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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 10-Q
(Mark One)
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2022
 
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from                  to                
 
Commission file number: 001-35867
 
CHIMERIX, INC.
(Exact Name of Registrant as Specified in Its Charter)  
Delaware 33-0903395
(State or Other Jurisdiction of Incorporation or Organization) (I.R.S. Employer Identification No.)
  
2505 Meridian Parkway, Suite 100
  
Durham, North Carolina
 27713
(Address of Principal Executive Offices) (Zip Code)
 
(919) 806-1074
(Registrant’s Telephone Number, Including Area Code)

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

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

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




Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes   No x
 
As of May 5, 2022, the number of outstanding shares of the registrant’s common stock, par value $0.001 per share, was 87,436,180.



CHIMERIX, INC.
 
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2022
 
INDEX
  
 Page
 
 

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


2



PART I - FINANCIAL INFORMATION
 
ITEM 1.    CONSOLIDATED FINANCIAL STATEMENTS
 
CHIMERIX, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
(unaudited) 
 March 31, 2022December 31, 2021
ASSETS  
Current assets:  
Cash and cash equivalents$31,957 $15,397 
Short-term investments, available-for-sale21,421 72,970 
Inventories3,406 2,760 
Prepaid expenses and other current assets5,766 4,678 
Total current assets62,550 95,805 
Long-term investments 2,022 
Property and equipment, net of accumulated depreciation229 253 
Operating lease right-of-use assets2,298 2,404 
Other long-term assets439 56 
Total assets$65,516 $100,540 
LIABILITIES AND STOCKHOLDERS' EQUITY  
Current liabilities:  
Accounts payable$3,494 $2,788 
Accrued liabilities11,718 13,108 
Note payable 14,000 
Total current liabilities15,212 29,896 
Loan fees250  
Lease-related obligations2,256 2,392 
Total liabilities17,718 32,288 
Stockholders’ equity:  
Preferred stock, $0.001 par value, 10,000,000 shares authorized at March 31, 2022 and December 31, 2021; no shares issued and outstanding as of March 31, 2022 and December 31, 2021
  
Common stock, $0.001 par value, 200,000,000 shares authorized at March 31, 2022 and December 31, 2021; 87,436,180 and 86,884,266 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively
87 87 
Additional paid-in capital958,147 953,782 
Accumulated other comprehensive loss, net(73)(21)
Accumulated deficit(910,363)(885,596)
Total stockholders’ equity47,798 68,252 
Total liabilities and stockholders’ equity$65,516 $100,540 
 
The accompanying notes are an integral part of the consolidated financial statements.



3



CHIMERIX, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(in thousands, except share and per share data)
(unaudited)
 Three Months Ended March 31,
 20222021
Revenues:
Contract and grant revenue$ $1,433 
Licensing revenue15 2 
Total revenues15 1,435 
Cost of goods sold114  
Gross Profit(99)1,435 
Operating expenses:  
Research and development19,040 11,862 
General and administrative5,632 4,136 
Acquired in-process research and development 82,890 
Total operating expenses24,672 98,888 
Loss from operations(24,771)(97,453)
Other income:
Interest income and other, net4 38 
Net loss(24,767)(97,415)
Other comprehensive loss:  
Unrealized loss on debt investments, net(52)(43)
Comprehensive loss$(24,819)$(97,458)
Per share information:  
Net loss, basic and diluted$(0.28)$(1.21)
Weighted-average shares outstanding, basic and diluted87,088,804 80,204,094 
  
The accompanying notes are an integral part of the consolidated financial statements.

 
4



CHIMERIX, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(in thousands)
(unaudited) 
Common Stock
SharesAmountAdditional
Paid-in Capital
Accumulated Other
Comprehensive
Gain (Loss)
Accumulated
Deficit
Total 
Stockholders’
Equity (Deficit)
Balance, December 31, 202186,884,266 $87 $953,782 $(21)$(885,596)$68,252 
Share-based compensation— — 3,708 — — 3,708 
Exercise of stock options34,406 — 102 — — 102 
Employee stock purchase plan purchases383,981 — 555 — — 555 
RSU stock issuance133,527 — — — — — 
Comprehensive loss:
Unrealized loss on investments, net— — — (52)— (52)
Net loss— — — — (24,767)(24,767)
Total comprehensive loss(24,819)
Balance, March 31, 202287,436,180 $87 $958,147 $(73)$(910,363)$47,798 

Common Stock
SharesAmountAdditional
Paid-in Capital
Accumulated Other
Comprehensive
Gain (Loss)
Accumulated
Deficit
Total 
Stockholders’
Equity (Deficit)
Balance, December 31, 202062,816,039 $63 $785,673 $ $(712,360)$73,376 
Share-based compensation— — 2,584 — — 2,584 
Exercise of stock options710,132 1 3,529 — — 3,530 
Employee stock purchase plan purchases259,837 — 330 — — 330 
RSU stock issuance168,752 — — — — — 
Issuance of common stock related to asset acquisition8,723,769 9 43,436 — — 43,445 
Issuance of common stock, net of issuance costs of $7.2 million
13,529,750 13 107,829 — — 107,842 
Comprehensive loss:
Unrealized loss on investments, net— — — (43)— (43)
Net loss— — — — (97,415)(97,415)
Total comprehensive loss(97,458)
Balance, March 31, 202186,208,279 $86 $943,381 $(43)$(809,775)$133,649 

5



CHIMERIX, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited) 
 Three Months Ended March 31,
 20222021
Cash flows from operating activities:  
Net loss$(24,767)$(97,415)
Adjustments to reconcile net loss to net cash used in operating activities:
  
Depreciation of property and equipment24 71 
Amortization of debt issuance costs33  
Amortization of discount/premium on investments53 128 
Share-based compensation 3,708 2,584 
Fair value of common stock issued related to asset acquisition 43,445 
Note payable related to asset acquisition 14,000 
Gain on sale of investments(1)(2)
Lease-related amortization63 41 
Changes in operating assets and liabilities:  
Accounts receivable (159)
Inventories(646) 
Prepaid expenses and other assets(1,002)(309)
Accounts payable and accrued liabilities(912)(280)
Net cash used in operating activities(23,447)(37,896)
Cash flows from investing activities:  
Purchases of property and equipment (75)
Purchases of short-term investments(5,258)(91,944)
Purchases of long-term investments (7,554)
Proceeds from sales of short-term investments7,699 2,007 
Proceeds from maturities of short-term investments51,026 8,850 
Net cash provided by (used in) investing activities53,467 (88,716)
Cash flows from financing activities:  
Proceeds from exercise of stock options102 3,530 
Proceeds from employee stock purchase plan556 330 
Proceeds from issuance of common stock, net of commissions 107,843 
Payments of debt issuance costs(118) 
Payment of note payable related to asset acquisition(14,000) 
Net cash (used in) provided by financing activities(13,460)111,703 
Net increase (decrease) in cash and cash equivalents16,560 (14,909)
Cash and cash equivalents:
Beginning of period15,397 46,989 
End of period$31,957 $32,080 
 
The accompanying notes are an integral part of the consolidated financial statements.

 
 
6



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

Chimerix is a biopharmaceutical company whose mission it is to develop medicines that meaningfully improve and extend the lives of patients facing deadly diseases.

The Company’s activities since inception have primarily consisted of performing research and development activities. The Company has no current source of revenue to sustain present activities, and does not expect to generate meaningful revenue until and unless the Company successfully commercializes one of its product candidates or enters into a procurement agreement with the US government. The Company is subject to a number of risks and uncertainties similar to those of other life science companies at a similar stage of development, including, among others, the need to obtain adequate additional financing, successful development efforts including regulatory approval of products, compliance with government regulations, successful commercialization of potential products, protection of proprietary technology and dependence on key individuals.

Basis of Presentation

The accompanying unaudited consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information, the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements and should be read in conjunction with the Company’s audited financial statements and notes thereto included in its Annual Report on Form 10-K for the year ended December 31, 2021. In the opinion of the Company’s management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of its financial position, operating results and cash flows for the periods presented have been included. Operating results for the three months ended March 31, 2022 are not necessarily indicative of the results that may be expected for the full year, for any other interim period or for any future year. 

Fair Value of Financial Instruments

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

At March 31, 2022 and December 31, 2021, the Company had cash equivalents including money market funds, whose value is based on quoted market prices. At March 31, 2022 and December 31, 2021, the Company had short-term investments,
7



including U.S. Treasury securities, whose value is based on quoted market prices. Accordingly, these securities are classified as Level 1.
 
At March 31, 2022, the Company had cash equivalents including money commercial paper and corporate bonds. At March 31, 2022, the Company had short-term investments, including U.S. Treasury securities, commercial paper. and corporate bonds, and on December 31, 2021, the Company had short-term investments including U.S. Treasury securities and corporate bonds. As quoted prices are not available for these securities, they are valued using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security’s credit rating, prepayment assumptions and other factors such as credit loss assumptions. Accordingly, these securities are classified as Level 2.
 
There was no material re-measurement to fair value of financial assets and liabilities that are not measured at fair value on a recurring basis. For additional information regarding the Company's investments, please refer to Note 2, "Investments."
 
Below are tables that present information about certain assets measured at fair value on a recurring basis (in thousands):
 
Fair Value Measurements
March 31, 2022
 TotalQuoted Prices in
Active Markets
for Identical Assets
(Level 1)
Significant Other
Observable Inputs
(Level 2)
Significant
Unobservable Inputs
(Level 3)
Cash equivalents
     Money market funds$17,785 $17,785 $ $ 
Commercial paper7,497  7,497  
     Corporate bonds1,000  1,000  
          Total cash equivalents26,282 17,785 8,497  
Short-term investments
     U.S. treasury securities9,488 4,507 4,981  
     Commercial paper6,972  6,972  
     Corporate bonds4,961  4,961  
          Total short-term investments21,421 4,507 16,914  
               Total assets$47,703 $22,292 $25,411 $ 
Fair Value Measurements
December 31, 2021
 TotalQuoted Prices in
Active Markets
for Identical Assets
(Level 1)
Significant Other
Observable Inputs
(Level 2)
Significant
Unobservable Inputs
(Level 3)
Cash equivalents
     Money market funds$11,841 $11,841 $ $ 
          Total cash equivalents11,841 11,841   
Short-term investments
     U.S. treasury securities7,517 2,523 4,994  
     Commercial paper34,887  34,887  
     Corporate bonds30,566  30,566  
          Total short-term investments72,970 2,523 70,447  
Long-term investments
     U.S. treasury securities2,022 2,022   
          Total long-term investments2,022 2,022   
               Total assets$86,833 $16,386 $70,447 $ 
  
8



Inventories

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

At March 31, 2022, the Company’s inventory is related to TEMBEXA, which is being manufactured for the treatment of smallpox and potential delivery to the Strategic National Stockpile (SNS) for the U.S. government and other government agencies. TEMBEXA was approved by the FDA on June 4, 2021, at which time the Company began to capitalize inventory costs associated with TEMBEXA. Prior to FDA approval of TEMBEXA, all costs related to the manufacturing of TEMBEXA were charged to research and development expense in the period incurred as there was no alternative future use.

The Company values its inventories at the lower of cost or estimated net realizable value. The Company determines the cost of its inventories, which includes amounts related to materials, manufacturing costs, shipping and handling costs on a first-in, first-out (FIFO) basis. Work-in-process includes all inventory costs prior to packaging and labelling, including raw material, active product ingredient, and drug product. Finished goods include packaged and labelled products. The Company's inventories at March 31, 2022 consisted of $2.6 million of work-in-process and $0.8 million of finished goods.

The Company’s assessment of market value requires the use of estimates regarding the net realizable value of its inventory balances, including an assessment of excess or obsolete inventory. The Company’s determination that a valuation reserve might be required, in addition to the quantification of such reserve, requires it to utilize judgment. The Company determines excess or obsolete inventory based on multiple factors, including an estimate of the future demand for its products, product expiration dates and current sales levels. The Company’s assumptions of future demand for its products are inherently uncertain and if the Company were to change any of these judgments or estimates, it could cause a material increase or decrease in the amount of inventory reserves that the Company reports in a particular period. In addition, the Company's inventory may experience expiration of its shelf-life stability. During the three months ended March 31, 2022, the Company did not record a reserve for inventory as the Company assumes TEMBEXA will be sold to the U.S. government under a procurement contract with Biomedical Advanced Research and Development Authority (BARDA) or could be sold to other governmental agencies. Should no procurement contract be secured in the future, the Company may reserve part or all of our inventory balance, which would be included in cost of sales. During the three months ended March 31, 2022, the Company wrote-off $0.1 million of inventory deemed to be unsalable to Cost of goods sold on the Consolidated Statements of Operations and Comprehensive Loss.

Deferred Loan Costs

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

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


9



Accrued Liabilities

Accrued liabilities consisted of the following (in thousands):
March 31, 2022December 31, 2021
Accrued research and development expenses$6,155 $4,642 
Accrued compensation3,068 5,491 
Other accrued liabilities2,495 2,975 
Total accrued liabilities$11,718 $13,108 

Revenue Recognition

Policy

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

Biomedical Advanced Research and Development Authority (BARDA)

In February 2011, the Company entered into a contract with BARDA for the advanced development of TEMBEXA as a medical countermeasure in the event of a smallpox release. Under the contract, the Company received $72.5 million in expense reimbursement and $4.6 million in fees over the performance of one base segment and four option segments. Exercise of each option segment was solely at the discretion of BARDA. The Company assessed the services in accordance with the authoritative guidance and concluded that there was a potential of five separate contracts (one base segment and four option segments) within this agreement, each of which had a single performance obligation. All option segments (one through four) were exercised, as well as the base segment. The transaction price for each segment, based on the transaction price as defined in each segment contract, was allocated to the single performance obligation for each contract. The transaction price was recognized over time by measuring the progress toward complete satisfaction of the performance obligation. For reimbursable expenses, this occurred as qualifying research activities were conducted based on invoices from company vendors. For the fixed fee, the progress toward complete satisfaction was estimated based on the costs incurred to date relative to the total estimated costs per the terms of each contract. The Company typically invoiced BARDA monthly as costs were incurred. Any amounts received in advance of performance were recorded as deferred revenue until earned. The base segment and first option segment were completed prior to adoption of ASC 606. The second and third option segments were completed on August 20, 2020. The fourth option segment was completed on September 1, 2021 and the contract has expired in accordance with its terms.

Grant Revenue

Grant revenue under cost-plus-fixed-fee grants from the federal government and private foundations is recognized as allowable costs are incurred and fees are earned. As a result of its acquisition of Oncoceutics, Inc. (Oncoceutics), the Company became the beneficiary of two federal grant programs and two grant programs with private foundations, of which the federal grant programs ended in the third quarter of 2021. At March 31, 2022, the Company has a deferred revenue balance of $0.2 million related to these grants. Additionally, for the three months ended March 31, 2022 and 2021, the Company recognized no grant revenue and $0.2 million of grant revenue related to these grants, respectively.
 
Research and Development Prepaids and Accruals

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

The Company’s objective is to reflect the appropriate research and development expenses in its financial statements by
10



matching those expenses with the period in which services and efforts are expended. The Company accounts for these expenses according to the progress of its research and development efforts. The Company determines prepaid and accrual estimates through discussion with applicable personnel and outside service providers as to the progress or state of communication of clinical trials, or other services completed. The Company adjusts its rate of research and development expense recognition if actual results differ from its estimates. The Company makes estimates of its prepaid and accrued expenses as of each balance sheet date in its financial statements based on facts and circumstances known at that time. Although the Company does not expect its estimates to be materially different from amounts actually incurred, its understanding of status and timing of services performed relative to the actual status and timing of services performed may vary and may result in the Company reporting amounts that are too high or too low for any particular period. Through March 31, 2022, there had been no material adjustments to the Company’s prior period estimates of prepaid and accruals for research and development expenses. The Company’s research and development prepaids and accruals are dependent upon the timely and accurate reporting of contract research organizations and other third-party vendors.
 
Basic and Diluted Net Loss Per Share of Common Stock 

Basic net loss per share of common stock is computed by dividing net loss by the weighted-average number of shares of common stock outstanding during the period, excluding the dilutive effects of non-vested restricted stock, stock options, and employee stock purchase plan purchase rights. Diluted net loss per share of common stock is computed by dividing net loss by the sum of the weighted-average number of shares of common stock outstanding during the period plus the potential dilutive effects of non-vested restricted stock, stock options, and employee stock purchase plan purchase rights outstanding during the period calculated in accordance with the treasury stock method, but are excluded if their effect is anti-dilutive. Because the impact of these items is anti-dilutive during the periods of net loss, there was no difference between basic and diluted loss per share of common stock for the three months ended March 31, 2022 and 2021.

Use of Estimates

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

Segments

The Company operates in only one segment, pharmaceuticals.

Impact of Recently Issued Accounting Standards

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

11



Note 2. Investments
 
The following tables summarize the Company's debt investments (in thousands):
 March 31, 2022
 Amortized CostGross Unrealized GainsGross Unrealized LossesEstimated Fair Value
Corporate bonds$4,968 $ $(6)$4,962 
U.S. treasury securities9,537  (50)9,487 
Commercial paper6,989  (17)6,972 
Total investments$21,494 $ $(73)$21,421 
 December 31, 2021
 Amortized CostGross Unrealized GainsGross Unrealized LossesEstimated Fair Value
Corporate bonds$30,571 $2 $(7)$30,566 
Commercial paper34,890 2 (5)34,887 
U.S. treasury securities9,552  (13)9,539 
Total investments$75,013 $4 $(25)$74,992 
 
The following tables summarize the Company's debt investments with unrealized losses, aggregated by investment type and the length of time that individual investments have been in a continuous unrealized loss position (in thousands, except number of securities):

March 31, 2022
Less than 12 MonthsGreater than 12 MonthsTotal
Fair ValueUnrealized LossFair ValueUnrealized LossFair ValueUnrealized Loss
Corporate bonds$4,962 $(6)$ $ $4,962 $(6)
Commercial paper6,972 (17)  6,972 (17)
U.S. treasury securities9,487 (50)  9,487 (50)
Total$21,421 $(73)$ $ $21,421 $(73)
Number of securities with unrealized losses10  10 
December 31, 2021
Less than 12 MonthsGreater than 12 MonthsTotal
Fair ValueUnrealized LossFair ValueUnrealized LossFair ValueUnrealized Loss
Corporate bonds$28,362 $(7)$ $ $28,362 $(7)
Commercial paper8,991 (5)  8,991 (5)
U.S. treasury securities$9,539 $(13)$ $ $9,539 $(13)
Total$46,892 $(25)$ $ $46,892 $(25)
Number of securities with unrealized losses18  18 

The Company periodically reviews available-for-sale debt investments for other-than-temporary declines in fair value below the cost basis and whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company evaluates, among other things, the duration and extent to which the fair value of a security is less than its cost; the financial condition of the issuer and any changes thereto; and the Company’s intent to sell, or whether it will more likely than not be required to sell, the security before recovery of its cost basis. At March 31, 2022, the Company did not intend to sell, and was not more likely than not to be required to sell, the available-for-sale debt investments in an unrealized loss position before recovery of the cost basis of the securities, which may be at maturity. There were no such declines in value
12



for the three months ended March 31, 2022 and 2021. Unrealized gains and losses on debt investments are recorded to unrealized (loss) gain on debt investments, net in the Consolidated Statements of Operations and Comprehensive Loss. Realized gains and losses on debt investments are recorded based on specific identification to interest income and other, net in the Consolidated Statements of Operations and Comprehensive Loss. The Company recognizes interest income on an accrual basis in interest income in the Consolidated Statements of Operations and Comprehensive Loss.

The following table summarizes the scheduled maturity for the Company's debt investments at March 31, 2022 (in thousands):
Maturing in one year or less$21,421 
     Total debt investments$21,421 
 
Note 3. Commitments and Contingencies
 
Leases

The Company leases its facilities under long-term operating leases that expire at various dates through 2026. The Company generally has options to renew lease terms on its facilities, which may be exercised at the Company's sole discretion. In addition, certain lease arrangements may be terminated prior to their original expiration date at the Company's discretion. The Company evaluates renewal and termination options at the lease commencement date to determine if it is reasonably certain to exercise the option and has concluded on all operating leases that it is not reasonably certain that any options will be exercised. The weighted-average remaining lease term for the Company's operating leases as of March 31, 2022 was 4.34 years.

Expense related to leases is recorded on a straight-line basis over the lease term. Lease expense under operating leases, including common area maintenance fees, totaled approximately $0.2 million and $0.1 million, respectively, for the three months ended March 31, 2022 and 2021.

The discount rate implicit within the Company's leases is generally not determinable and therefore the Company determines the discount rate based on its incremental borrowing rate based on the information available at commencement date. As of March 31, 2022, the operating lease liabilities reflect a weighted-average discount rate of 7.89%.

The following table sets forth the operating lease right-of-use assets and liabilities as of March 31, 2022 (in thousands):
Assets
Operating lease right-of-use assets $2,298 
Liabilities
Operating lease short-term liabilities (recorded within Accrued liabilities)$524 
Operating lease long-term liabilities (recorded within Lease-related obligations)2,256 
     Total operating lease liabilities$2,780 

Operating lease payments over the remainder of the lease terms are as follows (in thousands):
Years Ending December 31,As of March 31, 2022
2022539 
2023736 
2024759 
2025781 
2026467 
Total future minimum rental payments$3,282 
     Less amount of lease payments representing interest502 
Total present value of lease payments$2,780 

13



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

For the three months ended March 31, 2022 and 2021, the Company made lease payments of approximately $98,000 and $133,000, respectively.

Sublease

The Company subleased 3,537 square feet of its office space under a non-cancelable operating lease that expired in February 2021. For the three months ended March 31, 2021, the Company recognized approximately $12,000 of income in Interest income and other, net on the Consolidated Statement of Operations and Comprehensive Loss. As this lease has terminated, there are no future minimum rentals payments to be received.

Significance of Revenue Source

The Company was the recipient of federal research contract funds from BARDA, the primary source of the Company's prior year contract and grant revenue. Periodic audits are required under the Company’s BARDA agreement and certain costs may be questioned as appropriate under the BARDA agreement. At March 31, 2022 and December 31, 2021, the Company had recorded a provision for potential refundable amounts of $52,000.
 
Note 4. Equity Transactions and Share-based Compensation

Common Stock

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

Stock Options

The Company maintains a 2013 Equity Incentive Plan (the 2013 Plan), which provides for the grant of incentive stock options (ISOs), non-statutory stock options (NSOs), stock appreciation rights, restricted stock awards, restricted stock unit (RSU) awards, performance-based stock awards, and other forms of equity compensation (collectively, stock awards), all of which may be granted to employees, including officers, non-employee directors and consultants of the Company and its affiliates. Additionally, the 2013 Plan provides for the grant of performance cash awards. The number of shares of common stock reserved for future issuance automatically increases on January 1 of each calendar year by 4% of the total number of shares of capital stock outstanding on December 31 of the preceding calendar year, or a lesser number of shares determined by the Company’s board of directors. On January 1, 2022, the common stock reserved for issuance under the 2013 Plan was automatically increased by 3.5 million shares. As of March 31, 2022, there was a total of 1.6 million shares reserved for future issuance under the 2013 Plan. The Company issued approximately 34,000 shares of common stock pursuant to the exercise of stock options during the three months ended March 31, 2022. The Company issued 710,000 shares of common stock pursuant to the exercise of stock options during the three months ended March 31, 2021, respectively.

14



Employee Stock Purchase Plan

The Company maintains a 2013 Employee Stock Purchase Plan (ESPP), which provides for the issuance of shares of common stock pursuant to purchase rights granted to the Company’s employees or to employees of any of its designated affiliates. The Company has reserved a total of 4.3 million shares of common stock to be purchased under the ESPP, of which 2.3 million shares remained available for purchase as of March 31, 2022. The number of shares of common stock reserved for issuance automatically increases on January 1 of each calendar year, by the lesser of (a) 1% of the total number of shares of common stock outstanding on December 31 of the preceding calendar year, (b) 422,535 shares, or (c) a number determined by the Company’s board of directors that is less than (a) and (b). On January 1, 2022, the common stock reserved for issuance under the ESPP was automatically increased by an additional 422,535 shares.

The ESPP provides for an automatic reset feature to start participants on a new twenty-four month participation period in the event that the common stock market value on a purchase date is less than the common stock value on the first day of the twenty-four month offering period. Eligible employees may authorize an amount up to 15% of their salary to purchase common stock at the lower of a 15% discount to the beginning price of their offering period or a 15% discount to the ending price of each six-month purchase interval. The Company issued approximately 384,000 and 260,000 shares of common stock pursuant to the ESPP during the three months ended March 31, 2022 and 2021, respectively. Compensation expense for shares purchased under the ESPP related to the purchase discount and the “look-back” option and were determined using a Black-Scholes option pricing model.

Restricted Stock Units

The Company has issued RSUs to certain employees which vest based on service criteria. When vested, the RSU represents the right to be issued the number of shares of the Company's common stock that is equal to the number of RSUs granted. The grant date fair value for RSUs is based upon the market price of the Company's common stock on the date of the grant. The fair value is then amortized to compensation expense over the requisite service period or vesting term. The Company issued 134,000 shares of common stock pursuant to the vesting of RSUs during the three months ended March 31, 2022. The Company issued 169,000 shares of common stock pursuant to the vesting of RSUs during the three months ended March 31, 2021.

Stock-based Compensation

For awards with only service conditions and graded-vesting features, the Company recognizes compensation expense on a straight-line basis over the requisite service period. Total share-based compensation expense recognized related to stock options, the ESPP and RSUs was as follows (in thousands): 
 Three Months Ended March 31,
 20222021
Research and development expense$1,903 $1,377 
General and administrative expense1,805 1,207 
          Total share-based compensation expense$3,708 $2,584 

Note 5. Income Taxes
 
The Company estimates an annual effective tax rate of 0% for the year ending December 31, 2022 as the Company incurred losses for the three month period ended March 31, 2022, and is forecasting an estimated net loss for both financial statement and tax purposes for the year ending December 31, 2022. Therefore, no federal or state income taxes are expected and none have been recorded at this time. Income taxes have been accounted for using the liability method in accordance with FASB ASC 740.

Due to the Company's history of losses since inception, there is not enough evidence at this time to support that the Company will generate future income of a sufficient amount and nature to utilize the benefits of its net deferred tax assets. Accordingly, the deferred tax assets have been reduced by a full valuation allowance, since the Company cannot currently support that realization of its deferred tax assets is more likely than not. However, the Company feels its deferred tax assets may be used upon the Company becoming profitable.
 
At March 31, 2022, the Company had no unrecognized tax benefits that would reduce the Company’s effective tax rate if recognized.

15



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

In February 2011, the Company entered into a contract with BARDA for the advanced development of TEMBEXA as a medical countermeasure in the event of a smallpox release. Under the contract, BARDA agreed to reimburse the Company, plus pay a fixed fee, for the research and development of TEMBEXA as a broad-spectrum therapeutic antiviral for the treatment of smallpox infections. The contract consists of an initial performance period, referred to as the base performance segment, plus up to four extension periods, referred to as option segments, of which all have been exercised. Under the contract, the Company received $72.5 million in expense reimbursement and $4.6 million in fees.

The fourth option segment ended on September 1, 2021 and the contract has expired in accordance with its terms. For the three months ended March 31, 2021, the Company recognized revenue under this contract of $1.2 million.

Cantex Pharmaceuticals, Inc.

In July 2019, the Company entered into a License and Development Agreement with Cantex Pharmaceuticals, Inc. (Cantex) pursuant to which the Company acquired exclusive worldwide rights to develop and commercialize, for any and all uses, a glycosaminoglycan compound known as DSTAT, which was being studied for the treatment of acute myeloid leukemia. Under the terms of the license agreement, the Company is responsible for, and bears the future costs of, worldwide development and commercialization of DSTAT. On May 13, 2022, the Company provided Cantex with sixty (60) days advance written notification of its intent to terminate the License and Development Agreement. Pursuant to the terms of the license agreement the licensed rights will revert to Cantex.

SymBio Pharmaceuticals

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

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

Ohara Agreement

In 2019, Oncoceutics, Inc., a Delaware corporation (Oncoceutics) entered into a license, development and commercialization agreement with Ohara Pharmaceutical Co., Ltd. for ONC201 in Japan. The Company is entitled to receive up to $2.5 million in nonrefundable regulatory milestone payments. The Company is entitled to double-digit tiered royalties based on the aggregate annual net sales of all products, as defined in the agreement, in Japan.

CR Sanjiu Agreement

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

Note 7. Oncoceutics Acquisition

On January 7, 2021, the Company, Ocean Merger Sub, Inc., a Delaware corporation and wholly-owned subsidiary of the Company (Merger Sub), Oncoceutics and Fortis Advisors, LLC solely in its capacity as representative of the securityholders of
16



Oncoceutics (the Securityholders’ Representative), entered into an Agreement and Plan of Merger (the Merger Agreement). Concurrently with the execution of the Merger Agreement, Merger Sub merged with and into Oncoceutics (the Merger) whereupon the separate corporate existence of Merger Sub ceased, with Oncoceutics continuing as the surviving corporation of the Merger as a wholly-owned subsidiary of the Company.

As consideration for the Merger, the Company (a) paid an upfront cash payment of approximately $25.0 million, subject to certain customary adjustments, (b) issued an aggregate of 8,723,769 shares of the Company's common stock, (c) issued a promissory note to the Securityholders' Representative in the principal amount of $14.0 million (the Seller Note), to be paid in cash, subject to the terms and conditions of the Merger Agreement and the Seller Note, upon the one year anniversary of the closing of the Merger, and (d) agreed to make contingent payments up to an aggregate of $360.0 million based on the achievement of certain development, regulatory and commercialization events as set forth in the Merger Agreement, as well as additional tiered royalty payments based upon future net sales of ONC 201 and ONC 206 products, subject to certain reductions as set forth in the Merger Agreement, and a contingent payment in the event the Company receives any proceeds from the sale of a rare pediatric disease priority review voucher based on Oncoceutics' products. The closing payment may be adjusted after the closing, pursuant to procedures set forth in the Merger Agreement, in connection with the finalization of the cash, transaction expenses, debt and working capital amounts at closing. The promissory note totaling $14.0 million was paid to the Oncoceutics' shareholders in January 2022. A $20.0 million milestone payment was paid and expensed to research and development expenses in the fourth quarter of 2021 related to the achievement of the 20% ORR, evaluated by BICR, of ONC201 in H3 K27M-mutant glioma patients.

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

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

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

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

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Note 8. Subsequent Events

The Company has evaluated subsequent events through the issuance date of these financial statements to ensure that this filing includes appropriate disclosure of events both recognized in the financial statements as of March 31, 2022, and events which occurred subsequently but were not recognized in the financial statements.

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

The Company is currently in negotiation with BARDA on the terms of a TEMBEXA procurement contract. Chimerix will continue to lead this negotiation until its conclusion. Entry into a TEMBEXA procurement contract with BARDA is a closing condition to the acquisition agreement with Emergent.

Upon closing of the transaction, all TEMBEXA inventory will be transferred to Emergent. As of March 31, 2022, the Company had recorded inventories of $3.4 million.

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ITEM 2.     MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited consolidated financial statements and related notes included in this Quarterly Report on Form 10-Q and the audited financial statements and notes thereto as of and for the year ended December 31, 2021 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, both of which are contained in our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the Securities and Exchange Commission (SEC) on March 1, 2022. Past operating results are not necessarily indicative of results that may occur in future periods.
 
Forward-Looking Statements
The information in this discussion contains forward-looking statements and information within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act), which are subject to the “safe harbor” created by those sections. These forward-looking statements include, but are not limited to, statements concerning our strategy, future operations, future financial position, future revenues, projected costs, prospects and plans and objectives of management. The words “anticipates,” “believes,” “estimates,” “expects,” “intends,” “may,” “plans,” “projects,” “will,” “would” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements that we make. These forward-looking statements involve risks and uncertainties that could cause our actual results to differ materially from those in the forward-looking statements, including, without limitation, the risks set forth in Part II, Item IA, “Risk Factors” in this Quarterly Report on Form 10-Q and in our other filings with the SEC. The forward-looking statements are applicable only as of the date on which they are made, and we do not assume any obligation to update any forward-looking statements.
 
OVERVIEW

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

Recent Developments

TEMBEXA (brincidofovir, BCV)

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

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

Subject to the satisfaction or waiver of the closing conditions, the companies expect the transaction may close as early as the second quarter of 2022. We are currently in negotiation with BARDA on the terms of a TEMBEXA procurement contract. We will continue to lead this negotiation until its conclusion. Entry into a TEMBEXA procurement contract with BARDA is a closing condition to the acquisition agreement with Emergent.

Imipridones - ONC201, ONC206 and ONC212

Imipridones are a potential new class of selective cancer therapies. Clinical trials of ONC201 in glioma patients with the H3 K27M-mutation are underway at several locations in the U.S. ONC201 is an orally administered small molecule dopamine
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receptor D2 (DRD2) antagonist and caseinolytic protease (ClpP) agonist for the treatment of gliomas that harbor the H3 K27M mutation.

The FDA had previously requested the Company conduct a retrospective Natural Disease History (NDH) study of recurrent H3 K27M-mutant glioma. More recently, we were informed that the FDA no longer expects to rely on the outcome of a NDH study to inform a regulatory decision given the limitations inherent in NDH studies. Therefore, the Company plans to limit further investment in this study and will disclose the findings at a later date.

The Company has not yet requested formal feedback on a potential NDA submission for accelerated approval, however, communication from the FDA has made it clear that the potential for accelerated approval is more challenging than previously anticipated.

The Company plans to initiate a Phase 3 study of ONC201 in patients who harbor the H3 K27M-mutation. This study is designed to serve as the basis for either a confirmatory approval or first approval. Final study design and protocols are under review. Once agreement has been reached with the FDA, the Company will announce the final clinical design and timeline. While acknowledging the new regulatory sentiment against single-arm data to support accelerated approval, the Company continues work to complete the safety database, clinical pharmacology studies and other items to support a possible regulatory filing for accelerated approval.

ONC201 - Results from 50 Patient Cohort of ONC201 in H3 K27M-mutant Glioma

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

ONC206 and ONC212

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

Dociparstat (DSTAT) for First-Line Acute Myeloid Leukemia (AML)

After evaluating a number of options to accelerate the development of DSAT, and considering the evolving standard of care in first-line AML, Chimerix has decided to discontinue the DSTAT program in order to allocate resources to higher-priority oncology programs. On May 13, 2022, the Company provided Cantex with sixty (60) days advance written notification of its intent to terminate the License and Development Agreement related to DSTAT.

CMX521

Chimerix presented a Late Breaking Oral presentation of CMX521 at the International Conference of Antiviral Research (ICAR) on March 23, 2022. Promising preclinical efficacy data generated using an inhaled version of CMX521 as a potential prophylactic and treatment of SARS-CoV-2 (COVID-19) infection was generated through a collaboration between Chimerix and the Rapidly Emerging Antiviral Drug Development Initiative (READDI) at the University of North Carolina at Chapel Hill (UNC). READDI itself is a global public-private partnership founded at UNC by the UNC Eshelman School of Pharmacy, UNC School of Medicine, Gilling School of Global Public Health, Eshelman Institute for Innovation and the Structural Genomics Consortium. Development remains ongoing with this collaboration.

Silicon Valley Bank Loan and Security Agreement

On January 31, 2022, we entered into a Loan and Security Agreement (the Loan Agreement) with Silicon Valley Bank. The Loan Agreement provides for a four-year secured revolving loan facility (the Credit Facility) in an aggregate principal amount of up to $50.0 million. Proceeds from the Credit Facility may be used for working capital and general corporate purposes.

We entered into the Loan Agreement to increase our financial flexibility by, among other things, providing a non-dilutive source of capital that can be drawn on to support our future working capital needs in light of the previously disclosed potential entry into a sole source contract with BARDA. We view the Credit Facility as a resource that will supplement our financial
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position by providing an alternative source of capital that can be utilized on an as-needed basis, for example, in advance of an anticipated (or future) shipment of TEMBEXA treatment courses to BARDA into the U.S. Strategic National Stockpile over the term of the Credit Facility.

Business Development Review

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

FINANCIAL OVERVIEW

Revenues

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

In February 2011, we entered into a contract with BARDA, a U.S. governmental agency that supports the advanced research and development, manufacturing, acquisition, and stockpiling of medical countermeasures. The contract originally consisted of an initial performance period, referred to as the base performance segment, which ended on May 31, 2013, plus up to four extension periods, referred to as option segments, which have all been exercised. The contract was a cost-plus fixed fee development contract. Under the contract we received $72.5 million in expense reimbursement and $4.6 million in fees. The fourth and final option segment ended on September 1, 2021 and the contract expired in accordance with its terms. Under the BARDA contract, we recognized revenue of $1.2 million during the three months ended March 31, 2021.

In September 2019, we entered into a license agreement with SymBio for worldwide rights to develop, manufacture and commercialize TEMBEXA in all human indications, excluding the use for treatment of orthopoxviruses, including smallpox. Under the contract, we received a $5.0 million upfront payment in October 2019 and could receive up to an additional $180.0 million in potential regulatory and commercial milestones. Since the license agreement was entered into in September 2019, we have recognized all of the $5.0 million of revenue related to the upfront payment. Under the sale of TEMBEXA to Emergent, this agreement will transfer to Emergent. We could receive up to $12.5 million from Emergent in brincidofovir regulatory milestones related to the transferred SymBio license agreement and will recognize revenue upon occurrence of the triggering events related to those milestones.
 
In the future, we may generate revenue from a combination of product sales, license fees, milestone payments and royalties from the sales of products developed under licenses of our intellectual property. We expect that any revenue we generate will fluctuate from quarter to quarter as a result of the timing and amount of license fees, milestone and other payments, and the amount and timing of payments that we receive upon the sale of our products, to the extent any are successfully commercialized. If we fail to complete the development of any product candidates in a timely manner or obtain regulatory approval for them, our ability to generate future revenue, and our results of operations and financial position, would be materially adversely affected.
 
Research and Development Expenses

Since our inception, we have focused our resources on our research and development activities, including conducting preclinical studies and clinical trials, manufacturing development efforts and activities related to regulatory filings for our product candidates. We recognize research and development expenses as they are incurred. Costs for certain development activities are recognized based on an evaluation of the progress to completion of specific tasks using information and data provided to us by our vendors. We cannot determine with certainty the duration and completion costs of the current or future clinical studies of any product candidates. Our research and development expenses consist primarily of:
 
fees paid to consultants and contract research organizations (CROs), including in connection with preclinical and clinical trials, and other related clinical trial fees, such as for investigator grants, patient screening, laboratory work, clinical trial database management, clinical trial material management and statistical compilation and analysis;
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salaries and related overhead expenses, which include stock option, restricted stock units and employee stock purchase program compensation and benefits, for personnel in research and development functions;
payments to third-party manufacturers, which produce, test and package drug substance and drug product (including continued testing of process validation and stability);
costs related to legal and compliance with regulatory requirements; and
license fees for and milestone payments related to licensed products and technologies.
 
The table below summarizes our research and development expenses for the periods indicated (in thousands). Our direct research and development expenses consist primarily of external costs, such as fees paid to investigators, consultants, central laboratories and CROs, in connection with our clinical trials, preclinical development, and payments to third-party manufacturers of drug substance and drug product. We typically use our employee and infrastructure resources across multiple research and development programs.
 Three Months Ended March 31,
 20222021
Direct research and development expenses$11,344 $5,265 
Research and development personnel costs - excluding stock-based compensation5,328 4,462 
Research and development personnel costs - stock-based compensation1,903 1,377 
Indirect research and development expenses465 758 
Total research and development expenses$19,040 $11,862 
 
The successful development of product candidates is highly uncertain. At this time, we cannot reasonably estimate the nature, timing or costs of the efforts that will be necessary to complete the development of any product candidates or the period, if any, in which material net cash inflows from any product candidates may commence. This is due to the numerous risks and uncertainties associated with our business, as detailed in Part II, Item IA, “Risk Factors” in this Quarterly Report on Form 10-Q and in our other filings with the SEC.

TEMBEXA (Brincidofovir, BCV)

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

Imipridones program

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

Dociparstat sodium (DSTAT)

With the decision to stop development of DSTAT, we are currently in the process of closing our Phase 3 DASH AML trial. We expect to incur costs related to this program thru year end as we continue treatment for enrolled patients on the trial and begin to close down clinical trial sites.
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General and Administrative Expenses

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

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

The Financial Accounting Standards Board authoritative guidance requires that share-based payment transactions with employees be recognized in the financial statements based on their fair value and recognized as compensation expense over the vesting period. Total consolidated share-based compensation expense of $3.7 million and $2.6 million was recognized in the three months ended March 31, 2022 and 2021, respectively. The share-based compensation expense recognized included expense for stock options, RSUs and employee stock purchase plan purchase rights.
 
We estimate the fair value of our share-based awards to employees and directors using the Black-Scholes pricing model. This estimate is affected by our stock price as well as assumptions including the expected volatility, expected term, risk-free interest rate, expected dividend yield, expected rate of forfeiture and the fair value of the underlying common stock on the date of grant. 

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

We discussed accounting policies and assumptions that involve a higher degree of judgment and complexity in Note 1 to our consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC on March 1, 2022. There have been no material changes during the three months ended March 31, 2022 to our critical accounting policies, significant judgments and estimates disclosed in our Annual Report on Form 10-K for the year ended December 31, 2021.

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RESULTS OF OPERATIONS 

Comparison of the Three Months Ended March 31, 2022 and March 31, 2021

The following table summarizes our results of operations for the three months ended March 31, 2022 and March 31, 2021, together with the changes in those items (in thousands, except percentages): 
 
 Three Months Ended March 31,Dollar Change% Change
 20222021Increase/(Decrease)
Revenues:
Contract and grant revenue$— $1,433 $(1,433)(100.0)%
Licensing revenue15 13 650.0 
Total revenues15 1,435 (1,420)(99.0)%
Cost of goods sold114 — 114 *
Gross Profit(99)1,435 (1,534)(106.9)%
Operating expenses:    
Research and development19,040 11,862 7,178 60.5 %
General and administrative5,632 4,136 1,496 36.2 %
Acquired in-process research and development— 82,890 (82,890)(100.0)%
Total operating expenses24,672 98,888 (74,216)(75.1)%
Loss from operations(24,771)(97,453)72,682 (74.6)%
Other income:
Interest income and other, net38 (34)(89.5)%
Net loss$(24,767)$(97,415)$72,648 (74.6)%

*Not meaningful or not calculable

Contract and Licensing Revenue

For the three months ended March 31, 2022, total contract and licensing revenue decreased to $15,000 compared to $1.4 million for the three months ended March 31, 2021. The decrease of $1.4 million, or 99.0%, is primarily attributable to the conclusion of our development contract with BARDA.

Cost of Goods Sold

For the three months ended March 31, 2022, cost of goods sold was $0.1 million and for the three months ended March 31, 2021 we did not record any cost of goods sold. The increase of $0.1 million is attributable to the write-off of inventory deemed nonsalable.

Research and Development Expenses

For the three months ended March 31, 2022, our research and development expenses increased to $19.0 million compared to $11.9 million for the three months ended March 31, 2021. The increase of $7.2 million, or 60.5%, is primarily related to the following:

an increase of $7.8 million in research and development expenses primarily related to ongoing development of ONC201 related to manufacturing of drug substance, clinical trial and regulatory support;
an increase of $1.4 million in compensation expenses, of which $0.5 million is related to non-cash stock compensation, to support development of our current pipeline; offset by
a decrease of $1.2 million in brincidofovir development expenses with the approval of TEMBEXA in June 2021;
a decrease of $0.7 million in DSTAT development costs.
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General and Administrative Expenses

For the three months ended March 31, 2022, our general and administrative expenses increased to $5.6 million compared to $4.1 million for the three months ended March 31, 2021. The increase of $1.5 million, or 36.2%, is primarily related to the following:

an increase of $0.7 million in legal, professional, and operational expenses;
an increase of $0.6 million in compensation expenses, primarily related to non-cash stock compensation expense; and
an increase of $0.2 million in ongoing stability expenses related to TEMBEXA in June 2021.

Acquired In-process Research and Development Expenses

In connection with our acquisition of Oncoceutics in January 2021, we recorded a total of $82.9 million of acquired in-process research and development expenses for the three months ended March 31, 2021, which included $82.6 million of in-process research and development assets expensed and $0.3 million of transaction costs. We paid consideration including an upfront payment of $25.0 million to Oncoceutics, $43.4 million related to the fair value of the 8,723,769 shares of common stock issued to Oncoceutics, and a $14.0 million promissory note due on the one-year anniversary of the acquisition.

Interest Income and Other, Net

For the three months ended March 31, 2022, our interest income and other, net decreased to $4,000 compared to $38,000 for the three months ended March 31, 2021. This decrease is primarily attributable to loan fee amortization offsetting interest earned.

LIQUIDITY AND CAPITAL RESOURCES

As of March 31, 2022, we had capital available to fund operations of approximately $53.4 million. Cash in excess of immediate requirements is invested in accordance with our investment policy, primarily with a view to liquidity and capital preservation. We have incurred losses since our inception in 2000 and as of March 31, 2022, we had an accumulated deficit of $910.4 million. We may continue to incur losses 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.

On August 10, 2020, we entered into an Open Market Sale AgreementSM (the Jefferies Sales Agreement) with Jefferies LLC, as agent, pursuant to which we may offer and sell, from time to time through Jefferies, up to $75 million of shares of our common stock. Sales of our common stock made pursuant to the Jefferies Sales Agreement, if any, will be made under our shelf registration statement on Form S-3 (File No. 333-244146), which was declared effective by the SEC on August 17, 2020. As of March 31, 2022, we have not sold any shares of our common stock under the Jefferies Sales Agreement.

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

On May 6, 2021, we filed an automatic shelf registration statement on Form S-3 with the SEC (the 2021 Shelf Registration Statement), which became effective upon filing, pursuant to which we registered for sale an unlimited amount of any combination of our common stock, preferred stock, debt securities, warrants, rights and/or units from time to time and at prices and on terms that we may determine, so long as we continue to satisfy the requirements of a “well-known seasoned issuer” under SEC rules. However, since we no longer qualify as a well-known seasoned issuer, on March 1, 2022, we filed two post-effect amendments to the 2021 Shelf Registration Statement to convert it to a non-automatic shelf registration statement that we are eligible to use. The amendment to the 2021 Shelf Registration Statement to convert to a non-automatic shelf registration was declared effective by the SEC on May 2, 2022 and enables us to offer for sale, from time to time, in one or more offerings, $250 million, in the aggregate, of common stock, preferred stock, debt securities, warrants, right. The 2021 Shelf Registration Statement will remain in effect for up to three years from the date it initially became effective. As of March 31, 2022, no sales have been made under the 2021 Shelf Registration Statement.
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On January 31, 2022, we entered into a Loan and Security Agreement (the Loan Agreement) with Silicon Valley Bank. The Loan Agreement provides for a four-year secured revolving loan facility (the Credit Facility) in an aggregate principal amount of up to $50.0 million. Proceeds from the Credit Facility may be used for working capital and general corporate purposes. Reference the section headed “Recent Developments” above for additional information.

On May 15, 2022, we entered into an agreement to sell TEMBEXA to Emergent for $225 million upfront. Subject to the satisfaction or waiver of the closing conditions, we expect this transaction may close as early as the second quarter of 2022. We remain in negotiations with BARDA on the terms of a TEMBEXA procurement contract, which we also expect to complete in the second quarter of 2022.

We cannot assure that adequate funding will be available on terms acceptable to us, if at all. Any additional equity financings will be dilutive to our stockholders and any additional debt may involve operating covenants that may restrict our business. If adequate funds are not available through these means, we may be required to curtail significantly one or more of our research or development programs, and any launch and other commercialization expenses for any of our products that may receive marketing approval. We cannot assure you that we will successfully develop or commercialize our products under development or that our products, if successfully developed, will generate revenues sufficient to enable us to earn a profit.

We believe that our expected cash flow from sale of TEMBEXA, existing cash, cash equivalents, and investments will enable us to fund our current operating expenses and capital requirements for at least the next 12 months. However, changing circumstances beyond our control may cause us to consume capital more rapidly than we currently anticipate.

Cash Flows

The following table sets forth the significant sources and uses of cash for the period (in thousands): 
 Three Months Ended March 31,
 20222021
Cash sources and uses:  
Net cash used in operating activities$(23,447)$(37,896)
Net cash provided by (used in) investing activities53,467 (88,716)
Net cash (used in) provided by financing activities(13,460)111,703 
Net increase (decrease) in cash and cash equivalents$16,560 $(14,909)

The table above sets forth the net decrease or increase in cash and cash equivalents alone and not the change in our total capital available to fund operations, which also includes short-term and long-term investments. Cash and cash equivalents includes cash on hand and securities with original maturities of 90 days or less.
 
Operating Activities

Net cash used in operating activities of $23.4 million for the three months ended March 31, 2022 was primarily the result of our $24.8 million net loss and the change in operating assets and liabilities offset by the add-back of non-cash adjustments. The change in operating assets and liabilities includes an increase in prepaid expenses and other assets of $1.0 million, a decrease of $0.9 million in accounts payable and accrued liabilities and an increase in inventories of $0.6 million. Non-cash expenses included add-backs of $3.7 million for share-based compensation and $0.1 million of amortization of discount/premium on investments. Net cash used in operating activities of $37.9 million for the three months ended March 31, 2021 was primarily the result of our $97.4 million net loss and the change in operating assets and liabilities, partially offset by the add-back of non-cash expenses. The change in operating assets and liabilities includes an increase in prepaid expenses and other assets of $0.3 million, an increase in accounts receivable of $0.2 million and a decrease of $0.3 million in accounts payable and accrued liabilities. Non-cash expenses included add-backs of $43.4 million for the fair value of common stock issued in relation to the Oncoceutics acquisition, $14.0 million for the note payable due on the one-year anniversary of the Oncoceutics acquisition, $2.6 million for share-based compensation, $0.1 million of depreciation of property and equipment and $0.1 million of amortization of discount/premium on investments.

Investing Activities

Net cash provided by investing activities of $53.5 million for the three months ended March 31, 2022 was primarily the result of the maturity of $51.0 million in short-term investments and the sale of $7.7 million in short-term investments, offset by the purchase of $5.3 million in short-term investments. Net cash used in investing activities of $88.7 million for the three months
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ended March 31, 2021 was primarily the result of the purchase of $91.9 million in short-term investments and the purchase of $7.6 million in long-term investments, partially offset by the maturity of $8.9 million in short-term investments and the sale of $2.0 million in short-term investments.

Financing Activities

Net cash used by financing activities of $13.5 million for the three months ended March 31, 2022 was primarily the result of the $14.0 million payment of the note payable related to the Oncoceutics acquisition and the payment of $0.1 million of debt issuance costs, partially offset by $0.7 million in proceeds from the exercise of stock options and stock purchases through our ESPP. Net cash provided by financing activities of $111.7 million for the three months ended March 31, 2021 was primarily the result of $107.8 million in proceeds from the issuance of common stock and $3.9 million in proceeds from the exercise of stock options and stock purchases through our ESPP.

CONTRACTUAL OBLIGATIONS AND COMMITMENTS
 
There have been no material changes to our contractual obligations and commitments outside the ordinary course of business from those disclosed under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Contractual Obligations and Commitments” as contained in our Annual Report on Form 10-K for the year ended December 31, 2021 filed by us with the SEC on March 1, 2022.
 
Off-Balance Sheet Arrangements

During the periods presented, we did not have, nor do we currently have, any off-balance sheet arrangements as defined under SEC rules.
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ITEM 3.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
Our primary exposure to market risk is interest income sensitivity, which is affected by changes in the general level of U.S. interest rates. Due to the short-term duration of our investment portfolio and the low risk profile of our investments, an immediate 10% change in interest rates would not have a material effect on the fair market value of our portfolio. Accordingly, we would not expect our operating results or cash flows to be affected to any significant degree by the effect of a sudden change in market interest rates on our investment portfolio.
 
We do not believe that our cash, cash equivalents and available-for-sale investments have significant risk of default or illiquidity. While we believe our cash and cash equivalents and certificates of deposit do not contain excessive risk, we cannot provide absolute assurance that in the future our investments will not be subject to adverse changes in market value. In addition, we maintain certain amounts of cash and cash equivalents at one or more financial institutions that are in excess of federally insured limits.
 
Inflation generally affects us by increasing our cost of labor and clinical trial costs. We do not believe that inflation has had a material effect on our results of operations for the three months ended March 31, 2022 or March 31, 2021.
 
ITEM 4.     CONTROLS AND PROCEDURES
 
Evaluation of Disclosure Controls and Procedures

Our principal executive officer and principal financial officer, after evaluating the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the Exchange Act)) as of March 31, 2022, have concluded that, based on such evaluation, our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
 
Changes in Internal Control Over Financial Reporting

We routinely review our internal control over financial reporting and from time to time make changes intended to enhance the effectiveness of our internal control over financial reporting. We will continue to evaluate the effectiveness of our disclosure controls and procedures and internal control over financial reporting on an ongoing basis and will take action as appropriate. There have been no changes to our internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, during the first quarter of 2022 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
 
ITEM 1.     LEGAL PROCEEDINGS
 
None.
 
ITEM 1A.        RISK FACTORS

Summary of Risk Factors

Below is a summary of material factors that make an investment in our common stock speculative or risky. Importantly, this summary does not address all of the risks that we face. Additional discussion of the risks summarized in this risk factor summary, as well as other risks that we face, can be found under the heading “Risk Factors” below.

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.
While we have received a sole source request from BARDA, there can be no assurances that we will be able to enter into a contract with BARDA on favorable terms, or at all, to act as the sole supplier for the procurement of TEMBEXA for the treatment of smallpox.
We have only received regulatory approval for TEMBEXA, and all of our other product candidates are still under clinical development and may not obtain regulatory approval or be successfully commercialized.
We may be unable to obtain, or may be delayed in obtaining, regulatory approval for our clinical candidates, including our most advanced clinical candidate, ONC201.
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 product candidates, and even if we generate future revenues, they may not be sufficient to lead to profitability.
Even though we have obtained regulatory approval for TEMBEXA, or if we obtain regulatory approval for any of our product candidates, including ONC201, we will still face extensive regulatory requirements and our products may face future development and regulatory difficulties.
We rely on third-party manufacturers to produce our preclinical drug supplies, clinical drug supplies and TEMBEXA, and we intend to rely on third parties to produce commercial supplies of any approved product candidates. We rely on limited sources of supply for the drug components for each of our product candidates including ONC201, and any disruption in the chain of supply for either of these product candidates may cause delays in their development and commercialization.
We routinely evaluate external assets to build our pipeline of product candidates and there can be no assurance that we will be successful in identifying or completing a transaction for a candidate, that any such transaction will result in additional value for our stockholders or that the process will not have an adverse impact on our business. For example, we may experience difficulties in integrating the operations of Oncoceutics into our business and in realizing the expected benefits of the merger with Oncoceutics.
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.
If we fail to comply with the extensive legal and regulatory requirements affecting the health care industry, we could face increased costs, delays in the development of our product candidates, penalties and a loss of business.
We face risks related to the coronavirus (COVID-19) outbreak, which could significantly disrupt our preclinical studies and clinical trials.
The completion of the sale of our TEMBEXA program and related assets is subject to conditions, some or all of which may not be satisfied or completed on a timely basis, if at all. Failure to complete the sale of our TEMBEXA program and related assets could have material adverse effects on our business. In addition, even if completed, the anticipated benefits may not be realized fully or at all or may take longer to realize than expected.

An investment in shares of our common stock involves a high degree of risk. You should carefully consider the following risk factors, as well as the other information contained elsewhere in this report, before deciding whether to purchase, hold or sell shares of our common stock. The occurrence of any of the following risks could harm our business, financial condition, results of operations and/or growth prospects or cause our actual results to differ materially from those contained in forward-looking statements we have made in this report and those we may make from time to time. You should consider all of the risk factors described when evaluating our business. We have marked with an asterisk (*) those risk factors that reflect changes from the risk factors included in our Annual Report on Form 10-K for the year ended December 31, 2021 filed with the Securities and Exchange Commission on March 1, 2022.

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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 commercializing TEMBEXA for the treatment of smallpox, and developing ONC201 for the treatment of H3 K27M-mutant glioma. We have incurred significant net losses in each year since our inception, including net losses of $24.8 million and $97.4 million for the three months ended March 31, 2022 and 2021, respectively. As of March 31, 2022, we had an accumulated deficit of approximately $910.4 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 may continue to incur losses and negative cash flows for the foreseeable future. The size of any loss will depend, in part, on the rate of future expenditures and our ability to generate revenues. In particular, we expect to incur substantial expenses as we seek to:

continue development and manufacturing activities related to imipridones, including ONC201 for the treatment of H3 K27M-mutant glioma, and other potential indications;
enter into an agreement with BARDA to sell TEMBEXA into the U.S. Strategic National Stockpile as a medical countermeasure for the treatment of smallpox;
obtain regulatory approvals for ONC201;
scale-up manufacturing capabilities to commercialize TEMBEXA and in the event we receive regulatory approval, ONC201;
identify and in-license additional product candidates to expand our research and development pipeline;
maintain, expand and protect our intellectual property portfolio; and
continue our internal research and development efforts and seek to discover additional product candidates.

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 acquiring or 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.

To date, we have only obtained regulatory approval for TEMBEXA, and none of our product candidates have been commercialized. We may not succeed in developing additional product candidates or commercializing any product candidate. If we do not successfully develop or commercialize any product candidate, or if revenues from any products that do receive regulatory approvals are insufficient, we will not achieve profitability and our business may fail. In addition to these risks in the United States, assuming regulatory approval in other geographies, 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.