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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 10-Q
(Mark One)
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2020
 
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 class Trading Symbol(s) Name of each exchange on which registered
Common Stock, par value $0.001 per share CMRX The 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 ☒
Non-accelerated filer ☐  
Smaller reporting company ☒
 
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o




Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes   No x
 
As of July 31, 2020, the number of outstanding shares of the registrant’s common stock, par value $0.001 per share, was 62,187,734.



CHIMERIX, INC.
 
FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2020
 
INDEX
  
  Page
 
3
3
4
5
7
8
 


2



PART I - FINANCIAL INFORMATION
 
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
 
CHIMERIX, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
(unaudited) 
  June 30, 2020 December 31, 2019
ASSETS    
Current assets:    
Cash and cash equivalents $ 53,501    $ 16,901   
Short-term investments, available-for-sale 42,449    96,574   
Accounts receivable 367    1,233   
Prepaid expenses and other current assets 2,578    3,385   
Total current assets 98,895    118,093   
Property and equipment, net of accumulated depreciation 338    540   
Operating lease right-of-use assets 2,414    709   
Other long-term assets 26    34   
Total assets $ 101,673    $ 119,376   
LIABILITIES AND STOCKHOLDERS' EQUITY    
Current liabilities:    
Accounts payable $ 1,425    $ 2,398   
Accrued liabilities 4,811    6,830   
Total current liabilities 6,236    9,228   
Lease-related obligations 2,302    196   
Total liabilities 8,538    9,424   
Stockholders’ equity:    
Preferred stock, $0.001 par value, 10,000,000 shares authorized at June 30, 2020 and December 31, 2019; no shares issued and outstanding as of June 30, 2020 and December 31, 2019
—    —   
Common stock, $0.001 par value, 200,000,000 shares authorized at June 30, 2020 and December 31, 2019; 62,172,418 and 61,590,013 shares issued and outstanding as of June 30, 2020 and December 31, 2019, respectively
62    62   
Additional paid-in capital 782,217    778,693   
Accumulated other comprehensive gain, net 130    35   
Accumulated deficit (689,274)   (668,838)  
Total stockholders’ equity 93,135    109,952   
Total liabilities and stockholders’ equity $ 101,673    $ 119,376   
 
The accompanying notes are an integral part of the consolidated financial statements.



3



CHIMERIX, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(in thousands, except share and per share data)
(unaudited)
  Three Months Ended June 30, Six Months Ended June 30,
  2020 2019 2020 2019
Revenues:
Contract revenue $ 1,396    $ 1,438    $ 2,567    $ 3,794   
Licensing revenue   —    76    —   
Total revenues 1,402    1,438    2,643    3,794   
Operating expenses:        
Research and development 8,578    13,827    17,527    27,342   
General and administrative 3,110    6,312    6,315    13,998   
Total operating expenses 11,688    20,139    23,842    41,340   
Loss from operations (10,286)   (18,701)   (21,199)   (37,546)  
Other income:
Interest income and other, net 270    1,051    763    2,203   
Net loss (10,016)   (17,650)   (20,436)   (35,343)  
Other comprehensive loss:        
Unrealized gain on debt investments, net 141    77    95    217   
Comprehensive loss $ (9,875)   $ (17,573)   $ (20,341)   $ (35,126)  
Per share information:        
Net loss, basic and diluted $ (0.16)   $ (0.35)   $ (0.33)   $ (0.69)  
Weighted-average shares outstanding, basic and diluted 62,042,778    51,130,104    61,892,407    51,009,935   
  
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
Additional
Paid-in Capital
Accumulated Other
Comprehensive
Gain (Loss)
Accumulated
Deficit
Total 
Stockholders’
Equity (Deficit)
Balance, December 31, 2019 $ 62    $ 778,693    $ 35    $ (668,838)   $ 109,952   
Share-based compensation —    1,326    —    —    1,326   
Employee stock purchase plan purchases —    229    —    —    229   
Comprehensive loss:
Unrealized loss on investments, net —    —    (46)   —    (46)  
Net loss —    —    —    (10,420)   (10,420)  
Total comprehensive loss (10,466)  
Balance, March 31, 2020 $ 62    $ 780,248    $ (11)   $ (679,258)   $ 101,041   
Share-based compensation —    1,391    —    —    1,391   
Exercise of stock options —    578    —    —    578   
Comprehensive loss:
Unrealized gain on investments, net —    —    141    —    141   
Net loss —    —    —    (10,016)   (10,016)  
Total comprehensive loss (9,875)  
Balance, June 30, 2020 $ 62    $ 782,217    $ 130    $ (689,274)   $ 93,135   

5



Common
Stock
Additional
Paid-in Capital
Accumulated Other
Comprehensive
Gain (Loss)
Accumulated
Deficit
Total 
Stockholders’
Equity (Deficit)
Balance, December 31, 2018 $ 51    $ 733,907    $ (92)   $ (556,262)   $ 177,604   
Share-based compensation —    4,073    —    —    4,073   
Exercise of stock options —    13    —    —    13   
Employee stock purchase plan purchases —    170    —    —    170   
Comprehensive loss:
Unrealized gain on investments, net —    —    140    —    140   
Net loss —    —    —    (17,693)   (17,693)  
Total comprehensive loss (17,553)  
Balance, March 31, 2019 $ 51    $ 738,163    $ 48    $ (573,955)   $ 164,307   
Share-based compensation —    2,367    —    —    2,367   
Exercise of stock options —    17    —    —    17   
Comprehensive loss:
Unrealized gain on investments, net —    —    77    —    77   
Net loss —    —    —    (17,650)   (17,650)  
Total comprehensive loss (17,573)  
Balance, June 30, 2019 $ 51    $ 740,547    $ 125    $ (591,605)   $ 149,118   

6



CHIMERIX, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited) 
  Six Months Ended June 30,
  2020 2019
Cash flows from operating activities:    
Net loss $ (20,436)   $ (35,343)  
Adjustments to reconcile net loss to net cash used in operating activities:
   
Depreciation of property and equipment 216    306   
Amortization of discount/premium on investments (277)   (1,205)  
Share-based compensation 2,717    6,440   
Unrealized loss on equity investment —    30   
Lease-related amortization (43)   (36)  
Changes in operating assets and liabilities:    
Accounts receivable 866    (444)  
Prepaid expenses and other assets 809    399   
Accounts payable and accrued liabilities (2,546)   302   
Net cash used in operating activities (18,694)   (29,551)  
Cash flows from investing activities:    
Purchases of property and equipment (11)   (150)  
Purchases of short-term investments (27,652)   (107,149)  
Proceeds from sales of short-term investments 1,498    —   
Proceeds from maturities of short-term investments 80,652    77,210   
Net cash provided by (used in) investing activities 54,487    (30,089)  
Cash flows from financing activities:    
Proceeds from exercise of stock options 578    30   
Proceeds from employee stock purchase plan 229    171   
Payments of deferred offering costs —    (23)  
Net cash provided by financing activities 807    178   
Net increase (decrease) in cash and cash equivalents 36,600    (59,462)  
Cash and cash equivalents:
Beginning of period 16,901    81,106   
End of period $ 53,501    $ 21,644   
 
The accompanying notes are an integral part of the consolidated financial statements.

 
 
7



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

Chimerix, Inc. (the Company) is a development-stage biopharmaceutical company dedicated to accelerating the advancement of innovative medicines that make a meaningful impact in the lives of patients living with cancer and other serious diseases. The Company has two clinical-stage product candidates, dociparstat sodium (DSTAT) and brincidofovir (BCV). Dociparstat sodium is a potential first-in-class glycosaminoglycan compound derived from porcine heparin with known anti-inflammatory properties, but is designed to substantially reduce the risk of bleeding complications compared to commercially available forms of heparin. DSTAT is in development as a potential first-line therapy in acute myeloid leukemia (AML). DSTAT is also being developed as a potential treatment for acute lung injury (ALI) in COVID-19 patients. DSTAT has the potential to inhibit several potentially key molecular drivers of COVID-19 pathology, including HMGB1, PF4 and P-selectin. DSTAT may effectively reduce the excessive inflammation and coagulation seen in COVID-19 via multiple mechanisms while mitigating the risk of severe bleeding events presented by fully anticoagulant forms of heparin. BCV is an investigational lipid conjugate that inhibits a viral DNA polymerase that is in development as a medical countermeasure for smallpox. The Company expects to continue its evaluation of external innovation in order to license, acquire or otherwise gain access to molecules that further broaden its pipeline of investigational agents in cancer or other serious diseases.

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, 2019. In the opinion of the Company’s management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of its financial position, operating results and cash flows for the periods presented have been included. Operating results for the three and six months ended June 30, 2020 are not necessarily indicative of the results that may be expected for the full year, for any other interim period or for any future year. 

Reclassifications

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

The carrying amounts of certain financial instruments, including accounts receivable, accounts payable and accrued expenses approximate their fair values due to the short-term nature of such instruments.
 
For assets and liabilities recorded at fair value, it is the Company’s policy to maximize the use of observable inputs and minimize the use of unobservable inputs when developing fair value measurements, in accordance with the fair value hierarchy. Fair value measurements for assets and liabilities where there exists limited or no observable market data are based primarily upon estimates and are often calculated based on the economic and competitive environment, the characteristics of the asset or liability and other factors. Therefore, fair value measurements cannot be determined with precision and may not be realized in an actual sale or immediate settlement of the asset or liability. Additionally, there may be inherent weaknesses in any calculation technique and changes in the underlying assumptions used, including discount rates and estimates of future cash flows, could significantly affect the calculated current or future fair values. The Company utilizes fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures.
 
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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 June 30, 2020 and December 31, 2019, the Company had cash equivalents including money market funds, whose value is based on quoted market prices. At June 30, 2020 and December 31, 2019, the Company had short term investments, including U.S. Treasury securities, whose value is based on quoted market prices. Accordingly, these securities are classified as Level 1.
 
At June 30, 2020 and December 31, 2019, the Company had short-term investments, including commercial paper and corporate bonds. As quoted prices are not available for these securities, they are valued using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security’s credit rating, prepayment assumptions and other factors such as credit loss assumptions. Accordingly, these securities are classified as Level 2.
 
There was no material re-measurement to fair value of financial assets and liabilities that are not measured at fair value on a recurring basis. For additional information regarding the Company's investments, please refer to Note 2, "Investments."
 
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Below are tables that present information about certain assets measured at fair value on a recurring basis (in thousands):
 
Fair Value Measurements
June 30, 2020
  Total Quoted 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 $ 48,938    $ 48,938    $ —    $ —   
          Total cash equivalents 48,938    48,938    —    —   
Short-term investments
     U.S. treasury securities 6,021    6,021    —    —   
     Commercial paper 18,594    —    18,594    —   
     Corporate bonds 17,834    —    17,834    —   
          Total short-term investments 42,449    6,021    36,428    —   
               Total assets $ 91,387    $ 54,959    $ 36,428    $ —   
Fair Value Measurements
December 31, 2019
  Total Quoted 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 $ 11,854    $ 11,854    $ —    $ —   
          Total cash equivalents 11,854    11,854    —    —   
Short-term investments
     U.S. treasury securities 22,493    22,493    —    —   
     Commercial paper 43,119    —    43,119    —   
     Corporate bonds 30,962    —    30,962    —   
          Total short-term investments 96,574    22,493    74,081    —   
               Total assets $ 108,428    $ 34,347    $ 74,081    $ —   
  
Accrued Liabilities

Accrued liabilities consisted of the following (in thousands):
June 30, 2020 December 31, 2019
Accrued research and development expenses $ 1,736    $ 1,868   
Accrued compensation 2,271    3,626   
Other accrued liabilities 804    1,336   
Total accrued liabilities $ 4,811    $ 6,830   

Revenue Recognition

Policy

The Company’s revenues generally consist of (i) contract revenue - revenue generated under federal 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
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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 BCV as a medical countermeasure in the event of a smallpox release. Under the contract, the Company may receive up to $75.8 million in expense reimbursement and $5.3 million in fees over the performance of 1 base segment and 4 option segments. Exercise of each option segment is solely at the discretion of BARDA. The Company assessed the services in accordance with the authoritative guidance and concluded that there is a potential of 5 separate contracts (1 base segment and 4 option segments) within this agreement, each of which has a single performance obligation. At present, all options segments (1 through 4) have been exercised, as well as the base segment. The transaction price for each segment, based on the transaction price as defined in each segment contract, is allocated to the single performance obligation for each contract. The transaction price is recognized over time by measuring the progress toward complete satisfaction of the performance obligation. For reimbursable expenses, this occurs as qualifying research activities are conducted based on invoices from company vendors. For the fixed fee, the progress toward complete satisfaction is estimated based on the costs incurred to date relative to the total estimated costs per the terms of each contract. The Company typically invoices BARDA monthly as costs are incurred. Any amounts received in advance of performance are recorded as deferred revenue until earned. The base segment and first option segment were completed prior to adoption of ASC 606. The Company is currently performing under the second, third and fourth option segments of the contract during which the Company may receive up to a total of $23.9 million, $14.1 million and $4.6 million in expense reimbursement and fees, respectively. The second and third option segments are scheduled to end on August 20, 2020. The fourth option segment is scheduled to end on February 15, 2021.

SymBio Pharmaceuticals

On September 30, 2019, the Company entered into a license agreement with SymBio Pharmaceuticals Limited (SymBio) under which the Company granted SymBio exclusive worldwide rights to develop, manufacture and commercialize BCV for all human indications, excluding the prevention and treatment of orthopoxviruses, including smallpox. The Company assessed the agreement in accordance with the authoritative guidance and concluded that the SymBio contract includes multiple performance obligations. The SymBio contract has one fixed transaction amount of a $5.0 million upfront payment received in October 2019 and several variable transaction amounts, up to $180 million, due to the Company at certain regulatory and commercial milestones, along with low double-digit percent royalties based on net sales of BCV. All variable transaction amounts are fully constrained, therefore the allocated transaction price is $5.0 million. The majority of the transaction price of the contract has been allocated to the combined performance obligation of the granting of the license to BCV and associated technology transfer which was recognized when the technology transfer was completed in the fourth quarter of 2019. The revenue from regulatory and commercial milestones and royalties from net sales will be recognized upon the occurrence of the triggering events or when those transaction amounts are no longer fully constrained.
 
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 matching those expenses with the period in which services and efforts are expended. The Company accounts for these expenses according to the progress of its research and development efforts. The Company determines prepaid and accrual estimates through discussion with applicable personnel and outside service providers as to the progress or state of communication of clinical trials, or other services completed. The Company adjusts its rate of research and development expense recognition if actual results differ from its estimates. The Company makes estimates of its prepaid and accrued expenses as of each balance sheet date in its financial statements based on facts and circumstances known at that time. Although the Company does not expect its estimates to be materially different from amounts actually incurred, its understanding of status and timing of services performed relative to the actual status and timing of services performed may vary and may result in the Company reporting amounts that are too high or too low for any particular period. Through June 30, 2020, 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.
 
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Basic and Diluted Net Loss Per Share of Common Stock 

Basic net loss per share of common stock is computed by dividing net loss by the weighted-average number of shares of common stock outstanding during the period, excluding the dilutive effects of non-vested restricted stock, stock options, and employee stock purchase plan purchase rights. Diluted net loss per share of common stock is computed by dividing net loss by the sum of the weighted-average number of shares of common stock outstanding during the period plus the potential dilutive effects of non-vested restricted stock, stock options, and employee stock purchase plan purchase rights outstanding during the period calculated in accordance with the treasury stock method, but are excluded if their effect is anti-dilutive. Because the impact of these items is anti-dilutive during the periods of net loss, there was no difference between basic and diluted loss per share of common stock for the three and six months ended June 30, 2020 and 2019.

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.

Note 2. Investments
 
The following tables summarize the Company's debt investments (in thousands):
  June 30, 2020
  Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value
Corporate bonds $ 17,767    $ 66    $ —    $ 17,833   
U.S. treasury securities 5,999    23    —    6,022   
Commercial paper 18,553    41    —    18,594   
Total investments $ 42,319    $ 130    $ —    $ 42,449   
  December 31, 2019
  Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value
Corporate bonds $ 30,952    $ 19    $ (9)   $ 30,962   
Commercial paper 43,109    14    (4)   43,119   
U.S. treasury securities 22,478    17    (2)   22,493   
Total investments $ 96,539    $ 50    $ (15)   $ 96,574   
 
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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):

At June 30, 2020 there were no debt investments with unrealized losses.
December 31, 2019
Less than 12 Months Greater than 12 Months Total
Fair Value Unrealized Loss Fair Value Unrealized Loss Fair Value Unrealized Loss
Corporate bonds $ 9,657    $ (9)   $ —    $ —    $ 9,657    $ (9)  
Commercial paper 10,147    (4)   —    —    10,147    (4)  
U.S. treasury securities 2,994    (2)   —    —    2,994    (2)  
Total $ 22,798    $ (15)   $ —    $ —    $ 22,798    $ (15)  
Number of securities with unrealized losses   —     

The Company periodically reviews available-for-sale debt investments for other-than-temporary declines in fair value below the cost basis and whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company evaluates, among other things, the duration and extent to which the fair value of a security is less than its cost; the financial condition of the issuer and any changes thereto; and the Company’s intent to sell, or whether it will more likely than not be required to sell, the security before recovery of its cost basis. At June 30, 2020, the Company had no available-for-sale debt investments in an unrealized loss position. There were no such declines in value for the three and six months ended June 30, 2020 and 2019. 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. The Company recognizes interest income on an accrual basis in interest income in the Consolidated Statements of Operations and Comprehensive Loss.

The following table summarizes the scheduled maturity for the Company's debt investments at June 30, 2020 (in thousands):
Maturing in one year or less $ 42,449   
Maturing after one year through two years —   
     Total debt investments $ 42,449   
 
Note 3. Commitments and Contingencies
 
Leases

The Company leases its facilities under long-term operating leases that expire at various dates through 2026. The Company generally has options to renew lease terms on its facilities, which may be exercised at the Company's sole discretion. In addition, certain lease arrangements may be terminated prior to their original expiration date at the Company's discretion. The Company evaluates renewal and termination options at the lease commencement date to determine if it is reasonably certain to exercise the option and has concluded on all operating leases that it is not reasonably certain that any options will be exercised. The weighted-average remaining lease term for the Company's operating leases as of June 30, 2020 was 5.67 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 $173,000 and $182,000, respectively, for the three months ended June 30, 2020 and 2019, and $366,000 and $376,000 for the six months ended June 30, 2020 and 2019, respectively.

The discount rate implicit within the Company's leases is generally not determinable and therefore the Company determines the discount rate based on its incremental borrowing rate based on the information available at commencement date. As of June 30, 2020, the operating lease liabilities reflect a weighted-average discount rate of 8.28%.

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The following table sets forth the operating lease right-of-use assets and liabilities as of June 30, 2020 (in thousands):
Assets
Operating lease right-of-use assets $ 2,414   
Liabilities
Operating lease short-term liabilities (recorded within Accrued liabilities) $ 189   
Operating lease long-term liabilities (recorded within Lease-related obligations) 2,302   
     Total operating lease liabilities $ 2,491   

Operating lease payments over the remainder of the lease terms are as follows (in thousands):
Years Ending December 31, As of June 30, 2020
2020 $ 362   
2021 (1) 191   
2022 546   
2023 562   
2024 580   
All remaining years 955   
Total future minimum rental payments $ 3,196   
     Less amount of lease payments representing interest 705   
Total present value of lease payments $ 2,491   

(1)The Company entered into the Ninth Amendment of its lease for the Company's headquarters in Durham, NC, which extended the term of the lease 65 months to July 31, 2026. As part of the amendment, the Company will receive a rent abatement of the first 5 months of the new lease term which begins on March 1, 2021. Additionally, the Ninth Amendment grants the Company a refurbishment allowance, which the Company expects to receive in 2021 after the refurbishment has been completed.

As of December 31, 2019, operating lease payments over the remainder of the lease terms were as follows (in thousands):
Years Ending December 31, As of December 31, 2019
2020 $ 719   
2021 182   
Total future minimum rental payments $ 901   
     Less amount of lease payments representing interest 66   
Total present value of lease payments $ 835   

For the three months ended June 30, 2020 and 2019, the Company made lease payments of approximately $180,000 and $194,000, respectively, and for the six months ended June 30, 2020 and 2019, the Company made lease payments of approximately $357,000 and $386,000, respectively, which are included in operating cash flows.

Sublease

The Company subleases 3,537 square feet of its office space under a non-cancelable operating lease that expires in February 2021. For the three and six months ended June 30, 2020 and 2019, the Company recognized approximately $18,000 and $35,000 of income in Interest income and other, net on the Consolidated Statement of Operations and Comprehensive Loss. Total future minimum rentals under the non-cancelable operating sublease are presented below (in thousands):
Years Ending December 31, As of June 30, 2020
2020 $ 41   
2021 14   
     Total future minimum sublease rentals $ 55   

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Significance of Revenue Source

The Company is the recipient of federal research contract funds from BARDA, the sole source of the Company's contract revenue. Periodic audits are required under the Company’s BARDA agreement and certain costs may be questioned as appropriate under the BARDA agreement. Management believes that such amounts in the current year, if any, are not significant. Accordingly, no provision for refundable amounts under the BARDA agreement had been made as of June 30, 2020 and December 31, 2019.
 
Note 4. Equity Transactions and Share-based Compensation

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, 2020, the common stock reserved for issuance under the 2013 Plan was automatically increased by 2.5 million shares. As of June 30, 2020, there was a total of 2.9 million shares reserved for future issuance under the 2013 Plan. The Company issued 242,000 shares of common stock pursuant to the exercise of stock options during each of the three and six months ended June 30, 2020. The Company issued approximately 6,000 and 14,000 shares of common stock pursuant to the exercise of stock options during the three and six months ended June 30, 2019, respectively.

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 3.5 million shares of common stock to be purchased under the ESPP, of which 2.6 million shares remained available for purchase as of June 30, 2020. 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, 2020, 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 177,000 and 113,000 shares of common stock pursuant to the ESPP during the six months ended June 30, 2020 and 2019, respectively. Compensation expense for shares purchased under the ESPP related to the purchase discount and the “look-back” option and were determined using a Black-Scholes option pricing model.

Restricted Stock Units

The Company has issued RSUs to certain employees which vest based on service criteria. When vested, the RSU represents the right to be issued the number of shares of the Company's common stock that is equal to the number of RSUs granted. The grant date fair value for RSUs is based upon the market price of the Company's common stock on the date of the grant. The fair value is then amortized to compensation expense over the requisite service period or vesting term. The Company issued no shares and approximately 163,000 shares of common stock pursuant to the vesting of RSUs during each of the three and six months ended June 30, 2020. The Company issued approximately 201,000 and 369,000 shares of common stock pursuant to the vesting of RSUs during the three and six months ended June 30, 2019, respectively.

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Stock-based Compensation

For awards with only service conditions and graded-vesting features, the Company recognizes compensation expense on a straight-line basis over the requisite service period. Total share-based compensation expense recognized related to stock options, the ESPP and RSUs was as follows (in thousands): 
  Three Months Ended June 30, Six Months Ended June 30,
  2020 2019 2020 2019
Research and development expense $ 725    $ 1,000    $ 1,465    $ 2,270   
General and administrative expense 666    1,367    1,252    4,170   
          Total share-based compensation expense $ 1,391    $ 2,367    $ 2,717    $ 6,440   

Compensation expense for the six months ended June 30, 2019 includes $1.8 million of share-based compensation expense related to the accelerated vesting and modification of stock options and RSUs of the Company's then President and CEO in connection with her severance agreement.

Related to the Company's reduction in workforce that occurred in May 2019, compensation expense for the three and six months ended June 30, 2019 includes $0.7 million of share-based compensation expense related to the accelerated vesting and modifications of stock options and RSUs.

Note 5. Income Taxes
 
The Company estimates an annual effective tax rate of 0% for the year ending December 31, 2020 as the Company incurred losses for the six month period ended June 30, 2020, and is forecasting an estimated net loss for both financial statement and tax purposes for the year ending December 31, 2020. Therefore, no federal or state income taxes are expected and none have been recorded at this time. Income taxes have been accounted for using the liability method in accordance with FASB ASC 740.

Due to the Company's history of losses since inception, there is not enough evidence at this time to support that the Company will generate future income of a sufficient amount and nature to utilize the benefits of its net deferred tax assets. Accordingly, the deferred tax assets have been reduced by a full valuation allowance, since the Company cannot currently support that realization of its deferred tax assets is more likely than not. However, the Company feels its deferred tax assets may be used upon the Company becoming profitable.
 
At June 30, 2020, the Company had no unrecognized tax benefits that would reduce the Company’s effective tax rate if recognized.

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 BCV as a medical countermeasure in the event of a smallpox release. Under the contract, BARDA will reimburse the Company, plus pay a fixed fee, for the research and development of BCV 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 as currently in effect, the Company may receive up to $75.8 million in expense reimbursement and $5.3 million in fees.

The Company is currently performing under the second, third and fourth option segments of the contract during which the Company may receive up to a total of $23.9 million, $14.1 million and $4.6 million in expense reimbursement and fees, respectively. The second and third option segments are scheduled to end on August 20, 2020. The fourth option segment is scheduled to end on February 15, 2021. Of the $75.8 million in expense reimbursement and $5.3 million in fees that the Company may receive, approximately $78.9 million in expense reimbursement and fees has been awarded. As of June 30, 2020, of the total funding the Company had invoiced an aggregate of $72.6 million with respect to the base performance segment and the four option segments. For the three months ended June 30, 2020 and 2019, the Company recognized revenue under this contract of $1.4 million and $1.4 million, respectively, and for the six months ended June 30, 2020 and 2019, the Company recognized revenue under this contract of $2.6 million and $3.8 million, respectively.

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Cantex Pharmaceuticals, Inc.

On July 26, 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 is currently being studied for the treatment of acute myeloid leukemia and acute lung injury in patients with COVID-19. Under the terms of the license agreement, the Company will be responsible for, and bear the future costs of, worldwide development and commercialization of DSTAT. In connection with the transaction, Cantex assigned to the Company all of its rights under its DSTAT supply agreements, including its bulk API agreement with Scientific Protein Laboratories LLC (SPL), pursuant to which SPL will exclusively produce DSTAT for the Company through October 2030.

In consideration for the license rights, the Company made an upfront cash payment of $30.0 million to Cantex and issued to Cantex 10.0 million shares of its common stock. During 2019, the Company recognized $65.0 million of acquired in-process research and development expenses for the $30.0 million upfront cash payment, the fair value of the 10.0 million shares of common stock issued to Cantex and $0.1 million of transaction costs. The license agreement obligates the Company to pay Cantex regulatory milestone payments of up to $202.5 million upon receipt of product approvals in the United States, the European Union and Japan, and sales milestone payments of up to $385.0 million upon achievement of specified net sales levels. The Company also agreed to pay Cantex tiered royalties based on percentages of net sales beginning at 10% and not to exceed the high-teens.

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 BCV 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 BCV 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 BCV 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 BCV. Since entering into the license agreement in September 2019, the Company has recognized substantially all of the $5.0 million upfront payment.

University of Michigan

In 2006, the Company entered into a license agreement with The Regents of the University of Michigan (UM) under which the Company obtained an exclusive, worldwide license to UM’s patent rights in certain inventions (UM Patent Rights) related to certain compounds originally synthesized at UM. Under the license agreement, the Company is permitted to research, develop, manufacture and commercialize products utilizing the UM Patent Rights, and to sublicense such rights subject to certain sublicensing fees and royalty payments.

In consideration for the rights granted to the Company, under the license agreement as amended in December 2016, the Company paid UM $50,000 in fees in 2016 and in January 2017 issued UM an aggregate of 33,058 shares of its common stock. In connection with the Company's commercialization or sublicensing of certain products covered by the license agreement, including our former product candidate CMX521, the Company could be required to pay royalties on net sales of such products ranging from 0.25% to 2%. Beginning in 2024, the Company is also subject to certain minimum annual royalty payments.

The UM license agreement requires that the Company use commercially reasonable efforts to develop and make commercially available licensed products as soon as practicable. Specifically, the Company has agreed to make the first commercial sale of a licensed product by June of 2026. UM may terminate the license agreement if the Company materially breaches the license agreement. The Company is currently in compliance with its milestone requirements.

Note 7. Restructuring Costs

In May 2019, the Company made the decision to discontinue the development of oral and IV BCV development programs for the treatment of Adenovirus (AdV) in stem-cell transplant (HCT) patients. The Company's development efforts with respect to BCV are now focused on the treatment of smallpox. As a result, the Company restructured its operations, which included a reduction in workforce of 43 full-time employees and the accrual of expenses to close-out the clinical trials for the oral and IV
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development programs of BCV in AdV (study 210, study 211, AdAPT) and other supportive BCV development programs. In 2019, the Company recorded charges for one-time employee termination benefits of $3.3 million, contract close-out costs of $2.0 million, other BCV development costs of $0.3 million, and losses on disposals of fixed assets of $0.3 million during 2019. The $2.0 million of contract close-out costs were recorded through an increase in liabilities of $1.5 million with the remainder recognized through the expensing of prepaid balances. As of December 31, 2019, the Company had a clinical trial accrual balance related to the AdAPT, 210 and 211 trial terminations of $27,000, other development costs accrual balance of $0.1 million, and severance accrual balance of $0.2 million. Additionally, as of December 31, 2019 prepaid balances of $1.3 million for unused deposits have been reclassed to other receivables, which was recorded in prepaid expenses and other current assets on the Consolidated Balance Sheet.

The following table summarizes the restructuring charges (in thousands) recorded in 2019 during the period subsequent to the restructuring in May 2019:
Employee Termination Benefits Clinical Trial Close-out Costs Other Development Costs Fixed Asset Disposals Total
Research and development $ 1,437    $ 2,021    $ 339    $ —    $ 3,797   
General and administrative 1,909    —    —    —    1.909   
Interest income and other, net —    —    —    250    250   
Total restructuring expenses $ 3,346    $ 2,021    $ 339    $ 250    $ 5,956   

For the three and six months ended June 30, 2019, $4.6 million of research and development and $1.9 million of general and administrative restructuring charges were recorded.

The following table sets forth the accrual activity for employee termination benefits and contract close-out costs (in thousands) for 2019.
Employee Termination Benefits Clinical Trial Close-out Costs Other Development Costs Fixed Asset Disposals Total
Balance at January 1, 2019 $ —    $ —    $ —    $ —    $ —   
Accruals 3,335    2,131    315    —    5,781   
Revised estimates 11    (621)   24    250    (336)  
Payments (3,163)   (1,483)   (229)   (250)   (5,125)  
Balance at December 31, 2019 $ 183    $ 27    $ 110    $ —    $ 320   

The following table sets forth the accrual activity for employee termination benefits and contract close-out costs (in thousands) for the six months ended June 30, 2020. All amounts are expected to be fully paid by the end of the third quarter of 2020 and no additional charges are expected to be incurred.
Employee Termination Benefits Clinical Trial Close-out Costs Other Development Costs Total
Balance at December 31, 2019 $ 183    $ 27    $ 110    $ 320   
Revised estimates —    (14)   —    (14)  
Payments (114)   (4)   (100)   (218)  
Balance at March 31, 2020 $ 69    $   $ 10    $ 88   
Revised estimates —    (5)   —    (5)  
Payments (69)   —    —    (69)  
Balance at June 30, 2020 $ —    $   $ 10    $ 14   

For the three and six months ended June 30, 2020, the revised accrual estimates resulted in a decrease to research and development expenses of $5,000 and $19,000, respectively. Additionally, during the three months ended June 30, 2020 refunds of unused deposits of $1.3 million were received, which were previously recorded in prepaid expenses and other current assets on the Consolidated Balance Sheet.

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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 June 30, 2020, and events which occurred subsequently but were not recognized in the financial statements.

On July 30, 2020, the Company entered into the Second Amendment to an industrial building lease to extend the lease period through July 31, 2026.
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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, 2019 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, 2019, filed with the Securities and Exchange Commission (SEC) on February 25, 2020. 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, or 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 is a development-stage biopharmaceutical company dedicated to accelerating the advancement of innovative medicines that make a meaningful impact in the lives of patients living with cancer and other serious diseases. Our two clinical-stage development programs are dociparstat sodium (DSTAT) and brincidofovir (BCV).

Dociparstat sodium is an investigational glycosaminoglycan derivative of heparin with known anti-inflammatory properties, but is designed to substantially reduce the risk of bleeding complications compared to commercially available forms of heparin. DSTAT is in development as a potential first-line therapy in acute myeloid leukemia (AML).

DSTAT is also being developed as a potential treatment for acute lung injury (ALI) in COVID-19 patients. In preclinical studies DSTAT has been observed to reduce levels of HMGB1, a cytokine which plays a major role in the pathogenesis of immune disorders. Elevated HMGB1 in serum is strongly associated with clinical severity and mortality in COVID-19 patients. We believe that DSTAT has the potential to inhibit several potentially key molecular drivers of COVID-19 pathology, including HMGB1, PF4 and P-selectin. We also believe that DSTAT has the potential to reduce the excessive inflammation and coagulation seen in COVID-19 via multiple mechanisms while mitigating the risk of severe bleeding events presented by fully anticoagulant forms of heparin.

BCV is an investigational lipid conjugate that inhibits a viral DNA polymerase that is in development as a medical countermeasure for smallpox. We expect to continue our evaluation of external innovation in order to license, acquire or otherwise gain access to molecules that further broaden our pipeline of investigational agents in cancer or other serious diseases.

Recent Developments

Dociparstat for the Treatment of Acute Lung Injury (ALI) in COVID-19 Patients

In April, we announced the initiation of a Phase 2/3 study of DSTAT in patients with acute lung injury (ALI) from COVID-19. The study is a 1:1 randomized, double-blind, placebo-controlled, Phase 2/3 trial to evaluate the safety and efficacy of DSTAT in adults with severe COVID-19 who are at high risk of respiratory failure. Eligible subjects will be those with confirmed COVID-19 who require hospitalization and supplemental oxygen therapy. The primary endpoint of the study is the proportion of subjects who survive and do not require mechanical ventilation through day 28. Additional endpoints include time to improvement as assessed by the National Institute of Allergy and Infectious Disease ordinal scale, time to hospital discharge,
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time to resolution of fever, number of ventilator-free days, all-cause mortality, and changes in key biomarkers (e.g. IL-6, TNF-α, HMGB1, C-reactive protein and d-dimer).

The Phase 2 portion of the study will enroll 24 subjects to determine the maximum tolerated dose and will then expand by an additional 50 patients (74 total) at the selected dose. A formal analysis of all endpoints, including supportive biomarkers will be performed at the conclusion of the Phase 2 portion of the study. Contingent upon positive results from the Phase 2 portion, the Phase 3 portion of the study will enroll approximately 450 subjects. This study is currently enrolling and we expect to complete Phase 2 enrollment in the fourth quarter of 2020.

Dociparstat for First-Line Acute Myeloid Leukemia (AML)

Earlier this year, we conducted an end of Phase 2 meeting with the FDA related to the Company’s development of DSTAT in AML. Following that meeting, we incorporated FDA's feedback on key elements of a proposed Phase 3 clinical trial and we believe have since reached consensus with FDA on the full protocol. Currently we are working to initiate the Phase 3 clinical study of DSTAT for the treatment of AML in early 2021.

We expect that the proposed Phase 3 trial will be a randomized, blinded trial of approximately 570 newly diagnosed AML patients. The trial will include patients 60 years of age and older who have an intermediate or adverse genetic risk profile. It will also include patients between 18 and 60 years old who have an adverse genetic risk profile. Patients will be randomized 1:1 to receive DSTAT in combination with standard cytarabine plus anthracycline (7+3) induction and cytarabine consolidation chemotherapy or will receive standard of care (7+3) induction and consolidation chemotherapy alone. Patients with FLT-3 mutations will be allowed in the study and will be eligible to receive midostaurin.

The primary endpoint of the proposed trial will be overall survival (OS). In addition, the FDA has indicated that event-free survival (EFS) using complete response with hematologic recovery to define induction success (CR) may be acceptable as an endpoint for regulatory approval. Other endpoints to be evaluated in the proposed trial include: minimal residual disease (MRD), relapse-free survival (RFS), time to hematologic recovery, and induction response.

In order to supplement the previously reported data from pilot and Phase 2 studies and provide additional evidence regarding DSTAT’s potential mechanism of action, the proposed Phase 3 trial includes an early assessment of comparative CR and MRD rates among the first 80 evaluable patients. The data are expected to be unblinded, reported publicly, and available for ongoing analysis of later endpoints, unless the independent Data Monitoring Committee (DMC) determines that exceptional pre-specified thresholds have been achieved, in which case the DMC will have the discretion to maintain blinding, which would allow inclusion of these patients in the final analysis.

BCV Oral Treatment for Smallpox

In April, we announced receipt of authorization from the FDA to initiate the rolling submission of our New Drug Application (NDA) for the approval of BCV as a medical countermeasure for smallpox. The Company is targeting completion of the rolling NDA submission for BCV late in the third quarter of 2020.

Also in June, BARDA exercised the fourth and final option to the BCV development contract for smallpox. The value of this option segment is up to approximately $4.6 million and will support smallpox regulatory filings related to the ongoing rolling NDA submission. The fourth option segment is scheduled to expire on February 15, 2021.

Appointment of Allen Melemed, M.D. as Chief Medical Officer

In June we announced the appointment of Allen Melemed, M.D. as our Chief Medical Officer. Prior to joining Chimerix, Dr. Melemed was employed by Eli Lilly and Company (Lilly), where he spent more than 20 years dedicated to the clinical development and approval of oncology medicines across a broad range of tumor types including VERZENIO®, CYRAMZA®, LARTRUVO®, ALIMTA® and RETEVMO® among others. Most recently, he served as a Distinguished Medical Fellow and Senior Director of Regulatory Affairs Oncology, North America at Lilly. In addition to his role at Lilly, Dr. Melemed was an attending physician in pediatric oncology at Indiana University (IU) School of Medicine, Riley Children’s Hospital from 1996 to 2012.

Business Development Review

In addition to our completed transaction with Cantex, 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,
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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 a government grant and 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 is a cost-plus fixed fee development contract. Under the contract as currently in effect, we may receive up to $75.8 million in expense reimbursement and $5.3 million in fees if all remaining option segments are exercised. We are currently performing under the second, third and fourth option segments of the contract during which we may receive up to a total of $23.9 million, $14.1 million and $4.6 million in expense reimbursement and fees, respectively. The second and third option segments are scheduled to end on August 20, 2020. The fourth option segment is scheduled to end on February 15, 2021. As of June 30, 2020, of the total funding the Company had invoiced an aggregate of $72.6 million with respect to the base performance segment and the four option segments. Under the BARDA contract, we recognized revenue of $1.4 million and $1.4 million during the three months ended June 30, 2020 and 2019, respectively, and we recognized revenue of $2.6 million and $3.8 million during the six months ended June 30, 2020 and 2019, respectively.

In September 2019, we entered into a license agreement with SymBio for worldwide rights to develop, manufacture and commercialize BCV 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 substantially all of the $5.0 million of revenue related to the upfront payment. The revenue from regulatory and commercial milestones and royalties from net sales will be recognized upon occurrence of the triggering events.
 
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;
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.
 
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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 June 30, Six Months Ended June 30,
  2020 2019 2020 2019
Direct research and development expenses $ 4,261    $ 7,264    $ 9,208    $ 14,948   
Research and development personnel costs - excluding stock-based compensation 2,913    4,637    5,516    8,259   
Research and development personnel costs - stock-based compensation 725    1,000    1,465    2,270   
Indirect research and development expenses 679    926    1,338    1,865   
Total research and development expenses $ 8,578    $ 13,827    $ 17,527    $ 27,342   
 
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.

Dociparstat sodium (DSTAT)

In July of 2019, we acquired DSTAT from Cantex Pharmaceuticals. In connection with the transaction, we recorded in 2019 a total of $65.0 million in expense. This is comprised of a $30.0 million upfront payment, $34.9 million for the fair value of the 10.0 million shares of common stock issued and $0.1 million in transaction costs. As we continue to focus on the development of DSTAT for treatment of AML patients and COVID-19, we expect research and development expense to increase with the ongoing and planned clinical trials. We are currently enrolling a Phase 2/3 study of DSTAT in ALI for patients with COVID-19 and plan to initiate a Phase 3 trial in AML in early 2021.

Brincidofovir

We are developing BCV for the treatment of smallpox. Under our cost-plus-fixed fee BARDA contract and additional costs we are not seeking reimbursement for from BARDA, we incurred expense in connection with the development of orthopoxvirus animal models, the demonstration of efficacy and pharmacokinetics of BCV in the animal models, the conduct of an open label clinical safety study for subjects with DNA viral infections, the manufacture and process validation of bulk drug substance and BCV 100 mg tablets, and submission of the NDA to the FDA. In addition, we have incurred additional supportive costs for the development of BCV for smallpox that we are not seeking reimbursement for from BARDA.

Historically, the majority of our research and development efforts have been focused on completing our Phase 3 trial of BCV for prevention of CMV in HCT recipients (SUPPRESS), our trial of BCV as a treatment for AdV (AdVise), the AdAPT study in pediatric HCT recipients and our other clinical and preclinical studies and other work needed to provide sufficient data supporting the safety, tolerability and efficacy of BCV for approval in the United States and equivalent health authority approval outside the United States. In May 2019, we discontinued both the oral and IV development programs of BCV in all indications other than smallpox and the associated clinical trials.

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 commercial readiness efforts, accounting and legal services, costs of various consultants, director and officer liability insurance, occupancy costs and information systems.
 
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Interest Income and Other, Net

Interest income and other, net consists primarily of interest earned on our cash, cash equivalents and short-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 $1.4 million and $2.4 million was recognized in the three months ended June 30, 2020 and 2019, respectively, and $2.7 million and $6.4 million was recognized in the six months ended June 30, 2020 and 2019, 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 accounting principles generally accepted 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, 2019 filed with the SEC on February 25, 2020. There have been no material changes during the six months ended June 30, 2020 to our critical accounting policies, significant judgments and estimates disclosed in our Annual Report on Form 10-K for the year ended December 31, 2019.

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RESULTS OF OPERATIONS 

Comparison of the Three Months Ended June 30, 2020 and June 30, 2019

The following table summarizes our results of operations for the three months ended June 30, 2020 and June 30, 2019, together with the changes in those items (in thousands, except percentages): 
 
  Three Months Ended June 30, Dollar Change % Change
  2020 2019 Increase/(Decrease)
Revenues:
Contract revenue $ 1,396    $ 1,438    $ (42)   (2.9) %
Licensing revenue   —      *
Total revenues 1,402    1,438    (36)   (2.5) %
Operating expenses:        
Research and development 8,578    13,827    (5,249)   (38.0) %
General and administrative 3,110    6,312    (3,202)   (50.7) %
Total operating expenses 11,688    20,139    (8,451)   (42.0) %
Loss from operations (10,286)   (18,701)   8,415    (45.0) %
Other income:
Interest income and other, net 270    1,051    (781)   (74.3) %
Net loss $ (10,016)   $ (17,650)   $ 7,634    (43.3) %

* Not meaningful or not calculable

Contract Revenue

For the three months ended June 30, 2020 and June 30, 2019, total contract revenue remained consistent at $1.4 million.
Research and Development Expenses

For the three months ended June 30, 2020, our research and development expenses decreased to $8.6 million compared to $13.8 million for the three months ended June 30, 2019. The decrease of $5.2 million, or 38.0%, is primarily related to the following:

a decrease of $4.8 million related to the discontinuation of both the oral and IV BCV development programs and CMX521 for norovirus;
a decrease of $2.3 million in compensation expenses as headcount was reduced as part of the Company's restructuring activities in May 2019;
a decrease of $0.5 million in smallpox program expenses primarily related to the conclusion of animal studies; offset by
an increase of $2.5 million in expenses primarily related to the conduct of clinical trials, animal studies, and drug manufacturing related to the development of DSTAT for first-line treatment of AML and COVID-19 patients.

General and Administrative Expenses

For the three months ended June 30, 2020, our general and administrative expenses decreased to $3.1 million compared to $6.3 million for the three months ended June 30, 2019. The decrease of $3.2 million, or 50.7%, is primarily related to the following:

a decrease of $2.3 million in compensation expenses due to the Company's restructuring activities in May 2019; and
a decrease of $0.9 million in legal, professional fees and operational expenses.

Interest Income and Other, Net

For the three months ended June 30, 2020, our interest income decreased to $0.3 million compared to $1.1 million for the three months ended June 30, 2019. This decrease is attributable to decreased interest earned on our cash and investments.
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Comparison of the Six Months Ended June 30, 2020 and June 30, 2019

The following table summarizes our results of operations for the six months ended June 30, 2020 and June 30, 2019, together with the changes in those items (in thousands except percentages): 
 
  Six Months Ended June 30, Dollar Change % Change
  2020 2019 Increase/(Decrease)
Revenues:
Contract revenue $ 2,567    $ 3,794    $ (1,227)   (32.3) %
Licensing revenue 76    —    76    *
Total revenues $ 2,643    $ 3,794    (1,151)   (30.3) %
Operating expenses:    
Research and development 17,527    $ 27,342    (9,815)   (35.9) %
General and administrative 6,315    13,998    (7,683)   (54.9) %
Total operating expenses 23,842    41,340    (17,498)   (42.3) %
Loss from operations (21,199)   (37,546)   16,347    (43.5) %
Other income:
Interest income and other, net 763    2,203    (1,440)   (65.4) %
Net loss $ (20,436)   $ (35,343)   $ 14,907    (42.2) %
* Not meaningful or not calculable

Contract Revenue

For the six months ended June 30, 2020, total contract revenue decreased to $2.6 million compared to $3.8 million for the six months ended June 30, 2019. The decrease of $1.2 million, or 32.3%, is related to a decrease in reimbursable expenses under our contract with BARDA.

Research and Development Expenses

For the six months ended June 30, 2020, our research and development expenses decreased to $17.5 million compared to $27.3 million for the six months ended June 30, 2019. The decrease of $9.8 million, or 35.9%, is primarily related to the following:

a decrease of $8.9 million in expenses related to the discontinuation of both the oral and IV BCV development programs and CMX521 for norovirus;
a decrease of $3.9 million in compensation expenses as headcount was reduced as part of the Company's restructuring activities in May 2019;
a decrease of $1.7 million in smallpox program expenses primarily related to the conclusion of animal studies; and
a decrease of $0.5 million related to our BCV compassionate use program; offset by
an increase of $5.3 million in expenses primarily related to the clinical trial expenses, animal studies, and drug manufacturing related to the development of DSTAT for first-line treatment of AML and COVID-19 patients.

General and Administrative Expenses

For the six months ended June 30, 2020, our general and administrative expenses decreased to $6.3 million compared to $14.0 million for the six months ended June 30, 2019. The decrease of $7.7 million, or 54.9%, is primarily related to the following:

a decrease of $5.9 million in compensation expenses as headcount was reduced as part of the Company's restructuring activities in May 2019;
a decrease of $1.5 million in operational expenses; and
a decrease of $0.3 million in expenses related to commercial readiness.

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Interest Income and Other, Net

For the six months ended June 30, 2020, our interest income and other, net decreased to $0.8 million compared to $2.2 million for the six months ended June 30, 2019. This decrease is attributable to decreased interest earned on our cash and investments.

LIQUIDITY AND CAPITAL RESOURCES

As of June 30, 2020, we had capital available to fund operations of approximately $96.0 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 June 30, 2020, we had an accumulated deficit of $689.3 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 November 8, 2017, we entered into an at-the-market (ATM) sales agreement with Cowen and Company, LLC to sell up to $75 million of our common stock under a shelf registration statement filed in November 2017. As of December 31, 2018, we had sold an aggregate of 2.8 million shares of common stock pursuant to the ATM at a weighted average price per share of $4.00 for net offering proceeds of $10.9 million. We did not sell any shares of our common stock subsequent to 2018 and we terminated the ATM sales agreement with Cowen and Company, LLC in July 2020.

On August 10, 2020, we entered into an Open Market Sale AgreementSM (the Jefferies Sales Agreement) with Jefferies LLC, as agent (Jefferies), 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 filed with SEC on August 10, 2020 (the Registration Statement), following such time as the Registration Statement is declared effective by the SEC. The Registration Statement is subject to review by the SEC.

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 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 (in thousands): 
  Six Months Ended June 30,
  2020 2019
Cash sources and uses:    
Net cash used in operating activities $ (18,694)   $ (29,551)  
Net cash provided by (used in) investing activities 54,487    (30,089)  
Net cash provided by financing activities 807    178   
Net increase (decrease) in cash and cash equivalents $ 36,600    $ (59,462)  
 
Operating Activities

Net cash used in operating activities of $18.7 million for the six months ended June 30, 2020 was primarily the result of our $20.4 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 a decrease of $2.5 million in accounts payable and accrued liabilities, partially offset by a decrease in prepaid expenses and other assets of $0.8 million and a decrease in accounts receivable of $0.9 million related to work on the BARDA contract. Non-cash expenses included add-backs of $2.7 million for share-based compensation and $0.2 million of depreciation of property and equipment, offset by $0.3 million of amortization of discount/premium on investments. Net cash used in operating activities of $29.6 million for the six months ended June 30, 2019 was primarily the result of our $35.3 million net loss, partially offset by the change in operating assets and liabilities and the add-
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back of non-cash expenses. Non-cash expenses included add-backs of $6.4 million for share-based compensation and $0.3 million of depreciation of property and equipment, offset by $1.2 million of amortization of discount/premium on investments. The change in operating assets and liabilities includes an decrease in prepaid expenses and other assets of $0.4 million and an increase of $0.3 million in accounts payable and accrued liabilities, partially offset by an increase in accounts receivable of $0.4 million related to work on the BARDA contract.

Investing Activities

Net cash provided by investing activities of $54.5 million for the six months ended June 30, 2020 was primarily the result of the maturity of $80.7 million in short-term investments and the sale of $1.5 million in short-term investments, partially offset by the purchase of $27.7 million in short-term investments. Net cash used in investing activities of $30.1 million for the six months ended June 30, 2019 was primarily the result of the purchase of $107.1 million in short-term investments, partially offset by the maturity of $77.2 million in short-term investments.

Financing Activities

Net cash provided by financing activities of $0.8 million for the six months ended June 30, 2020 was primarily the result of $0.8 million in proceeds from the exercise of stock options and stock purchases through our ESPP. Net cash provided by financing activities of $0.2 million for the six months ended June 30, 2019 was primarily the result of $0.2 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, 2019 filed by us with the SEC on February 25, 2020.
 
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 and six months ended June 30, 2020 or June 30, 2019.
 
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, or Exchange Act) as of June 30, 2020, 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 second quarter of 2020 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

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, 2019 filed with the Securities and Exchange Commission on February 25, 2020.

Risks Related To Our Financial Condition and Need For Additional Capital

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

We are a biopharmaceutical company focused primarily on developing dociparstat (DSTAT) for the treatment of acute myeloid leukemia (AML) and the treatment of acute lung injury (ALI) in COVID-19 patients, and brincidofovir (BCV) for the treatment of smallpox. We have incurred significant net losses in each year since our inception, including net losses of $20.4 million and $35.3 million for the six months ended June 30, 2020 and 2019, respectively. As of June 30, 2020, we had an accumulated deficit of approximately $689.3 million.

To date, we have financed our operations primarily through the sale of equity securities and, to a lesser extent, through government funding, licensing fees and debt. We have devoted most of our financial resources to research and development, including our preclinical development activities and clinical trials. We have not completed development of any product candidates. We 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 of DSTAT for the treatment of AML, the treatment of ALI in COVID-19 patients, and other potential indications;
continue the development of BCV for the treatment of smallpox as a medical countermeasure;
obtain regulatory approvals for DSTAT and BCV;
scale-up manufacturing capabilities to commercialize DSTAT and BCV in the event we receive regulatory approval;
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 not obtained regulatory approval for any product candidate, and none of our product candidates have been commercialized. We may never succeed in developing 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. Even if we successfully obtain regulatory approval to market a product candidate in the United States, our revenues are also dependent upon the size of markets outside of the United States, as well as our ability to obtain market approval and achieve commercial success outside of the United States.

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

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

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

obtaining favorable results for and advancing the development of DSTAT for the treatment of AML and ALI, and BCV for the treatment of smallpox;
obtaining United States and foreign regulatory approval(s) for DSTAT and BCV;
generating, licensing or otherwise acquiring a pipeline of product candidates which progress to clinical development, regulatory approval, and commercialization.

Conducting preclinical testing and clinical trials is a time-consuming, expensive and uncertain process that takes years to complete, and we may never generate the necessary data required to obtain regulatory approval and achieve product sales. Our anticipated development costs would likely increase if we do not obtain favorable results or if development of any product candidate is delayed. In particular, we would likely incur higher costs than we currently anticipate if development of any product candidate is delayed because we are required by the FDA or foreign regulatory authorities to perform studies or trials in addition to those that we currently anticipate, or we decide to conduct additional studies or trials for strategic reasons.

Because of the numerous risks and uncertainties associated with pharmaceutical product development, we are unable to predict with certainty the timing or amount of any increase in our anticipated development costs that will result should any additional trials be necessary.

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

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

Developing pharmaceutical products, including conducting preclinical studies and clinical trials, is a time-consuming, expensive and uncertain process that takes years to complete. We believe that our existing capital available to fund operations will enable us to fund our current operating expenses and capital requirements for at least the next twelve months. Changing circumstances beyond our control may cause us to consume capital more rapidly than we currently anticipate, and our clinical trials may encounter technical, enrollment or other difficulties that could increase our development costs more than we expected, or because the FDA or foreign regulatory authorities require us to perform studies or trials in addition to those that we currently anticipate.

In July 2019, we entered into a License and Development Agreement with Cantex in which we acquired an exclusive worldwide license to develop and commercialize DSTAT. We are currently enrolling a Phase 2/3 study of DSTAT in ALI for patients with COVID-19 and plan to initiate a Phase 3 trial in AML in early 2021.

We are also pursuing additional external opportunities to build our pipeline of product candidates, and we may need to raise additional funds if we identify additional product candidates other than DSTAT and BCV, which we may obtain through one or more equity offerings, debt financings, government or other third-party funding, strategic alliances and licensing or collaboration arrangements.

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

significantly delay, scale back or discontinue the development or commercialization of DSTAT, BCV or any other product candidate;
seek corporate partners for DSTAT, BCV, or any other product candidate at an earlier stage than otherwise would be desirable or on terms that are less favorable than might otherwise be available; or
relinquish or license on unfavorable terms, our rights to technologies or product candidates that we otherwise would seek to develop or commercialize ourselves.

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

We are evaluating 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.

In early 2019, we initiated a review of external assets that could be added to our pipeline of product candidates. In July 2019, in connection with this process, we entered into a License and Development Agreement with Cantex Pharmaceuticals, Inc. (Cantex) pursuant to which we acquired exclusive worldwide rights to develop and commercialize DSTAT for any and all uses. Under the terms of the license agreement, we are responsible for, and bear the future costs of, worldwide development and commercialization of DSTAT. These costs will be substantial, and we may require additional capital in order to pursue the development and commercialization of DSTAT as planned. Moreover, the anticipated benefits of our license to DSTAT may never be realized due to the various risks and uncertainties associated with drug development detailed elsewhere in the following risk factors.

In addition to DSTAT, we may in-license or acquire additional assets, engage in a merger or acquisition transaction, issue additional shares of our common stock, or engage in other potential actions designed to maximize stockholder value. Our continuing review of external assets may not result in the identification or consummation of any transaction. The process of reviewing external opportunities may be time consuming and disruptive to our business operations and, if we are unable to effectively manage the process, our business, financial condition and results of operations could be adversely affected. We could incur substantial expenses associated with identifying, evaluating, negotiating, and consummating potential transactions. There can be no assurance that any potential additional transaction, if consummated, will provide greater value to our stockholders than that reflected in the current price of our common stock. In addition, once any potential additional transaction is consummated, we are likely to incur substantial costs associated with future development and testing of any new product candidate, which may require us to raise additional capital.

 Risks Related to Clinical Development and Regulatory Approval

We face risks related to the coronavirus (COVID-19) outbreak, which could significantly disrupt our preclinical studies and clinical trials.*

The duration and the geographic impact of the business disruption and related financial impact resulting from the coronavirus cannot be reasonably estimated at this time and our business could be adversely impacted by the effects. We are currently conducting clinical trials with DSTAT in the United States for the treatment of COVID-19 patients and plan to initiate a clinical trial of DSTAT in AML in early 2021. We rely on independent clinical investigators, contract research organizations and other third-party service providers to assist us in managing, monitoring and otherwise carrying out our non-clinical studies and clinical trials, and the outbreak may affect their ability to devote sufficient time and resources to our programs. Similarly, clinical site initiation and patient enrollment may be delayed due to concerns for patient safety and prioritization of healthcare resources toward the COVID-19 pandemic. We also rely on third party suppliers and contract manufacturers to produce the drug product we utilize in our clinical trials, and the outbreak may cause delays in delivery and increases in the cost of APIs and drug product.  As a result, the expected timeline for data readouts of our non-clinical studies and clinical trials and certain regulatory filings, such as completion of a smallpox NDA submission, may be negatively impacted, and our APIs and drug product may become more expensive to obtain. The COVID-19 pandemic is also causing disruption of global financial markets which, if sustained or recurrent, could make it more difficult for us to access capital. The ultimate impact of the COVID-19 pandemic is highly uncertain and subject to change, and may adversely affect our business, healthcare systems and the global economy as a whole.