Q1 2022 Chimerix Inc Earnings Call
Operator: Good morning, ladies and gentlemen, and welcome to the Chimerix First Quarter 2022 Earnings
Good morning, ladies and gentlemen, and welcome to the clean metrics first quarter 2022 earnings conference call.
Operator: Conference Call.
Operator: Ladies and gentlemen, this concludes today's conference call.
Operator: I would now like to introduce to your host for today's call, Michelle LaSpaluto, Vice
I'd like to introduce to your host for today's call Michelle last fall due to vice president of strategic planning and Investor Relations.
Operator: President of Strategic Planning and Investor Relations at Chimerix.
Michelle LaSpaluto: Please proceed.
Please proceed.
Michelle LaSpaluto: Thank you.
Michelle LaSpaluto: Good morning, everyone, and welcome to the Chimerix First Quarter 2022 Financial and, Operating Results Conference Call. This morning, we issued two press releases, one to announce the sale of Tembexa to Emergent, BioSolutions and one announcing our first quarter operating operations.
Operator: Thank you for participating.
Thank you.
Everyone and welcome to the first quarter 2022 financial and operating results Conference call. This morning, we issued two press releases one to announce the sales come back such emergent bio solutions and one announcing our first quarter operating operation.
Operator: You may now disconnect.
Can access these press releases in our investors section of the website.
On today's call are President and Chief Executive Officer, Mike Sherman, Chief Medical Officer, Alan Melamed, Chief Financial and business Officer, Mike Andriole Chief.
Yeah Josh.
We began I would like to turn.
Mind, you that the statements made on today's call include forward looking statements within the meaning of the private Securities Litigation Reform Act of 90, 95 and are subject to risks and uncertainties and other factors.
These risks and uncertainties and other factors could cause actual results to differ materially from those referred to in the forward looking statements. Please refer to our filings with the SEC for more complete disclosure of these risks or uncertainties. At this time I would like to turn the call over to our President and Chief Executive Officer, Mike Sherman.
Michelle LaSpaluto: You can access these press releases in our Investor section of the website.
Operator: Have a great day.
Thanks, Michelle good morning, everyone and thanks for joining US we've had an active couple of months. So let me get right to the updates and I'll I'll start with 10 Bucks up.
Michelle LaSpaluto: With me on today's call are President and Chief Executive Officer Mike Sherman, Chief Medical Officer Allen Melemed, Chief Financial Business Officer Mike Andriole, and our Chief, and Nippert-Owned Technology Officer Josh Allen.
Michelle LaSpaluto: Before we begin, I would like to remind you that the statements made on today's call include forward-looking statements within the meaning of the Private Security Application Reform
Michelle LaSpaluto: Act of 1995 and are subject to risks and uncertainties and other factors. These risks and uncertainties and other factors could cause actual results to differ materially, from those referred to in the forward-looking statements. Please refer to our filings with the SEC for a more complete disclosure of these risks, and uncertainties.
This program has been central to our strategy for a couple of reasons first we're fulfilling an important need to protect the population from the possibility of a smallpox outbreak and we've done that with the first treatment approved for all ages and one that's likely robust even in the face of the inevitable mutations.
That compromise the efficacy of other treatments are ongoing negotiations with BARDA are progressing well to satisfy this first objective.
Michelle LaSpaluto: At this time, I would like to turn the call over to our President and Chief Executive
Second reason tobacco is central to our strategy because it will serve as an important mechanism to fund our ongoing development in oncology.
Mike Sherman: Officer, Mike Sherman.
This is of particular value at a time when access to capital within the biotech sector is so challenging that with with that in mind. We're excited to announce this transaction with emergent bio solutions the sale of worldwide rights to 10 Bucks up it.
Mike Sherman: Thanks, Michelle.
Mike Sherman: Good morning, everyone.
Mike Sherman: Thanks for joining us.
Secures substantial capital to fund our business. It allows us to focus our execution on the development pipeline and it positions the asset in the hands of a company that's well suited to maximize its value value. We will continue to participate in the milestones and royalties.
Mike Sherman: We've had an active couple of months, so let me get right to the updates, and I'll start, with Tembexa. This program has been central to our strategy for a couple of reasons.
Mike Sherman: First, we're fulfilling an important need to protect the population from the possibility, of a smallpox outbreak, and we've done that with the first treatment approved for all ages, and one that's likely robust even in the face of the inevitable mutations that compromise the efficacy of other treatments.
The emergence of leading Biodefense company with substantial experience in working with government agencies to ensure the protection of the Population's health.
Mike Sherman: Our ongoing negotiations with BARDA are progressing well to satisfy this first objective.
And securing the upfront capital with this transaction, we've positioned ourselves well to fund our pipeline without the ongoing uncertainty of future procurements, which as you know can be variable depending on the government's evolving priorities.
We continue to control the BARDA contract negotiation to its completion, which we still expect to occur later this quarter.
Following the signing of the procurement contract and closing of the emergent transaction, we look forward to facilitating a smooth transition, particularly as it relates to the well established supply chain for Tim Baxter, which emergent intends to continue to utilize.
I'll, let Mike Andriole covered the key terms of this transaction in a moment suffice it to say, we're very pleased to bring this transaction to fruition as it just makes great strategic sense for both organizations.
Let me now turn for a few minutes to all to all one.
We recently engaged a several key opinion leaders in the neuro oncology field, who participated in our advisory Board.
Porting the design of our phase III randomized trial in H Street, K twenty-seven M mutant glioma.
That engagement has been a great reminder of both the unmet need in this population and the physician enthusiasm Franco wanted the treatment. It's the combination of these two factors, which drive physicians and patients to seek out this treatment today and it will continue to be the engine driving enrollment in our phase III trial.
In our recent engagement with the FDA to discuss the phase III design and our analytical plants around the natural disease history study. They took the opportunity to provide feedback on potential accelerated approval path to.
To be clear, we did not seek formal feedback on that question as we anticipated those discussions would take place as we completed the safety database and some of the ongoing clinical pharmacology supporting work in other words.
When one would have had a more informed perspective on risk benefit.
That being said their feedback made it clear that an accelerated approval would be more challenging than we previously anticipated to be sure. The fda's recent public commentary on the accelerated approval path, particularly within oncology has certainly not been supportive of single arm data going forward.
The FDA also let us know it no longer plans to rely on a natural disease history study as a comparator due to its inherent limitations. We've had this study underway with the expectation that would be part of the potential submission and that being said we plan to wrap it up.
The study with the patient data, we have already in process and will look to publish our findings based on FDA feedback. This data's is likely less meaningful in their decision process and yet we would still expect to include it in a potential accelerated approval submission.
Let me underscore that we're not throwing in the towel on a potential accelerated approval pathway, but we need to prepare for the likelihood of.
That's the first approval may come with completion of the phase III.
We also need to prepare for the likelihood that if we do pursue accelerated approval. The FDA will be less likely to allow for certain work to be completed during a rolling submission or as part of our post marketing commitments as we had previously expected over the last year, we've successfully completed healthy volunteer safety.
T K studies improve the liquid formulation for pediatrics.
Evaluated concurrent medication and food effects on pharmacokinetics and are now evaluating stuff not special populations, including subjects with renal and hepatic impairment that work has all gone very well other work to be performed includes a cardiac safety study and pop PK modeling.
These studies extend into the first half of next year and would be gating items for submission for accelerated approval.
I need to hold off on sharing too many details of the phase III trial design as we're working quickly to get closure with the FDA on a couple of elements, but I will make a few comments about it the trial with initiation later this year will enroll H Street K twenty-seven M you'd agree I'm Ah patients, both pediatric and adult all will treat newly diagnosed patients.
At the conclusion of their standard radiation regimen patients will be randomized <unk> to a one or placebo at that time.
We're planning on overall survival as the primary endpoint, which of course, if successful will maximize the value of this of this agent.
We believe this trial can be completed quickly with rapid times, two events and including early interim analyses.
As we settle along the strict criteria required for the cohort of patients evaluated to date. It is not likely the optimal setting for all two O. One it was defined more to ensure the single agent activity was isolated.
And yet the data is still compelling as a result, we're really excited about this phase III trial is it deploys on two O. One at a time in the treatment cycle. When it's most likely to show maximum benefit to patients.
We'll come back with the final design elements powering assumptions and timelines in the coming weeks as we have final alignment with the FDA.
Finally, as we highlighted in our release, we terminated our D Stat program, along with the sale of some back. So this will reduce our spending and will give us tremendous focus on the in the nipigon platform and execution there.
With that I'll turn it over to Mike Andriole to share more about this come back to the transaction and the financial results for the quarter.
Thanks, Mike and good morning, everyone I'd like to start with a few comments about the financial implications of the strategic decisions, we announced this morning.
Mike Sherman: The second reason Tembexa is central to our strategy is because it will serve as an important, mechanism to fund our ongoing development in oncology. This is of particular value at a time when access to capital within the biotech sector, is so challenging.
First the upfront proceeds from the expected sale of 10 Bucks not only provide financial stability for the foreseeable future.
It also shifts the ongoing capital investment in the program to emerging this taken together with the decision to terminate you start development meaningfully improves our forward looking burn rate, while our normalized burn rate in the most recent quarter rose about $20 million, we expect.
Strategic decisions announced today to revert that burn back to about $15 million per quarter by the end of the year or about $60 million annually as we fully focus on the <unk> platform, where we see evidence of clinical activity.
Mike Sherman: With that in mind, we're excited to announce this transaction with Emergent Biosolutions, the sale of worldwide rights to Tembexa. It secures substantial capital to fund our business.
That said, we expect the proceeds from the <unk> transaction to from the organization into 2026 between now and then we will have the potential for accelerated approval of onto a one likely interim assessments of the arc 201 phase III randomized control study.
And likelihood of fully mature data from that study.
Mike Sherman: It allows us to focus our execution on the development pipeline, and it positions the, asset in the hands of a company that's well suited to maximize its value, value we will continue to participate in via milestones and royalties.
The potential for capital will be a milestone payments of up to $100 million of realized may obviate the need for additional capital through commercialization of entre of one if it's ultimately approved.
Still also removes the year to year uncertainty of the government budgeting and procurement process from Prime Eric's and places it with emerging in the organization, who has a key competency in that process. It's for that reason that the potential for future royalties. On this transaction are also important there are several scenarios, where the market for pandemic preparedness.
Mike Sherman: Emergent's a leading biodefense company with substantial experience in working with government, agencies to assure the protection of the population's health.
Mike Sherman: In securing the upfront capital with this transaction, we've positioned ourselves well, to fund our pipeline without the ongoing uncertainty of future procurements, which, as you know, can be variable depending on the government's evolving priorities.
Mike Sherman: We continue to control the BARDA contract negotiation to its completion, which we still, expect to occur later this quarter.
Mike Sherman: Following the signing of the procurement contract and closing of the Emergent transaction, we, look forward to facilitating a smooth transition, particularly as it relates to the well-established supply chain for Tembexa, which Emergent intends to continue to utilize.
Mike Sherman: I'll let Mike Andriole cover the key terms of this transaction in a moment.
Mike Sherman: Suffice it to say, we're very pleased to bring this transaction to fruition as it just, makes great strategic sense for both organizations.
Increases in the years to come and the royalties in this transaction enables <unk> to meaningfully participate in that growth will earn a 20% royalty on gross profit generated in the U S. Beyond the 1.7 million treatment courses expected in the first BARDA agreement those royalties could be associated with additional volume from a second.
BARDA contract or from volumes associated with sales from other sources in the U S.
In the event of an actual smallpox outbreak of course the value of those royalties on an outbreak scenario it would likely be substantial outside of the U S. <unk> will earn a 15% royalty on gross profit starting from the first sale and while we don't anticipate international revenue to be material in the near term. We do believe the urgent is well positioned.
To maximize the utilization of the product globally and royalty revenue from international sales may become material in the years to come.
I'll now.
Turn to a quick recap of our financial results for the quarter.
Starting with our statement of operations the company reported a net loss of $24 $8 million or 28 cents per basic and diluted share for the first quarter of 2022, compared with a net loss of $97 $4 million or $1 21 per basic and diluted share for the first quarter of 2021. The decrease is mainly due to the recording of the process.
R&D associated with the <unk> transaction in the comparable period last year of $82 $9 million.
R&D expenses increased to $19 million for the first quarter of 'twenty, two compared to $11 9 million in the same period of 'twenty. One the main driver of that increases the ongoing development related to onshore one general and administrative expenses increased to $5 6 million for the quarter compared to $4.1 million for the same period in 2021.
Turning now to the balance sheet during the first quarter, we paid the $14 million note payable to the <unk> shareholders associated with the acquisition of <unk> in Q1 last year and importantly, no further payments are due from that transaction until either approval of entre one or two of six in the U S or Europe net of.
That repayment we ended the first quarter of 2022 with approximately $53 $4 million in capital to fund operations, we expect to receive the upfront payment of $225 million associated with the sale of tobacco to emergent at closing of that transaction closing could take place as early as the end of June or shortly thereafter.
Dependent on antitrust clearance of the transaction and the Finalization of the expected BARDA procurement contract with that overview I'll now turn the call back to Mike Sherman for closing remarks, Mike.
Mike Sherman: Let me now turn for a few minutes to ONC 201.
Mike Sherman: We recently engaged several key opinion leaders in the neuro-oncology field who participated, in our advisory board supporting the design of our Phase III randomized trial in H3K27M mutant glioma.
Thanks, Mike Let me just conclude with a few key points first we've secured substantial capital sufficient to deliver our development strategy and have a partner well suited to maximize the likelihood of additional capital to come second.
Secondly, we reduced planned spending and focused our efforts to maximize the speed of our execution on the programs with the highest likelihood of success.
Mike Sherman: That engagement has been a great reminder of both the unmet need in this population, and the physician enthusiasm for ONC 201 as a treatment.
And third we have a lead program with among the most compelling and internally consistent efficacy data, you'll see relative to the depth of the unmet need and age three K twenty-seven glioma.
Mike Sherman: It's the combination of these two factors which drive physicians and patients to seek, out this treatment today, and it will continue to be the engine driving enrollment in our
We're working quickly to initiate the phase III trial, which would be the basis for first approval or as a confirmatory approval.
Mike Sherman: Phase III trial. In our recent engagement with the FDA to discuss the Phase III design and our analytical plans, around the natural disease history study, they took the opportunity to provide feedback on potential accelerated approval path.
Mike Sherman: To be clear, we did not seek formal feedback on that question as we anticipated those discussions, would take place as we completed the safety database and some of the ongoing clinical pharmacology supporting work. In other words, when one would have had a more informed perspective on risk-benefit.
Following an accelerated approval if we're successful with that path.
With that operator, we'll open the call to questions.
Thank you and if you will die cast a question. During this time simply press Star then the number one on your telephone keypad. Our first question comes from the line of more your breakdown of Jefferies. Your line is open.
Thanks for taking my questions I guess, just starting off with <unk> can you talk about some of the continued gating factors for the BARDA contract for <unk>, maybe start there.
So that on that.
Negotiation is is ongoing.
Need to be cautious.
In in sort of making any commentary about about the negotiation, where we're pretty far advanced as you can imagine given the notion that we still expect to be able to close that or sign that agreement before the end of this quarter, but beyond that I'm not sure that I can I can add much more until it's until.
It's done.
Okay, and then was there anything else that went into the decision to sell to and Baxter prior to the negotiations finishing.
You mentioned a few reasons, but just wanted to see if it was due to any uncertainty to contract size.
Well I think it's fair to say that that.
That.
This decision was clearly informed by the the ongoing negotiation and are you.
The potential risks around future procurements.
And and so for us the certainty of this upfront along with the participation in future economics was was attractive.
And so the risk profile associated with what we expect that agreements.
And in future.
The future potential of that agreement that that risk profile I think fits better with.
Emergent and and and their capabilities and the certainty of fits better or for our strategy.
Got it makes sense.
Can you talk a little bit about your views on antitrust and do some of the diligence work that you've done there and if you see any risk to that.
I'll, let Mike respond to that.
Yeah, we are we don't anticipate.
Issue their Murray of course, you always have to do the filing in.
Go through the process, but.
Our preliminary work doesn't.
Cause us to expect an issue there.
Mike Sherman: That being said, their feedback made it clear that an accelerated approval would be more, challenging than we previously anticipated.
Got it Okay and maybe last question just on the feed.
Feedback with FDA on an accelerated approval path does it have anything to do with the number of adults versus number of children in the study and yeah, I guess I'll leave it at that.
Mike Sherman: To be sure, the FDA's recent public commentary on the accelerated approval path, particularly, within oncology, has certainly not been supportive of single arm data going forward.
No no.
Their feedback was was really quite quite.
<unk>.
Which is one of the reasons why we continue to work on pulling the the the data analysis together to potentially pursue that path, even though they've highlighted.
The.
The.
Risk of that is higher than we may have expected previously.
So we're going to continue our work and then would plan on having a follow up conversation with them in a in a formal pre NDA meeting.
Got it okay. Thanks for taking my questions I'll hop back in the queue.
Morning.
Thank you next question comes from the line of and White of H C. Wainwright. Your line is open.
Good morning, Thanks for taking my questions and congratulations on signing the steel.
Thanks.
You're welcome just a question about how the $225 million will be.
Hmm.
Reflected on the income statement would this be a one recorded as a one time.
Benefit to revenues or could it be spread out over time or you're still waiting to see how what the accounting treatment for this will be.
Yeah.
Mike Andriole will have to complete.
Complete the work on the accounting treatment.
You know before answering that definitively of course, my expectation is that it will be.
Recognized as revenue this year and its entirety subject to there's a scenario as we disclosed in there.
A press release, where there could be an adjustment either up or down depending on sort of the final BARDA contract, although we don't expect.
Based on what we know today there to be an adjustment, but we would expect all of that to be to be recognized this period sort of subject to our our definitive accounting review.
Okay. Thanks, Mike and then just on the on the $25 million.
<unk> potential.
Potential.
Four.
Potential 25 million milestone payments.
Can you just review what what triggers those.
Yeah, there are triggered by.
The BARDA is exercise of additional options in the agreement. So you may recall the structure of a disagreement in other similar agreements is that there is a base period, followed by a number of additional options to get to the number of treatment courses those options.
Are always at risk depending on on.
Bart as option and into the future and so as they exercise those options should they exercise those options that milestone payment would be earned by chimeric and so each one is worth $25 million.
Regardless of the size of the of the option I would imagine.
There is a mechanism or getting into the details there is a mechanism in the agreement where could.
Protectively be higher or lower depending on if the actual amount of the option is different from what we currently anticipate.
But.
That could actually move in both directions, but we expected based on the current on.
On the current negotiation.
To be at or very near the 25 million.
Okay. Thanks, Mike and just a final question.
201.
<unk>.
Has project Optimists been brought up at all.
Can you talk about your thoughts on using the proper dose the dosing that it would be acceptable for the F D a or could they.
Want you to look at other doses and then also just as far as the phase III protocol I know you're going to tell us more about that later, but how are you thinking about the size of the study. Thank you.
Well I'll answer the second part of that and then and then let Alan speak to project Optimus the.
I will hold off on on describing the size of the trial we.
We do think that it's all relative of course.
What's your expectations are for your typical phase III, but I think for in this population and given the treatment side. The fact.
This is a this is a trial that we can we expect to be able to complete a relatively quickly. We also believe that we can incorporate.
Early analyses that are again, given our anticipated treatment effect or are likely to to hit and so when we when we provide that update on the specific and in those early.
Early analyses will be able to provide the powering assumptions for each of those and we'll we'll provide that detail to investors as we get that locked up with the.
The FDA in the coming weeks, maybe Alan can speak to some of the work that we've done on.
On the dose.
And so on.
Yes. Thank you Mike This is Alan element.
Regarding project Optimists as you know this has been our practice.
The doctor passenger and others.
Due to concerns that a lot of oncology drugs in phase III and phase on the maximum tolerated dose and in the phase III trial explain that the deltas have not been tolerable and just having some safety issues and the ability to give full doses in these patients and we have had some discussion regarding <unk>.
Optimists, let me just put a point on.
The dose that was utilized for 201 with not based on MTBE.
We have a pretty strong rationale based on where our dose was and it's a very safe dose and what we've seen is obviously an effective dose and we will continue to have a long discussion with FDA regarding.
To win in this area.
Okay. Thanks al.
Thank you next question comes from the line of Noreen Cuba.
Axiom your line is open.
Thank you congratulations on the backs of D&O and thanks for taking my questions. I guess the first one is on <unk> I was just wondering if you could comment on how the deal or negotiations came about with emergent who approached home or did you approach centerview.
And oriented smart mic.
We've had.
Sort of on and off conversations about their interests.
For a while but those did not boosted not accelerate until more more recently.
What I'd say, we're sort of true true conversations about their interest, but it's obvious that fits within their portfolio.
Really really very well.
It's not competitive with other agents and their portfolio given this as a treatment.
For for potential smallpox outbreak and you added.
They've got other agents in their portfolio that that.
Leverage their government contracting capability.
Our defense strategy, and so fits very well not not a surprise they were interested in this asset and as Mike Sherman said earlier the.
The value of substantial upfront capital.
Particularly in this market and the certainty that provides.
In developing and commercializing our portfolio has made a lot of sense for us and the ability to continue to participate in the long term upside.
If all of those options are ultimately exercises.
Also important for us for all the obvious reasons so.
Good deal dynamics between the two and I think more concerned of a good partnership on that program.
Cool.
That makes sense.
Thanks, So with so let me switch over to onto a one I'm just curious regarding the natural history study do you have a sense of you know what might've changed the Fda's mind from requesting a study initially and now it seems like they won't be relying on that far for its regulatory decision. So you know why the switch.
Mike Sherman: The FDA also let us know it no longer plans to rely on a natural disease history study, as a comparator due to its inherent limitations.
Mike Sherman: We've had this study underway with the expectation it would be part of the potential submission.
I don't know if I have a great answer for that honestly I'll, let Alan maybe maybe add to it there are certain elements of any natural disease history study that.
They are there inherent weaknesses.
And what you can conclude from those and yet there is substantial literature.
About in history of the FDA asking for those and evaluating those as part of their consideration. So that was all known upfront.
So so I I.
Not 100% clear why they would do this.
New this differently that having been said I do think that.
Mike Sherman: That being said, we plan to wrap it up, the study with the patient data we have already, in process, and we'll look to publish our findings.
We would still provide that analysis as part of a potential accelerated approval submission.
Mike Sherman: Based on FDA's feedback, this data is likely less meaningful in their decision process, and yet we would still expect to include it in a potential accelerated approval submission.
We continue to believe that would be supportive.
Mike Sherman: Let me underscore that we're not throwing in the towel on a potential accelerated approval, pathway, but we need to prepare for the likelihood that the first approval may come with completion of the phase three.
We have no reason to believe that the findings from that work would suggest anything other than.
What we had previously expected that responses are rare or.
Ever occur in this in this population. So I think it can still be helpful, but where we're going to limit our investment in that work based on their feedback.
Right Okay.
Can I just can I just ask you. Please go ahead I do think there has been somewhat more of a shift in FDA.
Regarding the utilization of phase two single arm trials for approvals as you probably have heard with the <unk> kinase inhibitors in heme malignancies. There has been the PDL one that you've seen with the phase III trials.
Your line disease, and all of that last year. So I think it's more of an FTA change again when you look at Q1, we still believe this is a very high unmet need disease, and an area, where there arent many treatment options and we believe that there is still an active and effective agent with arm to arm.
Mike Sherman: We also need to prepare for the likelihood that if we do pursue accelerated approval, the FDA will be less likely to allow for certain work to be completed during a rolling submission or as part of a post-marketing commitment, as we had previously expected. Over the last year, we've successfully completed healthy volunteer safety and PK studies, improved, the liquid formulation for pediatrics, we've evaluated concurrent medication and food effects on pharmacokinetics, and are now evaluating special populations, including subjects with renal and hepatic impairment. That work has all gone very well.
Yeah.
Makes sense. Thank you. So so you know when do you anticipate filing now Keith are you able to guide to that or.
Mike Sherman: Other work to be performed includes a cardiac safety study and POP-PK modeling. These studies extend into the first half of next year and would be gating items for a, submission for accelerated approval.
Well, we did say that.
There was an expectation previously that some of the work that we have ongoing we described some of the England harm in my commentary.
Some of that could be.
Submitted as part of our during our rolling submission.
And so I think it's more likely that the complete submission would would be required with with all of those things.
Ready.
For when you pull the trigger on that submission and as such.
Those studies will be.
Finishing up in the first half of next year. So it would follow that.
That's the best guidance I can get.
Got it yeah. That's actually helpful. Thank you that's all from me.
Thank you.
Our next question comes from the line of assuming for Ya Jones Research. Your line is open.
Hi, everyone. Congratulations on the timber deed and thank you for taking the question.
Curious if you have any plans on the use of the.
$225 million in terms of if you're going to acquire new assets any.
And whether it's telling me oncology.
Any color would be appreciated.
Hi, Sumit.
Mike Andriole I think.
Our focus is on October one and the <unk> platform.
We've said continuously we are always evaluating sort of external innovation.
Innovation is part of our normal business process.
And we'll be smart about you know if we if we see assets.
For when and how to pull them in one of the advantages of this transaction is in a market where.
Cash has probably never been more valuable in terms of.
Our premium.
And certainty in the runway.
There are some increasingly distressed assets in the market and I suspect over the course of the year, there is going to be more distress.
Distressed assets in the market given the.
The environment for smaller mid cap biotech that we find ourselves in today, so having a substantial cash balance.
To work with is helpful in that environment and yet.
We're also very very focused on making sure that we get pumped two I wanted to the finish line. We feel we've got a responsibility to make sure that we get what we believe to be an active agent to the finish line and get it to patients who desperately need it. So we're balance those two objectives.
As we evaluate the external market, but certainly there is.
The opportunities in business development. This year for those who have access to capital are more meaningful than they've been in a while.
Thanks, Mike Thats really helpful.
Last question is could you give us any color on the reason behind these tech combination what led you to that point any mechanistic understanding or.
So bandwidth it though.
Thank you.
Actually I didn't I didn't hear that question is from that can you repeat that.
Yes.
The reasoning behind why you coming.
Coming into the DC <unk> program.
Yeah.
And I can just take our understanding or something that yeah, well lemme efficient I. Appreciate that question because it gives me an opportunity to be really clear about.
That that drug I think is is.
Promising drug nothing has changed our view with regard to the safety profile or the potential for.
For efficacy there as you know we had challenges enrolling.
Our trial. So it was as much about looking at our portfolio identifying which assets we had the most definitive evidence.
On on activity and and then and then focusing our efforts there I expect that canpotex.
We'll we'll look for opportunities to continue to develop that.
That agents.
And any number of indications.
Thank you.
Thank you next question comes from the line of David.
<unk> <unk> of Wedbush Securities. Your line is open.
Hey, Thanks for taking my questions first off the.
<unk>.
Did you or have you share or have you shared sorry any of that.
Actual history study data with the FDA.
Prior to these discussions.
Second question is could you remind us typically what is the overall survival of patients post radiation with the.
You know with the H 'twenty seven.
Mike Sherman: I need to hold off on sharing too many details of the Phase 3 trial design as we're working, quickly to get closure with the FDA on a couple of elements, but I will make a few comments about it. The trial, with initiation later this year, will enroll H3K27M mutant glioma patients, both pediatric and adult, will treat newly diagnosed patients at the conclusion of their standard radiation regimen. Patients will be randomized to ONC201 or placebo at that time.
Mutation.
And.
Finally.
When you think about a potential phase III design with a placebo control I mean are there any <unk>.
Mike Sherman: We're planning on overall survival as the primary endpoint, which, of course, if successful, will maximize the value of this agent.
<unk> is about.
Our recruiting with a placebo arm.
Obviously.
Difficult disease to treat where I know there aren't any approved treatments but.
Patients might be seeking alternative therapies.
Mike Sherman: We believe this trial can be completed quickly with rapid times to events and including early, interim analyses.
Yes.
I'll answer part of that and then I think between Alan and Josh the second questions on survival in the placebo. When we can we can address it and so we did not provide any.
Mike Sherman: As we settle along, the strict criteria required for the cohort of patients evaluated to date, is not likely the optimal setting for ONC201. It was defined more to ensure the single agent activity was isolated, and yet the data is, still compelling.
Data.
From the natural disease history analysis, we've impact we were gonna subject that data to a blinded independent Central review and so that's why I made the comment earlier that we have no reason to believe or.
And that anything that we would see anything different than what we previously expected from that data. So this is more of a general.
General commentary from the FDA and frankly, just may be part of their.
There are a few reasons why the FDA could have provided the.
The feedback on on kind of risks associated with an accelerated approval one of those is that they they certainly want to have.
Mike Sherman: As a result, we're really excited about this Phase 3 trial as it deploys ONC201 at a time, in the treatment cycle when it's most likely to show maximum benefit to patients.
Mike Sherman: We'll come back with the final design elements, powering assumptions, and timelines in the, coming weeks as we have final alignment with the FDA.
Phase III trials up and running and so their emphasis was.
To focus on getting getting that trial up and running and so that they can have confidence that it would be executed and perhaps as a byproduct of these discussions that will position us more strongly.
Mike Sherman: Finally, as we highlighted in our release, we've terminated our DSAP program. Along with the sale of some Bexa, this will reduce our spending and will give us tremendous, focus on the Omicron platform and execution there.
As we go back to talk about an accelerated approval that there's likelihood and evidence that that's that trial is going to be dominant in a timely manner. So.
Mike Sherman: With that, I'll turn it over to Mike Andriel to share more about the Some Bexa transaction and the financial results for the quarter.
Anyway, let me hand, it off to Alan and Josh maybe to speak to the discussions we've had both with the advisory board on the trial design.
And survival expectation.
Mike Andriole: Thanks, Mike, and good morning, everyone.
Yeah, Let me just start to nominate taggant half too Josh we had.
Mike Andriole: I'd like to start with a few comments about the financial implications of the strategic, decisions we announced this morning. First, the upfront proceeds from the expected sale of Tembexa not only provide financial, stability for the foreseeable future, it also shifts the ongoing capital investment in the program to emergent. This, taken together with the decision to terminate DSTAT development, meaningfully, improves our forward-looking burn rate.
Mike Andriole: While our normalized burn rate in the most recent quarter was about $20 million, we expect, the strategic decisions announced today to revert that burn back to about $15 million per quarter by the end of the year or about $60 million annually as we fully focus on the Omicron platform where we see evidence of clinical activity. That said, we expect the proceeds from the Tembexa transaction to fund the organization, into 2026.
Several of these conversations with numerous leaders in this area and discuss the best design for this assuming that FTE.
Mike Andriole: And now and then, we'll have the potential for accelerated approval of ANC-201, likely, interim assessments of the ANC-201 phase three randomized control study, and likely the fully mature data from that study.
Mike Andriole: The potential for capital via milestone payments of up to $100 million, if realized, may obviate, the need for additional capital through commercialization of ANC-201 if it's ultimately approved.
Mike Andriole: This deal also removes the year-to-year uncertainty of the government budgeting and procurement, process from Chimerics and places it with Emergent, an organization who has a key competency in that process.
Require all of our survival and with discussions.
Almost all of the investigators.
We just felt that the best design would be a placebo controlled trial in the upfront setting post radiation.
This way you can control all the variables and I think the concern would be is that if you did not have this control that pace.
Patients could start a study and then come off without if theyre not.
The placebo controlled area numerous drugs have been.
And studies have been done as a placebo controls in similar disease with not exactly <unk>.
Patients with glaucoma. So it has been done in the past and I'll just pass it off to Josh throughout the comments on that.
Yes, Thanks for your questions, David I would agree with Alan there.
Exactly in the same space, but certainly a number of randomized placebo controlled trials have been conducted in sika in CNS tumors. So.
Tween, the precedent, there and or add comp it's been held to health is grappling with these issues. We've certainly been mindful about how we balance.
Ethics, and the need to accrue the trial expeditiously.
I'll circle back to your second question with regards to survival expectation.
Of course. This is one of the focuses business was put in for the natural disease history Thats been discussed on this call. While the results of that arent available I think the literature largely supports that the prognosis of these patients are.
Similar to our worst than Glioblastoma. So if youre looking for a benchmark I think you can look to that in addition to the emerging literature for expertise.
And then the only other comment I would add on to what Mike said for your question on <unk>.
Dialogue with FDA on the natural disease history.
While we have not shared results from from that study to date, we have had a dialogue with you and you can see in the past on the natural history of this.
Indication.
The available literature thought leader consensus as well as treatment guidelines that are available for a series of Kols all of which led to an agreement available therapy.
The recurrent setting for this disease is tally of the well.
Well well no specific data from our study a fair amount.
To help form that framework.
Okay.
Thank you.
Thank you next question comes from the line of Troy Lang forward of Cowen Your line is open.
Hi, Thanks for taking our questions and congratulations on the come back to the deal I just have one question I'll come back to that first so just given that you all consumers.
Mike Andriole: It's for that reason that the potential for future royalties in this transaction are also, important.
Mike Andriole: There are several scenarios where the market for pandemic preparedness increases in the, years to come, and the royalties in this transaction enable Chimerics to meaningfully participate in that growth. We'll earn a 20% royalty on gross profit generated in the U.S. beyond the 1.7 million treatment, courses expected in the first BARDA agreement.
Royalties on profits made on <unk> is that from contracts outside the U S. Can you just talk a little bit about how who would lead those regulatory submissions or negotiations so.
You will do that or would emergent honestly leads that we have those conversations and then I have a follow up after that.
Mike Andriole: Those royalties could be associated with additional volume from a second BARDA contract or from, volumes associated with sales from other sources in the U.S, including in the event of an actual smallpox outbreak.
Mike Andriole: Of course, the value of those royalties in an outbreak scenario would likely be substantial. Outside of the US, Chimerix will earn a 15% royalty on gross profit starting from the first sale.
Mike Andriole: And while we don't anticipate international revenue to be material in the near term, we do believe Emergent is well-positioned to maximize the utilization of the product globally, and royalty revenue from international sales may become material in the years to come.
Yes, emergent emergent will lead all regulatory interactions after closing.
In the U S and outside of the U S.
Okay, and the new one nuance to that is that we would be working with them closely during the transition period.
So facilitate that so.
I think I think there's a period, where which they would own it and lead it and yet might be relying on our team to support it.
Okay, great that helps a lot and then on October one and specifically the randomized phase III study I know you all can't or don't really want to talk a lot about the details of the study, but do you think theres any possibility that you could enroll patients with tumors.
<unk>.
Other than the midline from the Midland location.
And then I guess in terms of interactions with the FDA do you think or do you already have a meeting planned to discuss the trial details agency.
Mike Andriole: I'll now turn to a quick recap of the financial results for the quarter. Starting with our statement of operations, the company reported a net loss of $24.8 million or 28 cents per basic and diluted share for the first quarter of 2022, compared with a net loss of $97.4 million or $1.21 per basic and diluted share for the first quarter of 2021. The decrease is mainly due to the recording of the in-process R&D associated with the Oncostatics transaction in the comparable period last year of $82.9 million.
I'll start with the latter question, we did already have the discussion on the details and we're following up on.
Mike Andriole: R&D expenses increased to $19 million for the first quarter of 2022, compared to $11.9 million in the same period of 2021. The main driver of that increase is the ongoing development related to ONC201.
Mike Andriole: General and administrative expenses increased to $5.6 million for the quarter, compared to $4.1, million for the same period in 2021.
Mike Andriole: Turning now to the balance sheet, during the first quarter, we paid the $14 million note payable to the Oncostatics shareholders associated with the acquisition of Oncostatics in Q1 last year. Importantly, no further payments are due from that transaction until either approval of ONC201 or ONC206 in the U.S. or Europe.
Mike Andriole: Net of that repayment, we ended the first quarter of 2022 with approximately $53.4 million in capital fund operations. We expect to receive the upfront payment of $225 million associated with the sale of Tembexa to Emergent at closing of that transaction. That closing could take place as early as the end of June, or shortly thereafter, dependent on antitrust clearance of the transaction and the finalization of the expected BARDA procurement contract.
A few of the.
The open items from that so we would expect to have closure on that relatively relatively soon and those those interactions can be can be informal I'll let.
Alan speak to the the the approach around tumor.
Tumor location, Josh chip in.
Yeah, I think one of the key.
Inclusion criteria would be.
Presence of the HC casing flotation.
And we will deal.
At least at this point planning to be a little more open regarding our location and plan to.
Evaluate patients from that perspective.
Okay, Great that's helpful.
That's all for me and thanks, so much for answering our questions.
Thank you.
Thank you there are no further question at this time and I would like to turn the call back to Mr. Mike Sherman for closing remarks.
Mike Andriole: With that overview, I'll now turn the call back to Mike Sherman for closing remarks.
Mike Sherman: Mike?
Mike Sherman: Thanks, Mike.
Mike Sherman: Let me just conclude with a few key points.
Mike Sherman: First, we've secured substantial capital sufficient to deliver our development strategy and have a partner well suited to maximize the likelihood of additional capital to come.
Mike Sherman: Secondly, we reduced plan spending and focused our efforts to maximize the speed of our execution on the programs with the highest likelihood of success.
Mike Sherman: Third, we have a lead program with among the most compelling and internally consistent efficacy data, you'll see relative to the depth of the unmet need in H3K27M glioma.
Mike Sherman: We're working quickly to initiate the phase three trial, which would be the basis for first approval or as a confirmatory approval following an accelerated approval if we're successful with that path.
Well just thanks, everyone again for joining the call look forward to providing additional updates.
Mike Sherman: With that,
Operator: operator, we'll open the call to questions.
Operator: Thank you.
Operator: And if you would like to ask a question during this time, simply press star, then the number one on your telephone keypad.
Mario Braycroft: Our first question comes from the line of Mario Braycroft.
Hey.
Mario Braycroft: And thanks for taking my questions.
Mario Braycroft: I guess just starting off with Tembexa, can you talk, about some of the continued gating factors for the VARTA contract for Tembexa?
David Niven-Gartner: The second question is, could you remind us, typically, what is the overall survival of patients post-radiation with the H27 mutation?
Ladies and gentlemen. This concludes today's conference call. Thank you for participating you may now disconnect have a great day.
Mike Sherman: Maybe start there.
David Niven-Gartner: Finally, when you think about a potential Phase III design with a placebo, control, are there any concerns about recruiting with a placebo arm?
Mike Sherman: So that negotiation is ongoing.
David Niven-Gartner: Obviously, a difficult disease to treat. I know there aren't any approved treatments, but patients might be seeking alternative therapies.
Mike Sherman: I need to be cautious in sort of making any commentary, about the negotiation.
David Niven-Gartner: Thanks.
Operator: Thank you.
Mike Sherman: We're pretty far advanced, as you can imagine, given the notion that we select to be able to close that or sign that agreement before the end of this quarter.
Mike Sherman: I'll answer part of that, and then I think between Alan and Josh, the second question, is on survival and placebo.
Troy Langford: Next question comes from the line of Troy Langford of Cohen.
Mike Sherman: But beyond that, I'm not sure that I can add much more until it's done.
Mike Sherman: We can address it.
Operator: Your line is open.
Mike Sherman: Have a good day.
Mario Braycroft: Okay.
Mike Sherman: We did not provide any data from the natural disease history analysis.
Troy Langford: Hi.
Mario Braycroft: And then was there anything else that went into the decision to sell Tembexa prior, to the negotiations finishing?
Mike Sherman: In fact, we were going to subject that data to a blinded independent central review.
Troy Langford: Thanks for taking our questions and congratulations on the Tembexa deal.
Mike Sherman: You mentioned a few reasons, but just wanted to see if it was due to any uncertainty to contract size.
Mike Sherman: That's why I made the comment earlier that we have no reason to believe that we would see anything different than what we previously expected from that data.
Troy Langford: I just have one question on Tembexa first.
Mike Sherman: Well, I think it's fair to say that this decision was clearly informed by the ongoing, negotiation and our potential risks around future procurements.
Mike Sherman: This was more of a general commentary from the FDA, and frankly, just maybe part of it.
Troy Langford: So just given that you all can still receive royalties on profits made on Tembexa from, contracts outside the U.S., can you just talk a little bit about who would lead those regulatory submissions or negotiations?
Mike Sherman: And so for us, the certainty of this upfront along with participation in future economics was attractive.
Mike Sherman: There are a few reasons why the FDA could have provided the feedback on risks associated, with accelerated approval.
Mike Sherman: So would you all do that or would Emergent mostly lead those conversations?
Mike Sherman: And so the risk profile associated with what we expect that agreement and future potential of that agreement, that risk profile, I think fits better with emergent and their capabilities and the certainty fits better for our strategy.
Mike Sherman: One of those is that they certainly want to have Phase III trials up and running, and so their emphasis was to focus on getting that trial up and running so that they could have confidence that it would be executed, and perhaps as a byproduct of these discussions, that will position us more strongly as we go back to talk about an accelerated approval, that there's likelihood and evidence that that trial is going to be done in a timely manner.
Mike Sherman: And then I have a follow-up after that.
Mario Braycroft: Got it.
Mike Sherman: Anyway, let me hand it off to Alan and Josh maybe to speak to the discussions we've had, both with the advisory board on the trial design and survival expectations.
Mike Sherman: Emergent will lead all regulatory interactions after closing, both in the U.S. and outside, of the U.S.
Mario Braycroft: Makes sense.
Allen Melemed: Now let me just start, and I'm going to tag it off to Josh.
Troy Langford: Okay, great.
Mario Braycroft: And can you talk a little bit about your views on antitrust and just
Allen Melemed: We had several of these conversations with numerous thought leaders in this area and, discussed the best design for this, assuming that FDA would require OR survival. And with discussions, almost all of the investigators thought that the best design would be a placebo-controlled, trial in the upfront setting, post-radiation. This way, you can control all variables.
Troy Langford: The nuance to that is that we would be working with them closely, you know, during the transition, period, and so facilitate that. So I think there's a period where which they would own it and lead it, and yet might be, relying on our team to support it.
Mario Braycroft: some of the diligence work that you've done there and if you see any risk to that?
Allen Melemed: I think the concern would be that if you did not have this control, that patients could, start a study and then come off without, if they are not in a placebo-controlled area.
Mike Sherman: Okay, great.
Yeah.
Mike Andriole: I'll let Mike respond to that.
Allen Melemed: Numerous drugs have been, and studies have been done as a placebo-controlled in similar, diseases, not exactly in Z2K27, but in patients with glioma, so it has been done in the past.
Troy Langford: That helps a lot.
Mike Andriole: Yeah.
Joshua Allen: And I'll just pass it off to Josh for other comments on that.
Troy Langford: And then on OCD-201, specifically the randomized phase 3 study, I know you all can't or don't, really want to talk a lot about the details of the study, but do you think there's any possibility that you could enroll patients with tumors with other than those with midline from the midline location?
Yeah.
Mike Andriole: We don't anticipate an issue there, Maury.
Joshua Allen: Yeah, thanks for your questions, David.
Troy Langford: And then, I guess, in terms of interactions with the FDA, do you think or do you already, have a meeting plan to discuss the trial details with the agency?
[music].
Mario Braycroft: Of course, you always have to do the filing and go through the process, but our preliminary work doesn't cause us to expect an issue there.
Joshua Allen: I would agree with Allen there.
Mike Sherman: I'll start with the latter question.
Mario Braycroft: Got it.
Joshua Allen: Not exactly in the same space, but certainly a number of randomized placebo-controlled, trials have been conducted in CNS tumors.
Mike Sherman: We did already have the discussion on the details, and we're following up on a few of, the open items from that.
Mario Braycroft: Okay.
Joshua Allen: So between the precedent there and our ad comp that's been held to help with grappling, with these issues.
Mike Sherman: So we expect to have closure on that relatively soon, and those interactions can be informal.
Mario Braycroft: And maybe last question, just on the feedback with FDA on the accelerated, approval path, did it have anything to do with number of adults versus number of children in this study?
Joshua Allen: We've certainly been mindful about how we balance ethics and the need to approve this, trial expeditiously.
Mike Sherman: I'll let Nate Allen speak to the approach around tumor location, and Josh, chip in.
Mario Braycroft: And yeah, I guess I'll leave it at that.
Joshua Allen: I'll circle back to your second question with regards to survival expectations.
Allen Melemed: Yeah, I think one of the key inclusion criteria would be the presence of the HZK7 mutation.
Mike Sherman: No, no.
Joshua Allen: Of course, this is one of the focuses that was put in for the natural disease history, that's been discussed on this call.
Allen Melemed: And we will be, at least at this point, planning to be a little more open regarding location, and plan to evaluate patients in that perspective.
Mike Sherman: Their feedback was really quite general, which is one of the reasons why we continue, to work on pulling the data analysis together to potentially pursue that path, even though they've highlighted the risk of that is higher than we may have expected previously.
Joshua Allen: While the results of that aren't available, I think the literature largely supports that, the prognosis of these patients are similar to or worse than glioblastomas.
Allen Melemed: Okay.
Mike Sherman: So, we're going to continue our work and then would plan on having a follow-up conversation with them in a formal pre-NDA meeting.
Joshua Allen: So if you're looking for a benchmark, I think you can look to that in addition to the emerging, literature for our disease.
Troy Langford: Great.
Mario Braycroft: Got it.
Joshua Allen: And then the only other comment I would add onto what Mike said for your question on dialogue, with FDA and the natural disease history is that while we have not shared results from that study to date, we have had a dialogue with the agency in the past on the natural disease history of this indication in view of the available literature, thought leader consensus, as well as treatment guidelines that are available formed by a series of KOLs, all of which led to an agreement that available therapy in the recurrent setting for this disease is palliative.
Troy Langford: That helps a lot.
Mario Braycroft: Okay.
Joshua Allen: So while no specific data from our study, a fair amount of dialogue there to help form, that framework.
Troy Langford: That's all for me, and thanks so much for answering our questions.
Mario Braycroft: Thanks for taking my questions.
David Niven-Gartner: Okay.
Operator: Thank you.
Mario Braycroft: I'll have back in the queue.
Mike Sherman: There are no further questions at this time, and I would like to turn the call back to
Operator: Next morning.
Mike Sherman: Mr. Mike Sherman for closing remarks.
Operator: Thank you.
Mike Sherman: Well, just thanks, everyone, again, for joining the call.
Edward White: Next question comes from the line of Ed White of H.C.
Mike Sherman: Look forward to providing additional updates.
Operator: Winewright.
Edward White: Your line is open.
Edward White: Good morning.
Edward White: Thanks for taking my questions and congratulations on signing this deal.
Edward White: You're welcome.
Edward White: Just a question about how the, $225 million will be reflected on the income statement.
Edward White: Would this be recorded as a one-time benefit to revenues, or could it be spread out over time?
Mike Andriole: Or are you still waiting to see what the accounting treatment for this will be?
Mike Andriole: Yeah, Ed, it's Mike Andriole.
Mike Andriole: We'll have to complete the work on the accounting treatment, before answering that definitively, of course.
Mike Andriole: My expectation is that it will be recognized as revenue this year in its entirety, subject to...
Yes.
Mike Andriole: There's a scenario, as we disclosed in the press release, where there could be an adjustment either up or down, depending on sort of the final BARDA contract, although we don't expect, based on what we know today, there to be an adjustment.
Yes.
Edward White: But we would expect all of that to be recognized this period, sort of subject to our definitive accounting review.
Mike Andriole: Okay.
Edward White: Thanks, Mike.
Edward White: And then just, on the $25 million potential $25 million milestone payments, can you just review what triggers those?
Mike Andriole: Yeah, they're triggered by the BARDA's exercise, of additional options in the agreement. So you may recall the structure of this agreement and other similar agreements is that there's a base period followed by a number of additional options to get to the number of treatment courses.
Mike Andriole: Those options are always at risk, depending on BARDA's option into the future.
Mike Andriole: And so as they exercise those options, should they exercise those options, that milestone payment would be earned by chimerics.
Mike Andriole: And so each one is worth $25 million.
Mike Andriole: Regardless of the size of the option, I would, imagine?
Mike Andriole: There is a mechanism, getting into the details, there is a mechanism in the agreement where it could technically be higher or lower, depending on if the actual amount of the option is different from what we currently anticipate.
Mike Andriole: But that could actually move in both directions, but we, expect it, based on the current negotiation, to be at or very near the $25 million.
Mike Andriole: Okay.
Edward White: Thanks, Mike.
Edward White: And just a final question on Act 201.
Mike Sherman: Has Project Optimist been brought up at all?
Edward White: Can you talk about your thoughts on, using the proper dose, the dosing that would be acceptable for the FDA, or could they want you to look at other doses?
Allen Melemed: And then also just as far as the phase three protocol, I know you're going to tell us more about that later, but how are you thinking about the size, of the study?
Edward White: Thank you.
Allen Melemed: I'll answer the second part of that and then let Allen speak to Project Optimist.
Mike Sherman: I will hold off on describing the size of the trial. We do think it's all relative, of course, to what your expectations are for your typical phase three, but I think in this population and given the treatment size effect, this is a trial that we expect to be able to complete relatively quickly.
Mike Sherman: We also believe that we can incorporate early analyses that, again, given our anticipated treatment effect, are likely to hit.
Mike Sherman: And so when we provide that update on the specific end and those early analyses, we'll be able to provide the powering assumptions for each of those, and we'll provide that detail to investors as we get that locked up with the FDA in the coming weeks.
Allen Melemed: Maybe, Allen, you can speak to some of the work that we've done on dose and so on.
Allen Melemed: Yeah, thank you, Mike.
Allen Melemed: This is Allen Millamed.
Allen Melemed: Regarding Project Optimist, as you know, this has been a project initiated by Dr. Pazdur and others due to concerns that a lot of oncology drugs in phase three have been based on the maximum tolerated dose. And in the phase three trial, they find that the doses have not been tolerable and that they're, having some safety issues and ability to give full doses in these patients. We have had some discussion with the FDA regarding Project Optimist.
Allen Melemed: Let me just put a point on the dose that was utilized for ONC 201 was not based on MTD. We have pretty strong rationale based on where our dose was, and it's a very safe dose.
Allen Melemed: And what we've seen is obviously an effective dose, and we will continue to have ongoing discussion with FDA regarding ONC 201 in this area.
Allen Melemed: Okay, thanks, Allen.
Edward White: Thank you.
Operator: Next question comes from the line of Noreen Kibria of Maxim.
Naureen Quibria: Your line is open.
Naureen Quibria: Thank you.
Naureen Quibria: Congratulations on the Tembexa deal, and thanks for taking my questions.
Naureen Quibria: I guess the, first one's on Tembexa.
Naureen Quibria: I was just wondering if you could comment on how the deal or negotiations came about with eMERGENT?
Mike Sherman: You know, who approached whom, or did you approach Centerview?
Naureen Quibria: Hi, Noreen.
Mike Sherman: It's Mike.
Mike Sherman: You know, we've had sort of on and off conversations about their interest, for a while, but, you know, those did not accelerate until more recently into what I'd say were, you know, sort of true conversations about their interest. It's obvious it fits within their portfolio, you know, really, really very well.
Mike Sherman: You know, it's not competitive with with other agents in their portfolio given, you know, this is a treatment, for for potential smallpox outbreak and yet they've got other agents in their portfolio that that leverage their their government contracting capability and their biodefense strategy.
Mike Sherman: And so it's very well, not not a surprise.
Mike Sherman: They were interested in this asset.
Mike Sherman: And as Mike Sherman said earlier, the the value of substantial upfront capital, particularly in this market and the certainty that provides in in developing and commercializing our portfolio was made a lot of sense for us.
Mike Sherman: And and the ability to continue to participate in the long term upside, if all of those options are ultimately exercised is, you know, also important for us for all the obvious reasons.
Mike Sherman: So, you know, good deal dynamics between the two.
Mike Sherman: And and I think we'll we'll be the start of a good partnership on that program.
Naureen Quibria: Right.
Naureen Quibria: Well, that makes sense.
Naureen Quibria: Thanks.
Naureen Quibria: So with so let me switch over to Ankara one.
Naureen Quibria: I'm just curious regarding the natural history study.
Naureen Quibria: Do you have a sense of, you know, what might have changed the FDA's mind from requesting a study initially?
Naureen Quibria: And now it seems like, you know, they won't be relying on that for for its regulatory decision.
Mike Sherman: So, you know, why the switch?
Naureen Quibria: I don't know if I have a great answer for that, honestly, I'll let Alan maybe maybe add to it.
Mike Sherman: There are certain elements of any natural disease history study that, you know, there there are inherent weaknesses and in what you can conclude from those.
Mike Sherman: And yet there is substantial literature about and history of the FDA asking for those and evaluating those as part of their consideration.
Mike Sherman: So that was all known up front.
Mike Sherman: So so I it's not 100 percent clear why they would would do this.
Mike Sherman: View this differently.
Mike Sherman: That being said, I do think that we would still provide that analysis as part of a potential accelerated approval submission.
Mike Sherman: We continue to believe that would be supportive.
Mike Sherman: I we have no reason to believe that that the findings from that work would would suggest anything other than what we had previously expected, that that responses are rare or if ever occur in this in this population.
Mike Sherman: So I think it can still be helpful, but we're we're going to limit our investment in that work based on on their feedback.
Naureen Quibria: Right, OK, I'm just one more.
Allen Melemed: Can I just can I just add, please, go ahead.
Allen Melemed: I do think there's been somewhat more of a shift in FDA regarding the utilization of phase two single on trials for approval that, as you probably have heard, with the PI3 kinase inhibitors in heme malignancies.
Allen Melemed: There's been the PDO1 that you've seen with the phase three trials and the.
Allen Melemed: Neurological disease in the ODEP last year.
Allen Melemed: So I think it's more of an FDA change.
Allen Melemed: Again, when you look at ONC 201, we still believe this is a very high in that need, disease in an area where there aren't any many treatment options, and we believe that there's still an active and effective agent with ONC 201.
Allen Melemed: Yeah, that makes sense.
Naureen Quibria: Thank you.
Naureen Quibria: So, so, you know, when do you anticipate filing now?
Mike Sherman: Are you able to guide to that or?
Mike Sherman: Well, we did say that, there was an expectation previously that some of the work that we have ongoing, we described some of the farm and my and my commentary that some of that could be submitted as part of or during a rolling submission.
Mike Sherman: And and so I think we're more likely that a complete submission would would be required with, with all of those things ready for when you pull the trigger on on that submission and as such those those studies will be finishing up in the first half of next year, so it would follow that.
Mike Sherman: It's the best guidance I can give.
Naureen Quibria: Got it.
Naureen Quibria: Yeah, that's actually helpful.
Naureen Quibria: Thank you.
Naureen Quibria: That's all from me.
Naureen Quibria: Thank you.
Operator: Next question comes from the line of Sumit Voi of Jones Research.
Soumit Roy: Your line is open.
Soumit Roy: Hi, everyone.
Soumit Roy: Congratulations on the 10-BEC study and thank you for taking the question.
Soumit Roy: Curious if you have any plans on the use of the, $225 million in terms of if you're going to acquire new assets, any whether it's on oncology, any color would be appreciated.
Mike Andriole: Hi, Sumit.
Mike Andriole: It's, Mike Andreol.
Mike Andriole: I think, you know, our focus is on ARC-201 and the Omicrodone platform.
Mike Andriole: As we've said continuously, we're always evaluating sort of external innovation as part of our normal business process. And we'll be smart about, you know, if we if we see assets, if or when and how to pull them in. One of the advantages of this transaction is in a market where cash has probably never been more valuable in terms of a premium uncertainty in the runway, there are some increasingly distressed assets in the market.
Mike Andriole: And I suspect over the course of the year, there's going to be more distressed assets in the market given the environment for smaller mid-cap biotech that we find ourselves in today. So having substantial cash balance to work with is helpful in that environment.
Mike Andriole: And yet, we're also very, very focused on making sure that we get ONC-201 to the finish line. We feel we've got a responsibility, to make sure that we get what we believe to be an active agent to the finish line and get it to patients who desperately need it.
Mike Andriole: So we'll balance those two objectives as we evaluate the external market, but certainly there's the opportunities in business development this year for those who have access to capital are more meaningful than they've been in a while.
Soumit Roy: Thanks, Mike.
Soumit Roy: That's really helpful.
Soumit Roy: And also, our last question is, could you give, us any color on the reason behind DSTAC termination?
Soumit Roy: What led you to that point?
Mike Sherman: Any mechanistic understanding or bandwidth or anything?
Soumit Roy: Thank you.
Soumit Roy: Actually, I didn't hear that question, Shumeit.
Soumit Roy: Can you repeat that?
Soumit Roy: The reasoning behind why you terminated the DSTAC program.
Soumit Roy: Any mechanistic understanding, or something?
Mike Sherman: Yeah.
Mike Sherman: Well, I appreciate that question because it gives me an opportunity to be really clear, about that.
Mike Sherman: That drug, I think, is a promising drug. Nothing has changed our view with regard to the safety profile or the potential for efficacy there.
Mike Sherman: As you know, we had challenges in rolling our trial, so it was as much about looking at our portfolio, identifying which assets we had the most definitive evidence on activity, and then focusing our efforts there.
Mike Sherman: I expect that Cantex will look for opportunities to continue to develop that agent in any number of indications.
Soumit Roy: Thank you.
Soumit Roy: Thank you.
Operator: Next question comes from the line of David Niven-Gartner of Wedbush Securities.
David Niven-Gartner: Your line is open.
David Niven-Gartner: Thanks for taking my questions.
David Niven-Gartner: First off, did you or have you shared any of the national, history study data with the FDA prior to these discussions?