Durham drug-development company Chimerix is betting that promising test results and a potentially lucrative deal with pharmaceutical giant Merck will be a winning formula on Wall Street.
On Friday Chimerix, which has spent $123 million on research and development but doesnt yet have a product on the market, filed plans to raise as much as $85 million through an initial public offering of stock.
Its based on hopes and expectations, said John Fitzgibbon Jr., who tracks new stock offerings for IPOScoop.com. What you have to offer is whats in the pipeline.
Being bereft of products didnt stop Chimerix from lining up a blue-chip team of investment banks to manage the offering, led by Morgan Stanley and Cowen and Co.
Theres nothing shabby about either of those, Fitzgibbon said.
Its not uncommon for companies that seek to go public to abandon their plans in the face of investor indifference. But Fitzgibbon said that drug companies like Chimerix that are all about the potential can succeed in going public, although they typically end up cutting the share price theyve targeted in order to do so.
Chimerix hasnt yet targeted a share price. In fact, its filing doesnt even disclose how big an ownership stake the company intends to sell to raise up to $85 million, which would reveal what Chimerix financial advisors believe the company is worth. Companies typically disclose such information as they get closer to going public.
Chimerix is the second Triangle company to unveil plans to go public since the first of the year.
Last month Quintiles, the worlds largest pharmaceutical services company, filed plans to raise up to $600 million via an IPO. The Durham company previously went public in 1994, remaining a publicly held company for nearly a decade before going private in a leveraged buyout in 2003.
Chimerix declined to comment on its plans, which is typical for companies seeking to go public because securities regulations limit their public pronouncements.
Incorporated in 2000, Chimerix has 46 employees. To date it has been sustained mostly by government grants and $101 million raised from private investors, including Durham-based Pappas Ventures. Pappas currently owns a 6.9 percent stake in the business, although that stake would be diminished by an IPO.
Chimerixs pipeline includes CMX001, an experimental treatment for life-threatening viral infections in patients whose immune systems have been compromised by cancer or drugs.
The company expects to enroll patients in a Phase 3 trial for CMX001, the final phase required before seeking regulator approval, this year. A Phase 2 trial involving 230 patients found that the drug reduced the risk of infection in patients by more than 50 percent.
Last summer company officials said that, if all goes well, Chimerix could be ready to seek regulatory approval for CMX001 in 2015. The company also has received federal government funding to develop the drug as a treatment for smallpox that could be used in the event of a bioterrorist attack.
Also in the works, but not as advanced in the development process, is experimental HIV treatment CMX157. Last summer Merck licensed the rights to CMX157 for a $17.5 million upfront payment plus milestone payments that could reach $151 million. Merck is responsible for developing and marketing the drug and also would pay royalties based on sales if CMX157 makes it to market a big if in the high-risk, high-reward world of drug development.
Chimerix plans to use the money raised from an IPO for research and development and general operating expenses, with about $45 million earmarked for CMX001s Phase 3 trials.
The company estimates that the net proceeds from the offering after deducting underwriting fees and expenses, combined with its existing hoard of cash, will enable it to fund its operations at least through mid-2015.
Chimerix had $29.8 million in cash and investments as of Dec. 31. It also has $15 million in debt, money it borrowed from Silicon Valley Bank and MidCap Financial of Bethesda, Md.
As is typical of development-stage companies, Chimerix has consistently lost money. It posted a loss of $35.2 million in 2011 but narrowed its loss to $8.8 million last year, thanks in large part to the upfront payment it received from Merck.
Chimerix is led by Kenneth Moch, who joined the company as chief operating officer in June 2009 and was named president and CEO the following April. Mochs compensation package totaled $797,349 last year, including a salary of $427,450 and stock options valued at $283,091.
The companys new chairman, Ernest Mario, is well-known in the Triangle. Mario, who joined the Chimerix board last month, was CEO of what is now GlaxoSmithKline from 1989 to 1993 and before that headed the companys U.S. operations out of Research Triangle Park.
Companies looking to go public must list risk factors that investors need to consider.
Among other things, Chimerix cautions that our ability to generate future revenues from product sales is uncertain and depends upon our ability to successfully develop, obtain regulatory approval for, and commercialize our product candidates.
If Chimerix succeeds in going public, it expects to trade on NASDAQ under the symbol CMRX.