What happened
A poorly received decision from the management team at Chimerix (CMRX -1.66%), a biopharmaceutical company, sent its stock price into a nosedive on Monday morning. Investors furious about the sale of Tembexa for an uncertain sum and the company's plans for that cash infusion have hammered the stock 59.7% lower as of 10:36 a.m. ET.
So what
Chimerix reported first-quarter earnings this morning, but with just $15,000 in top-line revenue, investors were more interested in an accompanying announcement regarding the company's most valuable asset. Investors are not happy about the company's planned sale of Tembexa, an antiviral the U.S. Food and Drug Administration (FDA) approved to treat smallpox last June, to Emergent Biosolutions (EBS -10.55%), a company with a history of manufacturing medical countermeasures against eradicated diseases for the U.S. government.
Under the terms of the agreement, Chimerix will receive $225 million when the transaction closes plus up to $100 million worth of milestone payments. The stock's market cap has fallen to about $150 million because the company also noted these payments could be adjusted based on actual procurement value.
Image source: Getty Images.
Now what
Chimerix is also entitled to royalties of 20% in the U.S. if Emergent can sell more than 1.7 million courses of Tembexa before it loses patent-protected exclusivity. If the company behaved like a simple holding company that passed all Tembexa-related cash flows on to shareholders, Chimerix stock wouldn't be plunging today. Instead, it wants to try its hand at developing new cancer drugs.
Last year, Chimerix acquired Oncoceutics and its lead asset, ONC201, for $78 million with hopes it would quickly earn approval to treat brain tumors. Today the company admitted to investors the potential for accelerated approval of ONC201 is more challenging than anticipated. This means Chimerix and its shareholders are on the hook for a long and expensive phase 3 trial that will burn through the proceeds of the Tembexa sale long before they will know whether ONC201 has a chance at eventually earning approval.
