal penalties, damages, fines, exclusion from the Medicare and Medicaid programs, and the curtailment or restructuring of our operations. Any penalties, damages, fines, exclusions, curtailment, or restructuring of our operations could adversely affect our ability to operate our business and our financial results.

Risks Related to Our Business Operations and Industry

Our future success depends on our ability to retain key executives and to attract, retain and motivate qualified personnel.

We are highly dependent on principal members of our executive team listed under “Management.” While we have entered into employment agreements or offer letters with each of our executive officers, any of them could leave our employment at any time, as all of our employees are “at will” employees. We do not maintain “key person” insurance for any of our executives or other employees. Recruiting and retaining other qualified employees for our business, including scientific and technical personnel, will also be critical to our success. There is currently a shortage of skilled executives in our industry, which is likely to continue. We also experience competition for the hiring of scientific and clinical personnel from universities and research

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institutions. As a result, competition for skilled personnel is intense and the turnover rate can be high. We may not be able to attract and retain personnel on acceptable terms given the competition among numerous pharmaceutical and biotechnology companies for similar personnel. In addition, failure of any of our clinical studies may make it more challenging to recruit and retain qualified personnel. The inability to recruit or loss of the services of any executive or key employee may adversely affect the progress of our research, development and commercialization objectives.

In addition, we rely on consultants and advisors, including scientific and clinical advisors, to assist us in formulating our research and development and commercialization strategy. Our consultants and advisors may be employed by employers other than us and may have commitments under consulting or advisory contracts with other entities that may limit their availability to us, which could also adversely affect the progress of our research, development and commercialization objectives.

We will need to expand our organization, and we may experience difficulties in managing this growth, which could disrupt our operations.

As of December 31, 2012, we had 46 full-time employees. As our company matures, we expect to expand our employee base to increase our managerial, clinical, scientific and engineering, operational, sales, and marketing teams. Future growth would impose significant additional responsibilities on our management, including the need to identify, recruit, maintain, motivate and integrate additional employees, consultants and contractors. Also, our management may need to divert a disproportionate amount of its attention away from our day-to-day activities and devote a substantial amount of time to managing these growth activities. We may not be able to effectively manage the expansion of our operations, which may result in weaknesses in our infrastructure, give rise to operational mistakes, loss of business opportunities, loss of employees and reduced productivity among remaining employees. Our expected growth could require significant capital expenditures and may divert financial resources from other projects, such as the development of product candidates. If our management is unable to effectively manage our growth, our expenses may increase more than expected, our ability to generate and/or grow revenues could be reduced, and we may not be able to implement our business strategy. Our future financial performance and our ability to commercialize CMX001 and our other product candidates and compete effectively will depend, in part, on our ability to effectively manage any future growth.

Potential product liability lawsuits against us could cause us to incur substantial liabilities and to limit commercialization of any products that we may develop.

The use of our product candidates, including CMX001, in clinical studies and the sale of any products for which we obtain marketing approval exposes us to the risk of product liability claims. Product liability claims might be brought against us by consumers, health care providers, pharmaceutical companies or others selling or otherwise coming into contact with our products. On occasion, large judgments have been awarded in class action lawsuits based on drugs that had unanticipated adverse effects. If we cannot successfully defend against product liability claims, we could incur substantial liability and costs. In addition, regardless of merit or eventual outcome, product liability claims may result in:

We currently carry $5.0 million in product liability insurance covering our clinical trials. Our current product liability insurance coverage may not be sufficient to reimburse us for any expenses or losses we may suffer. Moreover, insurance coverage is becoming increasingly expensive and in the future we may not be able

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to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against losses due to liability. If and when we obtain marketing approval for our product candidates, we intend to expand our insurance coverage to include the sale of commercial products; however, we may be unable to obtain product liability insurance on commercially reasonable terms or in adequate amounts. A successful product liability claim or series of claims brought against us could cause our stock price to decline and, if judgments exceed our insurance coverage, could adversely affect our results of operations and business.

Risks Related to this Offering and Ownership of Our Common Stock

The market price of our common stock is likely to be volatile, and you may not be able to resell your shares at or above the initial public offering price.

The trading price of our common stock is likely to be volatile. Our stock price could be subject to wide fluctuations in response to a variety of factors, including the following:

In addition, the stock market in general, and the Nasdaq Global Market in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of these companies. Broad market and industry factors may negatively affect the market price of our common stock, regardless of our actual operating performance.

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An active trading market for our common stock may not develop.

Prior to this offering, there has not been a public market for our common stock. Although our common stock has been approved for listing on the Nasdaq Global Market, an active trading market for our shares may never develop or be sustained following this offering. If an active market for our common stock does not develop, you may not be able to sell your shares quickly or at the market price. The initial public offering price for the shares will be determined by negotiations between us and representatives of the underwriters and may not be indicative of prices that will prevail in the trading market.

Our principal stockholders and management own a significant percentage of our stock and will be able to exert significant control over matters subject to stockholder approval.

Our executive officers, directors, 5% stockholders and their affiliates beneficially own approximately 81% of our voting stock and, upon the closing of this offering, that same group will beneficially own approximately 59% of our voting stock. Therefore, even after this offering these stockholders will have the ability to substantially influence us through this ownership position. For example, these stockholders, if they choose to act together, may be able to control elections of directors, amendments of our organizational documents, or approval of any merger, sale of assets, or other major corporate transaction. This concentration of voting power could delay or prevent an acquisition of our company on terms that other stockholders may desire.

We are an “emerging growth company,” and we cannot be certain if the reduced reporting requirements applicable to emerging growth companies will make our common stock less attractive to investors.

We are an “emerging growth company,” as defined in the JOBS Act. For as long as we continue to be an emerging growth company, we may take advantage of exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies,” including exemption from compliance with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002 (Sarbanes-Oxley Act), reduced disclosure obligations regarding executive compensation in this prospectus and our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of this offering, (b) in which we have total annual gross revenue of at least $1.0 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our common stock that is held by non-affiliates exceeds $700.0 million as of the prior June 30th, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period.

Even after we no longer qualify as an emerging growth company, we may still qualify as a “smaller reporting company” which would allow us to take advantage of many of the same exemptions from disclosure requirements including exemption from compliance with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act and reduced disclosure obligations regarding executive compensation in this prospectus and our periodic reports and proxy statements. We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.

Under the JOBS Act, emerging growth companies can also delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards and, therefore, will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.

We will incur significant increased costs as a result of operating as a public company, and our management will be required to devote substantial time to new compliance initiatives.

As a public company, we will incur significant legal, accounting and other expenses that we did not incur as a private company. In addition, the Sarbanes-Oxley Act, as well as rules subsequently implemented by the Securities and Exchange Commission (SEC), and the Nasdaq Global Market have imposed various

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requirements on public companies. In July 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), was enacted. There are significant corporate governance and executive compensation related provisions in the Dodd-Frank Act that require the SEC to adopt additional rules and regulations in these areas such as “say on pay” and proxy access. Stockholder activism, the current political environment and the current high level of government intervention and regulatory reform may lead to substantial new regulations and disclosure obligations, which may lead to additional compliance costs and impact (in ways we cannot currently anticipate) the manner in which we operate our business. Our management and other personnel will need to devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations will increase our legal and financial compliance costs and will make some activities more time-consuming and costly. For example, we expect that these rules and regulations will make it more difficult and more expensive for us to obtain director and officer liability insurance and we may be required to incur substantial costs to maintain our current levels of such coverage.

If you purchase our common stock in this offering, you will incur immediate and substantial dilution in the book value of your shares.

Investors purchasing common stock in this offering will pay a price per share that substantially exceeds the pro forma book value (deficit) per share of our tangible assets after subtracting our liabilities. As a result, investors purchasing common stock in this offering will incur immediate dilution of $9.60 per share, based on our pro forma net tangible book value (deficit) as of December 31, 2012. Further, investors purchasing common stock in this offering will contribute approximately 49% of the total amount invested by stockholders since our inception, but will own only approximately 30% of the shares of common stock outstanding. For information on how the foregoing amounts were calculated, see “Dilution.”

This dilution is due to the substantially lower price paid by our investors who purchased shares prior to this offering as compared to the price offered to the public in this offering, and the exercise of stock options granted to our employees. In addition, as of December 31, 2012, options to purchase 2,593,423 shares of our common stock at a weighted-average exercise price of $2.45 per share were outstanding, restricted stock units to acquire 43,199 shares of our common stock were outstanding and warrants to purchase 1,613,395 shares of our common stock at a weighted-average exercise price of $7.26 per share were outstanding. The exercise of any of these options or warrants, and the issuance of shares pursuant to these restricted stock units (which will vest in connection with the consummation of this offering), would result in additional dilution. As a result of the dilution to investors purchasing shares in this offering, investors may receive significantly less than the purchase price paid in this offering, if anything, in the event of our liquidation.

A significant portion of our total outstanding shares are restricted from immediate resale but may be sold into the market in the near future. This could cause the market price of our common stock to drop significantly, even if our business is doing well.

Sales of a substantial number of shares of our common stock in the public market or the perception that these sales might occur, could depress the market price of our common stock and could impair our ability to raise capital through the sale of additional equity securities. We are unable to predict the effect that sales may have on the prevailing market price of our common stock.

After this offering, we will have outstanding 24,410,085 shares of common stock based on the number of shares outstanding as of December 31, 2012, and the issuance of 1,076,002 shares of common stock underlying shares of our Series F preferred stock issuable immediately prior to the closing of this offering in respect of the accumulated dividends on our Series F preferred stock through the date immediately preceding the date of this prospectus. This includes the shares that we are selling in this offering, which may be resold in the public market immediately without restriction, unless purchased by our affiliates. Of the remaining shares, shares are currently restricted as a result of securities laws or lock-up agreements but will be able to be sold after the offering as described under the “Shares Eligible for Future Sale.”

Substantially all of our existing stockholders, optionholders, restricted stock unit holders and warrantholders are subject to lock-up agreements with the underwriters of this offering that restrict their ability to transfer shares of our common stock or securities convertible into or exercisable or exchangeable for shares of our common stock for at least 180 days from the date of this prospectus. The lock-up agreements limit the

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number of shares of common stock that may be sold immediately following the public offering. Subject to certain limitations, approximately 17,090,085 shares will become eligible for sale upon expiration of the lock-up period, as calculated and described in more detail in the section entitled “Shares Eligible for Future Sale.” In addition, shares issued or issuable upon exercise of options, restricted stock units and warrants vested as of the expiration of the lock-up period will be eligible for sale at that time. Sales of stock by these stockholders could have a material adverse effect on the trading price of our common stock.

Certain holders of our securities are entitled to rights with respect to the registration of their shares under the Securities Act, subject to the 180-day lock-up arrangement described above. At any time after 180 days of this offering but not before six months after this offering, holders of the registrable securities then outstanding, will have rights, subject to some conditions, to require us to file registration statements covering their shares or to include their shares in registration statements that we may file for ourselves or other stockholders. Registration of these shares under the Securities Act would result in the shares becoming freely tradable without restriction under the Securities Act, except for shares held by our affiliates as defined in Rule 144 under the Securities Act. Any sales of securities by these stockholders could have a material adverse effect on the trading price of our common stock.

We also intend to register all shares of common stock that we may issue under our equity compensation plans. Once we register these shares, they can be freely sold in the public market upon issuance, subject to volume limitations applicable to affiliates and the lock-up agreements described in the “Underwriting” section of this prospectus.

We have broad discretion in the use of the net proceeds from this offering and may not use them effectively.

Our management will have broad discretion in the application of the net proceeds, including for any of the purposes described in the section entitled “Use of Proceeds,” and you will not have the opportunity as part of your investment decision to assess whether our management are using the net proceeds appropriately. Because of the number and variability of factors that will determine our use of the net proceeds from this offering, their ultimate use may vary substantially from their currently intended use. The failure by our management to apply these funds effectively could result in financial losses that could have a material adverse effect on our business, cause the price of our common stock to decline and delay the development of our product candidates. Pending their use, we may invest the net proceeds from this offering in short-term, investment-grade, interest-bearing securities. These investments may not yield a favorable return to our stockholders.

Volatility in our stock price could subject us to securities class action litigation.

In the past, securities class action litigation has often been brought against a company following a decline in the market price of its securities. This risk is especially relevant for us because pharmaceutical companies have experienced significant stock price volatility in recent years. If we face such litigation, it could result in substantial costs and a diversion of management’s attention and resources, which could harm our business.

Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.

Under Section 382 of the Internal Revenue Code of 1986, as amended (Code), if a corporation undergoes an “ownership change,” generally defined as a greater than 50% change (by value) in its equity ownership over a three year period, the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes (such as research tax credits) to offset its post-change income may be limited. We have determined that a Section 382 ownership change occurred in 2002 and 2007 resulting in limitations of at least $64,000 and $762,000, respectively, of losses incurred prior to the respective ownership change dates. We believe that, with our initial public offering, our most recent private placement and other transactions that have occurred since 2007, we may have triggered an ownership change limitation. We may also experience ownership changes in the future as a result of subsequent shifts in our stock ownership. As a result, if we earn net taxable income, our ability to use our pre-change net operating loss carryforwards to offset United States federal taxable income may be subject to limitations, which could potentially result in increased future tax liability to us.

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Because we do not anticipate paying any cash dividends on our common stock in the foreseeable future, capital appreciation, if any, would be your sole source of gain.

We have never declared or paid any cash dividends on our common stock. We currently anticipate that we will retain future earnings for the development, operation and expansion of our business and do not anticipate declaring or paying any cash dividends for the foreseeable future. As a result, capital appreciation, if any, of our common stock would be your sole source of gain on an investment in our common stock for the foreseeable future.

Provisions in our corporate charter documents and under Delaware law could make it more difficult for a third party to acquire us or increase the cost of acquiring us, even if doing so would benefit our stockholders and may prevent attempts by our stockholders to replace or remove our current management.

Some provisions of our charter documents and Delaware law may have anti-takeover effects that could discourage an acquisition of us by others, even if an acquisition would be beneficial to our stockholders and may prevent attempts by our stockholders to replace or remove our current management. These provisions include:

The amendment of any of these provisions, with the exception of the ability of our board of directors to issue shares of preferred stock and designate any rights, preferences and privileges thereto, would require the affirmative vote of the holders of at least 66 2/3% of the voting power of all of our then outstanding common stock.

These provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors, which is responsible for appointing the members of our management. In addition, we are subject to Section 203 of the Delaware General Corporation Law, which generally prohibits a Delaware corporation from engaging in any of a broad range of business combinations with an interested stockholder for a period of three years following the date on which the stockholder became an interested stockholder, unless such transactions are approved by our board of directors. This provision could have the effect of delaying or preventing a change of control, whether or not it is desired by or beneficial to our stockholders. Further, other provisions of Delaware law may also discourage, delay or prevent someone from acquiring us or merging with us.

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus, including the sections entitled “Prospectus Summary,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business,” contains forward-looking statements. We may, in some cases, use word such as “anticipate,” “believe,” “could,” “estimate,” “expects,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “will,” “would” or the negative of those terms, and similar expressions that convey uncertainty of future events or outcomes to identify these forward-looking statements. Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking statements. Forward-looking statements in this prospectus include, but are not limited to, statements about:

These forward-looking statements reflect our management’s beliefs and views with respect to future events and are based on estimates and assumptions as of the date of this prospectus and are subject to risks and uncertainties. We discuss many of these risks in greater detail under “Risk Factors.” Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. Given these uncertainties, you should not place undue reliance on these forward-looking statements.

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You should read this prospectus and the documents that we reference in this prospectus and have filed as exhibits to the registration statement, of which this prospectus is a part, completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of the forward-looking statements in this prospectus by these cautionary statements. Except as required by law, we undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.

MARKET, INDUSTRY AND OTHER DATA

This prospectus also contains estimates, projections and other information concerning our industry, our business and relevant antiviral markets, including data regarding the estimated size of relevant antiviral markets, patient populations, projected diagnosis rates and the perceptions and preferences of patients and physicians regarding certain therapies, as well as data regarding market research and estimates. Information that is based on estimates, forecasts, projections, market research or similar methodologies is inherently subject to uncertainties and actual events or circumstances may differ materially from events and circumstances that are assumed in this information. Unless otherwise expressly stated, we obtained this industry, business, market and other data from reports, research surveys, studies and similar data prepared by market research firms and other third parties, industry, medical and general publications, government data and similar sources that we believe to be reliable. In some cases, we do not expressly refer to the sources from which this data is derived. In that regard, when we refer to one or more sources of this type of data in any paragraph, you should assume that other data of this type appearing in the same paragraph is derived from the same sources, unless otherwise expressly stated or the context otherwise requires.

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USE OF PROCEEDS

We estimate that we will receive net proceeds of approximately $93.2 million (or approximately $107.4 million if the underwriters’ over-allotment option is exercised in full) from the sale of the shares of common stock offered by us in this offering, after deducting the underwriting discounts and commissions and estimated offering expenses payable by us.

The principal purposes of this offering are to obtain additional capital to support our operations, to create a public market for our common stock and to facilitate our future access to the public equity markets. We anticipate that we will use the net proceeds of this offering for the following purposes:

We may also use a portion of the remaining net proceeds to in-license, acquire, or invest in complementary businesses, technologies, products or assets. However we have no current commitments or obligations to do so.

The amount and timing of our actual expenditures will depend upon numerous factors, including the ongoing status and results of SUPPRESS. Furthermore, we anticipate that we will need to secure additional funding for the further development of CMX001 for other indications, and for the development of any of our other product candidates.

Our expected use of net proceeds from this offering represents our current intentions based upon our present plans and business condition. As of the date of this prospectus, we cannot predict with certainty all of the particular uses for the net proceeds to be received upon the completion of this offering, or the amounts that we will actually spend on the uses set forth above. The amounts and timing of our actual use of the net proceeds will vary depending on numerous factors, including our ability to obtain additional financing, the relative success and cost of our research, preclinical and clinical development programs, the amount and timing of additional revenues, if any, received from our collaboration and licensing agreement with Merck, whether we are able to enter into future licensing arrangements, and whether we are able to extend our agreement with BARDA. As a result, our management will have broad discretion in the application of the net proceeds, and investors will be relying on our judgment regarding the application of the net proceeds of this offering. In addition, we might decide to postpone or not pursue clinical trials or preclinical activities (including SUPPRESS) if the net proceeds from this offering and the other sources of cash are less than expected.

Pending their use, we plan to invest the net proceeds from this offering in short- and intermediate-term, interest-bearing obligations, investment-grade instruments, certificates of deposit or direct or guaranteed obligations of the U.S. government.

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DIVIDEND POLICY

We have never declared or paid any cash dividends on our capital stock. We currently intend to retain all available funds and any future earnings to support our operations and finance the growth and development of our business. We do not intend to pay cash dividends on our common stock for the foreseeable future. Any future determination related to our dividend policy will be made at the discretion of our board of directors and will depend upon, among other factors, our results of operations, financial condition, capital requirements, contractual restrictions, business prospects and other factors our board of directors may deem relevant.

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CAPITALIZATION

The following table sets forth our cash and cash equivalents, and our capitalization as of December 31, 2012:

You should read this table together with “Selected Financial Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and the related notes appearing elsewhere in this prospectus.

		As of December 31, 2012
		Actual				Pro Forma				Pro Forma As Adjusted
						(unaudited)
		(in thousands, except per share amounts)
Cash and cash equivalents		$	19,906				19,906			$	113,058
Redeemable convertible preferred stock:
Redeemable convertible preferred stock warrant liability		$	7,512			$	—			$	—
Redeemable convertible preferred stock; $0.001 par value: 69,679,299 shares authorized, 51,404,514 shares issued and outstanding, actual; no shares authorized, issued or outstanding, pro forma; no shares authorized, issued or outstanding, pro forma as adjusted			107,723				—				—
Stockholders’ deficit:
Preferred stock, $0.001 par value; no shares authorized, no shares issued and outstanding actual; 10,000,000 shares authorized, no shares issued and outstanding, pro forma and pro forma as adjusted			—				—				—
Common stock, $0.001 par value; 89,700,000 shares authorized, 1,533,995 shares issued and outstanding, actual; 200,000,000 shares authorized, 17,090,085 shares issued and outstanding, pro forma; 200,000,000 shares authorized, 24,410,085 shares issued and outstanding, pro forma as adjusted			3				17				24
Additional paid-in capital			—				116,197				209,342
Accumulated other comprehensive loss			(2	)			(2	)			(2	)
Accumulated deficit			(101,032	)			(102,008	)			(102,008	)
Total stockholders’ equity (deficit)			(101,031	)			14,204				107,356
Total capitalization		$	14,204			$	14,204			$	107,356

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The number of common shares shown as issued and outstanding on a pro forma as adjusted basis in the table is based on the number of shares of our common stock outstanding as of December 31, 2012, and the issuance of 1,076,002 shares of common stock underlying shares of our Series F preferred stock issuable immediately prior to the closing of this offering in respect of the accumulated dividends on our Series F preferred stock through the date immediately preceding the date of this prospectus, and excludes:

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DILUTION

If you invest in our common stock in this offering, your ownership interest will be immediately diluted to the extent of the difference between the initial public offering price per share of our common stock and the pro forma net tangible book value per share of our common stock after this offering.

Our historical net tangible book value (deficit) as of December 31, 2012, was approximately $(101.0) million, or $(65.86) per share of our common stock. Our historical net tangible book value (deficit) is the amount of our total tangible assets less our liabilities and convertible preferred stock which is not included within equity. Net historical tangible book value (deficit) per share is our historical net tangible book value (deficit) divided by the number of shares of common stock outstanding as of December 31, 2012.

Our pro forma net tangible book value (deficit) as of December 31, 2012, was $14.2 million, or $0.83 per share of common stock. Pro forma net tangible book value (deficit) gives effect to the conversion of all of our outstanding convertible preferred stock as of December 31, 2012, into an aggregate of 14,480,088 shares of our common stock and the reclassification of our preferred stock warrant liability into permanent equity, both of which will occur automatically upon the closing of this offering, and the issuance of 1,076,002 shares of common stock underlying shares of our Series F preferred stock issuable immediately prior to the closing of this offering in respect of the accumulated dividends on our Series F preferred stock through the date immediately preceding the date of this prospectus.

Pro forma as adjusted net tangible book value is our pro forma net tangible book value (deficit), plus the effect of the sale of 7,320,000 shares of our common stock in this offering at the initial public offering price, and after deducting the underwriting discounts and commissions and estimated offering expenses payable by us. This amount represents an immediate increase in pro forma as adjusted net tangible book value of $4.40 per share to our existing stockholders, and an immediate dilution of $9.60 per share to new investors participating in this offering.

The following table illustrates this dilution on a per share basis:

Initial public offering price per share						$	14.00
Historical net tangible book value (deficit) per share as of December 31, 2012		$	(65.86	)
Pro forma increase in net tangible book value per share as of December 31, 2012 attributable to the conversion of convertible preferred stock			65.85
Pro forma increase in net tangible book value per share as of December 31, 2012 attributable to the issuance of 1,076,002 shares of common stock underlying shares of our Series F preferred stock issuable immediately prior to the closing of this offering in respect of the accumulated dividends on our Series F preferred stock through the date immediately preceding the date of this prospectus and the reclassification of our preferred stock warrant liability into permanent equity			0.84
Increase in pro forma net tangible book value per share attributable to new investors participating in this offering			3.57
Pro forma as adjusted net tangible book value per share after this offering							4.40
Dilution per share to new investors participating in this offering						$	9.60

If the underwriters exercise their over-allotment option in full to purchase 1,098,000 additional shares of our common stock in this offering, the pro forma as adjusted net tangible book value will increase to $4.77 per share, representing an immediate increase in pro forma as adjusted net tangible book value (deficit) to existing stockholders of $0.37 per share and an immediate decrease of dilution of $0.37 per share to new investors participating in this offering.

The following table summarizes, on a pro forma as adjusted basis as of December 31, 2012, the number of shares purchased or to be purchased from us, the total consideration paid or to be paid to us, and the average price per share paid or to be paid to us by existing stockholders and new investors participating in this offering at the initial public offering price, before deducting underwriting discounts and commissions and

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estimated offering expenses payable by us. As the table below shows, new investors participating in this offering will pay an average price per share substantially higher than our existing stockholders paid.

		Total Shares								Total Consideration								Average Price Per Share
		Number				Percent				Amount				Percent
		(in thousands, except percents and per share data)
Existing stockholders before this offering			17,090				70	%		$	108,272				51	%		$	6.34
Investors participating in this offering			7,320				30				102,480				49				14.00
Total			24,410				100	%		$	210,752				100	%			8.63

If the underwriters exercise their over-allotment option in full to purchase 1,098,000 additional shares of our common stock in this offering, the number of shares of common stock held by existing stockholders will be reduced to 67% of the total number of shares of common stock to be outstanding after this offering, and the number of shares of common stock held by investors participating in this offering will be further increased to 8,418, or 33% of the total number of shares of common stock to be outstanding after this offering.

The foregoing discussion and tables are based on 17,090,085 shares of common stock outstanding as of December 31, 2012, after giving effect to the conversion of our outstanding convertible preferred stock as of December 31, 2012, into an aggregate of 14,480,088 shares of common stock, and the issuance of 1,076,002 shares of common stock underlying shares of our Series F preferred stock issuable immediately prior to the closing of this offering in respect of the accumulated dividends on our Series F preferred stock through the date immediately preceding the date of this prospectus, and excludes:

Effective immediately upon the execution and delivery of the underwriting agreement for this offering, an aggregate of 1,408,450 shares of our common stock will be reserved for issuance under the 2013 plan (plus 427,933 shares of common stock reserved for issuance under our 2012 plan as of December 31, 2012, which shares will be added to the shares reserved under the 2013 plan upon its effectiveness). Furthermore, we may choose to raise additional capital through the sale of equity or convertible debt securities due to market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans. To the extent we issue additional shares of common stock or other equity or convertible debt securities in the future, there will be further dilution to investors participating in this offering.

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SELECTED FINANCIAL DATA

The following selected financial data should be read together with our financial statements and related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” appearing elsewhere in this prospectus. The selected financial data in this section are not intended to replace our financial statements and the related notes. Our historical results are not necessarily indicative of the results that may be expected in the future and results of interim periods are not necessarily indicative of the results for the entire year.

The selected statement of operations data for the years ended December 31, 2010, 2011 and 2012 and the selected balance sheet data as of December 31, 2011 and 2012 are derived from our audited financial statements appearing elsewhere in this prospectus. The pro forma basic and diluted net loss per common share data are computed using the weighted-average number of shares of common stock outstanding, after giving effect to the conversion (using the as if-converted method) of all shares of our convertible preferred stock into common stock and the issuance of 1,076,002 shares of common stock underlying shares of our Series F preferred stock issuable immediately prior to the closing of this offering in respect of the accumulated dividends on our Series F preferred stock through the date immediately preceding the date of this prospectus.

		Years Ended December 31,
		2010				2011				2012
		(in thousands, except share and per share data)
Statement of Operations:
Revenues:
Collaboration and licensing revenues		$	—			$	55			$	17,445
Contract and grant revenues			1,715				12,046				16,275
Total revenues			1,715				12,101				33,720
Operating expenses:
Research and development			19,413				27,695				27,821
General and administrative			7,606				9,398				8,682
Total operating expenses			27,019				37,093				36,503
Loss from operations			(25,304	)			(24,992	)			(2,783	)
Other (expense) income:
Interest expense			(154	)			(212	)			(776	)
Fair value adjustments to warrant liability			—				(385	)			(847	)
Other income			1				—				—
Net loss			(25,457	)			(25,589	)			(4,406	)
Accretion of redeemable convertible preferred stock			—				(9,565	)			(4,357	)
Net loss attributable to common shareholders		$	(25,457	)		$	(35,154	)		$	(8,763	)
Net loss per share, basic and diluted		$	(17.52	)		$	(23.49	)		$	(5.75	)
Weighted-average shares outstanding:
Basic and diluted			1,453				1,496				1,525
Pro forma net loss per share basic and diluted (unaudited):										$	(0.47	)
Weighted-average pro forma shares outstanding, basic and diluted (unaudited):											9,369

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		As of December 31,
		2011				2012
		(in thousands, except share and per share data)
Balance Sheet Data:
Cash and cash equivalents		$	13,607			$	19,906
Short-term investments, available-for-sale			5,918				9,849
Working capital			18,010				23,931
Total assets			25,432				32,031
Loan payable(1)			2,601				14,620
Redeemable convertible preferred stock warrant liability			6,491				7,512
Redeemable convertible preferred stock			103,366				107,723
Accumulated deficit			(93,681	)			(101,032	)
Total stockholders’ deficit			(93,680	)			(101,031	)

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MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with “Selected Financial Data” and our financial statements and related notes included elsewhere in this prospectus. This discussion and analysis and other parts of this prospectus contain forward-looking statements based upon current beliefs, plans and expectations that involve risks, uncertainties and assumptions, such as statements regarding our plans, objectives, expectations, intentions and projections. Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of several factors, including those set forth under “Risk Factors” and elsewhere in this prospectus. You should carefully read the “Risk Factors” section of this prospectus to gain an understanding of the important factors that could cause actual results to differ materially from our forward-looking statements. Please also see the section entitled “Special Note Regarding Forward-Looking Statements.”

Overview

Chimerix is a biopharmaceutical company committed to the discovery, development and commercialization of novel, oral antiviral therapeutics that are designed to transform patient care in areas of high unmet medical need. Our proprietary lipid technology has given rise to two clinical-stage compounds, CMX001 and CMX157, which have demonstrated the potential for enhanced antiviral activity and safety in convenient, orally administered dosing regimens. We have worldwide rights to our lead product candidate, CMX001, and anticipate beginning the Phase 3 SUPPRESS study in 2013 for the prevention of CMV infection in HSCT recipients. We intend to develop CMX001 as the first broad-spectrum antiviral against dsDNA viruses. Our second clinical-stage compound, CMX157, is a Phase 1 product candidate for the treatment of HIV and was licensed to Merck, Sharp & Dohme Corp. (Merck) in 2012.

To date, we have devoted substantially all of our resources to our research and development efforts relating to our product candidates, including conducting clinical trials with our product candidates, providing general and administrative support for these operations and protecting our intellectual property. We do not have any products approved for sale and have not generated any revenue from product sales. From our inception through December 31, 2012, we have funded our operations primarily through:

We have incurred net losses in each year since our inception in 2000. Our net losses were approximately $25.5 million, $25.6 million, and $4.4 million for the years ended December 31, 2010, 2011 and 2012, respectively. As of December 31, 2012, we had an accumulated deficit of approximately $101.0 million. Substantially all our net losses resulted from costs incurred in connection with our research and development programs and from general and administrative costs associated with our operations.

We expect to continue to incur significant expenses and increasing operating losses for at least the next several years. We anticipate that our expenses will increase substantially as we:

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We do not expect to generate revenue from product sales unless and until we successfully complete development and obtain marketing approval for one or more of our product candidates, which we expect will take a number of years and is subject to significant uncertainty. Accordingly, we anticipate that we will need to raise additional capital in addition to the net proceeds of this offering prior to the commercialization of CMX001 or any of our other product candidates. Until such time that we can generate substantial revenue from product sales, if ever, we expect to finance our operating activities through a combination of equity offerings, debt financings, government or other third-party funding, marketing and distribution arrangements and other collaborations, strategic alliances and licensing arrangements. However, we may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms or at all, which would have a negative impact on our financial condition and could force us to delay, limit, reduce or terminate our research and development programs or commercialization efforts. Failure to receive additional funding could cause us to cease operations, in part or in full.

Financial Overview

Revenue

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

In September 2003, we were awarded a $36.3 million grant from the National Institute of Allergy and Infectious Diseases (NIAID) to support our development of an oral drug for the treatment of smallpox. The work performed under this grant resulted in our selection of CMX001 as a lead product candidate for development. The grant, and our activities conducted in connection therewith, were substantially complete in early 2010. However, the grant was not formally terminated until February 2011.

In February 2011, we entered into a contract with Biomedical Advanced Research and Development Authority (BARDA), a U.S. governmental agency that supports the advanced research and development, manufacturing, acquisition, and stockpiling of medical countermeasures. The contract consists of an initial performance period, referred to as the base performance segment, which ends on May 31, 2013, plus up to four extension periods of around one year each, referred to as option segments, each of which may be exercised at BARDA’s sole discretion. The contract is a cost plus fixed fee development contract. Under the contract as currently in effect, if each follow-on option segment is exercised by BARDA, we may receive up to $75.8 million in expense reimbursement and $5.3 million in fees. We are currently completing the base performance segment of the contract under which we may receive up to a total of approximately $31.0 million. As of December 31, 2012, we had recognized revenue in aggregate of $28.3 million with respect to the base performance segment.

In July 2012, we entered into a collaboration and license agreement granting Merck exclusive worldwide rights to CMX157, our oral nucleotide compound currently being evaluated to treat HIV infection. Under the terms of the agreement, Merck receives an exclusive worldwide license for any human use of CMX157 and is responsible for future development and commercialization of CMX157. Following execution of the agreement, we received a $17.5 million upfront payment. In addition, we are eligible to receive payments up to

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$151.0 million upon the achievement of certain development and regulatory milestones, as well as tiered royalties on net sales escalating from high single digit to low double digits based on the volume of sales. Such royalties continue through the later of expiration of our patent rights or ten years from the first commercial sale on a country-by-country basis.

In the future, we may generate revenue from a combination of product sales, license fees, milestone payments and royalties from the sales of products developed under licenses of our intellectual property. We expect that any revenue we generate will fluctuate from quarter to quarter as a result of the timing and amount of license fees, milestone and other payments, and the amount and timing of payments that we receive upon the sale of our products, to the extent any are successfully commercialized. If we fail to complete the development of our product candidates in a timely manner or obtain regulatory approval for them, our ability to generate future revenue, and our results of operations and financial position, would be materially adversely affected.

Research and Development Expenses

Since our inception, we have focused our resources on our research and development activities, including conducting preclinical studies and clinical trials, manufacturing development efforts and activities related to regulatory filings for our product candidates. We recognize research and development expenses as they are incurred. Our research and development expenses consist primarily of:

From our inception through December 31, 2012, we have incurred approximately $123.2 million in research and development expenses, of which we estimate $92.3 million relates to our development of CMX001. In the years ended December 31, 2010, 2011 and 2012, we spent $19.4 million, $27.7 million, and $27.8 million, respectively, on research and development expenses. We plan to increase our research and development expenses for the foreseeable future as we continue the development of CMX001 for the prevention of CMV infection in HSCT and other indications and to further advance the development of our other product candidates, subject to the availability of additional funding. Our direct research and development expenses consist principally of external costs, such as fees paid to investigators, consultants, central laboratories and CROs, in connection with our clinical trials, and costs related to acquiring and manufacturing clinical trial materials. We typically use our employee and infrastructure resources across multiple research and development programs.

The successful development of our clinical and preclinical product candidates is highly uncertain. At this time, we cannot reasonably estimate the nature, timing or costs of the efforts that will be necessary to complete the remainder of the development of any of our clinical or preclinical product candidates or the period, if any, in which material net cash inflows from these product candidates may commence. This is due to the numerous risks and uncertainties associated with the development of our product candidates, including:

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A change in the outcome of any of these variables with respect to the development of a product candidate could mean a significant change in the costs and timing associated with the development of that product candidate. For example, if the FDA or another regulatory authority were to require us to conduct clinical trials beyond those that we currently anticipate will be required for the completion of clinical development of a product candidate, or if we experience significant delays in enrollment in any of our clinical trials, we could be required to expend significant additional financial resources and time with respect to the development of that product candidate.

CMX001

The majority of our research and development resources are currently focused on our Phase 3 clinical trial for CMX001, SUPPRESS, and our other planned clinical and preclinical studies and other work needed to submit CMX001 for regulatory approval in the United States and Canada. We have incurred and expect to continue to incur significant expense in connection with these efforts, including expenses related to:

In addition, pursuant to our contract with BARDA, we are evaluating CMX001 for the treatment of smallpox. During the base performance segment of the contract, we incurred significant expense in connection with the development of orthopox virus animal models, the demonstration of efficacy and pharmacokinetics of CMX001 in the animal models, the conduct of an open label clinical safety study for subjects with dsDNA infections, and the manufacture and process validation of bulk drug substance and 100 mg tablets.

General and Administrative Expenses

General and administrative expenses consist primarily of salaries and related costs for employees in executive, finance, corporate development and human resources and administrative support functions, including stock-based compensation expenses and benefits. Other significant general and administrative expenses include accounting and legal services, expenses associated with obtaining and maintaining patents, cost of various consultants, occupancy costs and information systems.

We expect that our general and administrative expenses will increase as we operate as a public company and due to the potential commercialization of our product candidates. We believe that these increases will likely include increased costs for director and officer liability insurance, costs related to the hiring of additional personnel and increased fees for outside consultants, lawyers and accountants. We also expect to incur increased costs to comply with corporate governance, internal controls, investor relations and disclosures, and similar requirements applicable to public companies.

Interest Income (Expense), Net

Interest income consists of interest earned on our cash, cash equivalents and short-term investments. We expect our interest income to increase following the completion of this offering as we invest the net proceeds from this offering pending their use in our operations.

Interest expense pertains primarily of interest accrued or paid on amounts outstanding under our loan and security agreement with SVB and MidCap.

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Critical Accounting Policies and Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which we have prepared in accordance with generally accepted accounting principles in the United States (GAAP). The preparation of our financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of our financial statements, as well as the reported revenues and expenses during the reported periods. We evaluate these estimates and judgments on an ongoing basis. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

While our significant accounting policies are more fully described in Note 2 to our financial statements appearing elsewhere in this prospectus, we believe that the following accounting policies related to revenue recognition, clinical trial expenses, valuation of stock-based compensation and restricted stock units are the most critical for fully understanding and evaluating our financial condition and results of operations.

Revenue Recognition

We derive our revenues from two sources: contracts and grants, and collaborations and licensing. Contract and grant revenues are revenues generated pursuant to federal contracts and other awarded grants. Collaboration and licensing revenues are revenues related to license and collaboration agreements. We recognize revenue in accordance with the criteria outlined in the SEC’s Topic 13 and Accounting Standards Codification (ASC) 605-25 and by the Financial Accounting Standards Board (FASB). Following these accounting pronouncements, revenue is recognized when all four of the following criteria are met: (i) persuasive evidence of an arrangement exists; (ii) delivery of the products and/or services has occurred and risk of loss has passed; (iii) the selling price is fixed or determinable; and (iv) collectability is reasonably assured.

For arrangements that involve the delivery of more than one element, each product, service and/or right to use assets is evaluated to determine whether it qualifies as a separate unit of accounting. This determination is based on whether the deliverable has “stand-alone value” to the customer. The consideration that is fixed or determinable is then allocated to each separate unit of accounting based on the relative selling prices of each deliverable. The consideration allocated to each unit of accounting is recognized as the related goods and services are delivered, limited to the consideration that is not contingent upon future deliverables. If the arrangement constitutes a single unit of accounting, the revenue recognition policy must be determined for the entire arrangement and the consideration received is recognized over the period of inception through the date the last deliverable within the single unit of accounting is expected to be delivered. Revisions to the estimated period of recognition are reflected in revenue prospectively.

Non-refundable upfront fees are recorded as deferred revenue and recognized into revenue as license fees from collaborations on a straight-line basis over the estimated period of our substantive performance obligations. If we do not have substantive performance obligations, we recognize non-refundable upfront fees into revenue through the date the deliverable is satisfied. Analyzing the arrangement to identify deliverables requires the use of judgment, and each deliverable may be an obligation to deliver services, a right or license to use an asset, or another performance obligation.

Milestone payments are recognized when earned, provided that (i) the milestone event is substantive, (ii) there is no ongoing performance obligation related to the achievement of the milestone earned, and (iii) it would result in additional payments. Milestone payments are considered substantive if all of the following conditions are met: the milestone payment is non-refundable; achievement of the milestone was not reasonably assured at the inception of the arrangement; substantive effort is involved to achieve the milestone; and the amount of the milestone appears reasonable in relation to the effort expended, the other milestones in the arrangement and the related risk associated with the achievement of the milestone. Contingent based event payments we may receive under a license or collaboration agreement will be recognized when received.

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From our inception through December 31, 2012, we have not generated any revenue from product sales. For the same period, we have generated $65.7 million in grant and contract revenue. We recognize revenue under government grants and contracts as qualifying research activities are conducted based on invoices received from company vendors. Any amounts received in advance of performance are recorded as deferred revenue until earned.

We entered into a collaboration and license agreement with Merck in July 2012. The agreement provides for various types of payments, including a $17.5 million non-refundable upfront license fee, contingent event-based milestone payments and future royalties on net product sales. We recognized the upfront license fee payment from Merck as revenue for the year ended December 31, 2012, as our remaining performance obligations under the contract are not considered substantive. The contingent event-based payments pursuant to our agreement with Merck do not meet the definition of a milestone as achievement of the triggering event for such payments is based on the performance of Merck and not our performance. Therefore the milestone method will not be applied to any such payments.

Clinical Trial Accruals

As part of the process of preparing financial statements, we are required to estimate our expenses resulting from our obligation under contracts with vendors and consultants and clinical site agreements in connection with conducting clinical trials. 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 us under such contracts. Our clinical trial accrual is dependent upon the timely and accurate reporting of contract research organizations and other third-party vendors.

Our objective is to reflect the appropriate clinical trial expenses in our financial statements by matching those expenses with the period in which services and efforts are expended. We account for these expenses according to the progress of the trial as measured by patient progression and the timing of various aspects of the trial. We determine accrual estimates through discussion with applicable personnel and outside service providers as to the progress or state of communication of trials, or the services completed. During the course of a clinical trial, we adjust the rate of clinical trial expense recognition if actual results differ from the estimates. We make estimates of our accrued expenses as of each balance sheet date in our financial statements based on facts and circumstances known at that time. Although we do not expect that our estimates will be materially different from amounts actually incurred, our understanding of status and timing of services performed relative to the actual status and timing of services performed may vary and may result in us reporting amounts that are too high or too low for any particular period. Through December 31, 2012, there had been no material adjustments to our prior period estimates of accrued expenses for clinical trials. However, due to the nature of estimates, we cannot assure you that we will not make changes to our estimates in the future as we become aware of additional information about the status or conduct of our clinical trials.

Valuation of Stock-Based Compensation

We record the fair value of stock options issued to employees as of the grant date as compensation expense. We recognize compensation expense over the requisite service period, which is equal to the vesting period. For non-employees, we also record the fair value of stock options as of the grant date as compensation expense. We then periodically re-measure the awards to reflect the current fair value at each reporting period until the non-employee completes the performance obligation or the date on which a performance commitment is reached. Expense is recognized over the related service period.

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Stock-based compensation expense includes stock options granted to employees and non-employees and has been reported in our statements of operations as follows:

		Years Ended December 31,
		2010				2011				2012
		(in thousands)
Research and development
Employee		$	299			$	315			$	336
Non-employee			—				—				80
General and administrative
Employee			454				651				921
Non-employee			—				—				59
Total		$	753			$	966			$	1,396

We calculate the fair value of stock-based compensation awards using the Black-Scholes option-pricing model. The Black-Scholes option-pricing model requires the use of subjective assumptions, including volatility of our common stock, the expected term of our stock options, the risk free interest rate for a period that approximates the expected term of our stock options and the fair value of the underlying common stock on the date of grant. In applying these assumptions, we considered the following factors:

The assumptions used in the Black-Scholes option-pricing model for the years ended December 31, 2010, 2011, and 2012 are set forth below:

Employee Stock Options

		Years Ended December 31,
		2010				2011				2012
Volatility			91.00%				82.00%				80.55%
Expected term (in years)			7.0				7.0				6.0
Risk-free interest rate			2.69%				2.85%				0.86%
Expected dividend yield			0%				0%				0%
Weighted-average option value per share		$	1.75			$	1.74			$	1.93

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Non-employee Stock Options

		Years Ended December 31,
		2010				2011				2012
Volatility			—				77.80%				81.77%
Expected term (in years)			—				2.7				5.8
Risk-free interest rate			—				0.40%				0.78%
Expected dividend yield			—				0%				0%
Weighted-average option value per share			—			$	3.38			$	3.48

Common Stock Fair Value

The fair value of our common stock for purposes of determining the exercise price for stock option grants was determined on each grant date by our board of directors, or by a committee of our board of directors acting under delegated authority, with input from management. All options to purchase shares of our common stock were intended to be granted with an exercise price per share no less than the fair value per share of our common stock underlying those options on the date of grant, determined in good faith and based on the information known to us on the date of grant. In the absence of a public trading market for our common stock, on each grant date, our board of directors, or a committee of our board of directors acting under delegated authority, considered various objective and subjective factors, along with input from management, to determine the fair value of our common stock, including:

Our board of directors, or a committee of our board of directors acting under delegated authority, also considered and relied upon appraisals of the value of our stock from an independent third-party valuation specialist who conducted a thorough analysis using methodologies, approaches and assumptions consistent with the American Institute of Certified Public Accountants (AICPA) Audit and Accounting Practice Aid Series: Valuation of Privately Held Company Equity Securities Issued as Compensation (AICPA Practice Guide). The independent third-party valuation specialist provided appraisals containing the valuation analyses described below as to the fair value of our common stock as of June 1, 2009, February 15, 2011, December 31, 2011, September 30, 2012, December 31, 2012 and March 1, 2013.

The June 1, 2009 Valuation

The valuation analysis as of June 1, 2009, identified three primary components of our business: CMX001 for the smallpox indication, CMX001 for commercial indications, and CMX157 for HIV and other assets.

The valuation of CMX001 for the smallpox indication involved combining a Monte Carlo simulation with an income approach that reflected the significant business risk associated with procuring government contracts and receiving the expected base revenue going forward. Separately, as part of our long-range planning, we developed expense and potential sales projections that indicated the expected growth path of research and development expenditures. This data was used as input to a compound option-pricing model which was then used to estimate values of CMX001 for commercial indications and CMX157 for HIV and other assets.

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In addition, the AICPA guidelines require the examination of the implied value of our equity when a financing occurs on or very close to the valuation date. Since our Series E preferred stock financing was expected to occur shortly following the valuation date, this was used as a basis for determining the total value of our equity following the financing event. The valuation analysis yielded a fair value of our common stock of $3.16 per share as of June 1, 2009.

Our board of directors, or a committee of our board of directors acting under delegated authority, granted stock options on the dates set forth in the table below in reliance on the valuation analysis as of June 1, 2009, and the other objective and subjective factors described above:

Grant Dates		Number of Common Shares Underlying Options Granted				Exercise Price per Common Share				Fair Value per Common Share				Intrinsic Value per Grant
January 15, 2010			41,547			$	3.16			$	3.16				—
February 5, 2010			1,492			$	3.16			$	3.16				—
April 14, 2010			234,771			$	3.16			$	3.16				—
April 20, 2010			56,338			$	3.16			$	3.16				—
May 11, 2010			7,125			$	3.16			$	3.16				—
May 24, 2010			39,436			$	3.16			$	3.16				—
July 6, 2010			39,436			$	3.16			$	3.16				—
July 20, 2010			52,672			$	3.16			$	3.16				—
August 12, 2010			14,084			$	3.16			$	3.16				—

The February 15, 2011 Valuation

AICPA guidelines require that when a financing event takes place close to the valuation date, the implied value of equity within that financing must be considered in the valuation analysis. Since our Series F preferred stock financing closed in early February 2011, this event was used as a basis for this valuation. Our value of equity was calculated by back-solving for the overall equity value implied in the financing. Our Series F preferred stock financing resulted in gross proceeds of $45.0 million, approximately 62% of which was raised from new outside investors. Because this investment was a significant amount, where a portion was made by informed investors that had no prior investment in us, we determined that this investment represented the fair value of our Series F preferred stock and the related warrants to purchase Series F preferred stock issued in connection therewith. After setting up the contingent claims allocation model to be representative of the total interests of each class of equity security then-outstanding, the model was back-solved, holding the claims of each equity security constant relative to one another, in order to determine the fair value of our equity. The valuation analysis yielded a fair value of our common stock of $2.35 per share as of February 15, 2011.

Our board of directors, or a committee of our board of directors acting under delegated authority, granted stock options to purchase our common stock on the dates set forth in the table below in reliance on the valuation analysis as of February 15, 2011, and the other objective and subjective factors described above:

Grant Dates		Number of Common Shares Underlying Options Granted				Exercise Price per Common Share				Fair Value per Common Share				Intrinsic Value per Grant
April 7, 2011			721,530			$	2.35			$	2.35				—
April 8, 2011			12,674			$	2.35			$	2.35				—
May 10, 2011			39,716			$	2.35			$	2.35				—
June 20, 2011			14,084			$	2.35			$	2.35				—
August 15, 2011			14,084			$	2.35			$	2.35				—
September 6, 2011			3,380			$	2.35			$	2.35				—
September 30, 2011			15,774			$	2.35			$	2.35				—
November 17, 2011			70,422			$	2.35			$	2.35				—
February 22, 2012(1)			1,690			$	2.35			$	2.49			$	240
February 28, 2012(1)			4,225			$	2.35			$	2.49			$	600
March 29, 2012(1)			14,084			$	2.35			$	2.49			$	2,000
April 18, 2012(1)			14,084			$	2.35			$	2.49			$	2,000

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The December 31, 2011 Valuation

The valuation analysis at December 31, 2011, was completed in two stages. Using a contingent claims model in combination with our sale of Series F preferred stock, which occurred in February 2011, the fair value of total equity and all components of our capital structure, including our common stock, was determined as of the time of the financing event. Using this value as a starting point, a series of equity values and associated probabilities were calculated using simulation methodologies that incorporated both Monte Carlo and risk neutral frameworks. Based on assessments of expected returns and volatilities that are consistent with the expectations of market participants, a distribution of equity values was produced which covered the range of events that an informed market participant might expect. These outcomes were organized into ranges and a probability was calculated based on the percent of the total falling into each range. This process created a range of equity values. Using a contingent claims framework, each equity value in the array was allocated to the various components of the capital structure, including our common stock. The value of our common stock was weighted by its respective probability to determine the final fair value of our common stock as of December 31, 2011. The valuation analysis yielded a fair value of our common stock of $2.38 per share as of December 31, 2011.

Our board of directors, or a committee of our board of directors acting under delegated authority, granted stock options on the dates set forth in the table below in reliance on the valuation analysis as of December 31, 2011, and the other objective and subjective factors described above.

Grant Dates		Number of Common Shares Underlying Options Granted				Exercise Price per Common Share				Fair Value per Common Share				Intrinsic Value per Grant
May 16, 2012			1,408			$	2.38			$	3.38			$	1,400
June 1, 2012			14,084			$	2.38			$	3.38			$	14,100
June 13, 2012			123,019			$	2.38			$	3.38			$	123,000
June 27, 2012			845			$	2.38			$	3.38			$	840
July 16, 2012			14,084			$	2.38			$	3.38			$	14,000
August 17, 2012			7,041			$	2.38			$	4.26			$	13,250
September 17, 2012			2,816			$	2.38			$	4.26			$	5,300
October 8, 2012(1)			4,224			$	2.38			$	4.26			$	7,950
October 25, 2012(1)			4,507			$	2.38			$	4.26			$	8,480

The September 30, 2012 Valuation

The valuation analysis at September 30, 2012, was completed in two stages. Using a contingent claims model in combination with our sale of Series F preferred stock, which occurred in February 2011, the fair value of total equity and all components of our capital structure, including our common stock, was determined as of the time of the financing event. Using this value as a starting point, a series of equity values and associated probabilities were calculated using simulation methodologies that incorporate both Monte Carlo and risk neutral frameworks. Based on assessments of expected returns and volatilities that are consistent with the expectations of market participants, a distribution of equity values was produced which covered the range of events that an informed market participant might expect. These outcomes were organized into ranges and a probability was calculated based on the percent of the total falling into each range. This process created a range of equity values.

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In addition to the range of simulation outcomes associated with the firm as a going concern, an additional outcome was assigned to reflect the increased likelihood of the occurrence of an initial public offering. As a result of an in-depth management assessment regarding developments in our business, a 20% probability of an initial public offering was assigned. In particular, during the period from December 31, 2011, through September 30, 2012, the following events occurred which increased the likelihood of the occurrence of an initial public offering:

Using a contingent claims framework, each equity value in the array was allocated to the various components of the capital structure, including our common stock. The value of our common stock was weighted by its respective probability to determine the final fair value of our common stock as of September 30, 2012. The valuation analysis yielded a fair value of our common stock of $4.26 per share as of September 30, 2012.

Our board of directors, or a committee of our board of directors acting under delegated authority, granted stock options on the date set forth in the table below subject to the completion of the valuation analysis as of September 30, 2012, and the other objective and subjective factors described above:

Grant Date		Number of Common Shares Underlying Options Granted				Exercise Price per Common Stock				Fair Value per Common Share				Intrinsic Value per Grant
November 18, 2012			176,056			$	4.26			$	4.26				—

The December 31, 2012 Valuation

The valuation analysis at December 31, 2012, was completed in two stages. Using a contingent claims model in combination with our sale of Series F preferred stock, which occurred in February 2011, the fair value of total equity and all components of our capital structure, including our common stock was determined as of the time of the financing event. Using this value as a starting point, a series of equity values and associated probabilities were calculated using simulation methodologies that incorporate both Monte Carlo and risk neutral frameworks. Based on assessments of expected returns and volatilities that are consistent with the expectations of market participants, a distribution of equity values was produced which covered the range of events that an informed market participant might expect. These outcomes were organized into ranges and a probability was calculated based on the percent of the total falling into each range. This process created a range of equity values.

In addition to the range of simulation outcomes associated with the firm as a going concern, an additional outcome was assigned to reflect the increased likelihood of the occurrence of an initial public offering. As a result of an in-depth management assessment regarding the developments in our business, a 30% probability of an initial public offering was assigned. In particular, during the period from September 30, 2012, through December 31, 2012, the following events occurred which increased the likelihood of the occurrence of an initial public offering:

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Using a contingent claims framework, each equity value in the array was allocated to the various components of the capital structure, including our common stock. The value of our common stock was weighted by its respective probability to determine the final fair value of our common stock as of December 31, 2012. The valuation analysis yielded a fair value of our common stock of $5.05 per share as of December 31, 2012.

Our board of directors, or a committee of our board of directors acting under delegated authority, granted stock options on the dates set forth in the table below subject to the completion of the valuation analysis as of December 31, 2012, and the other objective and subjective factors described above:

Grant Date		Number of Common Shares Underlying Options Granted				Exercise Price per Common Stock				Fair Value per Common Share				Intrinsic Value per Grant
February 4, 2013			84,507			$	5.05			$	5.05				—
February 21, 2013			1,408			$	5.05			$	5.05				—

The March 1, 2013 Valuation

The valuation analysis at March 1, 2013, was completed in two stages. Using a contingent claims model in combination with our sale of Series F preferred stock, which occurred in February 2011, the fair value of total equity and all components of our capital structure, including our common stock was determined as of the time of the financing event. Using this value as a starting point, a series of equity values and associated probabilities were calculated using simulation methodologies that incorporate both Monte Carlo and risk neutral frameworks. Based on assessments of expected returns and volatilities that are consistent with the expectations of market participants, a distribution of equity values was produced which covered the range of events that an informed market participant might expect. These outcomes were organized into ranges and a probability was calculated based on the percent of the total falling into each range. This process created a range of equity values.

In addition to the range of simulation outcomes associated with the firm as a going concern, an additional outcome was assigned to reflect the increased likelihood of the occurrence of an initial public offering. As a result of an in-depth management assessment regarding the developments in our business, a 45% probability of an initial public offering was assigned. In particular, during the period from December 31, 2012, through March 1, 2013, the following events occurred which increased the likelihood of the occurrence of an initial public offering:

Using a contingent claims framework, each equity value in the array was allocated to the various components of the capital structure, including our common stock. The value of our common stock was weighted by its respective probability to determine the final fair value of our common stock as of March 1, 2013. The valuation analysis yielded a fair value of our common stock of $7.57 per share as of March 1, 2013.

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Our board of directors, or a committee of our board of directors acting under delegated authority, granted stock options on the date set forth in the table below subject to the completion of the valuation analysis as of March 1, 2013, and the other objective and subjective factors described above:

Grant Date		Number of common shares underlying options granted				Exercise price per common share				Fair value per common share				Intrinsic value per grant
March 13, 2013			98,591			$	7.57			$	7.57				—

In connection with the preparation of the financial statements necessary for inclusion in the registration statement related to this offering, we reassessed the estimated fair value of our common stock on a retrospective basis for financial reporting purposes. Based on the September 30, 2012, and December 31, 2012, valuation reports, we concluded that certain stock options granted during 2012 had an exercise price (which was determined in good faith based on all available information as of the date of grant, rather than based on retrospective analysis) that was different than the reassessed fair value of the common stock at the date of grant. We used these fair value reassessments to determine stock-based compensation expense which is recorded in our financial statements. The difference between the reassessed fair value of the common stock versus the exercise price of the stock options is reflected as intrinsic value in the applicable tables above.

The intrinsic value of all outstanding vested and unvested options as of December 31, 2012, was as follows:

		Number of Options				Aggregate Intrinsic Value
						(in thousands)
Unvested			989,143			$	1,471
Vested			1,604,280			$	3,231

Restricted Stock Units (RSUs)

In 2012, we issued RSUs to certain employees which vest immediately upon the earlier of (i) a change of control and (ii) the effective date of a registration statement for our initial public offering, subject to the employee’s continuous service with us from the grant date through the applicable vesting event. The RSUs entitle the employee upon or shortly following vesting to receive a number of shares of common stock that is equal to the number of RSUs granted. We only record compensation expense attributable to the RSUs if it is probable that the performance criteria will be satisfied. As of December 31, 2012, there were a total of 43,199 RSUs outstanding. The grant date fair value of the RSUs was $2.49 per unit. As of December 31, 2012, no compensation has been recorded as it was not considered probable that the performance criteria will be met.

Fair Value Adjustments to Warrant Liability

We issued warrants to purchase shares of our Series F preferred stock in connection with (i) a loan and security agreement entered into with SVB and MidCap in January 2012, and (ii) an equity financing agreement with certain investors for the sale of Series F preferred stock, which occurred in February 2011. As discussed in Note 2 to our financial statements appearing elsewhere in this prospectus, the warrants to purchase shares of our Series F preferred stock are classified as a liability and are required to be measured at fair value. The adjustment to the fair valuation of the warrants resulted in other expense of $385,000 and $847,000 for the year ended December 31, 2011 and 2012, respectively. The warrants were valued using a two stage process. Using a contingent claims model, the fair value of total equity and all components of our capital structure, including the warrants, was determined as of the time of our sale of Series F preferred stock. Using this value as a starting point, a series of equity values and associated probabilities were calculated using simulation methodologies that incorporated both Monte Carlo and risk neutral frameworks. Using a contingent claims framework, each equity value in the array was allocated to the various components of the capital structure including the warrants. Each warrant value was weighted by its respective probability to determine the final fair value of the warrants as of December 31, 2011 and 2012. The key unobservable inputs used in the determination of the December 31, 2012 fair value are (i) volatility – 79%, (ii) range of implied fair value of the Series F redeemable convertible preferred stock – $2.19 to $2.85, (iii) time to liquidity – 8 months to 5 years, and (iv) range of probabilities of liquidity event outcomes – 2% to 31%.

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Upon completion of this offering, these warrants will be adjusted to fair value with any changes recorded in other income (expense). The warrant liability will then be reclassified as common stock warrants. At such time, the warrant liability will also be reclassified to additional paid-in capital, and no further revaluations will be necessary.

Utilization of Net Operating Loss Carryforwards

At December 31, 2011 and 2012, we had net operating loss carryforwards for federal and state tax purposes of approximately $80.2 million and $75.9 million and $83.4 million and $65.8 million, respectively, which begin to expire in 2020 and 2018, respectively. In addition, we had tax credit carryforwards for federal tax purposes of approximately $0.9 million as of December 31, 2012, which begin to expire in 2022. The future utilization of net operating loss and tax credit carryforwards may be limited due to changes in ownership. In general, if we experience a greater than 50% point aggregate change in ownership of certain significant stockholders or groups over a three-year period (a Section 382 ownership change), utilization of our pre-change net operating loss carryforwards is subject to an annual limitation under Section 382 of the Code (and similar state laws). The annual limitation generally is determined by multiplying the value of our stock at the time of such ownership change (subject to certain adjustments) by the applicable long-term tax-exempt rate. Such limitations may result in expiration of a portion of the pre-change net operating loss carryforwards before utilization and may be substantial. We have determined that a Section 382 ownership change occurred in 2002 and 2007 resulting in limitations of at least $64,000 and $762,000, respectively, of losses incurred prior to the respective ownership change dates. We believe that, with our initial public offering, our most recent private placement and other transactions that have occurred since 2007, we may have triggered an ownership change limitation. We may also experience ownership changes in the future as a result of subsequent shifts in our stock ownership. As a result, if we earn net taxable income, our ability to use our pre-change net operating loss carryforwards to offset United States federal taxable income may be subject to limitations, which could potentially result in increased future tax liability to us.

JOBS Act

On April 5, 2012, the JOBS Act was enacted. Section 107 of the JOBS Act provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have irrevocably elected not to avail ourselves of this extended transition period and, as a result, we will adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required for other public companies.

We are in the process of evaluating the benefits of relying on other exemptions and reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, as an “emerging growth company,” we intend to rely on certain of these exemptions, including without limitation, (i) providing an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act, and (ii) complying with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements, known as the auditor discussion and analysis. We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of this offering, (b) in which we have total annual gross revenue of at least $1.0 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our common stock that is held by non-affiliates exceeds $700.0 million as of the prior June 30th, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period.

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Results of Operations

Comparison of the Years Ended December 31, 2010 and 2011

		Years Ended December 31,								Increase (Decrease)				% Increase (Decrease)
		2010				2011
		(in thousands, except percentages)
Revenues:
Collaboration and license revenue		$	—			$	55			$	55				*
Contract and grant revenue			1,715				12,046				10,331				602.4	%
Operating expenses:
Research and development			19,413				27,695				8,282				42.6	%
General and administrative			7,606				9,398				1,792				23.6	%
Loss from operations			(25,304	)			(24,992	)			312				1.2	%
Interest expense, net			(154	)			(212	)			58				37.7	%
Fair value of warrant adjustment			—				(385	)			385				*
Other income			1				—				(1	)			*
Net loss		$	(25,457	)		$	(25,589	)		$	132				0.5	%

Contract and Grant Revenue

For the year ended December 31, 2011, we recorded $12.0 million in revenue for services performed pursuant to the BARDA contract that was awarded in February 2011. In the year ended December 31, 2010, our revenue consisted of amounts paid pursuant to our grant from the NIAID and a $491,000 federal research and development tax credit.

Research and Development Expenses

Research and development expenses were $19.4 million and $27.7 million for the years ended December 31, 2010 and 2011, respectively. The increase in research and development expenses during this period of $8.3 million, or 42.6%, was primarily due to:

General and Administrative

General and administrative expenses were $7.6 million and $9.4 million for the years ended December 31, 2010 and 2011, respectively. The increase in general and administrative expenses during this period of $1.8 million, or 23.6%, was primarily due to:

Interest Expense, Net

Interest expense, net was $154,000 and $212,000 for the years ended December 31, 2010 and 2011, respectively. The increase of $58,000, or 37.7%, relates to interest expense attributable to a full year of

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interest payments made in 2011 in connection of the loan we incurred in March 2010, as compared to eight months of interest payments made in 2010.

Fair Value of Warrant Adjustment

Some of our outstanding warrants are deemed to be derivative instruments that require liability classification and mark-to-market accounting. As such, at the end of each reporting period, the fair value of the warrants were determined by us using a two-stage contingent claims model, resulting in the recognition of additional losses of $385,000 for the year ended December 31, 2011. The loss is due to the increased value of the warrants due to increased likelihood of the occurrence of a liquidity event. We did not have any warrants outstanding at December 31, 2010 that were deemed to be derivative instruments.

Comparison of the Years Ended December 31, 2011 and 2012

		Years Ended December 31,								Increase (Decrease)				% Increase (Decrease)
		2011				2012
		(in thousands, except percentages)
Revenues:
Collaboration and license revenue		$	55			$	17,445			$	17,390				316.2	%
Contract and grant revenue			12,046				16,275				4,229				35.1	%
Operating expenses:
Research and development			27,695				27,821				126				0.4	%
General and administrative			9,398				8,682				(716	)			(7.6	%)
Income (loss) from operations			(24,992	)			(2,783	)			(22,209	)			(88.9	%)