Chimerix (NASDAQ:CMRX)

CAPS Rating: 4 out of 5


Player Avatar zzlangerhans (99.69) Submitted: 3/18/2014 12:03:43 AM : Underperform Start Price: $26.00 CMRX Score: +11.28

Chimerix stock recently spiked from 19 to 27 after the company found a way to solve a public relations disaster by providing their experimental drug brincidofovir to an immunocompromised child with disseminated adenoviral infection. Chimerix initially refused the parents' plea for the drug on the completely logical basis that they could not make the drug available to everyone who requested it for compassionate use, and that providing it to one individual and refusing it to others would create enormous ethical dilemmas. The details of the story and the commentary of Chimerix management are presented very well in this Forbes story from Matthew Herper

The controversy was quickly picked up by national media and Chimerix soon found themselves the subject of a public witch hunt, with management receiving death threats from individuals who no doubt had a minimal understanding of the pertinent issues, if any. Ultimately, Chimerix had no choice but to go against their ethical stance and found what was probably the best path out of the situation. They immediately provided brincidofovir to the dying child and claimed it was part of a new phase III trial that they had quickly devised with the cooperation of the FDA. Of course, it seems much more likely that both the company and the FDA recognized that this was a much better approach to the problem than continuing to steadfastly refuse to provide the drug on a compassionate basis and trying to weather the public relations storm.

If one of my own children was suffering or in danger of dying and could be saved through compassionate use of an experimental drug, I have no doubt I would do exactly what the parents of this child did, which is use to any forum available to bring pressure on the company and FDA. Any normal parent would do that. Society as a whole, on the other hand, should create rules and structure that ensure that processes in drug development are fair to everyone. It's very possible that the resources being used to provide brincidofovir in this one instance will delay development of the drug for months and lead to the deaths of many more children. In the internet age, much of the power that previously rested with experts and professionals has now been moved to the mob. The media wields a reflex hammer and knows exactly how to strike their readers on the patella. For the media, the ultimate goal is page views and advertising revenue, and the consequences of engendering mob mentality are irrelevant to them. Most laypeople don't have to encounter dying children on a regular basis and would prefer to think that was a phenomenon that did not exist. When they strike out against the "evil corporation" in a case like this they've solved the problem of dying children in their own minds, which will free them to devote their mental energies to basketball tournaments and celebrity hookups. Meanwhile, the fate of this child remains very dubious as it is far from clear that brincidofovir will be an effective treatment for him and he suffers from life-threatening medical conditions far beyond the adenoviral infection. If he doesn't survive, don't expect any front page headlines to report it.

One interesting byproduct of the controversy is Chimerix's stock surge, despite the absence of any new fundamental value in the company. I believe a large part of that expansion in cap is simply due to an increase in attention to the stock. Perhaps some traders are speculating that if the child survives, somehow that will lead to an immediate FDA approval and widespread commercial use of brincidofovir. Hwoever, I think it's more likely we'll see a continuation of the current degradation in share price back below 20, as the lead indication for brincidofovir is actually CMV and not adenovirus. Topline data from the SUPPRESS phase III trial of brincidofovir as CMV prophylaxis after hematopoietic cell transplantation is not expected until mid 2015, and a market cap of 700M at this point is unrealistic even for the biopharma bull market.

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