Chimerix
Annual Report 2018

Plain-text annual report

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, DC 20549 Form 10-K (Mark One)xANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2018 oroTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from toCommission file number: 001-35867 Chimerix, Inc.(Exact Name of Registrant as Specified in its Charter) Delaware 33-0903395(State or Other Jurisdiction ofIncorporation or Organization) (I.R.S. EmployerIdentification No.) 2505 Meridian Parkway, Suite 100Durham, 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 Name of Each Exchange on Which RegisteredCommon Stock, par value $0.001 per share The Nasdaq Stock Market LLC Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No xIndicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes o No xIndicate 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 12months (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 oIndicate 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 (§232.405of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No oIndicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’sknowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. xIndicate 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 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 xNon-accelerated filer o Smaller reporting company x Emerging growth company oIf 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 financialaccounting 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 Securities Exchange Act of 1934). Yes o No xThe aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant based upon the closing price of its Common Stock on TheNasdaq Global Market on June 29, 2018 was $124,953,651.The number of outstanding shares of the registrant’s common stock, par value $0.001 per share, as of February 26, 2019 was 50,903,196.DOCUMENTS INCORPORATED BY REFERENCEDocument DescriptionPortions of the registrant’s notice of annual meeting of stockholders and proxy statement to be filed pursuant to Regulation 14Awithin 120 days after registrant’s fiscal year end of December 31, 2018 are incorporated by reference into Part III of thisreport………………………………………………………10-K PartIIICHIMERIX, INC.FORM 10-KFor the Fiscal Year Ended December 31, 2018Table of Contents Page PART I Item 1Business3Item 1ARisk Factors21Item 1BUnresolved Staff Comments49Item 2Properties49Item 3Legal Proceedings49Item 4Mine Safety Disclosures49 PART II Item 5Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities50Item 6Selected Financial Data51Item 7Management’s Discussion and Analysis of Financial Condition and Results of Operations52Item 7AQuantitative and Qualitative Disclosures About Market Risk65Item 8Financial Statements and Supplementary Data66Item 9Changes in and Disagreements With Accountants on Accounting and Financial Disclosure91Item 9AControls and Procedures91Item 9BOther Information92 PART III Item 10Directors, Executive Officers and Corporate Governance93Item 11Executive Compensation93Item 12Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters93Item 13Certain Relationships and Related Transactions, and Director Independence93Item 14Principal Accounting Fees and Services93 PART IV Item 15Exhibits, Financial Statement Schedules94 Signatures 2PART IForward-Looking StatementsThis Annual Report on Form 10-K (Annual Report) may contain “forward-looking statements” within the meaning of the federal securities laws madepursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Our actual results could differ materially from those anticipatedin these forward-looking statements as a result of various factors, including those set forth below under Part I, Item 1A, “Risk Factors” in this Annual Report.Except as required by law, we assume no obligation to update these forward-looking statements, whether as a result of new information, future events orotherwise. These statements, which represent our current expectations or beliefs concerning various future events that are subject to risks and uncertainties,may contain words such as “may,” “will,” “expect,” “anticipate,” “intend,” “plan,” “believe,” “estimate” or other words indicating future results. Suchstatements may include, but are not limited to, statements concerning the following:•the initiation, cost, enrollment, timing, progress and results of our research and development activities, preclinical studies and future clinicaltrials;•our ability to obtain and maintain regulatory approval of our current and future product candidates, and any related restrictions, limitations,and/or warnings in the label of an approved product candidate;•our ability to obtain funding for our operations;•our plans to research, develop and commercialize our future product candidates;•our strategic alliance partners’ election to pursue development and commercialization;•our ability to attract collaborators with development, regulatory and commercialization expertise;•our ability to obtain and maintain intellectual property protection for our future product candidates;•the size and growth potential of the markets for our current and future product candidates, and our ability to serve those markets;•our ability to successfully commercialize our current and future product candidates;•the rate and degree of market acceptance of our current and future product candidates;•our ability to develop sales and marketing capabilities, whether alone or with potential future collaborators;•regulatory developments in the United States and foreign countries;•the performance of our third-party suppliers and manufacturers;•the success of competing therapies that are or become available;•the loss of key scientific or management personnel;•our use of the proceeds from our public offerings; and•the accuracy of our estimates regarding expenses, future revenues, capital requirements and need for additional financing.Market, Industry and Other DataThis Annual Report contains estimates, projections and other information concerning our industry, our business and relevant markets, including dataregarding the estimated size of relevant antiviral markets, patient populations, projected diagnosis rates and the perceptions and preferences of patients andphysicians regarding certain therapies, as well as data regarding market research and estimates. Information that is based on estimates, forecasts, projections,market research or similar methodologies is inherently subject to uncertainties and actual events or circumstances may differ materially from events andcircumstances that are assumed in this information. Unless otherwise expressly stated, we obtained this industry, business, market and other data from reports,research surveys, studies and similar data prepared by market research firms and other third parties, industry, medical and general publications, governmentdata and similar sources that we believe to be reliable. In some cases, we do not expressly refer to the sources from which this data is derived. In that regard,when we refer to one or more sources of this type of data in any paragraph, you should assume that other data of this type appearing in the same paragraph arederived from the same sources, unless otherwise expressly stated or the context otherwise requires.ITEM 1. BUSINESSChimerix OverviewChimerix, Inc. is a biopharmaceutical company committed to discovering, developing and commercializing medicines that improve outcomes forimmunocompromised patients. We were founded in 2000 based on the promise of our proprietary lipid conjugate technology to unlock the potential of someof the most broad-spectrum antivirals by enhancing their antiviral activity and safety profiles in convenient dosing regimens. Our lead compound,brincidofovir (BCV), is in development as an oral and intravenous (IV) formulation for the prevention and treatment of DNA viruses, including smallpox,adenovirus (AdV), and the human herpesviruses.3BrincidofovirBrincidofovir is an investigational nucleoside analog that has shown broad-spectrum antiviral activity in vitro against all five families of dsDNA (double-stranded deoxyribonucleic acid) viruses that cause human disease. In over 1,200 patients treated with BCV under a Chimerix protocol to-date, brincidofovirhas been associated with a low risk of kidney or bone marrow toxicity. Oral and IV formulations of brincidofovir are currently in development, both of whichdeliver the active antiviral directly to the site of viral replication.Potential indications for brincidofovir include prevention of serious viral infections in hematopoietic or stem cell transplant recipients (HCT), such as HHV-6, and treatment of serious AdV infection and disease, treatment of smallpox, and treatment of BK virus (BKV) infection in kidney and stem cell transplantrecipients.Composition of matter coverage for brincidofovir in the U.S. is currently expected to extend to October 2034.The Company has received three orphan designations from the European Commission in relation to brincidofovir, treatment of AdV infection inimmunocompromised patients, prevention of cytomegalovirus (CMV) disease, and treatment of smallpox. Companies that obtain an orphan designation areeligible for a number of incentives in the European Union (EU), including free of charge scientific advice for each orphan designation received. Compoundsstill meeting the criteria for orphan designation at the time of marketing approval may receive market exclusivity for 10 years from marketing approval, plusan additional two years of market exclusivity for medicines that have complied with the agreed pediatric investigational plan. The Company has alsoreceived orphan drug designation from the U.S. Food and Drug Administration (FDA) for brincidofovir treatment of smallpox.I.Oral Formulations of BrincidofovirBrincidofovir remains in development as an orally-administered lipid conjugate nucleotide for the treatment of serious AdV infections and as a medicalcountermeasure for the treatment of smallpox.A.Oral Brincidofovir for Treatment of AdVAdV causes gastrointestinal (GI) and upper respiratory infections, including the common cold, in individuals with a functional immune system. However, inpeople with a weakened immune system, AdV can lead to life-threatening infections, including pneumonia and hepatitis. Pediatric and adult patients whohave undergone allogeneic HCT are at especially high risk for serious or fatal AdV infections due to profound immunodeficiency. Mortality rates of 50 to 80percent have been reported in the literature for disseminated AdV disease. AdV infections are more common in pediatric transplant recipients than in adults;many transplant centers now actively screen their pediatric patients for AdV infection. There is currently no approved therapy for AdV infection, andalthough progression to disseminated disease occurs in a small proportion of patients, expected mortality for serious AdV disease is greater than 50 percent inthe first three months after diagnosis.Brincidofovir is a broad-spectrum antiviral that has demonstrated high in vitro potency against all AdV subtypes. Intracellular cleavage of brincidofovirallows cidofovir to be delivered directly to the site of viral replication. Moreover, there is a lower risk of nephrotoxicity and myelotoxicity associated withbrincidofovir as compared to off-label use of intravenous cidofovir.i.AdAPTWe initiated the AdAPT study (Adenovirus after Allogeneic Pediatric Transplantation) in December 2017. This study is targeting enrollment of 141 pediatricallogeneic HCT recipients with confirmed AdV infection. Patients are randomized 2:1 to receive short-course oral BCV or local standard-of-care (SOC)treatment at approximately 40 sites in Europe and the United States.The primary endpoint of the study is a comparison of the average AdV viral burden (as measured by AdV DNA levels in blood) over 16 weeks in subjectstreated with short-course oral BCV versus those who receive local SOC. The study is 90% powered to show the superiority of reduced adenoviral burden inbrincidofovir-treated patients compared to SOC. The study is also designed to evaluate the correlation of adenoviral burden (and its clearance) with clinicaloutcomes, including survival. We have faced regulatory and site initiation delays in the implementation of this study. In addition, we have observed lowerthan anticipated incidence at the centers that have been initiated to date. Based on a thorough re-evaluation of current screening and enrollment rates, wenow project that enrollment in AdAPT will be substantially delayed beyond 2019. While some recently initiated sites are historically more active intransplantation, we continue to evaluate strategies to accelerate the time to completion of the study, including opening further AdAPT sites, and possibly re-considering the targeted number of patients for full enrollment. The Company plans to provide an update on AdAPT enrollment in mid-2019.4If successful, AdAPT may form the basis of an application for conditional or full marketing approval of brincidofovir in the EU for the treatment of AdVinfection in HCT recipients. A successful trial may also further support potential continued development of oral brincidofovir in the U.S.AdVance is the largest multicenter observational study conducted to date for AdV infection after allogeneic HCT, with established outcomes associated withthe current SOC for treatment of AdV in France, Germany, Italy, Netherlands, Spain, the Czech Republic and the United Kingdom. We believe these data willhelp support the virologic endpoint from our ongoing AdAPT clinical trial. In February 2019, we submitted a Type C meeting request with the FDA to reviewthe AdVance data and virologic endpoints.B.Oral Brincidofovir for Treatment of SmallpoxWe are collaborating with the Biomedical Advanced Research and Development Authority (BARDA) for the development of BCV as a potential medicalcountermeasure for smallpox. Efficacy is to be demonstrated via two animal models under the FDA’s Animal Efficacy Rule. This rule allows for testing ofinvestigational drugs in animal models to support the effectiveness of the drug in diseases in which human clinical studies are not ethical or feasible. InJanuary 2019, we received positive preliminary top-line results of the in-life part of our adjunct pivotal rabbitpox efficacy study that was conducted underthe Animal Efficacy Rule. The study was designed to determine the effect of administering BCV to animals at certain times (3, 4, 5 or 6 days) afterinoculation with the rabbitpox virus. These preliminary results are subject to further audit, however, based on these preliminary findings the study met itsprimary endpoint. The topline survival results are as follows: BCV treatment 3days post-infectionBCV treatment 4days post-infectionBCV treatment 5days post-infectionBCV treatment 6days post-infectionNo treatment (placebo)Overall Survival29/29 (100%)26/29 (90%)20/29 (69%)20/29 (69%)8/28 (29%)P-value vs. Group 5<0.0001<0.00010.00140.00140The differences in survival rate observed between each group of animals that received BCV and the animals that did not are statistically significant. Datafrom this study are in-line with those reported in 2015 from our first pivotal study in the rabbitpox model.In February 2019, we initiated a pivotal study in the mouse ectromelia model, which constitutes our second animal model as described in the Animal EfficacyRule. We anticipate data from this study in the second half of 2019 and, contingent upon the results of the animal efficacy studies, we plan to submitmarketing applications in 2020. C.Oral Brincidofovir Expanded Access ProgramWe continue to fulfill requests for orally administered brincidofovir via our expanded access programs. In 2018, we granted almost 340 requests forbrincidofovir for the treatment of AdV, highlighting the continued unmet need in this area.II.IV Formulation of BrincidofovirOur ability to provide brincidofovir in oral and IV formulations enables development across multiple indications and populations with the potential for best-in-class efficacy and safety. In animal studies and multiple dose administration in healthy subjects, IV BCV has shown the potential for less GI injurycompared to oral brincidofovir, even with higher plasma drug concentrations and longer-term dosing.A.IV Brincidofovir Multiple Ascending Dose Study in Healthy SubjectsIn late 2017, we completed the multiple ascending dose (MAD) study of IV BCV in healthy subjects. This Phase 1 study evaluated the safety, tolerability andpharmacokinetics (PK) of IV BCV 10 mg given twice weekly and IV BCV 20 mg given once weekly in healthy subjects for two to four weeks. IV BCV waswell-tolerated at all dose levels, with no dose-limiting clinical adverse events. Importantly, there was no diarrhea reported for IV BCV 10 mg dosed twiceweekly, a dose that provides drug levels equivalent to oral BCV 100 mg which demonstrated antiviral activity in previous late-stage clinical studies. Non-clinically-relevant elevations in serum transaminases were noted as seen in previous studies of oral BCV.5B.Ongoing Phase 2 Studies (210/211)Following completion of the MAD study of IV brincidofovir in healthy subjects, we have started two Phase 2 open label dose-ranging studies of IV BCV inpatients with active AdV.Studies of IV BCV in AdV virally-infected patients are ongoing. These studies may provide data on other viral infections such as CMV and/or BKV inpatients with multi-viral infections. These studies are the first-in-patient studies to demonstrate the safety and tolerability and pharmacokinetic profile ofmultiple doses of IV BCV in adult HCT recipients. We will also evaluate the relationship between dose and change from baseline in AdV in blood and stool.Similar to AdAPT, we have faced regulatory and site initiation delays in the implementation of these studies. We have also observed lower than anticipatedincidence at the study 210/211 centers that have been initiated, which has caused enrollment to occur more slowly than expected. We plan to provide a studyupdate in mid-2019.Data from these studies will inform the dose and dosing regimen for our potential Multi Viral Protection (MVP)-Peds study and potential studies of IV BCVfor other DNA viruses, such as BKV or HHV-6.The improved drug concentrations in the central nervous system (CNS) achieved with IV brincidofovir in animals could support the study of IV brincidofovirin viral CNS infections such as herpes encephalitis, HHV-6 encephalitis, JC virus infection.CMX521 for NorovirusCMX521 is a nucleoside analog identified from our proprietary Chemical Library which targets the norovirus polymerase, a part of the virus that is commonto all strains and is required for viral replication. It therefore has the potential to be active against the multiple genetically diverse norovirus strains thatcirculate each year and cause disease in humans.We previously presented the safety and tolerability data from a Phase 1 study of CMX521, which supported continued development of the first smallmolecule in clinical development for prophylaxis or treatment of norovirus. Evaluation of active antiviral concentrations in GI biopsies indicate thatimproved intracellular delivery is needed prior to conducting efficacy studies. The norovirus research and development program has been pausedindefinitely.CMX157CMX157, our second clinical stage nucleoside analog, uses the same proprietary lipid technology as brincidofovir to deliver high intracellularconcentrations of the potent antiviral drug, tenofovir. Tenofovir, marketed under the brand name Viread® and in multiple fixed-dose combinations, is widelyused for the treatment of HIV and hepatitis B virus (HBV) infection. In December 2014, we entered into a licensing agreement with ContraVirPharmaceuticals (Nasdaq: CTRV) for the development and commercialization of CMX157 for certain antiviral indications. Under the terms of the agreement,ContraVir has sole responsibility with respect to the control of the development and commercialization of CMX157.Lipid Conjugate Technology and Our Chemical LibraryLipid Conjugate TechnologyOur proprietary lipid conjugate technology is used to covalently modify a drug molecule with a lipid side-chain that mimics a naturally occurringphospholipid component of cellular membranes. The lipid mimic can then utilize natural uptake pathways to achieve oral bioavailability, enhance uptakeinto cells, and potentially to avoid many toxicities.We believe that our lipid conjugate technology can be used to develop new drugs from parent molecules having a known mechanism of action butpotentially with an improved safety, efficacy, and/or ADME (absorption/distribution/metabolism/excretion) profile relative to the parent. Preclinical studiesand in vitro assessments of a number of drugs, including some that are approved, have shown specific improvements in biological activity compared with theparent drug.The most advanced example of our proprietary lipid conjugate technology is brincidofovir, which was developed to improve the efficacy and safety of anapproved drug, cidofovir. Use of cidofovir has been limited by significant toxicities, particularly kidney toxicity. Unlike cidofovir, the lipid-conjugatedbrincidofovir molecule is not actively concentrated in the kidneys, but does effectively deliver the active antiviral to cells. Brincidofovir may have a higherbenefit-risk ratio that allows expanded use relative to cidofovir, for example in prevention of AdV disease, and potentially protection from or treatment ofother DNA viruses.6Chimerix Chemical LibraryThe Chimerix Chemical Library contains over 10,000 heterocyclic ring systems and nucleosides, the majority of which were originally synthesized in thelaboratory of Dr. Leroy Townsend at the University of Michigan. This library includes approximately 3,500 nucleoside analog compounds, most of which arecandidates for lipid conjugation. We have an active discovery program focusing on viral diseases in which there is significant unmet medical need. Weperiodically screen the library for activity against viral targets for which limited or no therapies are currently available.Evaluation of External Opportunities to Strengthen our PipelineWe are looking at business development opportunities as a means to complement our existing pipeline with technologies that will take advantage of ourstrengths. We are actively seeking opportunities to grow our business through the acquisition of, or investment in, other companies, through strategicrelationships, or through in-licensing of complementary compounds and products.Significant AgreementsContraVir PharmaceuticalsIn December 2014, we entered into a license agreement with ContraVir Pharmaceuticals (Nasdaq: CTRV) for the development and commercialization ofCMX157 for certain antiviral indications. Under the terms of the agreement, ContraVir has sole responsibility with respect to the control of the developmentand commercialization of CMX157.In exchange for the license to CMX157 rights, we received an upfront payment consisting of 120,000 shares of ContraVir Series B Convertible PreferredStock with a stated value of $1.2 million. In addition, we are eligible to receive up to approximately $20 million in clinical, regulatory and initialcommercial milestones in the United States and Europe, as well as royalties and additional milestones based on commercial sales in those territories. Eitherparty may terminate the license agreement upon the occurrence of a material breach by the other party (subject to standard cure periods), or upon certainevents involving the bankruptcy or insolvency of the other party. ContraVir may also terminate the license agreement without cause on a country-by-countrybasis upon sixty days’ prior written notice.In September 2016, we converted our shares of ContraVir Series B Convertible Preferred Stock into shares of ContraVir common stock.BARDAIn February 2011, we entered into a contract with BARDA for the advanced development of brincidofovir as a medical countermeasure in the event of asmallpox release. BARDA is a division of the U.S. Department of Health and Human Services (DHHS) in the Office of the Assistant Secretary for Preparednessand Response that supports the advanced research and development, manufacturing, acquisition and stockpiling of medical countermeasures. The scope ofwork for the contract includes preclinical, clinical and manufacturing development activities that fall into the following areas: non-clinical animal efficacystudies; clinical activities; manufacturing activities; and all associated regulatory, quality assurance, management, and administrative activities.Under the contract, BARDA will reimburse our costs, plus pay us a fixed fee, for the research and development of brincidofovir as a treatment of smallpoxinfections. The contract consists of an initial performance period, referred to as the base performance segment which ended on May 31, 2013, plus up to fourextension periods, referred to as option segments, each of which may be exercised at BARDA’s sole discretion. We must complete agreed upon milestonesand deliverables in each discrete work segment before the next option segment is eligible to be exercised. Under the contract as currently in effect, if eachfollow-on option segment is exercised by BARDA, we may receive up to $75.8 million in expense reimbursement and $5.3 million in fees.We substantially completed the first option segment of the contract on August 28, 2014. In September 2014, we were awarded a contract extension for asecond option segment providing an additional $17.0 million. In August 2016, the contract was amended to provide an additional $535,000, in December2017 the contract was amended to increase funding by an additional $4.1 million, and in January 2019 the contract was amended to increase funding by anadditional $2.3 million for the performance of the second option segment, which is scheduled to end on August 1, 2019. On September 11, 2015, BARDAexercised option segment three, which provided approximately $12.9 million in funding for the performance of the segment. In December 2017, BARDAdecreased the scope of this segment by removing a potential second pivotal ectromelia virus study which decreased the funding of this option segment by$1.3 million to a total award of $11.6 million; option segment three is scheduled to end on March 30, 2019. Of the $75.8 million expense reimbursement and$5.3 million in fees that we may receive, approximately $74.3 million in expense7reimbursement and fees has been funded. As of December 31, 2018, of the total funding we had invoiced an aggregate of $62.6 million with respect to thebase performance segment and the first three extension periods.Pursuant to the contract, Chimerix and the U.S. government share the rights to any inventions made in the performance of our work under the contract.Specifically, the U.S. government retains a nonexclusive, nontransferable, irrevocable, paid up license to any invention made in the performance of our workunder the contract, provided, however, that the U.S. government may, under certain circumstances, including circumstances involving public health andsafety, license such inventions to third parties without our consent. There have been no inventions made to date under the BARDA contract.The contract may be terminated by BARDA ten days after giving us notice of a material default which remains uncured for ten days. In addition, BARDA isalso permitted under applicable law to terminate the contract if it is in the U.S. government’s best interest.In April 2015, the DHHS, Office of the Assistant Secretary for Preparedness and Response, BARDA posted a notice of intent to use other than full and opencompetition (Notice of Intent) to award a sole source contract to us for the procurement of brincidofovir for the treatment of smallpox. In July 2015, BARDA issued a RFP entitled “2015 Procurement of a Second Smallpox Antiviral Drug for the Strategic National Stockpile.” In August 2015,we submitted a response to the RFP and we subsequently engaged in discussions with BARDA regarding our response. The issuance of that RFP did notculminate with agreement for the sole source supply of brincidofovir for the Strategic National Stockpile.There are no RFPs for procurement of a smallpox antiviral pertaining to brincidofovir that are currently pending.In the event a new RFP is issued we will likely submit a proposal. In the event that our proposal is chosen (potentially among several competing proposals)and before we can enter into a contract we must negotiate its terms, including the price and delivery schedule. In addition, as a governmental agency,BARDA’s ability to enter into a contract is subject to continued funding for this purpose, which can change at any time. We remain in discussions withBARDA regarding the potential to supply brincidofovir to the Strategic National Stockpile, however, there can be no assurances regarding any suchprocurement. The Company continues to receive funding under an advanced research and development contract for the development of brincidofovir for thetreatment of smallpox. We are currently evaluating brincidofovir for efficacy in two different animal models to support potential approval under the FDA’sAnimal Efficacy Rule.The Regents of the University of CaliforniaIn May 2002, we entered into a license agreement with The Regents of the University of California (UC) under which we obtained an exclusive, worldwidelicense to UC’s patent rights in certain inventions (the UC Patent Rights) related to lipid-conjugated antiviral compounds and their use, including certainpatents relating to brincidofovir and CMX157. Under the license agreement, we are permitted to research, develop, manufacture and commercialize productsutilizing the UC Patent Rights for all human and veterinary uses, and to sublicense such rights subject to certain sublicensing fees and royalty payments.In consideration for the rights granted to us under the license agreement, we issued UC an aggregate of 64,788 shares of our common stock. In connection tothe development and commercialization of brincidofovir and CMX157, we could be required to pay UC up to an aggregate of $3.4 million in milestonepayments, assuming the achievement of all applicable milestone events under the license agreement. In addition, upon commercialization of any productutilizing the UC Patent Rights, which would include brincidofovir or CMX157, we will be required to pay low single digit royalties on net sales of suchproduct.The license agreement requires that we diligently develop, manufacture and commercialize compounds that are covered by the UC Patent Rights, and wehave agreed to meet certain development and commercialization milestones. UC may, at its option, either terminate the license agreement or change thelicense granted from an exclusive license to a non-exclusive license if we fail to meet such development and commercialization milestones. We are currentlyin compliance with these milestone requirements.University of MichiganIn 2006, we entered into a license agreement with The Regents of the University of Michigan (UM) under which we obtained an exclusive, worldwide licenseto UM’s patent rights in certain inventions (UM Patent Rights) related to certain compounds originally synthesized in the laboratory of Dr. Leroy Townsendat the University of Michigan. Under the license agreement, we are permitted to research, develop, manufacture and commercialize products utilizing the UMPatent Rights, and to sublicense such rights subject to certain sublicensing fees and royalty payments.8In consideration for the rights granted to us under the license agreement, we have paid UM an aggregate of $70,000 in fees and in January 2017 issued UM anaggregate of 33,058 shares of our common stock. In connection with our commercialization or sublicensing of certain products covered by the licenseagreement, including CMX521, we could be required to pay royalties on net sales of such products ranging from 0.25% to 2%. Beginning in 2024, we arealso subject to certain minimum annual royalty payments.The UM license agreement requires that we use commercially reasonable efforts to develop and make commercially available licensed products as soon aspracticable. Specifically, we have agreed to make the first commercial sale of a licensed product by June of 2026. UM may terminate the license agreement ifwe materially breach the license agreement. We are currently in compliance with our milestone requirements.Commercial OperationsWe anticipate that our first commercial indication for brincidofovir may be in the treatment of AdV infections in pediatric allogeneic HCT recipients. Inanticipation of potential regulatory approval and commercial launch of brincidofovir, we are building select commercial functions tied to key milestones.These milestones include the availability of data from our IV brincidofovir studies, and other potential trials or studies, potential submission of marketingapplications for brincidofovir, and anticipated approval (or PDUFA) dates.Patients who undergo an allogeneic HCT are likely to be treated at a small number of major medical centers by specialized teams of physicians andhealthcare providers. There are approximately 200 HCT transplant centers in the U.S. and 300 in the EU-5. The management of therapies for transplantpatients is largely the responsibility of transplant physicians, infectious disease specialists, and clinical pharmacists who oversee post-transplant therapies.These clinicians focus on prevention and management of post-transplant infections as one of their key priorities. Practice patterns for the management oftransplant patients and post-transplant viral infections vary from institution to institution and are highly driven by research activities, data and publications.If brincidofovir is approved for the treatment of AdV infection, we believe it is possible for us to commercialize brincidofovir in the United States. Weanticipate that this would entail a relatively small commercial infrastructure, which may include a contract sales force, partner sales force, or internal team.While our commercialization efforts may initially be focused on health care providers who are responsible for treating AdV, this commercial infrastructurewould serve as the foundation for an expanded commercial presence based on lifecycle indications and other opportunities within the corporate portfolio.Outside of the United States, subject to obtaining necessary marketing approvals, we may seek to commercialize brincidofovir ourselves or throughdistribution or other collaboration arrangements. If we elect to develop brincidofovir for other DNA viral indications, we would plan to do so selectivelyeither on our own or by establishing alliances with one or more pharmaceutical company collaborators, depending on, among other things, the applicableindications, the related development costs, reimbursement complexities and our available resources.CompetitionOur industry is highly competitive and subject to rapid and significant technological change. While we believe that our therapeutic experience, scientificand commercial knowledge provide us with competitive advantages, we will face competition from large and small pharmaceutical, biotechnologycompanies, including specialty pharmaceutical and generic drug companies, and other emerging technologies.We believe that the key competitive factors that will affect the commercial success of brincidofovir and our other product candidates are the efficacy, safetyand tolerability profile and the risk:benefit trade-off compared to alternative therapies or procedures. Securing market access and reimbursement will be animportant element of product uptake and market penetration. Our commercial opportunity could be negatively impacted if our competitors develop or marketproducts or other technologies that are more effective, better tolerated, safer, more convenient or have greater market access than brincidofovir, or obtainregulatory approval for their products more rapidly than we do. In addition, our ability to compete will be affected by the availability of generic products.9If approved, brincidofovir would compete with a number of existing products and other product candidates that target serious viral infections, includingdrugs and vaccines which demonstrate efficacy against viruses that affect our target patient populations. We believe brincidofovir has potential benefits overthe competitive products, including the potential to be the first antiviral indicated for treatment of disseminated AdV in allogeneic HCT recipients. Based onmarket research, competing products that are currently used, or being developed for use, to treat AdV include and are not limited to:•cidofovir, a drug that is sold by generic manufacturers; and•patient-specific T-cell therapies.Other product candidates currently in development may compete against brincidofovir for the prevention or mitigation of CMV infection in a variety ofsettings, including:•letermovir (marketed under the trade name PREVYMIS), an anti-CMV drug recently approved for the prevention of CMV infections in adultHCT recipients pursuant to an exclusive worldwide license agreement between AiCuris GmbH & Co. KG and Merck & Co., Inc.;•maribavir, an antiviral owned by Shire plc, currently in Phase 3 trials for the treatment of CMV resistant or refractory CMV infections in bothHCT and SOT adult patients, and for preemptive use in adult HCT patients; and•patient-specific T-cell therapies directed at antigens of CMV and other dsDNA viruses.Furthermore, we anticipate that we will face intense and increasing competition as new products enter the market, as advanced technologies become availableand as increasing numbers of generic formulations of currently branded products become available.Changes in the health care system may limit our ability to price brincidofovir or our other product candidates at a level that would allow recovery of ourresearch and development costs and may impede our ability to generate or maintain a profit.We believe that brincidofovir has potential benefits over existing and potential competitive products as described in more detail under“Business - Brincidofovir.” As a result, we believe that brincidofovir should be well positioned to gain market share if we obtain the required regulatoryapproval. However, even with those benefits, we may not be able to make promotional claims that brincidofovir is superior to these competing productswithout conducting additional studies, which delivers differentiated data, and brincidofovir may be unable to compete successfully against these products.See “Risk Factors - Risks Related to Commercialization of Our Product Candidates.”Our Intellectual PropertyWe strive to protect and enhance the proprietary technologies we believe are important to our business, including by seeking and maintaining patentsintended to cover our products and compositions, their methods of use and any other inventions that are important to the development of our business. Wealso rely on trade secrets to protect aspects of our business that are not amenable to, or that we do not consider appropriate for, patent protection.Our success will depend significantly on our ability to obtain and maintain patent and other proprietary protection for commercially important technology,inventions and know-how related to our business, defend and enforce our patents, maintain licenses to our intellectual property owned by third parties,preserve the confidentiality of our trade secrets and operate without infringing the valid and enforceable patents and proprietary rights of third parties.We believe that we have a strong intellectual property position and substantial know-how relating to the development and commercialization of our lipidconjugate technology platform and the Chimerix Chemical Library.At February 15, 2019, our worldwide patent portfolio included:•123 patents or patent applications that we own or have in-licensed from academic institutions, related to brincidofovir and CMX157, whichrepresented a slight decrease over the number of patents in our patent portfolio at the end of fiscal 2017;•This includes 87 US and foreign exclusively and jointly owned patents and 36 US and foreign applications related to brincidofovir andCMX157. Granted European patents are counted as one patent and have been validated throughout Europe;•19 jointly-owned patents or patent applications related to our agreement with the UM regarding our proprietary Chemical Library; and•One international patent application owned exclusively by Chimerix directed to a morphic form of a compound from the Chemical Library.10In 2015, U.S. Patent No. 8,962,829 covering a method of synthesis and the commercial morphic form of brincidofovir was issued to Chimerix. With theaddition of this patent, composition of matter coverage for brincidofovir in the U.S. is expected to extend to October 2034.Patents generally have a term of twenty years from the date they are filed. As our patent portfolio has been built over time, the remaining terms of theindividual patents across our patent portfolio vary. We believe that our patents and patent applications are important for maintaining the competitivedifferentiation of our lipid-antiviral-conjugate technology platform and the Chimerix Chemical Library, enhancing our freedom of action to sell ourantivirals, upon appropriate regulatory approvals, in markets in which we choose to participate, and maximizing our return on research and developmentinvestments. No single patent is in itself essential to the conduct of our business as a whole.We are also open to expanding our intellectual property portfolio through licensing intellectual property from third parties as we deem appropriate. We havegranted and will continue to grant to others licenses under our patents when we consider these arrangements to be in our interest.ManufacturingWe do not own or operate and we do not expect to own or operate facilities for product manufacturing, storage and distribution, or testing. In the past, wehave relied on third-party manufacturers for supply of our lead product candidate, brincidofovir, as well as our other product candidates. We expect that inthe future we will rely on such manufacturers for supply of drug substance and drug product that will be used in clinical trials of brincidofovir, as well as forcommercial purposes should brincidofovir be approved. When produced on a commercial scale, we expect that cost-of-goods-sold relating to brincidofovirwill generally be in-line with that of other small-molecule pharmaceutical compounds.The manufacturing process for brincidofovir drug substance is relatively straight-forward and generally in-line with other small molecule pharmaceuticalcompounds in terms of cost and complexity. The process is robust and reproducible, does not require dedicated reactors or specialized equipment, usescommon synthetic chemistry and readily available materials, including off-the-shelf and made-to-order starting materials, and is readily transferable.Our current drug substance supply chain for brincidofovir involves various contractors that supply the raw materials for the drug substance process, a contractmanufacturer for an intermediate, and a contract manufacturer for the drug substance. We have completed transferring our current commercial drug substancemanufacturing process to our selected contractor that will produce the commercial supply of drug substance and began process validation during 2015.Manufacturers of drug components must meet certain FDA qualifications with respect to manufacturing standards. At present, we have qualified only one firmas a supplier of drug substance. We continually assess our manufacturing needs and may seek to engage additional qualified vendors as circumstancesdictate. Changes in our requirements may require revalidation of the manufacturing process at a different scale and potentially at a different contractordepending on the necessary scale, infrastructure and technical capabilities. To ensure continuity in our supply chain, we plan to establish supplyarrangements with alternative suppliers for certain portions of our supply chain, as appropriate.Our drug products (tablets, oral suspension, intravenous solution or lyophilized powder for solution) are also manufactured under contract. We havecompleted development and transfer of our current commercial suspension and tablet manufacturing process to our selected contractor that will producecommercial supplies. We initiated validation of these processes in 2018. The intravenous formulation of brincidofovir is in early-stage development.Manufacturing is subject to extensive regulations that impose various procedural and documentation requirements, which govern record keeping,manufacturing processes and controls, personnel, quality control and quality assurance, among others. Our systems and contractors are required to be incompliance with these regulations, and this is assessed regularly through monitoring of performance and a formal audit program. We have personnel withextensive technical, manufacturing, analytical and quality experience and strong project management discipline to oversee contract manufacturing andtesting activities, and to compile manufacturing and quality information for our regulatory submissions.Pursuant to our license agreement with ContraVir, the manufacture of CMX157 is under the control and direction of ContraVir.Government Regulation and Product ApprovalGovernment authorities in the United States, at the federal, state and local level, and government authorities of member states of the EU and other countriesextensively regulate, among other things, the research, development, testing, manufacture, quality11control, approval, labeling, packaging, storage, record-keeping, promotion, advertising, distribution, post-approval monitoring and reporting, marketing andexport and import of products such as those we are developing. Any product candidate that we develop must be approved by the FDA or EMA before it maybe legally marketed in the United States or EU and in other countries by the responsible national regulatory agency before it may be legally marketed.U.S. Drug Development ProcessIn the United States, the FDA regulates drugs under the Federal Food, Drug and Cosmetic Act (FDCA), and implementing regulations. Drugs are also subjectto other federal, state and local statutes and regulations. The process of obtaining regulatory approvals and the subsequent compliance with appropriatefederal, state, local and foreign statutes and regulations require the expenditure of substantial time and financial resources. Failure to comply with theapplicable U.S. requirements at any time during the product development process, FDA approval process or after FDA approval, may subject an applicant toadministrative or judicial civil or criminal sanctions. FDA sanctions could include refusal to approve pending applications, withdrawal of an approval,clinical hold, warning letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals ofgovernment contracts, debarment, restitution, disgorgement or civil or criminal penalties. Any agency or judicial enforcement action, whether before or afterthe FDA approval process, could have a material adverse effect on us. The process required by the FDA before a drug may be marketed in the United Statesgenerally involves the following:•completion of nonclinical laboratory tests, animal studies and formulation studies according to good laboratory practices (GLP), or otherapplicable regulations;•submission to the FDA of an application for an IND, which must become effective before human clinical trials may begin;•performance of adequate and well-controlled human clinical trials according to the FDA’s regulations commonly referred to as current goodclinical practices (GCPs), to establish the safety and efficacy of the proposed drug for its intended use;•submission to the FDA of a NDA for a new drug;•satisfactory completion of an FDA inspection of the manufacturing facility or facilities where the drug is produced to assess compliance with theFDA’s current good manufacturing practice standards (cGMP), to assure that the facilities, methods and controls are adequate to preserve thedrug’s identity, strength, quality and purity;•potential FDA inspection of the nonclinical and clinical trial sites that generated the data in support of the NDA; and FDA review of the NDA.The lengthy process of seeking required approvals and the continuing need for compliance with applicable statutes and regulations require the expenditureof substantial resources and approvals are inherently uncertain.Before testing any compounds with potential therapeutic value in humans, the drug candidate enters the preclinical testing stage. Preclinical tests, alsoreferred to as nonclinical studies, include laboratory evaluations of product chemistry, toxicity and formulation, as well as animal studies to assess thepotential safety and activity of the drug candidate. The conduct of the preclinical tests must comply with federal regulations and requirements includingGLP. The sponsor must submit the results of the preclinical tests, together with manufacturing information, analytical data, any available clinical data orliterature and a proposed clinical protocol to the FDA as part of the IND. The IND automatically becomes effective 30 days after receipt by the FDA, unlessthe FDA places the clinical trial on a clinical hold within that 30-day time period. In such a case, the IND sponsor and the FDA must resolve any outstandingconcerns before the clinical trial can begin. The FDA may also impose clinical holds on a drug candidate at any time before or during clinical trials due tosafety concerns or non-compliance. Accordingly, we cannot be sure that submission of an IND will result in the FDA allowing clinical trials to begin, or that,once begun, issues will not arise that suspend or terminate such trial.Clinical trials involve the administration of the drug candidate to healthy subjects or affected patients under the supervision of qualified investigators,generally physicians not employed by or under the trial sponsor’s control. Clinical trials are conducted under protocols detailing, among other things, theobjectives of the clinical trial, dosing procedures, subject selection and exclusion criteria, and the parameters to be used to monitor subject safety. Eachprotocol must be submitted to the FDA as part of the IND. Patients not meeting protocol inclusion and exclusion criteria may be considered for our expandedaccess program under the IND. Clinical trials must be conducted in accordance with the FDA’s regulations comprising the good clinical practicesrequirements. Further, each clinical trial must be reviewed and approved by an independent institutional review board (IRB), at or servicing each institutionat which the clinical trial will be conducted. An IRB is charged with protecting the welfare and rights of trial participants and considers such items as whetherthe risks to individuals participating in the clinical trials are minimized and are reasonable in relation to anticipated benefits. The IRB also approves the formand content of the informed consent that must be signed by each clinical trial subject or his or her legal representative and must monitor the clinical trialuntil completed.12Human clinical trials are typically conducted in three sequential phases that may overlap or be combined:•Phase 1. The drug is initially introduced into healthy human subjects and tested for safety, dosage tolerance, absorption, metabolism,distribution and excretion. In the case of some products for severe or life-threatening diseases, especially when the product may be tooinherently toxic to ethically administer to healthy volunteers, the initial human testing is often conducted in patients.•Phase 2. The drug is evaluated in a limited patient population to identify possible adverse effects and safety risks, to preliminarily evaluate theefficacy of the product for specific targeted diseases and to determine dosage tolerance, optimal dosage and dosing schedule.•Phase 3. Clinical trials are undertaken to further evaluate dosage, clinical efficacy and safety in an expanded patient population atgeographically dispersed clinical trial sites. These clinical trials are intended to establish the overall risk/benefit ratio of the product andprovide an adequate basis for product labeling. Generally, two adequate and well-controlled Phase 3 clinical trials are required by the FDA forapproval of an NDA.Post-approval clinical trials, sometimes referred to as Phase 4 clinical trials, may be conducted after initial marketing approval. These clinical trials are usedto gain additional experience from the treatment of patients in the intended therapeutic indication.Annual progress reports detailing the results of the clinical trials must be submitted to the FDA and written IND safety reports must be promptly submitted tothe FDA and the investigators for serious and unexpected adverse events or any finding from tests in laboratory animals that suggests a significant risk forhuman subjects. Phase 1, Phase 2 and Phase 3 clinical trials may not be completed successfully within any specified period, if at all. The FDA or the sponsoror its data safety monitoring board may suspend a clinical trial at any time on various grounds, including a finding that the research subjects or patients arebeing exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution if the clinical trial is notbeing conducted in accordance with the IRB’s requirements or if the drug has been associated with unexpected serious harm to patients.Concurrent with clinical trials, companies usually complete additional animal studies and must also develop additional information about the chemistry andphysical characteristics of the drug as well as finalize a process for manufacturing the product in commercial quantities in accordance with cGMPrequirements. The manufacturing process must be capable of consistently producing quality batches of the drug candidate and, among other things, mustdevelop methods for testing the identity, strength, quality and purity of the final drug. Additionally, appropriate packaging must be selected and tested andstability studies must be conducted to demonstrate that the drug candidate does not undergo unacceptable deterioration over its shelf life.U.S. Review and Approval ProcessesThe results of product development, nonclinical studies and clinical trials, along with descriptions of the manufacturing process, analytical tests conductedon the chemistry of the drug, proposed labeling and other relevant information are submitted to the FDA as part of an NDA requesting approval to market theproduct. The submission of an NDA is subject to the payment of substantial user fees; a waiver of such fees may be obtained under certain limitedcircumstances.In addition, under the Pediatric Research Equity Act (PREA), an NDA or supplement to an NDA must contain data to assess the safety and effectiveness of thedrug for the claimed indications in all relevant pediatric subpopulations and to support dosing and administration for each pediatric subpopulation for whichthe product is safe and effective. The FDA may grant deferrals for submission of data or full or partial waivers. Unless otherwise required by regulation, PREAdoes not apply to any drug for an indication for which orphan designation has been granted.The FDA reviews all NDAs submitted to determine if they are substantially complete before it accepts them for filing; this initial review period prior toaccepting the NDA for filing is 2 months in duration. Once the submission is accepted for filing, the FDA begins an in-depth review of the NDA. Under thegoals and policies agreed to by the FDA under the Prescription Drug User Fee Act (PDUFA), the FDA has 10 months from the date of accepting the NDA forfiling in which to complete its initial review of a standard NDA and respond to the applicant, and six months for a priority NDA. The FDA does not alwaysmeet its PDUFA goal dates for standard and priority NDAs. The review process and the PDUFA goal date may be extended if the FDA requests or the NDAsponsor otherwise provides additional information or clarification regarding information already provided in the submission without prior agreement reachedat a pre-submission meeting.After the NDA submission is accepted for filing, the FDA reviews the NDA to determine, among other things, whether the proposed product is safe andeffective for its intended use, and whether the product is being manufactured in accordance with cGMP to assure and preserve the product’s identity, strength,quality and purity. The FDA may refer applications for novel drug or biological products or drug or biological products which present difficult questions ofsafety or efficacy to an advisory committee, typically13a panel that includes clinicians and other experts, for review, evaluation and a recommendation as to whether the application should be approved and underwhat conditions. The FDA is not bound by the recommendations of an advisory committee, but it considers such recommendations carefully when makingdecisions. During the drug approval process, the FDA also will determine whether a risk evaluation and mitigation strategy (REMS), is necessary to assure thesafe use of the drug. If the FDA concludes a REMS is needed, the sponsor of the NDA must submit a proposed REMS. The FDA will not approve the NDAwithout a REMS, if required.Before approving an NDA, the FDA will inspect the facilities at which the product is manufactured. The FDA will not approve the product unless itdetermines that the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistent production of theproduct within required specifications. Additionally, before approving an NDA, the FDA will typically inspect one or more clinical sites to assure that theclinical trials were conducted in compliance with IND study requirements. If major issues with trial conduct are identified at a site, data collected from thatsite can be determined to be unacceptable for supporting the application. If the FDA determines that the application, manufacturing process or manufacturingfacilities are not acceptable it will outline the deficiencies in the submission and often will request additional testing or information.The NDA review and approval process is lengthy and difficult and the FDA may refuse to approve an NDA if the applicable regulatory criteria are notsatisfied or may require additional clinical data or other data and information. Even if such data and information is submitted, the FDA may ultimately decidethat the NDA does not satisfy the criteria for approval. Data obtained from clinical trials are not always conclusive and the FDA may interpret data differentlythan we interpret the same data. The FDA will issue a complete response letter if the agency decides not to approve the NDA. The complete response letterusually describes all of the specific deficiencies in the NDA identified by the FDA. The deficiencies identified may be minor, for example, requiring labelingchanges, or major, for example, requiring additional clinical trials. Additionally, the complete response letter may include recommended actions that theapplicant might take to place the application in a condition for approval. If a complete response letter is issued, the applicant may either resubmit the NDA,addressing all of the deficiencies identified in the letter, or withdraw the application.If a product receives regulatory approval, the approval may be significantly limited to specific diseases and dosages or the indications for use may otherwisebe limited, which could restrict the commercial value of the product. Further, the FDA may require that certain contraindications, warnings or precautions beincluded in the product labeling. In addition, the FDA may require post marketing clinical trials, sometimes referred to as Phase 4 clinical trials testing, whichinvolves clinical trials designed to further assess a drug’s safety and effectiveness and may require testing and surveillance programs to monitor the safety ofapproved products that have been commercialized.Orphan Drug DesignationUnder the Orphan Drug Act, the FDA may grant orphan designation to a drug or biological product intended to treat a rare disease or condition, which isgenerally a disease or condition that affects fewer than 200,000 individuals in the United States, or more than 200,000 individuals in the United States andfor which there is no reasonable expectation that the cost of developing and making a drug or biological product available in the United States for this typeof disease or condition will be recovered from sales of the product. Orphan product designation must be requested before submitting an NDA. After the FDAgrants orphan product designation, the identity of the therapeutic agent and its potential orphan use are disclosed publicly by the FDA. Orphan productdesignation does not convey any advantage in or shorten the duration of the regulatory review and approval process.If a product that has orphan designation subsequently receives the first FDA approval for the disease or condition for which it has such designation, theproduct is entitled to orphan product exclusivity, which means that the FDA may not approve any other applications to market the same drug or biologicalproduct for the same indication for seven years, except in limited circumstances, such as a showing of clinical superiority to the product with orphanexclusivity. Competitors, however, may receive approval of different products for the indication for which the orphan product has exclusivity or obtainapproval for the same product but for a different indication for which the orphan product has exclusivity. Orphan product exclusivity also could block theapproval of a product for seven years if a competitor obtains approval of the same drug or biological product as defined by the FDA or if a drug candidate isdetermined to be contained within the competitor’s product for the same indication or disease. If a drug or biological product designated as an orphanproduct receives marketing approval for an indication broader than what is designated, it may not be entitled to orphan product exclusivity.Expedited Development and Review ProgramsThe FDA has a number of programs that are intended to expedite or facilitate the process for reviewing new drugs and biological products for seriousconditions that meet certain criteria. Specifically, new drugs and biological products are eligible for Fast Track, Breakthrough Therapy, and/or PriorityReview designation if they are intended to treat a serious or life-threatening condition14and demonstrate the potential to address unmet medical needs for the condition. Fast Track designation applies to the combination of the product and thespecific indication for which it is being studied. Breakthrough Therapy designation is for a drug that is intended to treat a serious condition and preliminaryclinical evidence indicates that the drug may demonstrate substantial improvement on a clinically significant endpoint(s) over available therapies. Unique toFast Track and Breakthrough Therapy products, the FDA may consider for review sections of the NDA on a rolling basis before the complete application issubmitted, if the sponsor provides a schedule for the submission of the sections of the NDA, the FDA agrees to accept sections of the NDA and determines thatthe schedule is acceptable, and the sponsor pays any required user fees upon submission of the first section of the NDA.Any product submitted to the FDA for marketing approval, including Fast Track and Breakthrough Therapy programs, may also be eligible for other types ofFDA programs intended to expedite development and review, such as priority review and accelerated approval. Any product is eligible for priority review if ithas the potential to provide safe and effective therapy where no satisfactory alternative therapy exists or a significant improvement in the treatment,diagnosis or prevention of a disease compared to marketed products. The FDA will attempt to direct additional resources to the evaluation of an applicationfor a new drug or biological product designated for priority review in an effort to facilitate the review. Additionally, a product may be eligible for acceleratedapproval. Drug or biological products studied for their safety and effectiveness in treating serious or life-threatening illnesses and that provide meaningfultherapeutic benefit over existing treatments may receive accelerated approval, which means that they may be approved on the basis of adequate and well-controlled clinical trials establishing that the product has an effect on a surrogate endpoint that is reasonably likely to predict a clinical benefit, or on thebasis of an effect on a clinical endpoint other than survival or irreversible morbidity. As a condition of approval, the FDA may require that a sponsor of a drugor biological product receiving accelerated approval perform adequate and well-controlled post-marketing clinical trials to establish safety and efficacy forthe approved indication. In addition, the FDA currently requires as a condition for accelerated approval pre-review of promotional materials, which couldadversely impact the timing of the commercial launch of the product. Fast Track, Breakthrough, and Priority Review designations and accelerated approvaldo not change the standards for approval but may expedite the development or approval process.Animal Efficacy RuleFDA permits the approval of certain drugs and biologics that are intended to reduce or prevent serious or life-threatening conditions based on evidence ofsafety from clinical trial(s) in healthy subjects and effectiveness from appropriate animal studies when human efficacy studies are not ethical or feasible.These regulations, which are known as the “Animal Rule”, authorize the FDA to rely on animal studies to provide evidence of a product’s effectiveness undercircumstances where there is a reasonably well-understood mechanism for the activity of the agent. Under these requirements, and with the FDA’s prioragreement, drugs used to reduce or prevent the toxicity of chemical, biological, radiological or nuclear substances may be approved for use in humans basedon evidence of effectiveness derived from appropriate animal studies and any additional supporting data. Products evaluated under this rule mustdemonstrate effectiveness through pivotal animal studies, which are generally equivalent in design and robustness to Phase 3 clinical studies. The animalstudy endpoint must be clearly related to the desired benefit in humans and the information obtained from animal studies must allow for selection of aneffective dose in humans. Safety under this rule is established under preexisting requirements, including safety studies in both animals (toxicology) andhumans. Products approved under the Animal Rule are subject to additional requirements including post-marketing study requirements, restrictions imposedon marketing or distribution or requirements to provide information to patients.Expanded access programsMany jurisdictions allow the supply of unauthorized medicinal products in the context of strictly regulated and exceptional early access programs, and somecountries may provide reimbursement for drugs provided in the context of such programs. The promotion, advertising and marketing of unauthorizedmedicinal products is generally prohibited, and authorization for early access programs must generally be obtained from regulatory authorities, which mightnot grant such authorization. To provide expanded access, sponsors must submit detailed regulatory information to the FDA. FDA authorization depends onseveral different factors, including whether expanded access will interfere with related clinical trials or drug development. In addition to the FDA’s earlyaccess program, the Trickett Wendler, Frank Mongiello, Jordan McLinn, and Matthew Bellina Right to Try Act of 2017, or the Right to Try Act, among otherthings, provides a federal framework for certain patients to access certain investigational new drug products that have completed a Phase I clinical trial andthat are undergoing investigation for FDA approval. Under certain circumstances, eligible patients can seek treatment without enrolling in clinical trials andwithout obtaining FDA permission under the FDA expanded access program. There is no obligation for a pharmaceutical manufacturer to make its drugproducts available to eligible patients as a result of the Right to Try Act. Sponsors may not promote products as safe or effective for expanded-access uses.15Post-Approval RequirementsAny drug products for which we or our strategic alliance partners receive FDA approvals are subject to continuing regulation by the FDA, including, amongother things, record-keeping requirements, reporting of adverse experiences with the product, providing the FDA with updated safety and efficacyinformation, product sampling and distribution requirements, complying with certain electronic records and signature requirements and complying with FDApromotion and advertising requirements. These promotion and advertising agreements include, among others, standards for direct-to-consumer advertising,promoting drugs for uses or in patient populations that are not described in the drug’s approved labeling (known as “off-label use”), industry-sponsoredscientific and educational activities, and promotional activities involving the internet. Failure to comply with FDA requirements can have negativeconsequences, including adverse publicity, enforcement letters from the FDA, mandated corrective advertising or communications with doctors, and civil orcriminal penalties. Although physicians may prescribe legally available drugs for off-label uses, manufacturers may not market or promote such off-labeluses.We will rely, and expect to continue to rely, on third parties for the production of clinical and commercial quantities of any products that we maycommercialize. Our strategic alliance partners may also utilize third parties for some or all of a product we are developing with such strategic alliance partner.Manufacturers of our products are required to comply with applicable FDA manufacturing requirements contained in the FDA’s cGMP regulations. cGMPregulations require among other things, quality control and quality assurance as well as the corresponding maintenance of records and documentation. Drugmanufacturers and other entities involved in the manufacture and distribution of approved drugs are required to register their establishments with the FDAand certain state agencies, and are subject to periodic unannounced inspections by the FDA and certain state agencies for compliance with cGMP and otherlaws. Accordingly, manufacturers must continue to expend time, money, and effort in the area of production and quality control to maintain cGMPcompliance. Discovery of problems with a product after approval may result in restrictions on a product, manufacturer, or holder of an approved NDA,including withdrawal of the product from the market. In addition, changes to the manufacturing process generally require prior FDA approval before beingimplemented and other types of changes to the approved product, such as adding new indications and additional labeling claims, are also subject to furtherFDA review and approval.The FDA also may require post-marketing testing, known as Phase 4 testing, risk minimization action plans and surveillance to monitor the effects of anapproved product or place conditions on an approval that could restrict the distribution or use of the product.U.S. Patent Term Restoration and Marketing ExclusivityDepending upon the timing, duration and specifics of the FDA approval of the use of our drug candidates, some of our United States patents may be eligiblefor limited patent term extension under the Drug Price Competition and Patent Term Restoration Act of 1984, commonly referred to as the Hatch-WaxmanAmendments. The Hatch-Waxman Amendments permit a patent restoration term of up to five years as compensation for patent term lost during productdevelopment and the FDA regulatory review process. However, patent term restoration cannot extend the remaining term of a patent beyond a total of 14years from the product’s approval date. The patent term restoration period is generally one-half the time between the effective date of an IND and thesubmission date of an NDA, plus the time between the submission date of an NDA and the approval of that application. Only one patent applicable to anapproved drug is eligible for the extension and the application for the extension must be submitted prior to the expiration of the patent. The United StatesPatent and Trademark Office, in consultation with the FDA, reviews and approves the application for any patent term extension or restoration. In the future,we may apply for restoration of patent term for one of our currently owned or licensed patents to add patent life beyond its current expiration date, dependingon the expected length of the clinical trials and other factors involved in the filing of the relevant NDA.Market exclusivity provisions under the FDCA can also delay the submission or the approval of certain applications of other companies seeking to referenceanother company’s NDA. The FDCA provides a five-year period of non-patent marketing exclusivity within the United States to the first applicant to obtainapproval of an NDA for a new chemical entity. A drug is a new chemical entity if the FDA has not previously approved any other new drug containing thesame active moiety, which is the molecule or ion responsible for the action of the drug substance. During the exclusivity period, the FDA may not accept forreview an abbreviated new drug application (ANDA), or a 505(b)(2) NDA submitted by another company for another version of such drug where the applicantdoes not own or have a legal right of reference to all the data required for approval. However, an application may be submitted after four years if it contains acertification of patent invalidity or non-infringement to one of the patents listed with the FDA by the innovator NDA holder. The FDCA also provides threeyears of marketing exclusivity for an NDA, or supplement to an existing NDA if new clinical investigations, other than bioavailability studies, that wereconducted or sponsored by the applicant are deemed by the FDA to be essential to the approval of the application, for example new indications, dosages orstrengths of an existing drug. This three-year exclusivity covers only the conditions associated with the new clinical investigations and does not prohibit theFDA from approving ANDAs for drugs containing the original active agent. Five-year and three-year16exclusivity will not delay the submission or approval of a full NDA. However, an applicant submitting a full NDA would be required to conduct or obtain aright of reference to all of the preclinical studies and adequate and well-controlled clinical trials necessary to demonstrate safety and effectiveness. Pediatricexclusivity is another type of regulatory market exclusivity in the United States. Pediatric exclusivity, if granted, adds six months to existing exclusivityperiods and patent terms. This six-month exclusivity, which runs from the end of other exclusivity protection or patent term, may be granted based on thevoluntary completion of a pediatric trial in accordance with an FDA-issued “Written Request” for such a trial.US Health Care LawsOur operations may be subject to federal and state health care laws and regulations including, without limitation: anti-kickback statutes, false claims statutes,patient data privacy and security laws, and physician payment transparency laws and regulations, many of which may become more applicable if our productcandidates are approved and we begin commercialization. If our operations are found to be in violation of any of these laws or regulations, we may be subjectto penalties, including administrative, civil and criminal penalties, damages, fines, disgorgement, imprisonment, exclusion from participation in federalhealthcare programs, and additional reporting obligations and oversight if we become subject to a corporate integrity agreement or other agreement toresolve allegations of non-compliance with these laws, as well as contractual damages, reputational harm, diminished profits and future earnings, and thecurtailment or restructuring of our operations.ReimbursementSales of pharmaceutical products depend in significant part on the availability of third-party reimbursement. Third-party payers include government healthprograms such as Medicare and Medicaid, managed care providers, private health insurers and other organizations. These third-party payers are increasinglychallenging the price and examining the cost-effectiveness of medical products and services, including prescription drugs. In addition, significantuncertainty exists as to the reimbursement status of newly approved prescription drugs and other healthcare products. We may need to conduct expensivepharmacoeconomic studies in order to demonstrate the cost-effectiveness of any of our products that is successfully developed and approved. Our productcandidates may not be considered cost-effective. It is time consuming and expensive to seek reimbursement from third-party payers. Reimbursement may notbe available or sufficient to allow the sale of any of our products that is successfully developed and approved on a competitive and profitable basis.The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA), established the Medicare Part D program to provide a voluntaryprescription drug benefit to Medicare beneficiaries. Under Part D, Medicare beneficiaries may enroll in prescription drug plans offered by private entities toprovide coverage of outpatient prescription drugs. Part D plans include both stand-alone prescription drug benefit plans and prescription drug coverage as asupplement to Medicare Advantage plans. Unlike Medicare Parts A and B, Part D coverage is not standardized. Part D prescription drug plan sponsors are notrequired to pay for all covered Part D drugs, and each Part D prescription drug plan can develop its own drug formulary that identifies which drugs it willcover and at what tier or level. However, Part D prescription drug formularies must include drugs within each therapeutic category and class of covered Part Ddrugs, although not necessarily all of the drugs within each category or class. Any formulary used by a Part D prescription drug plan must be developed andreviewed by a pharmacy and therapeutic committee.It is not clear what long-term effect the MMA will have on the prices paid for currently approved drugs and the pricing options for newly approved drugs.Government payment for some of the costs of prescription drugs may increase demand for any of our products that is successfully developed and approved.However, any negotiated prices for our products covered by a Part D prescription drug plan will likely be lower than the prices we might otherwise obtain.Moreover, although the MMA applies only to drug benefits for Medicare beneficiaries, private payers often follow Medicare coverage policy and paymentlimitations in setting their own payment rates. Accordingly, any reduction in payment that results from the MMA may result in a similar reduction inpayments from non-governmental payers.We expect that there will continue to be a number of federal and state proposals to implement governmental pricing controls and limit the growth ofhealthcare costs, including the cost of prescription drugs. Currently, Medicare is prohibited from negotiating directly with pharmaceutical companies fordrugs. However, the U.S. Congress may in the future consider legislation that would lift the ban on federal negotiations.The American Recovery and Reinvestment Act of 2009 provides funding for the federal government to compare the effectiveness of different treatments forthe same illness. A plan for the research would be developed by the U.S. Department of Health and Human Services (DHHS), Agency for Healthcare Researchand Quality and the National Institutes of Health, and periodic reports on the status of the research and related expenditures would be made to the U.S.Congress. Although the results of the comparative effectiveness studies are not intended to mandate coverage policies for public or private payers, it is notclear whether research would have any effect on the sales of any of our products that are successfully developed and approved, if the product or the17condition that it is intended to treat becomes the subject of a study. It is also possible that comparative effectiveness research demonstrating benefits of acompetitor’s product could adversely affect the sales of any of our products that is successfully developed and approved. If third-party payers do not considerour products to be cost-effective compared to other available therapies, they may not cover our products after approval as a benefit under their plans or, ifthey do, the level of payment may not be sufficient to allow us to sell our products on a profitable basis.The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (collectively, ACA), is expectedto have a significant impact on the health care industry. The ACA is expected to expand coverage for the uninsured while at the same time containing overallhealthcare costs. Among other things, the ACA expands and increases industry rebates for drugs covered under Medicaid programs and make changes to thecoverage requirements under the Medicare Part D program. We cannot predict the impact of the ACA on pharmaceutical companies because some of theACA’s reforms require the promulgation of detailed regulations to implement the statutory provisions, which has not yet occurred. In addition, there havebeen judicial and Congressional challenges to certain aspects of the ACA, as well as recent efforts by the Trump administration to repeal and replace certainaspects of the ACA, and we expect such challenges to continue. Since January 2017, President Trump has signed two Executive Orders and other directivesdesigned to delay the implementation of certain provisions of the ACA or otherwise circumvent some of the requirements for health insurance mandated bythe ACA. Concurrently, Congress has considered legislation that would repeal or repeal and replace all or part of the ACA. While Congress has not passedcomprehensive repeal legislation, two bills affecting the implementation of certain taxes under the ACA have been enacted. Legislation enacted in 2017(H.R. 1, "An Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018"), informally titled theTax Cuts and Jobs Act of 2017, or Tax Act, includes a provision repealing, effective January 1, 2019, the tax-based shared responsibility payment imposedby the ACA on certain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as the “individualmandate.” On January 22, 2018, President Trump signed a continuing resolution on appropriations for fiscal year 2018 that delayed the implementation ofcertain fees mandated by the ACA, including the so-called “Cadillac” tax on certain high-cost employer-sponsored insurance plans, the annual fee imposedon certain health insurance providers based on market share, and the medical device excise tax on non-exempt medical devices. The Bipartisan Budget Act of2018, or the BBA, among other things, amended the ACA, effective January 1, 2019, to close the coverage gap in most Medicare drug plans, and alsoincreases in 2019 the percentage that a drug manufacturer must discount the cost of prescription drugs from 50 percent to 70 percent. In July 2018, theCenters for Medicare and Medicaid Services, or CMS, published a final rule permitting further collections and payments to and from certain ACA qualifiedhealth plans and health insurance issuers under ACA risk adjustment program in response to the outcome of federal district court litigation regarding themethod CMS uses to determine this risk adjustment. On December 14, 2018, a Texas U.S. District Court Judge ruled that ACA is unconstitutional in itsentirety because the “individual mandate” was repealed by Congress as part of the Tax Act. While the Texas U.S. District Court Judge, as well as the Trumpadministration and CMS, have stated that the ruling will have no immediate effect pending appeal of the decision, it is unclear how this decision, subsequentappeals, and other efforts to repeal and replace ACA will impact ACA.The Physician Payment Sunshine Act (Sunshine Act), which was enacted as part of ACA, requires covered manufacturers of drugs covered under Medicare,Medicaid or the Children’s Health Insurance Program to report annually to the Secretary of the DHHS payments or other transfers of value made by thatentity, or by a third party as directed by that entity, to physicians and teaching hospitals, or to third parties on behalf of physicians or teaching hospitals,during the course of the preceding calendar year. The final rule implementing the Sunshine Act, published on February 8, 2013, requires data collection onpayments to begin on August 1, 2013. Failure to submit required information may result in significant civil monetary penalties for all payments, transfers ofvalue or ownership or investment interests not reported in an annual submission.If not preempted by the ACA, several states require pharmaceutical manufacturers to report expenses relating to the marketing and promotion ofpharmaceutical products and to report gifts and payments to individual physicians in the states. Other states prohibit providing various other marketingrelated activities. Still other states require the posting of information relating to clinical studies and their outcomes. In addition, some states, such asCalifornia, Nevada and Massachusetts, require pharmaceutical manufacturers to implement compliance programs or marketing codes. Currently, severaladditional states are considering similar proposals. Compliance with these laws is difficult and time consuming, and companies that do not comply with thesestate laws face civil penalties.There has also been increasing legislative and enforcement interest in the United States with respect to drug pricing practices, including several recentCongressional inquiries and proposed and enacted federal and state legislation designed to, among other things, increase drug pricing transparency, reducethe cost of drugs under Medicare, review relationships between pricing and manufacturer patient assistance programs, and reform government program drugreimbursement methodologies.In some foreign countries, the proposed pricing for a drug must be approved before it may be lawfully marketed. The requirements governing drug pricingvary widely from country to country. For example, the EU provides options for its member states to restrict18the range of medicinal products for which their respective national health insurance systems provide reimbursement and to control the prices of medicinalproducts for human use. A member state may approve a specific price for the medicinal product or it may instead adopt a system of direct or indirect controlson the profitability of the company placing the medicinal product on the market. There can be no assurance that any country that has price controls orreimbursement limitations for pharmaceutical products will allow favorable reimbursement and pricing arrangements for any of our products for which wereceive marketing approval. Historically, the price structures for products launched in the EU do not follow those of the United States and tend to besignificantly lower.Europe / Rest of World Government RegulationIn addition to regulations in the United States, we and our strategic alliance partners will be subject to a variety of regulations in other jurisdictionsgoverning, among other things, clinical trials and any commercial sales and distribution of our products.Whether or not we or our collaborators obtain FDA approval for a product, we must obtain the requisite approvals from regulatory authorities in foreigncountries prior to the commencement of clinical trials or marketing of the product in those countries. Certain countries outside of the United States have asimilar process that requires the submission of a clinical trial application prior to the commencement of human clinical trials. In the EU, for example, aclinical trial application (CTA), must be submitted to each country’s national health authority and an independent ethics committee, much like the FDA andIRB, respectively. Once the CTA is approved in accordance with a country’s requirements, the particular clinical trial may proceed.The requirements and process governing the conduct of clinical trials, product licensing, pricing and reimbursement vary from country to country. In allcases, the clinical trials are conducted in accordance with GCP and the applicable regulatory requirements and the ethical principles that have their origin inthe Declaration of Helsinki.To obtain regulatory approval of an investigational drug or biological product under EU regulatory systems, we or our strategic alliance partners must submita marketing authorization application. The application used to file the NDA or a Biologics License Application in the United States is similar to theapplication dossier (eCTD) required in the EU.For other countries outside of the EU, such as countries in Eastern Europe, Latin America or Asia, the requirements governing the conduct of clinical trials,product licensing, pricing and reimbursement vary from country to country. In all cases, again, the clinical trials are conducted in accordance with GCP andthe applicable regulatory requirements and the ethical principles that have their origin in the Declaration of Helsinki.If we or our strategic alliance partners fail to comply with applicable foreign regulatory requirements, we may be subject to, among other things, fines,suspension or withdrawal of regulatory approvals, product recalls, seizure of products, operating restrictions and criminal prosecution.EU Review and Approval Process In the EU, there are two main routes for authorizing the marketing of medicines, a centralized route and a national route. The centralized procedureis compulsory for certain types of medicines, including those that have received orphan designation from the European Commission (Orphan Designation).Under the centralized authorization procedure, pharmaceutical companies submit a single marketing-authorization application to the EMA. EMA’sCommittee for Medicinal Products for Human Use (CHMP) carries out a scientific assessment of the application and makes a recommendation to theEuropean Commission whether the medicine should be marketed or not. If authorization is granted by the European Commission, the centralized marketingauthorization is valid in all EU Member States as well as in the European Economic Area (EEA) countries Iceland, Liechtenstein and Norway.Additionally, medicines that belong to at least one of the below categories may be granted a conditional market authorization (CMA). This regulatorypathway is intended to help speed up patient access to new medicines that are:•aimed at treating, preventing or diagnosing seriously debilitating or life-threatening diseases;•intended for use in emergency situations (also less comprehensive pharmaceutical and non-clinical data may be accepted for such products);and/or•designated as orphan medicines.A CMA may be granted if: (1) the CHMP finds that the benefit-risk balance of the product is positive, (2) it is likely that the applicant will be able to providecomprehensive data, (3) the unmet medical needs will be fulfilled, and (4) the benefit to public19health of the medicinal product’s immediate availability on the market outweighs the risks due to need for further data.CMAs are valid for one year and can be renewed annually. The CMA holder will be required to complete specific obligations (to complete ongoing or newstudies, and in some cases additional activities) with a view to providing comprehensive data confirming that the benefit-risk balance is positive. Oncecomprehensive data on the product have been obtained, the CMA may be converted into a full marketing authorization (not subject to specific obligations).Initially, this is valid for five years, but can be renewed for unlimited validity.Orphan Designation in the EUIn order to qualify for Orphan Designation, a medicine must meet the following criteria:•it must be intended for the treatment, prevention or diagnosis of a disease that is life-threatening or chronically debilitating;•the prevalence of the condition in the EU must not be more than 5 in 10,000 or it must be unlikely that marketing of the medicine wouldgenerate sufficient returns to justify the investment needed for its development; and•no satisfactory method of diagnosis, prevention or treatment of the condition concerned can be authorized, or, if such a method exists, themedicine must be of significant benefit to those affected by the condition.EMA is responsible for reviewing applications from sponsors for orphan designation. The EMA’s Committee for Orphan Medicinal Products (COMP),through its network of experts, examines applications for Orphan Designation and issues an opinion to EMA. The evaluation process takes approximately of90 days from validation. Once EMA receives COMP’s opinion, EMA sends it to the European Commission, which is responsible for granting the OrphanDesignation.At the time a sponsor of a marketing application files for marketing authorization for a medicine that has received Orphan Designation, the sponsor must alsosubmit a report on the maintenance of the Orphan Designation in parallel. EMA uses this report to determine whether the medicine can maintain its status asan orphan medicine and benefit from the extended market exclusivity applicable to orphan products. Market exclusivity is linked to the maintenance of theOrphan Designation when the medicine receives a marketing authorization for the indication concerned.If it is determined that a medicine still meets the criteria for Orphan Designation at the time of marketing approval, that medicine may benefit from a period often years market exclusivity in the EU. This incentive is intended to protect orphan medicines from market competition with similar medicines with similarindications once they are approved, and fundamentally to encourage the development of medicines for rare diseases.The applicant is obliged to submit an annual report to the EMA every year after their medicine has been granted orphan designation. The annual report needsprovide information on the status of the development of the medicine, such as a review of ongoing clinical studies, a description of the investigation plan forthe coming year and any anticipated or current problems in the process, difficulties in testing and potential changes that may have an impact on themedicine’s orphan designation.The European Commission is responsible for granting market exclusivity for orphan medicines. Market exclusivity is linked to each specific OrphanDesignation for which a marketing authorization has been granted.The period of market exclusivity is extended by two years for medicines that also have complied with an agreed pediatric investigation plan (PIP). Eachorphan designation for a product linked to a separate orphan condition is eligible for a two-year extension if this is accounted for in the PIP. The extension isgranted by the European Commission based on the positive compliance check from the Pediatric Committee and opinion from the CHMP.Environmental, Health and Safety RegulationsWe are subject to various environmental, health and safety regulations, including those governing laboratory procedures and the handling, use, storage,treatment and disposal of hazardous substances. From time to time, and in the future, our operations may involve the use of hazardous materials.EmployeesAs of December 31, 2018, we had 82 full-time employees. Of these employees, 59 employees are engaged in research and development activities and 23employees are engaged in marketing, finance, legal, human resources, facilities and general management. We have no collective bargaining agreements withour employees and we have not experienced any work stoppages. We consider our relations with our employees to be good.20Corporate InformationWe were incorporated in the State of Delaware in April 2000. Our corporate headquarters are located at 2505 Meridian Parkway, Suite 100, Durham, NorthCarolina 27713 in a facility we lease encompassing approximately 24,862 square feet of office space. The leases for this facility expire in February 2021. Weseparately lease laboratory space in Durham and Research Triangle Park, North Carolina, encompassing a total of approximately 10,274 square feet. Theleases for this laboratory space in Durham and Research Triangle Park expire in July 2021 and August 2021, respectively.Our corporate website address is www.chimerix.com. Our filings with the Securities and Exchange Commission are available free of charge through ourwebsite as soon as reasonably practicable after being electronically filed with or furnished to the SEC. The information contained on, or that can be accessedthrough, our website is not part of this Annual Report, and the inclusion of our website address in this Annual Report is an inactive textual reference only.ITEM 1A. RISK FACTORSExcept for the historical information contained herein or incorporated by reference, this Annual Report and the information incorporated by referencecontains forward-looking statements that involve risks and uncertainties. These statements include projections about our research, development andcommercialization efforts, our accounting and finances, plans and objectives for the future, future operating and economic performance and otherstatements regarding future performance. These statements are not guarantees of future performance or events. Our actual results may differ materially fromthose discussed here. Factors that could cause or contribute to differences in our actual results include those discussed in the following section, as well asthose discussed in Part II, Item 7 entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewherethroughout this Annual Report and in any other documents incorporated by reference into this Annual Report. You should consider carefully the followingrisk factors, together with all of the other information included or incorporated in this Annual Report. Each of these risk factors, either alone or takentogether, could adversely affect our business, operating results and financial condition, as well as adversely affect the value of an investment in ourcommon stock. There may be additional risks that we do not presently know of or that we currently believe are immaterial which could also impair ourbusiness and financial position.An investment in shares of our common stock involves a high degree of risk. You should carefully consider the following information about these risks,together with the other information appearing elsewhere in this Annual Report, before deciding to invest in our common stock. The occurrence of any of thefollowing risks could have a material adverse effect on our business, financial condition, results of operations and future growth prospects. In thesecircumstances, the market price of our common stock could decline, and you may lose all or part of your investment.Risks Related To Our Financial Condition and Need For Additional CapitalWe have incurred significant losses since our inception. We anticipate that we will continue to incur significant losses for the foreseeable future, and wemay never achieve or maintain profitability.We are a biopharmaceutical company focused primarily on developing our lead product candidate, brincidofovir. We have incurred significant net losses ineach year since our inception, including net losses of $69.5 million, $71.0 million and $76.4 million for the twelve months ended December 31, 2018, 2017and 2016, respectively. As of December 31, 2018, we had an accumulated deficit of approximately $556.3 million.To date, we have financed our operations primarily through the sale of equity securities and, to a lesser extent, through government funding, licensing feesand 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 expect to continue to incur losses and negative cash flows for the foreseeable future. Thesize of our losses will depend, in part, on the rate of future expenditures and our ability to generate revenues. In particular, we expect to incur substantial andincreased expenses as we seek to:•continue the development of our lead product candidate, brincidofovir, for the treatment of AdV infection;•advance the development of an IV formulation of brincidofovir;•continue the development of brincidofovir for the prevention or treatment of CMV, AdV, BK virus, and other viral indications in HCTrecipients, solid organ transplant recipients and other patient populations;•continue the development of brincidofovir for the treatment of smallpox as a medical countermeasure;•obtain regulatory approvals for brincidofovir;21•scale-up manufacturing capabilities to commercialize brincidofovir for any indications for which we receive regulatory approval;•expand our research and development activities and advance our clinical programs;•maintain, expand and protect our intellectual property portfolio;•continue our research and development efforts and seek to discover additional product candidates; and•add operational, financial and management information systems and personnel, including personnel to support our product development andcommercialization efforts and operations as a public company.To become and remain profitable, we must succeed in developing and eventually commercializing products with significant market potential. This willrequire us to be successful in a range of challenging activities, including discovering product candidates, completing preclinical testing and clinical trials ofour product candidates, obtaining regulatory approval for these product candidates, and manufacturing, marketing and selling those products for which wemay 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 of our product candidates, and none of our product candidates have been commercialized. We maynever succeed in developing or commercializing any of our product candidates. If our product candidates are not successfully developed or commercialized,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 wesuccessfully obtain regulatory approval to market our product candidates in the United States, our revenues are also dependent upon the size of marketsoutside of the United States, as well as our ability to obtain market approval and achieve commercial success outside of the United States.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 remainprofitable would depress the value of our company and could impair our ability to raise capital, expand our business, diversify our product offerings orcontinue 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 approvalfor, and commercialize our 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 our product candidates. We do not anticipate generating revenues from sales of our productcandidates 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 brincidofovir and our other product candidates, including successfullycompleting clinical development of IV and oral formulations of brincidofovir;•obtaining United States and foreign regulatory approval(s) for brincidofovir;•launching and commercializing brincidofovir, including establishing a sales force and/or collaborating with third party providers of salesorganizations;•achieving broad market acceptance of brincidofovir in the medical community and with third-party payers;•delivering a competitive value proposition compared to established competition and/or competitors who will enter the market before or afterany of our product candidates, including brincidofovir; and•generating, licensing or otherwise acquiring a pipeline of product candidates which progress to clinical development, regulatory approval, andcommercialization.Conducting preclinical testing and clinical trials is a time-consuming, expensive and uncertain process that takes years to complete, and we may nevergenerate the necessary data required to obtain regulatory approval and achieve product sales. Our anticipated development costs would likely increase if wedo not obtain favorable results or if development of our product candidates is delayed. In particular, we would likely incur higher costs than we currentlyanticipate if development of our product candidates is delayed because we are required by the FDA or foreign regulatory authorities to perform studies ortrials in addition to those that we currently anticipate, or we decide to conduct additional studies or trials for strategic reasons. For example, in December2015 we announced that in the SUPPRESS trial brincidofovir did not prevent clinically significant CMV infection through Week 24 after HCT to a greaterextent than occurred on placebo, the primary endpoint of the trial. Since that time, we have revised our overall development plan for brincidofovir. We havedesigned and are conducting multiple trials with the goal of attaining FDA and/or foreign regulatory approval of brincidofovir for commercial indications.Furthermore, we may have difficulties implementing our clinical trials due to delays in enrollment. For example, enrollment of our AdAPT study and ourPhase 2 open label dose-ranging studies of IV BCV in patients with active AdV have faced regulatory and site initiation delays, and we have observed lowerthan anticipated incidence at the centers that have been initiated, all of which has caused delays in the enrollment of these studies.22Because of the numerous risks and uncertainties associated with pharmaceutical product development, we are unable to predict with certainty the timing oramount of any increase in our anticipated development costs that will result should any additional trials be necessary.In addition, our product candidates, if approved, may not achieve commercial success. Our commercial revenues, if any, will be derived from sales of productsthat we do not expect to be commercially available for a number of years, if at all. Even if one or more of our product candidates is approved for commercialsale, we anticipate incurring significant costs in connection with commercialization. As a result, we cannot assure you that we will be able to generaterevenues from sales of any approved product candidates, 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 forthe 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 thattakes years to complete. We believe that our existing capital available to fund operations will enable us to fund our current operating expenses and capitalrequirements for at least the next twelve months. Based on our 2019 plans for both oral and IV brincidofovir, we currently expect research and developmentexpenses to remain consistent for the full year 2019 as compared to the full year 2018. In addition, we presently continue to provide brincidofovir for thetreatment of AdV infection through our expanded access protocol (Study 351) in the US and through the Named Patient Program in the EU. Changingcircumstances 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 authoritiesrequire us to perform studies or trials in addition to those that we currently anticipate. For example, enrollment of our AdAPT study and our Phase 2 openlabel dose-ranging studies of IV BCV in patients with active AdV have faced regulatory and site initiation delays, and we have observed lower thananticipated incidence at the centers that have been initiated, all of which has caused delays in the enrollment of these studies. We may need to raiseadditional funds if we choose to initiate clinical trials for our product candidates other than brincidofovir. In any event, we will require additional capital tocommercialize our lead product candidate, brincidofovir, which we may obtain through one or more equity offerings, debt financings, government or otherthird-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 andcommercialize our product candidates, including brincidofovir. In addition, we cannot guarantee that future financing will be available in sufficient amountsor 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 our product candidates, including brincidofovir;•seek corporate partners for brincidofovir or any of our other product candidates at an earlier stage than otherwise would be desirable or on termsthat 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 orcommercialize 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 andcommercialization efforts, which will have a material adverse effect on our business, operating results and prospects and on our ability to develop our productcandidates. Risks Related To Clinical Development and Regulatory ApprovalWe depend on the success of our lead product candidate, brincidofovir, which is still under clinical development, and may not obtain regulatory approvalor be successfully commercialized.We have not marketed, distributed or sold any products. The success of our business depends upon our ability to develop and commercialize our lead productcandidate, brincidofovir. In December 2015, we announced that in the SUPPRESS trial, brincidofovir did not prevent clinically significant CMV infectionthrough Week 24 after transplant to a greater extent than occurred on placebo, the primary endpoint of the trial. In addition, overall mortality forbrincidofovir and for placebo were not statistically different, but numerically higher for the patients who were randomized to receive brincidofovir.23Our AdVise study of brincidofovir for the treatment of AdV infection in allogeneic HCT recipients and other immunocompromised individuals is completeand did not demonstrate a survival benefit when results were compared to data from Study 305, our historical matched control study.The AdAPT study is currently enrolling pediatric and young adult allogeneic HCT recipients with AdV infection to compare the average AdV viral burdenover 16 weeks in subjects randomized to short-course oral brincidofovir to those who are treated with the local standard-of-care.Through our continuing development contract with BARDA, we recently completed the in-life segment of our second rabbitpox efficacy study and initiatedthe pivotal efficacy study in the mouse model (ectromelia virus). We believe that efficacy data from this model could serve as the second animal model tosupport the approval of brincidofovir for the treatment of smallpox.There is no guarantee that our current or future clinical trials, including any Phase 3 trials, will be approved by regulators, and no guarantee that they will becompleted or, if completed, will be successful, or if successful, will result in an approval for the sale of any of our product candidates. The success ofbrincidofovir will depend on several factors, including the following:•successful conduct of required trial(s) of oral brincidofovir for the treatment of adenovirus;•successful conduct of a second efficacy study of oral brincidofovir in an animal model of smallpox infection, and acceptance of data from theseanimal model studies by the FDA and foreign regulatory bodies;•development of an IV formulation and/or alternate drug formulations;•receipt of marketing approvals from the FDA and corresponding regulatory authorities outside the United States;•establishing commercial manufacturing capabilities;•launching commercial sales of the product, whether alone or in collaboration with others;•acceptance of the product by patients, the medical community and third-party payers;•effectively competing with other therapies;•a continued acceptable safety profile of the product following approval;•obtaining, maintaining, enforcing and defending intellectual property rights and claims; and•establishing distribution channels in Europe and U.S.If we do not achieve one or more of these factors in a timely manner or at all, we could experience significant delays or an inability to successfullycommercialize brincidofovir, which would materially harm our business.We have never obtained regulatory approval for a drug and we may be unable to obtain, or may be delayed in obtaining, regulatory approval forbrincidofovir.We have never obtained regulatory approval for a drug. It is possible that the FDA and/or foreign health authorities, such as the EMA, may refuse to acceptour NDA (or corresponding foreign application) for substantive review or may conclude after review of our data that our application is insufficient to obtainregulatory approval of brincidofovir.An unfavorable numerical difference in mortality was observed in SUPPRESS and no survival benefit was observed when results from our AdVise study werecompared to data from Study 305, our historical matched control study.The AdAPT study is currently enrolling pediatric and young adult allogeneic HCT recipients with AdV infection to compare the average AdV viral burdenover16 weeks in subjects randomized to oral brincidofovir to those who are treated with the local standard-of-care.We have not yet reached agreement with the FDA or foreign regulators regarding the adequacy of these planned studies with respect to a potential approvalfor marketing. We may be required to conduct additional clinical, nonclinical or manufacturing validation studies and submit those data beforereconsideration of our application occurs. Depending on the extent of these or any other required studies, approval of any NDA or application that we submitmay be delayed by several years, or may require us to expend more resources than we have available. It is also possible that additional studies, if performedand completed, may not be considered sufficient by the FDA and/or foreign health authorities to approve our NDA or foreign application.Through our continuing development contract with BARDA, we recently completed the in-life segment of our second rabbitpox efficacy study and initiatedthe pivotal efficacy study in the mouse model (ectromelia virus). We believe that efficacy data from this model could serve as the second animal model tosupport the approval of brincidofovir for the treatment of smallpox.Any delay in obtaining, or an inability to obtain, regulatory approvals would prevent us from commercializing brincidofovir, generating revenues andachieving and sustaining profitability. If any of these outcomes occur, we may be forced to abandon our24development efforts for brincidofovir, which would have a material adverse effect on our business and could potentially cause us to cease operations.We depend on the successful completion of animal efficacy studies for brincidofovir for the treatment of smallpox. The positive efficacy results obtainedfor brincidofovir for the treatment of rabbitpox in the rabbit animal model may not be repeated in future animal efficacy studies.Before obtaining regulatory approval for brincidofovir for the treatment of smallpox, we must conduct efficacy studies of brincidofovir in animal models oflethal orthopoxvirus infections. These studies are expensive and difficult to design and conduct, can take years to complete, and are uncertain as to outcome.We rely on a limited number of research organizations which conduct orthopoxvirus infection studies. A failure of one or more of our trials can occur at anystage of testing. The outcome of prior efficacy studies of brincidofovir may not be predictive of the success of later animal efficacy studies. Results of thesestudies are susceptible to varying interpretation.Through our continuing development contract with BARDA, we recently completed the in-life segment of our second rabbitpox efficacy study and initiatedthe pivotal efficacy study in the mouse model (ectromelia virus). We believe that efficacy data from this model could serve as the second animal model tosupport the approval of brincidofovir for the treatment of smallpox. It is our intention to continue development of brincidofovir for the treatment of smallpoxthrough assessment of efficacy in animal models of orthopoxvirus infections.We depend on the successful completion of clinical trials for our product candidates, including brincidofovir. The positive clinical results obtained for ourproduct candidates in prior clinical studies may not be repeated in future clinical studies.Before obtaining regulatory approval for the sale of our product candidates, including brincidofovir, we must conduct extensive clinical trials to demonstratethe safety and efficacy of our product candidates in humans. Clinical testing is expensive, difficult to design and implement, can take many years to completeand is uncertain as to outcome. A failure of one or more of our clinical trials can occur at any stage of testing. The outcome of preclinical testing and earlyclinical trials may not be predictive of the success of later clinical trials, and interim results of a clinical trial do not necessarily predict final results.Moreover, preclinical and clinical data are often susceptible to varying interpretations and analyses, and many companies that have believed their productcandidates performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain marketing approval for their products.We may experience a number of unforeseen events during, or as a result of, clinical trials or animal efficacy studies for our product candidates, includingbrincidofovir, that could adversely affect the completion of our clinical trials, including:•regulators or institutional review boards may not authorize us or our investigators to commence a clinical trial or conduct a clinical trial at aprospective trial site;•clinical trials of our product candidates may produce negative or inconclusive results, and we may decide, or regulators may require us, toconduct additional clinical trials or abandon product development programs;•animal efficacy studies of our product candidates may produce negative or inconclusive results, and we may decide, or regulators may require usto conduct additional animal efficacy studies or abandon development programs;•we might be required to change one of our clinical research organizations (CROs) during ongoing clinical programs;•the number of subjects required for clinical trials of our product candidates may be larger than we anticipate, enrollment in these clinical trialsmay be insufficient or slower than we anticipate or subjects may drop out of these clinical trials at a higher rate than we anticipate;•our third-party contractors may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, or atall;•we may have to suspend or terminate clinical trials of our product candidates for various reasons, including a finding that the subjects are beingexposed to unacceptable health risks;•regulators or institutional review boards may require that we or our investigators suspend or terminate clinical research for various reasons,including noncompliance with regulatory requirements;•the cost of clinical trials of our product candidates may be greater than we anticipate;•we may encounter agency or judicial enforcement actions which impact our clinical trials;•the supply or quality of our product candidates or other materials necessary to conduct clinical trials of our product candidates may beinsufficient or inadequate; or•our product candidates may have undesirable side effects or other unexpected characteristics, causing us or our investigators to suspend orterminate the trials.An unfavorable numerical difference in mortality was observed in SUPPRESS and no survival benefit was observed when results from our AdVise study werecompared to data from Study 305, our historical matched control study.25The AdAPT study is currently enrolling pediatric and young adult allogeneic HCT recipients with AdV infection to compare the average AdV viral burdenover 16 weeks in subjects randomized to oral brincidofovir to those who are treated with the local standard-of-care.We do not know whether any clinical trials we may conduct will demonstrate adequate efficacy and safety to result in regulatory approval to market ourproduct candidates, including brincidofovir. If later stage clinical trials do not produce favorable results, our ability to obtain regulatory approval for ourproduct candidates, including brincidofovir, may be adversely impacted.We are developing brincidofovir to treat patients who are extremely ill, and patient deaths that occur in our clinical trials could negatively impact ourbusiness even if they are not shown to be related to brincidofovir.It is our intention to further develop our lead product candidate, brincidofovir, for the treatment of AdV infection through clinical trials, and for theprevention or treatment of other DNA viral infections. Many of these patients receive an HCT as a potential cure or remission for many cancers and geneticdisorders. For example, patients that were enrolled in AdVise were often extremely sick and had a high likelihood of experiencing adverse outcomes as aresult of their infection or due to other significant risks including relapse of their underlying malignancy. To prepare for an HCT, patients receive a pre-transplant conditioning regimen, which involves high-dose chemotherapy and may also include radiation therapy. The conditioning regimen suppresses thepatient's immune system in order to prevent it from attacking the new bone marrow.We are currently assessing the possibility of conducting additional clinical trials for oral or IV brincidofovir for other indications, including in the solidorgan transplant setting. In this or other transplant settings, immunosuppressive therapies are administered to decrease the risk of organ rejection and aregenerally tapered after the first few months; the risk of severe viral infection is highest in the first few months. Generally, patients remain at high risk duringthe first 100 to 200 days following their transplant and are at increased risk of infections during that period, which can be serious, which may cause loss of thenew organ, and which may be life-threatening due to their weakened immune systems.As a result, it is likely that we will observe severe adverse outcomes during our clinical trials for brincidofovir, including patient death. If a significantnumber of study subject deaths were to occur, regardless of whether such deaths are attributable to brincidofovir, our ability to obtain regulatory approvaland/or achieve commercial acceptance for brincidofovir may be adversely impacted and our business could be materially harmed.Delays in clinical trials are common and have many causes, and any delay could result in increased costs to us and jeopardize or delay our ability toobtain regulatory approval and commence product sales.Clinical testing is expensive, difficult to design and implement, can take many years to complete, and is uncertain as to outcome. We may experience delaysin clinical trials at any stage of development and testing of our product candidates. Our planned clinical trials may not begin on time, have an effectivedesign, enroll a sufficient number of subjects, or be completed on schedule, if at all.Events which may result in a delay or unsuccessful completion of clinical trials, including our currently planned or future clinical trials for brincidofovir,include:•inability to raise funding necessary to initiate or continue a trial;•delays in obtaining, or failure to obtain, regulatory approval of Investigational New Drug applications or to commence a trial;•delays in reaching agreement with the FDA and foreign health authorities on final trial design;•imposition of a clinical hold following an inspection of our clinical trial operations or trial sites by the FDA or other regulatory authorities;•delays caused by disagreements with existing CROs and/or clinical trial sites;•delays in reaching agreement on acceptable terms with prospective CROs and clinical trial sites;•delays in obtaining, or failure to obtain, required IRB or ethics committee (EC) approvals covering each site;•delays in recruiting suitable patients to participate in a trial;•delays in having subjects complete participation in a trial or return for post-treatment follow-up;•delays caused by subjects dropping out of a trial due to side effects or otherwise;•clinical sites declining to participate or dropping out of a trial to the detriment of enrollment;•agency or judicial enforcement actions against us;•time required to add new clinical sites; and•delays by our contract manufacturers to produce and deliver sufficient supply of clinical trial materials.26Due to the specialized indication and patient populations studied in our past and future clinical trials of brincidofovir, the number of study sites available tous is relatively limited, and therefore enrollment of suitable patients to participate in the trial may take longer than is typical for studies involving otherindications. This may result in a delay or unsuccessful completion of our clinical trials. For example, enrollment of our AdAPT study and our Phase 2 openlabel dose-ranging studies of IV BCV in patients with active AdV have faced regulatory and site initiation delays, and we have observed lower thananticipated incidence at the centers that have been initiated, all of which has caused delays in the enrollment of these studies.If initiation or completion of any of our clinical trials for our product candidates, including brincidofovir, are delayed for any of the above reasons, ourdevelopment costs may increase, our approval process could be delayed, any periods during which we may have the exclusive right to commercialize ourproduct candidates may be reduced and our competitors may have more time to bring products to market before we do. Any of these events could impair ourability to generate revenues from product sales and impair our ability to generate regulatory and commercialization milestones and royalties, all of whichcould have a material adverse effect on our business.Our product candidates may cause adverse effects or have other properties that could delay or prevent their regulatory approval or limit the scope of anyapproved label or market acceptance.Adverse events (AEs) caused by our product candidates could cause us, other reviewing entities, clinical study sites or regulatory authorities to interrupt,delay or halt clinical studies and could result in the denial of regulatory approval. For example, subjects enrolled in our clinical trials for brincidofovir haveexperienced gastrointestinal AEs and liver-related safety laboratory value changes. In addition, brincidofovir is related to the approved drug cidofovir, acompound which has been shown to result in significant renal toxicity and impairment following use. There is also a risk that our other product candidatesmay induce AEs, many of which may be unknown at this time. If an unacceptable frequency and/or severity of AEs are reported in our clinical trials for ourproduct candidates, our ability to obtain regulatory approval for product candidates, including brincidofovir, may be negatively impacted. We anticipate thatwe will need to conduct one or more additional clinical trials in order to attain FDA and/or foreign regulatory approval of brincidofovir.If any of our approved products cause serious or unexpected side effects prior to or after receiving market approval, a number of potentially significantnegative consequences could result, including:•regulatory authorities may approve the product only with a REMS, potentially with restrictions on distribution and other elements to assure safeuse (ETASU);•regulatory authorities may withdraw their approval of the product or impose restrictions on its distribution in a form of a modified REMS;•regulatory authorities may require the addition of labeling statements, such as warnings or contraindications;•we may be required to change the way the product is administered or to conduct additional clinical studies;•we could be sued and held liable for harm caused to patients; and•our reputation may suffer.Any of these events could prevent us from achieving or maintaining market acceptance of the affected product candidate and could substantially increase thecosts of commercializing our product candidates.After the completion of our clinical trials, we cannot predict whether or when we will obtain regulatory approval to commercialize brincidofovir and wecannot, therefore, predict the timing of any future revenue from brincidofovir.We cannot commercialize our product candidates, including brincidofovir, until the appropriate regulatory authorities have reviewed and approved theproduct candidate. The regulatory agencies may not complete their review processes in a timely manner, or we may not be able to obtain regulatory approvalfor brincidofovir. Additional delays in the United States may result if brincidofovir is brought before an FDA advisory committee, which could recommendrestrictions on approval or recommend non-approval of the product candidate. In the EU context, an Oral Explanation during MAA review could extendapproval timelines and result in a Negative Opinion. A re-examination procedure is available in the EU whereby a Negative Opinion could be over-turnedand become a Positive Opinion. New rapporteurs would be selected for the product. In addition, we may experience delays or rejections based uponadditional government regulation from future legislation or administrative action, or changes in regulatory agency policy during the period of productdevelopment, clinical studies and the review process. As a result, we cannot predict when, if at all, we will receive any future revenue from commercializationof any of our product candidates, including brincidofovir.Even if we obtain regulatory approval for brincidofovir and our other product candidates, we will still face extensive regulatory requirements and ourproducts may face future development and regulatory difficulties.Even if we obtain regulatory approval, the granting authority may still impose significant restrictions on the indicated uses,27distribution or marketing of our product candidates, including brincidofovir, or impose ongoing requirements for potentially costly post-approval studies orpost-market surveillance. For example, the labeling ultimately approved for our product candidates, including brincidofovir, will likely include restrictionson use due to the specific patient population and manner of use in which the drug was evaluated and the safety and efficacy data obtained in thoseevaluations. In addition, the distribution of brincidofovir may be tightly controlled through a REMS with ETASU, which are required medical interventionsor other actions healthcare professionals need to execute prior to prescribing or dispensing the drug to the patient. Some actions may also be required in orderfor the patient to continue on treatment. In addition, the label for brincidofovir may be required to include a boxed warning, or “black box,” regardingbrincidofovir being carcinogenic, teratogenic and impairing fertility in animal studies, as well as a contraindication in patients who have had a demonstratedclinically significant hypersensitivity reaction to brincidofovir or cidofovir or any component of the formulation. The brincidofovir labeling may alsoinclude warnings or black boxes pertaining to gastrointestinal AEs or liver-related safety laboratory value changes.Brincidofovir and our other product candidates will also be subject to additional ongoing regulatory requirements governing the labeling, packaging,storage, distribution, safety surveillance, advertising, promotion, record-keeping and reporting of safety and other post-market information. In the UnitedStates, the holder of an approved NDA is obligated to monitor and report AEs and any failure of a product to meet the specifications in the NDA. The holderof an approved NDA must also submit new or supplemental applications and obtain FDA approval for certain changes to the approved product, productlabeling or manufacturing process. If a REMS is required, the NDA holder may be required to monitor and evaluate those in the healthcare system who areresponsible for implementing ETASU measures. Advertising and promotional materials must comply with FDA rules and are subject to FDA review, inaddition to other potentially applicable federal and state laws. Moreover, EU and member countries impose strict restrictions on the promotion and marketingof drug products. The off-label promotion of medicinal products is prohibited in the U.S., EU and in other territories. The promotion of medicinal productsthat are not subject to a marketing authorization is also prohibited in the EU. Violations of the rules governing the promotion of medicinal products in theEU and in other territories could be penalized by administrative measures, fines and imprisonment.In addition, manufacturers of drug products and their facilities are subject to payment of user fees and continual review and periodic inspections byregulatory authorities for compliance with cGMP, and adherence to commitments made in the application. If we, or a regulatory agency, discover previouslyunknown problems with a product, such as quality issues or AEs of unanticipated severity or frequency, or problems with the facility where the product ismanufactured, a regulatory agency may impose restrictions relative to that product or the manufacturing facility, including requiring recall or withdrawal ofthe product from the market or suspension of manufacturing.If we fail to comply with applicable regulatory requirements following approval of our product candidate, a regulatory agency may:•issue an untitled or warning letter asserting that we are in violation of the law;•seek an injunction or impose civil or criminal penalties or monetary fines;•suspend or withdraw regulatory approval;•suspend any ongoing clinical trials;•refuse to approve a pending application or supplements to an application submitted by us;•recall and/or seize product; or•refuse to allow us to enter into supply contracts, including government contracts.Any government investigation of alleged violations of law could require us to expend significant time and resources in response and could generate negativepublicity. The occurrence of any event or penalty described above may inhibit our ability to commercialize brincidofovir and our other product candidatesand inhibit our ability to generate revenues.Obtaining FDA approval for brincidofovir or any of our other products in the United States does not mean we will ever obtain approval for orcommercialize brincidofovir or any of our other products outside of the United States, nor does approval of brincidofovir or any of our other productsoutside the United States mean we will ever obtain approval for or commercialize brincidofovir or any of our other products inside the United States, all ofwhich could limit our ability to realize their full market potential.In order to market any products outside of the United States, we must establish and comply with numerous and varying regulatory requirements on a country-by-country basis regarding safety and efficacy. Approval by the FDA does not ensure approval by regulatory authorities in other countries or jurisdictions. Inaddition, clinical trials conducted in one country may not be accepted by regulatory authorities in other countries, and regulatory approval in one countrydoes not guarantee regulatory approval in any other country. Approval processes vary among countries and can involve additional product testing andvalidation and additional administrative review periods. Seeking foreign regulatory approval could result in difficulties and costs for us and requireadditional preclinical studies or clinical trials which could be costly and time consuming. Regulatory requirements can vary widely from28country to country and could delay or prevent the introduction of our products in those countries. We do not have any product candidates approved for salein any jurisdiction, including international markets, and we do not have experience in obtaining regulatory approval in any markets. If we fail to comply withregulatory requirements in international markets or to obtain and maintain required approvals, or if regulatory approvals in international markets are delayed,our target market will be reduced and our ability to realize the full market potential of our products will be unrealized.Conversely, approval by regulatory authorities outside the United States, such as the European Commission, does not ensure approval by the FDA. Moreover,clinical trials conducted outside the United States may not be accepted by the FDA.There is no guarantee that brincidofovir or any other of our product candidates will be eligible for or receive certain regulatory incentives, such as orphandrug designation, and even if they do, we may never actually realize some or all of the associated benefits, such as market exclusivity.There are a variety of incentives made available by regulatory authorities in the United States, the EU, and other countries, such as orphan drug designation,which may benefit companies developing medicines in areas of unmet need. There is no guarantee, however, that brincidofovir or any of our other productcandidates will be eligible for or receive such incentives. For example, even though the Company has received orphan designation for brincidofovir in theEU for the treatment of AdV in immunocompromised patients, prevention of CMV disease, and treatment of smallpox, the European Commission mustdetermine that brincidofovir still meets the mandatory criteria for each of these orphan designations at the time of marketing approval, which may nothappen.Our relationships with investigators, health care professionals, consultants, third-party payers, and customers may be subject to applicable anti-kickback,fraud and abuse and other healthcare laws and regulations, which could expose us to criminal sanctions, civil penalties, contractual damages,reputational harm and diminished profits and future earnings.Healthcare providers, physicians and others play a primary role in the recommendation and prescribing of any products for which we obtain marketingapproval. Our current business operations and future arrangements with investigators, healthcare professionals, consultants, third-party payers and customersmay expose us to broadly applicable fraud and abuse and other healthcare laws and regulations. These laws may constrain the business or financialarrangements and relationships through which we research, market, sell and distribute our products for which we obtain marketing approval. Restrictionsunder applicable federal and state healthcare laws and regulations, include, but are not limited to, the following:•the federal healthcare anti-kickback statute which prohibits, among other things, persons or entities from knowingly and willfully soliciting,offering, receiving or paying remuneration (including any kickback, bribe or rebate), directly or indirectly, overtly or covertly, in cash or inkind, to induce or reward either the referral of an individual for, or the purchase, lease, order or recommendation of, any good, facility, item orservice, for which payment may be made, in whole or in part, under federal healthcare programs such as Medicare and Medicaid;•the federal civil and criminal false claims laws and the Federal Civil Monetary Penalties Act, including the Federal Civil False Claims Act (FalseClaims Act) which permit private individuals to bring a civil action on behalf of the federal government to enforce certain of these laws thoughtcivil whistleblower or qui tam actions, which prohibit, among other things, individuals or entities from knowingly presenting, or causing to bepresented, to the federal government, claims for payment or approval that are false or fraudulent or from knowingly making a false statement toimproperly avoid, decrease or conceal an obligation to pay money to the federal government;•the federal Health Insurance Portability and Accountability Act of 1996 (HIPAA) which, among other things, imposes criminal liability forknowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program or to obtain, by means of falseor fraudulent pretenses, representations, or promises, any of the money or property owned by, or under the custody or control of, any healthcarebenefit program, regardless of the payer (e.g., public or private) and knowingly or willfully falsifying, concealing or covering up by any trick ordevice a material fact or making any materially false statement in connection with the delivery of, or payment for, healthcare benefits, items orservices relating to healthcare matters;•HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act (HITECH) and their implementingregulations, and as amended again by the final HIPAA omnibus rule, Modifications to the HIPAA Privacy, Security, Enforcement, and BreachNotification Rules Under HITECH and the Genetic Information Nondiscrimination Act; Other Modifications to HIPAA, published in January2013, which imposes certain obligations, including mandatory contractual terms, with respect to safeguarding the privacy, security andtransmission of individually identifiable health information without appropriate authorization by entities subject to the rule, such as healthplans, healthcare clearinghouses and certain healthcare providers, as well as their business associates;•the General Data Protection Regulation (GDPR), which impose obligations on companies in relation to the handling of personal data ofindividuals within the EU, along with related national legislation;29•mandated physician payments reporting laws and/or requirements throughout global jurisdictions, including EU member states, in which weconduct research and development and/or other business activities;•the FDCA which prohibits, among other things, the adulteration or misbranding of drugs and devices;•the federal transparency law, enacted as part of the Patient Protection and Affordable Care Act, as amended by the Health Care and EducationReconciliation Act of 2010 (collectively, the ACA), and its implementing regulations, which requires manufacturers of drugs, devices,biologicals and medical supplies to report to the Centers for Medicare & Medicaid Services (CMS) information related to payments and othertransfers of value made to physicians and teaching hospitals, as well as ownership and investment interests held by physicians and theirimmediate family members; and•analogous state laws and regulations, including: state anti-kickback and false claims laws, which may apply to our business practices, includingbut not limited to, research, distribution, sales and marketing arrangements and claims involving healthcare items or services reimbursed bystate governmental and non-governmental third-party payers, including private insurers; state laws that require pharmaceutical companies tocomply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federalgovernment; state and local laws that require the registration of pharmaceutical sales representatives; state laws and regulations that requiremanufacturers to file reports relating to pricing and marketing information, which requires tracking gifts and other remuneration and items ofvalue provided to healthcare professionals and entities; and state laws governing the privacy and security of health information, many of whichdiffer from each other in significant ways and often are not preempted by HIPAA.Efforts to ensure that our business arrangements with third parties comply with applicable healthcare laws and regulations involve substantial costs. It ispossible that governmental authorities will conclude that our business practices do not comply with current or future statutes, regulations, agency guidanceor case law involving applicable fraud and abuse or other healthcare laws and regulations. If our operations are found to be in violation of any of these or anyother health regulatory laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrativepenalties, damages, fines, disgorgement, additional reporting obligations and oversight if we become subject to a corporate integrity agreement or otheragreement to resolve allegations of non-compliance with these laws, exclusion from government funded healthcare programs, such as Medicare andMedicaid, and the curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business and our financialresults. Any action against us for violation of these laws, even if we successfully defend against it, could cause us to incur significant legal expenses and/ordivert our management’s attention from the operation of our business. If any of the physicians or other providers or entities with whom we expect to dobusiness are found to be not in compliance with applicable laws, they also may be subject to criminal, civil or administrative sanctions, including, but notlimited to, exclusions from government funded healthcare programs, which could also materially affect our business.Recently enacted and future legislation may increase the difficulty and cost for us to obtain marketing approval of and commercialize our productcandidates and affect the prices we may obtain.In the United States and some foreign jurisdictions, there have been a number of legislative and regulatory changes and proposed changes regarding thehealthcare system that could prevent or delay marketing approval of our product candidates, restrict or regulate post-approval activities and affect our abilityto profitably sell any products for which we obtain marketing approval.In the United States, the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (Medicare Modernization Act) changed the wayMedicare covers and pays for pharmaceutical products. The legislation expanded Medicare coverage for drug purchases by the elderly and introduced a newreimbursement methodology based on average sales prices for physician-administered drugs. In addition, this legislation provided authority for limiting thenumber of drugs that will be covered in any therapeutic class. Cost reduction initiatives and other provisions of this legislation could decrease the coverageand price that we receive for any approved products. While the Medicare Modernization Act applies only to drug benefits for Medicare beneficiaries, privatepayers often follow Medicare coverage policy and payment limitations in setting their own reimbursement rates. Therefore, any reduction in reimbursementthat results from the Medicare Modernization Act may result in a similar reduction in payments from private payers.More recently, in March 2010, the ACA was enacted to broaden access to health insurance, reduce or constrain the growth of healthcare spending, enhanceremedies against fraud and abuse, add new transparency requirements for health care and health insurance industries, impose new taxes and fees on the healthindustry and impose additional health policy reforms. The ACA revises the definition of “average manufacturer price” for reporting purposes, which couldincrease the amount of Medicaid drug rebates to states. Further, the new law imposes a significant annual fee on companies that manufacture or importbranded prescription drug products. New provisions affecting compliance have also been enacted, which may affect our business practices with health carepractitioners. However, there have been judicial and Congressional challenges to certain aspects of the ACA, as well as recent efforts by the Trumpadministration to repeal and replace certain aspects of the ACA, and we expect such challenges to continue. Since January 2017, President Trump has signedtwo Executive Orders and other directives designed to delay the implementation30of certain provisions of the ACA or otherwise circumvent some of the requirements for health insurance mandated by the ACA. Concurrently, Congress hasconsidered legislation that would repeal or repeal and replace all or part of the ACA. While Congress has not passed comprehensive repeal legislation, twobills affecting the implementation of certain taxes under the ACA have been enacted. The Tax Cuts and Jobs Act of 2017 (Tax Act) includes a provisionrepealing, effective January 1, 2019, the tax-based shared responsibility payment imposed by the ACA on certain individuals who fail to maintain qualifyinghealth coverage for all or part of a year that is commonly referred to as the “individual mandate.” On January 22, 2018, President Trump signed a continuingresolution on appropriations for fiscal year 2018 that delayed the implementation of certain fees mandated by the ACA, including the so-called “Cadillac”tax on certain high cost employer-sponsored insurance plans, the annual fee imposed on certain health insurance providers based on market share, and themedical device excise tax on non-exempt medical devices. The Bipartisan Budget Act of 2018, or the BBA, among other things, amended the ACA, effectiveJanuary 1, 2019, to close the coverage gap in most Medicare drug plans, and also increases in 2019 the percentage that a drug manufacturer must discount thecost of prescription drugs from 50 percent to 70 percent. In July 2018, CMS published a final rule permitting further collection and payments to and fromcertain ACA qualified health plans and health insurance issuers under the ACA risk adjustment program in response to the outcome of federal district courtlitigation regarding the method CMS uses to determine this risk adjustment. On December 14, 2018, a Texas U.S. District Court Judge ruled that ACA isunconstitutional in its entirety because the “individual mandate” was repealed by Congress as part of the Tax Act. While the Texas U.S. District Court Judge,as well as the Trump administration and CMS, have stated that the ruling will have no immediate effect pending appeal of the decision, it is unclear how thisdecision, subsequent appeals, and other efforts to repeal and replace ACA will impact ACA and our business. Congress also could consider additionallegislation to repeal or repeal and replace other elements of the ACA.Although it is too early to determine the full effect of the ACA, the law appears likely to continue the pressure on pharmaceutical pricing, especially underthe Medicare program, and may also increase our regulatory burdens and operating costs.Legislative and regulatory proposals have also been made to expand post-approval requirements and restrict sales and promotional activities forpharmaceutical products.Additionally, there has been increasing legislative and enforcement interest in the United States with respect to specialty drug pricing practices. Specifically,there have been several recent U.S. Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bringmore transparency to drug pricing, reduce the cost of prescription drugs under Medicare, review the relationship between pricing and manufacturer patientprograms, and reform government program reimbursement methodologies for drugs. At the federal level, the Trump administration’s budget proposal forfiscal year 2019 contains additional drug price control measures that could be enacted during the 2019 budget process or in other future legislation,including, for example, measures to permit Medicare Part D plans to negotiate the price of certain drugs under Medicare Part B, to allow some states tonegotiate drug prices under Medicaid and to eliminate cost sharing for generic drugs for low-income patients. Further, the Trump administration released a"Blueprint" to lower drug prices and reduce out-of-pocket costs of drugs. This "Blueprint" contains additional proposals to increase manufacturercompetition, increase the negotiating power of certain federal healthcare programs, incentivize manufacturers to lower the list price of their products andreduce the out-of-pocket costs of drug products paid by consumers. The U.S. Department of Health and Human Services (DHHS) has already started theprocess of soliciting feedback on some of these measures and, at the same time, is immediately implementing other measures under its existing authority. Forexample, in September 2018, CMS announced that it will allow Medicare Advantage Plans the option to use step therapy for Part B drugs beginning January1, 2019, and in October 2018, CMS proposed a new rule that would require direct-to-consumer television advertisements of prescription drugs and biologicalproducts, for which payment is available through or under Medicare or Medicaid, to include in the advertisement the Wholesale Acquisition Cost, or listprice, of that drug or biological product. On January 31, 2019, the DHHS Office of Inspector General proposed modifications to federal Anti-Kickback Statutesafe harbors which, among other things, may affect rebates paid by manufacturers to Medicare Part D plans, the purpose of which is to further reduce the costof drug products to consumers. Although a number of these, and other potential, proposals will require authorization through additional legislation tobecome effective, Congress and the Trump administration have each indicated that it will continue to seek new legislative and/or administrative measures tocontrol drug costs. At the state level, legislatures have increasingly passed legislation and implemented regulations designed to control pharmaceutical andbiological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing costdisclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.Further, on May 30, 2018, the Trickett Wendler, Frank Mongiello, Jordan McLinn, and Matthew Bellina Right to Try Act of 2017 (Right to Try Act) wassigned into law. The law, among other things, provides a federal framework for certain patients to access certain investigational new drug products that havecompleted a Phase I clinical trial and that are undergoing investigation for FDA approval. Under certain circumstances, eligible patients can seek treatmentwithout enrolling in clinical trials and without obtaining FDA permission under the FDA expanded access program. There is no obligation for a drugmanufacturer to make its drug products available to eligible patients as a result of the Right to Try Act.31Healthcare reform measures that may be adopted in the future may result in more rigorous coverage criteria, lower reimbursement, and additional downwardpressure on the price that we receive for any future approved product. We cannot predict what healthcare reform initiatives may be adopted in the future.Risks Related to Our Reliance on Third PartiesWe rely on third-party manufacturers to produce our preclinical and clinical drug supplies, and we intend to rely on third parties to produce commercialsupplies of any approved product candidates.We do not own or operate, and we do not expect to own or operate, facilities for product manufacturing, storage and distribution, or testing. In the past, wehave relied on third-party manufacturers for supply of our preclinical and clinical drug supplies. We expect that in the future we will continue to rely on suchmanufacturers for drug supply that will be used in clinical trials of our product candidates, including brincidofovir, and for commercialization of any of ourproduct candidates that receive regulatory approval.Our reliance on third-party manufacturers entails risks, including:•inability to meet our product specifications and quality requirements consistently;•delay or inability to procure or expand sufficient manufacturing capacity;•manufacturing and product quality issues related to scale-up of manufacturing;•costs and validation of new equipment and facilities required for scale-up;•failure to comply with cGMP and similar foreign standards;•inability to negotiate manufacturing agreements with third parties under commercially reasonable terms;•termination or nonrenewal of manufacturing agreements with third parties in a manner or at a time that is costly or damaging to us;•reliance on a limited number of sources, and in some cases, single sources for product components, such that if we are unable to secure asufficient supply of these product components, we will be unable to manufacture and sell our product candidates in a timely fashion, insufficient quantities or under acceptable terms;•lack of qualified backup suppliers for those components that are currently purchased from a sole or single source supplier;•operations of our third-party manufacturers or suppliers could be disrupted by conditions unrelated to our business or operations, including thebankruptcy of the manufacturer or supplier;•carrier disruptions or increased costs that are beyond our control; and•failure to deliver our products under specified storage conditions and in a timely manner.Any of these events could lead to clinical study delays, failure to obtain regulatory approval or impact our ability to successfully commercialize ourproducts. Some of these events could be the basis for FDA or equivalent foreign regulator action, including injunction, recall, seizure, or total or partialsuspension of production.We rely on limited sources of supply for the drug component for our lead product candidate, brincidofovir, and any disruption in the chain of supply maycause delay in developing and commercializing brincidofovir.Manufacturing of drug components is subject to certain FDA and comparable foreign qualifications with respect to manufacturing standards. We are currentlyvalidating the drug substance manufacturing process at our selected contractor that will produce the commercial supply of drug substance and have selectedcommercial tablet and suspension manufacturers to optimize tablet and suspension formulation production to meet forecasted commercial demand. There canbe no assurance that such transfer to the selected vendors will be successful. It is our expectation that only one supplier of drug substance and one supplier ofdrug product will be qualified as vendors with the FDA. If supply from an approved vendor is interrupted, there could be a significant disruption incommercial supply of brincidofovir. An alternative vendor would need to be qualified through an NDA supplement which could result in further delay. TheFDA or other regulatory agencies outside of the United States may also require additional studies if a new drug substance or drug product supplier is reliedupon for commercial production.These factors could cause the delay of clinical trials, regulatory submissions, required approvals or commercialization of brincidofovir, and cause us to incuradditional costs. Furthermore, if our suppliers fail to deliver the required commercial quantities of active pharmaceutical ingredient on a timely basis and atcommercially reasonable prices, and we are unable to secure one or more replacement suppliers capable of production at a substantially equivalent cost, ourclinical trials for brincidofovir may be delayed, which could inhibit our ability to generate revenues.32Manufacturing issues may arise that could increase product and regulatory approval costs or delay commercialization of brincidofovir.We have a validated process for drug substance production for brincidofovir at a scale that is well in excess of our anticipated commercial scale. We arecurrently revalidating our drug substance process, and will begin revalidating our drug product processes, using our current commercial processes at ourintended commercial scale with our intended commercial manufacturers.The validation processes, along with ongoing stability studies and analyses we are conducting, may reveal difficulties in our processes which could requireresolution in order to proceed with our planned clinical trials and obtain regulatory approval for the commercial marketing of brincidofovir. In the future, wemay identify significant impurities, which could result in increased scrutiny by the regulatory agencies, delays in clinical program and regulatory approvalfor brincidofovir, increases in our operating expenses, or failure to obtain or maintain approval for brincidofovir.We depend on the continuation of our current collaboration with ContraVir Pharmaceuticals, who is currently responsible for developing andcommercializing CMX157.In 2014, we entered into a licensing arrangement with ContraVir, whereby ContraVir is responsible for the future development and commercialization ofCMX157. Under this arrangement, ContraVir is responsible for conducting preclinical studies and clinical trials, obtaining required regulatory approvals forCMX157, and manufacturing and commercializing CMX157. Our right to receive milestone and royalty payments under the licensing agreement depends onthe achievement of certain development, regulatory and commercial milestones by ContraVir.The development and commercialization of CMX157 and our ability to receive potential milestones and royalty payments under the license agreement withContraVir, would be adversely affected if ContraVir:•lacks or does not devote sufficient time and resources to the development and commercialization of CMX157;•lacks or does not devote sufficient capital to fund the development and commercialization of CMX157;•develops, either alone or with others, products that compete with CMX157;•fails to gain the requisite regulatory approvals for CMX157;•does not successfully commercialize CMX157;•does not conduct its activities in a timely manner;•terminates its license with us;•does not effectively pursue and enforce intellectual property rights relating to CMX157; or•merges with a third-party that wants to terminate the collaboration.We have limited or no control over the occurrence of any of the foregoing. Furthermore, disagreements with ContraVir could lead to litigation or arbitration,which could be time-consuming and expensive. If any of these issues arise, it may delay the development and commercialization milestones and royaltiesbased on further development and sales of CMX157.We rely on third parties to conduct, supervise and monitor our clinical studies and related data, and if those third parties perform in an unsatisfactorymanner, it may harm our business.We rely on CROs and clinical trial sites to ensure the proper and timely conduct of our clinical trials. While we have agreements governing their activities,we have limited influence over their actual performance. We have relied and plan to continue to rely upon CROs to monitor and manage data for our ongoingclinical programs for brincidofovir and our other product candidates, as well as the execution of nonclinical studies. We control only certain aspects of ourCROs’ activities. Nevertheless, we are responsible for ensuring that each of our studies is conducted in accordance with the applicable protocol, legal,regulatory and scientific standards and our reliance on CROs does not relieve us of our regulatory responsibilities.We and our CROs are required to comply with the FDA’s guidance for clinical trials conducted within the jurisdiction of the United States (or the foreignregulatory authority equivalent for clinical trials conducted outside the jurisdiction of the United States), which follows the International Council forHarmonization Good Clinical Practice (ICH GCP), which are regulations and guidelines enforced by the FDA for all of our product candidates in clinicaldevelopment. The FDA enforces the ICH GCP through periodic inspections of trial sponsors, principal investigators and clinical trial sites. If we or our CROsfail to comply with the ICH GCP, the clinical data generated in our clinical trials may be deemed unreliable and the FDA may require us to perform additionalclinical trials before approving our marketing applications. In addition, our Phase 3 clinical trials for brincidofovir will require a sufficiently large number oftest subjects to evaluate the safety and effectiveness of brincidofovir. Accordingly, if our CROs fail to comply with these regulations or fail to recruit asufficient number of subjects, we may be required to repeat these Phase 3 clinical trials, which would delay the regulatory approval process.33Our CROs are not our employees, and we cannot control whether or not they devote sufficient time and resources to our ongoing clinical and nonclinicalprograms. These CROs may also have relationships with other commercial entities, including our competitors, for whom they may also be conducting clinicalstudies, or other drug development activities which could harm our competitive position. We face the risk of potential unauthorized disclosure ormisappropriation of our intellectual property by CROs, which may reduce our trade secret protection and allow our potential competitors to access andexploit our proprietary technology.If our CROs do not successfully carry out their contractual duties or obligations, fail to meet expected deadlines, or if the quality or accuracy of the clinicaldata they obtain is compromised due to the failure to adhere to our clinical protocols or regulatory requirements or for any other reasons, our clinical trialsmay be extended, delayed or terminated, and we may not be able to obtain regulatory approval for, or successfully commercialize brincidofovir or our otherproduct candidates. Disagreements with our CROs over contractual issues, including performance, compliance or compensation could lead to termination ofCRO agreements and/or delays in our clinical program and risks to the accuracy and usability of clinical data. As a result, our financial results and thecommercial prospects for brincidofovir and any other product candidates that we develop would be harmed, our costs could increase, and our ability togenerate revenues could be delayed.Risks Related to Commercialization of Our Product CandidatesThe commercial success of brincidofovir and our other product candidates will depend upon the acceptance of these products by the medical community,including physicians, patients, pharmacists and health care payers.If any of our product candidates, including brincidofovir, receive marketing approval, they may nonetheless not gain sufficient market acceptance byphysicians, patients, healthcare payers and others in the medical community. If these products do not achieve an adequate level of market acceptance, wemay not generate significant product revenues and we may not become profitable. The degree of market acceptance of any of our product candidates,including brincidofovir, will depend on a number of factors, including:•demonstration of clinical safety and efficacy in our clinical trials;•relative convenience, ease of administration and acceptance by physicians, patients, pharmacists and health care payers;•prevalence and severity of any AEs;•limitations or warnings contained in the FDA-approved labeling from Regulatory Authorities such as the FDA and EMA for the relevant productcandidate;•availability, efficacy and safety of alternative treatments;•price and cost-effectiveness;•effectiveness of our or any future collaborators’ or competitor’s sales and marketing strategies;•ability to obtain hospital formulary approval;•ability to ensure availability for product through appropriate channels;•ability to maintain adequate inventory; and•ability to obtain and maintain sufficient third-party coverage and adequate reimbursement, which may vary from country to country.If we are unable to establish sales and marketing capabilities or enter into agreements with third parties to market and sell our product candidates, wemay be unable to generate any revenue.We currently do not have an organization for the sales and distribution of pharmaceutical products. The cost of establishing and maintaining such anorganization may exceed the cost-effectiveness of doing so. In order to market any products that may be approved, including brincidofovir, we must establishour sales, marketing, managerial and other non-technical capabilities or make arrangements with third parties to perform these services. We may enter intostrategic partnerships with third parties to commercialize our product candidates, including brincidofovir.Our strategy for brincidofovir is to establish a specialty sales force and/or collaborate with third parties to promote the product to healthcare professionals andthird-party payers in the United States and elsewhere. We may elect to launch with a contract sales organization and utilize accompanying commercialsupport services provided by a contract sales organization. Our future collaboration partners, if any, may not dedicate sufficient resources to thecommercialization of our product candidates or may otherwise fail in their commercialization due to factors beyond our control. If we are unable to establisheffective collaborations to enable the distribution and sale of our product candidates to healthcare professionals and in geographical regions, including theUnited States, that are not covered by our own marketing and sales force, or if our potential future collaboration partners do not successfully commercializeour product candidates, our ability to generate revenues from product sales, including sales of brincidofovir, will be adversely affected.34Establishing an internal or contract sales force involves many challenges, including:•recruiting and retaining talented people;•training employees that we recruit;•establishing compliance standards;•setting the appropriate system of incentives;•managing additional headcount;•ensuring that appropriate support functions are in place to support sales force organizational needs; and•integrating a new business unit into an existing corporate architecture.If we are unable to establish our own sales force or negotiate a strategic partnership for the commercialization of brincidofovir in any markets, we may beforced to delay the potential commercialization of brincidofovir in those markets, reduce the scope of our sales or marketing activities for brincidofovir inthose markets or undertake the commercialization activities for brincidofovir in those markets at our own expense. If we elect to increase our expenditures tofund commercialization activities ourselves, we will need to obtain additional capital, which may not be available to us on acceptable terms, or at all. If wedo not have sufficient funds, we will not be able to bring brincidofovir to market or generate product revenue. Limited or lack of funding will impede ourability to achieve successful commercialization.If we are unable to establish adequate sales, marketing and distribution capabilities, whether independently or with third parties, we may not be able togenerate sufficient product revenue and may not become profitable. We will be competing with many companies that currently have extensive and well-funded marketing and sales operations. Without an internal team or the support of a third party to perform marketing and sales functions, we may be unable tocompete successfully against these more established companies.In addition, there are risks involved with both establishing our own sales and marketing capabilities and entering into arrangements with third parties toperform these services. For example, recruiting and training a sales force is expensive and time-consuming and could delay any product launch. If thecommercial launch of a product candidate for which we recruit a sales force and establish marketing capabilities is delayed or does not occur for any reason,we would have prematurely or unnecessarily incurred these commercialization expenses. This may be costly, and our investment would be lost if we cannotretain or reposition our sales, marketing and market access personnel.If we obtain approval to commercialize any products outside of the United States, a variety of risks associated with international operations couldmaterially adversely affect our business.If our product candidates are approved for commercialization, we may enter into agreements with third parties to market those product candidates outside theUnited States, including brincidofovir. We expect that we will be subject to additional risks related to entering into international business relationships,including:•different regulatory requirements for drug approvals in the EU and other foreign countries;•reduced protection for intellectual property rights;•unexpected changes in tariffs, trade barriers and regulatory and labor requirements;•economic weakness, including inflation, or political instability in particular foreign economies and markets;•compliance with tax, employment, immigration and labor laws for employees living or traveling abroad;•foreign taxes, including withholding of payroll taxes;•foreign currency fluctuations, which could result in increased operating expenses and reduced revenues, and other obligations incident to doingbusiness in another country;•differing payer reimbursement regimes, governmental payers or patient self-pay systems and price controls;•workforce uncertainty in countries where labor unrest is more common than in the United States;•production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad;•business interruptions resulting from geopolitical actions, including war and terrorism, or natural disasters including earthquakes, typhoons,floods and fires; and•regulatory and compliance risks that relate to maintaining accurate information and control over activities that may fall within the purview ofthe U.S. Foreign Corrupt Practices Act, its books and records provisions or its anti‑bribery provisions, or similar anti‑bribery or anti‑corruptionlaws and regulations.We have limited experience in these areas. In addition, there are complex regulatory, tax, labor and other legal requirements imposed by both the EU andmany of the individual countries in Europe with which we will need to comply. Many U.S.-based biopharmaceutical companies have found the process ofmarketing their own products outside the United States to be very challenging.35We face significant competition from other biotechnology and pharmaceutical companies and our operating results will suffer if we fail to competeeffectively.The biotechnology and pharmaceutical industries are intensely competitive. We have competitors both in the United States and internationally, includingmajor multinational pharmaceutical companies, biotechnology companies and universities and other research institutions.Based on market research, competing products that are currently used to prevent or treat AdV and/or CMV include and are not limited to:•cidofovir, a drug that is sold by generic manufacturers;•oral and intravenous ganciclovir, a drug that is sold by generic manufacturers;•Valcyte® (valganciclovir), a prodrug of ganciclovir that is marketed by Genentech, Inc. and generic manufacturers;•foscarnet sodium for injection available through generic manufacturers;•acyclovir, a drug that is sold by generic manufacturers; and•Prevymis® (letermovir), an anti-CMV drug marketed by Merck & Co., Inc.Other product candidates currently in development or under regulatory review may compete against brincidofovir for the prevention or mitigation of AdVand/or CMV infection in a variety of settings, including:•maribavir (SHP620) from Shire for CMV infections in transplant recipients; and•patient-specific T-cell therapies directed at antigens of CMV and other DNA viruses, including AdV.Many of our competitors have substantially greater financial, technical, commercial and other resources, such as larger research and development staff,stronger intellectual property portfolios and experienced marketing and manufacturing organizations and established sales forces. Additional mergers andacquisitions in the biotechnology and pharmaceutical industries may result in even more resources being concentrated in our competitors.Competition may increase further as a result of advances in the commercial applicability of technologies and greater availability of capital for investment inthese industries. Our competitors may succeed in developing, acquiring or licensing, on an exclusive basis, drug products that are more effective or lesscostly than brincidofovir or any other drug candidate that we are currently developing or that we may develop.We will face competition from other drugs currently approved or that will be approved in the future for the same indications. Therefore, our ability tocompete successfully will depend largely on our ability to:•discover and develop medicines that are superior to other products in the market;•demonstrate through our clinical trials that our product candidates, including brincidofovir, are differentiated from existing and futuretherapies;•evaluate new potential indications across the lifecycle of brincidofovir;•attract qualified scientific, product development and commercial personnel;•obtain and successfully defend and enforce patent and/or other proprietary protection for our medicines and technologies;•obtain required regulatory approvals;•successfully collaborate with pharmaceutical companies in the discovery, development and commercialization of new medicines;•deliver a competitive value proposition compared to established competition and/or competitors who will enter the market before or after any ofour product candidates, including brincidofovir; and•negotiate competitive pricing and reimbursement with third-party payers.The availability of our competitors’ products could limit the demand, and the price we are able to charge, for brincidofovir and any other product candidatewe develop. We will not achieve our business plan if the acceptance of brincidofovir is inhibited by price competition or reimbursement issues or thereluctance of physicians to switch from existing drug products to brincidofovir, or if physicians switch to other new drug products or choose to reservebrincidofovir for use in limited circumstances. The inability to compete with existing or subsequently introduced drug products would have a materialadverse impact on our business, financial condition and prospects.Established pharmaceutical companies may invest heavily to accelerate discovery and development of novel compounds or to in-license novel compoundsthat could make our product candidates, including brincidofovir, less competitive. In addition, any new product that competes with an approved productmust demonstrate compelling advantages in efficacy, convenience, tolerability36and safety in order to overcome price competition and to be commercially successful. Accordingly, our competitors may succeed in obtaining patentprotection, receiving FDA approval or discovering, developing and commercializing medicines before we do, which would have a material adverse impact onour business.New technologies or procedures could be developed that would change or restrict the number of patients undergoing hematopoietic cell or solid organtransplants. A reduction in the number of transplants could negatively impact our commercial business by decreasing sales of our products and limiting peaksales potential.Hospital formulary approval and reimbursement may not be available for brincidofovir and our other product candidates, which could make it difficultfor us to sell our products profitably.Obtaining hospital formulary approval can be an expensive and time-consuming process. We cannot be certain if and when we will obtain formularyapproval to allow us to sell our product candidates, including brincidofovir, into our target markets. Failure to obtain timely formulary approval will limit ourcommercial success.Furthermore, market acceptance and sales of brincidofovir, or any other product candidates that we develop, will depend in part on the extent to whichcoverage and reimbursement for these products and related treatments will be available from third-party payers such as government health administrationauthorities, private health insurers and other organizations. Third-party payers decide which drugs they will pay for and establish reimbursement levels. Aprimary trend in the U.S. healthcare industry and elsewhere is cost containment. Third-party payers have attempted to control costs by limiting coverage andthe amount of reimbursement for particular medications. Obtaining reimbursement for our products may be particularly difficult because of the higher pricesoften associated with products administered under the supervision of a physician. We cannot be sure that reimbursement will be available for brincidofovir,or any other product candidates.Also, reimbursement amounts may reduce the demand for, or the price of, our products. If reimbursement is not available, or is available only to limitedlevels, we may not be able to successfully commercialize brincidofovir, or any other product candidates that we develop.There have been a number of legislative and regulatory proposals to change the healthcare system in the United States and in some foreign jurisdictions thatcould affect our ability to sell any future products profitably. These legislative and regulatory changes may negatively impact the reimbursement for anyfuture products, following approval. The availability of generic treatments may also substantially reduce the likelihood of reimbursement for any futureproducts, including brincidofovir. The application of user fees to generic drug products will likely expedite the approval of additional generic drugtreatments. We expect to experience pricing pressures in connection with the sale of brincidofovir and any other product candidate that we develop, due tothe trend toward managed healthcare, the increasing influence of health maintenance organizations and additional legislative changes. In addition, there maybe significant delays in obtaining reimbursement for approved products, and coverage may be more limited than the purposes for which the product isapproved by the FDA or regulatory authorities in other countries. Moreover, eligibility for reimbursement does not imply that any product will be paid for inall cases or at a rate that covers our costs, including research, development, manufacture, sale and distribution. Interim payments for new products, ifapplicable, may also not be sufficient to cover our costs and may not be made permanent. Payment rates may vary according to the use of the product and theclinical setting in which it is used, may be based on payments allowed for lower cost products that are already reimbursed, and may be incorporated intoexisting payments for other services. Net prices for products may be reduced by mandatory discounts or rebates required by government healthcare programsor private payers and by any future relaxation of laws that presently restrict imports of products from countries where they may be sold at lower prices than inthe United States. Third-party payers often rely upon Medicare coverage policy and payment limitations in setting their own reimbursement policies, but alsohave their own methods and approval process apart from Medicare determinations. Therefore, one third-party payer's determination to provide coverage for aproduct does not assure that other payers will also provide coverage for the product.Our inability to promptly obtain coverage and profitable payment rates from both government funded and private payers for any of our product candidates,including brincidofovir, could have a material adverse effect on our operating results, our ability to raise capital needed to commercialize products and ouroverall financial condition.We may expend our limited resources to pursue a particular product candidate or indication and fail to capitalize on product candidates or indicationsthat may be more profitable or for which there is a greater likelihood of success.The success of our business depends primarily upon our ability to identify, develop and commercialize product candidates. Because we have limitedfinancial and managerial resources, we focus on research programs and product candidates for specific indications. As a result, we may forego or delay pursuitof opportunities with other product candidates or other indications that later prove to have greater commercial potential.37Our research programs may initially show promise in identifying potential product candidates, yet fail to yield product candidates for clinical developmentfor a number of reasons, including:•our research methodology or that of our collaboration partners may be unsuccessful in identifying potential product candidates;•our potential product candidates may be shown to have harmful side effects or may have other characteristics that may make the productsunmarketable or unlikely to receive marketing approval; and•our collaboration partners may change their development profiles for potential product candidates or abandon a therapeutic area.If any of these events occur, we may be forced to abandon our development efforts for a program or programs, which would have a material adverse effect onour business and could potentially cause us to cease operations. Research programs to identify new product candidates require substantial technical, financialand human resources. We may focus our research efforts and resources on potential programs or product candidates that ultimately prove to be unsuccessful.If we do not accurately evaluate the commercial potential or target market for a particular product candidate, we may relinquish valuable rights to thatproduct candidate through collaboration, licensing or other royalty arrangements in cases in which it would have been advantageous for us to retain soledevelopment and commercialization rights.Risks Related to Our Intellectual PropertyIf we are unable to obtain or protect intellectual property rights related to our products and product candidates, we may not be able to compete effectivelyin our market.We rely upon a combination of patents, trade secret protection and confidentiality agreements to protect the intellectual property related to our products andproduct candidates. The strength of patents in the biotechnology and pharmaceutical field involves complex legal and scientific questions and can beuncertain. The patent applications that we own or in-license may fail to result in issued patents with claims that cover the products in the United States or inother countries. If this were to occur, early generic competition could be expected against brincidofovir and any other product candidates in development.There is no assurance that all of the potentially relevant prior art relating to our patents and patent applications has been found, which can invalidate a patentor prevent a patent from issuing based on a pending patent application. Even if patents do successfully issue, third parties may challenge their validity,enforceability, scope or ownership, which may result in such patents, or our rights to such patents, being narrowed or invalidated.Furthermore, even if they are unchallenged, our patents and patent applications may not adequately protect our intellectual property or prevent others fromdesigning around our claims. If the patent applications we hold or license with respect to brincidofovir fail to issue or if their breadth or strength of protectionis threatened, it could dissuade companies from collaborating with us to develop, and threaten our ability to commercialize, our products. We cannot offerany assurances about which, if any, patents will issue or whether any issued patents will be found not invalid and not unenforceable, will go unthreatened bythird parties or will adequately protect our products and product candidates. Further, if we encounter delays in regulatory approvals, the period of time duringwhich we could market brincidofovir under patent protection could be reduced. Since patent applications in the United States and most other countries areconfidential for a period of time after filing, and some remain so until issued, we cannot be certain that we or our licensors were the first to file any patentapplication related to brincidofovir or our other product candidates. Furthermore, if third parties have filed such patent applications, an interferenceproceeding in the United States can be provoked by a third party or instituted by us to determine who was the first to invent any of the subject matter coveredby the patent claims of our applications. An unfavorable outcome could require us to cease using the related technology or to attempt to license it from theprevailing party, which may not be possible. In addition to the protection afforded by patents, we rely on trade secret protection and confidentialityagreements to protect proprietary know-how that is not patentable, processes for which patents are difficult to enforce and other elements of our drugdiscovery and development processes that involve proprietary know-how, information or technology that is not covered by patents. Although we expect allof our employees to assign their inventions to us, and all of our employees, consultants, advisors and any third parties who have access to our proprietaryknow-how, information or technology to enter into confidentiality agreements, we cannot provide any assurances that all such agreements have been dulyexecuted, that such agreements provide adequate protection and will not be breached, that our trade secrets and other confidential proprietary informationwill not otherwise be disclosed or that competitors will not otherwise gain access to our trade secrets or independently develop substantially equivalentinformation and techniques. If we are unable to prevent material disclosure of the non-patented intellectual property related to our technologies to thirdparties, and there is no guarantee that we will have any such enforceable trade secret protection, we may not be able to establish or maintain a competitiveadvantage in our market, which could materially adversely affect our business, results of operations and financial condition.Further, the laws of some foreign countries do not protect patents and other proprietary rights to the same extent or in the same38manner as the laws of the United States. As a result, we may encounter significant problems in protecting and defending our intellectual property abroad. Wemay also fail to pursue or obtain patents and other intellectual property protection relating to our products and product candidates in all foreign countries.Finally, certain of our activities and our licensors’ activities have been funded, and may in the future be funded, by the U.S. federal government. When newtechnologies are developed with U.S. federal government funding, the government obtains certain rights in any resulting patents, including a nonexclusivelicense authorizing the government to use the invention for non-commercial purposes. These rights may permit the government to disclose our confidentialinformation to third parties and to exercise “march-in” rights to use or allow third parties to use our patented technology. The government can exercise itsmarch-in rights if it determines that action is necessary because we fail to achieve practical application of the U.S. government-funded technology, becauseaction is necessary to alleviate health or safety needs, to meet requirements of federal regulations or to give preference to U.S. industry. In addition, U.S.government-funded inventions must be reported to the government, U.S. government funding must be disclosed in any resulting patent applications, and ourrights in such inventions may be subject to certain requirements to manufacture products in the United States.Third-party claims of intellectual property infringement may prevent or delay our development and commercialization efforts or otherwise affect ourbusiness.Our commercial success depends in part on our avoiding infringement and other violations of the patents and proprietary rights of third parties. There is asubstantial amount of litigation, both within and outside the United States, involving patent and other intellectual property rights in the biotechnology andpharmaceutical industries, including patent infringement lawsuits, interferences, oppositions and inter party reexamination proceedings before the UnitedStates Patent and Trademark Office (U.S. PTO) and its foreign counterparts. Numerous U.S. and foreign issued patents and pending patent applications, whichare owned by third parties, exist in the fields in which we and our collaborators are developing product candidates. As the biotechnology and pharmaceuticalindustries expand and more patents are issued, and as we gain greater visibility and market exposure as a public company, the risk increases that our productcandidates or other business activities may be subject to claims of infringement of the patent and other proprietary rights of third parties. Third parties mayassert that we are employing their proprietary technology without authorization. There may be third-party patents or patent applications with claims tomaterials, formulations, methods of manufacture or methods for treatment related to the use or manufacture of brincidofovir and/or our other productcandidates. Because patent applications can take many years to issue, there may be currently pending patent applications which may later result in issuedpatents that our product candidates may infringe. In addition, third parties may obtain patents in the future and claim that use of our technologies infringesupon these patents. If any third-party patents were held by a court of competent jurisdiction to cover the manufacturing process of any of our productcandidates, any molecules formed during the manufacturing process or any final product itself, the holders of any such patents may be able to block ourability to commercialize such product candidate unless we obtained a license under the applicable patents, or until such patents expire.Similarly, if any third-party patent were held by a court of competent jurisdiction to cover aspects of our formulations, processes for manufacture or methodsof use, including combination therapy, the holders of any such patent may be able to block our ability to develop and commercialize the applicable productcandidate unless we obtained a license or until such patent expires. In either case, such a license may not be available on commercially reasonable terms or atall. In addition, we may be subject to claims that we are infringing other intellectual property rights, such as trademarks or copyrights, or misappropriating thetrade secrets of others, and to the extent that our employees, consultants or contractors use intellectual property or proprietary information owned by others intheir work for us, disputes may arise as to the rights in related or resulting know-how and inventions.Parties making claims against us may obtain injunctive or other equitable relief, which could effectively block our ability to further develop andcommercialize one or more of our product candidates. Defense of these claims, regardless of their merit, would involve substantial litigation expense andwould be a substantial diversion of employee resources from our business. In the event of a successful infringement or other intellectual property claimagainst us, we may have to pay substantial damages, including treble damages and attorneys’ fees for willful infringement, obtain one or more licenses fromthird parties, pay royalties or redesign our affected products, which may be impossible or require substantial time and monetary expenditure. We cannotpredict whether any such license would be available at all or whether it would be available on commercially reasonable terms. Furthermore, even in theabsence of litigation, we may need to obtain licenses from third parties to advance our research or allow commercialization of our product candidates, and wehave done so from time to time. We may fail to obtain any of these licenses at a reasonable cost or on reasonable terms, if at all. In that event, we would beunable to further develop and commercialize one or more of our product candidates, which could harm our business significantly. We cannot provide anyassurances that third-party patents do not exist which might be enforced against our products or product candidates, resulting in either an injunctionprohibiting our sales, or, with respect to our sales, an obligation on our part to pay royalties and/or other forms of compensation to third parties.39We license certain key intellectual property from third parties, and the loss of our license rights could have a materially adverse effect on our business.We are a party to a number of technology licenses that are important to our business and expect to enter into additional licenses in the future. For example,we rely on an exclusive license to certain patents, proprietary technology and know-how from UC, which we believe cover brincidofovir. We also have anexclusive license to certain patents covering inventions of the UM. If we fail to comply with our obligations under our license agreements, or we are subjectto a bankruptcy, the licensor may have the right to terminate the license, in which event we would not be able to develop or market products covered by thelicense, including in the case of the UC license, brincidofovir, which would have a materially adverse effect on our business.We may be involved in lawsuits to protect or enforce our patents, the patents of our licensors or our other intellectual property rights, which could beexpensive, time consuming and unsuccessful.Competitors may infringe or otherwise violate our patents, the patents of our licensors or our other intellectual property rights. Tocounter infringement or unauthorized use, we may be required to file legal claims, which can be expensive and time-consuming. In addition, in aninfringement proceeding, a court may decide that a patent of ours or our licensors is not valid or is unenforceable, or may refuse to stop the other party fromusing the technology at issue on the grounds that our patents do not cover the technology in question. An adverse result in any litigation or defenseproceedings could put one or more of our patents at risk of being invalidated or interpreted narrowly and could put our patent applications at risk of notissuing. The initiation of a claim against a third party may also cause the third party to bring counter-claims against us.We may not be able to prevent, alone or with our licensors, misappropriation of our intellectual property rights, particularly in countries where the laws maynot protect those rights as fully as in the United States. Our business could be harmed if in a litigation the prevailing party does not offer us a license oncommercially reasonable terms. Any litigation or other proceedings to enforce our intellectual property rights may fail, and even if successful, may result insubstantial costs and distract our management and other employees.Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of ourconfidential information could be compromised by disclosure during this type of litigation. There could also be public announcements of the results ofhearings, motions or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have amaterial adverse effect on the price of our common stock.Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and otherrequirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with theserequirements.Periodic maintenance fees on any issued patent are due to be paid to the U.S. PTO and foreign patent agencies in several stages over the lifetime of the patent.The U.S. PTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment and othersimilar provisions during the patent application process.While an inadvertent lapse can in many cases be cured by payment of a late fee or by other means in accordance with the applicable rules, there are situationsin which noncompliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in therelevant jurisdiction. Non-compliance events that could result in abandonment or lapse of a patent or patent application include, but are not limited to,failure to respond to official actions within prescribed time limits, non-payment of fees and failure to properly legalize and submit formal documents. If we orour licensors that control the prosecution and maintenance of our licensed patents fail to maintain the patents and patent applications covering our productcandidates, we may lose our rights and our competitors might be able to enter the market, which would have a material adverse effect on our business.Risks Related to Our United States Government Contracts and GrantsAll of our immediately foreseeable future revenues to support the development of brincidofovir for the treatment of smallpox are dependent upon ourcontract with the Biomedical Advanced Research and Development Authority (BARDA), and if we do not receive all of the funds under the BARDAcontract we anticipate that we will suspend or terminate our smallpox program.Substantially all of our revenues that support the development of brincidofovir for the treatment of smallpox have been derived from prior government grantsand our current development contract with BARDA. Our contract with BARDA is for the development of brincidofovir for the treatment of smallpox. It isdivided into a base segment and four option segments. We substantially completed performance under the first option segment of the contract in August2014 and are currently performing under the second and third option segments of the contract which are scheduled to end in August 2019 and March 2019,respectively. Subsequent option40segments are not subject to automatic renewal and are not exercisable at our discretion. There can be no assurance that we will reach agreement with BARDAon the most appropriate development pathway or that the FDA will ultimately agree with the experiments which we perform or the appropriateness of theresults of these experiments for approval of brincidofovir for smallpox. In addition, there can be no assurance that any of the subsequent option segments willbe exercised or that we will continue to receive revenues under this contract once the current option segments are completed. We do not anticipatecontinuing this program without ongoing support from BARDA.Additionally, the contract provides for reimbursement of the costs of the development of brincidofovir for the treatment of smallpox that are allowable underthe Federal Acquisition Regulation (FAR), plus the payment of a fixed fee. It does not include the manufacture of brincidofovir for the Strategic NationalStockpile. There can be no assurances that this contract will continue, that BARDA will extend the contract for additional option segments, that any suchextension would be on favorable terms, or that we will be able to enter into new contracts with the United States government to support our smallpoxprogram. Changes in government budgets and agendas may result in a decreased and de-prioritized emphasis on supporting the discovery and developmentof brincidofovir for the treatment of smallpox. In such event, BARDA is not required to continue funding our existing contract. Any such reduction in ourrevenues from BARDA or any other government contract could materially adversely affect our financial condition and results of operations. In addition, if wedo not receive all of the funds under the BARDA contract, we anticipate that we will suspend or terminate our program for the development of brincidofovirfor the treatment of smallpox.There can be no assurances that we will be able to enter into a contract with BARDA to act as the sole supplier for the procurement of brincidofovir for thetreatment of smallpox.In April 2015, BARDA posted a notice of intent to use other than full and open competition to award a sole source contract to us for the procurement ofbrincidofovir for the treatment of smallpox. In May 2015, BARDA posted an approved justification for the use of other than full and open competition for thecontract. In July 2015, BARDA issued a RFP entitled “2015 Procurement of a Second Smallpox Antiviral Drug for the Strategic National Stockpile.” InAugust 2015, we submitted a response to the RFP and we subsequently engaged in discussions with BARDA regarding our response. The issuance of thatRFP did not culminate with agreement for the sole source supply of brincidofovir for the Strategic National Stockpile.We remain in discussions with BARDA regarding the potential to supply brincidofovir to the Strategic National Stockpile, however, there can be noassurances regarding any such procurement. We continue to receive funding under an advanced research and development contract for the development ofbrincidofovir for the treatment of smallpox. We are currently evaluating brincidofovir for efficacy in two different animal models to support potentialapproval under the FDA’s animal rule.Through our continuing development contract with BARDA, we recently completed the in-life segment of our second rabbitpox efficacy study and initiatedthe pivotal efficacy study in the mouse model (ectromelia virus). We believe that efficacy data from this model could serve as the second animal model tosupport the approval of brincidofovir for the treatment of smallpox.Unfavorable provisions in government contracts, including our contract with BARDA, may harm our business, financial condition and operating results.United States government contracts typically contain unfavorable provisions and are subject to audit and modification by the government at its solediscretion, which will subject us to additional risks. For example, under our contract with BARDA, the U.S. government has the power to unilaterally:•audit and object to any BARDA contract-related costs and fees on grounds that they are not allowable under the FAR, and require us toreimburse all such costs and fees;•suspend or prevent us for a set period of time from receiving new contracts or extending our existing contract based on violations or suspectedviolations of laws or regulations;•claim nonexclusive, nontransferable rights to product manufactured and intellectual property developed under the BARDA contract and may,under certain circumstances, such as circumstances involving public health and safety, license such inventions to third parties without ourconsent;•cancel, terminate or suspend our BARDA contract based on violations or suspected violations of laws or regulations;•terminate our BARDA contract in whole or in part for the convenience of the government for any reason or no reason, including if funds becomeunavailable to the applicable governmental agency;•reduce the scope and value of our BARDA contract;•decline to exercise an option to continue the BARDA contract;•direct the course of a development program in a manner not chosen by the government contractor;•require us to perform the option segments even if doing so may cause us to forego or delay the pursuit of other opportunities with greatercommercial potential;•take actions that result in a longer development timeline than expected; and41•change certain terms and conditions in our BARDA contract.The U.S. government also has the right to terminate the BARDA contract if termination is in the government’s interest, or if we default by failing to performin accordance with the milestones set forth in the contract. Termination-for-convenience provisions generally enable us to recover only our costs incurred orcommitted (plus a portion of the agreed fee) and settlement expenses on the work completed prior to termination. Except for the amount of services receivedby the government, termination-for-default provisions do not permit recovery of fees.In addition, we must comply with numerous laws and regulations that affect how we conduct business with the United States government. Among the mostsignificant government contracting regulations that affect our business are:•FAR, and agency-specific regulations supplements to the FAR, which comprehensively regulate the procurement, formation, administration andperformance of government contracts and implement federal procurement policy in numerous areas, such as employment practices, protection ofthe environment, accuracy and retention periods of records, recording and charging of costs, treatment of laboratory animals and human subjectresearch;•business ethics and public integrity obligations, which govern conflicts of interest and the hiring of former government employees, restrict thegranting of gratuities and funding of lobbying activities and incorporate other requirements such as the Anti-Kickback Act and the ForeignCorrupt Practices Act;•export and import control laws and regulations; and•laws, regulations and executive orders restricting the use and dissemination of information classified for national security purposes and theexportation of certain products and technical data.Furthermore, we may be required to enter into agreements and subcontracts with third parties, including suppliers, consultants and other third-partycontractors, in order to satisfy our contractual obligations pursuant to our agreements with the U.S. government. Negotiating and entering into sucharrangements can be time-consuming and we may not be able to reach agreement with such third parties. Any such agreement must also be compliant with theterms of our government contract. Any delay or inability to enter into such arrangements or entering into such arrangements in a manner that is non-compliant with the terms of our contract, may result in violations of our contract.As a result of these unfavorable provisions, we must undertake significant compliance activities. The diversion of resources from commercial programs tothese compliance activities, as well as the exercise by the U.S. government of any rights under these provisions, could materially harm our business.Our business is subject to audit by the U.S. government, including under our contract with BARDA, and a negative audit could adversely affect ourbusiness.United States government agencies, such as the DHHS, routinely audit and investigate government contractors and recipients of federal grants, including ourcontract with BARDA. These agencies review a contractor’s performance under its contracts, cost structure and compliance with applicable laws, regulationsand standards.The DHHS can also review the adequacy of, and a contractor’s compliance with, its internal control systems and policies, including the contractor’spurchasing, property, estimating, compensation and management information systems. Any costs found to be improperly allocated to a specific contract willnot be reimbursed, while such costs already reimbursed must be refunded. If an audit uncovers improper or illegal activities, we may be subject to civil andcriminal penalties and administrative sanctions, including:•termination of contracts;•forfeiture of profits;•suspension of payments;•fines; and•suspension or prohibition from conducting business with the U.S. government.In addition, we could suffer serious reputational harm if allegations of impropriety were made against us by the U.S. government, which could adverselyaffect our business.Agreements with government agencies may lead to claims against us under the Federal False Claims Act, and these claims could result in substantial finesand other penalties.The biopharmaceutical industry is, and in recent years has been, under heightened scrutiny as the subject of government investigations and enforcementactions. Our BARDA contract is subject to substantial financial penalties under the Federal Civil42Monetary Penalties Act and the False Claims Act. The False Claims Act imposes liability on any person who, among other things, knowingly presents, orcauses to be presented, a false record or statement material to a false or fraudulent claim paid or approved by the government. Under the False Claims Act’s“whistleblower” provisions, private enforcement of fraud claims against businesses on behalf of the U.S. government has increased due in part to amendmentsto the False Claims Act that encourage private individuals to sue on behalf of the government. These whistleblower suits, known as qui tam actions, may befiled by private individuals, including present and former employees. The False Claims Act provides for treble damages and significant civil monetarypenalties per false claim. If our operations are found to be in violation of any of these laws, or any other governmental regulations that apply to us, we may besubject to penalties, including civil, criminal and administrative penalties, damages, fines, exclusion from the Medicare and Medicaid programs, and thecurtailment or restructuring of our operations. Any penalties, damages, fines, exclusions, curtailment, or restructuring of our operations could adversely affectour ability to operate our business and our financial results.Risks Related to Our Business Operations and IndustryIncreasing demand for compassionate use of our unapproved therapies could result in losses.We are developing brincidofovir for life-threatening illnesses for which there are currently limited to no available therapeutic options. During 2014, we werethe target of an active and disruptive social media campaign related to a request for access to our unapproved drug, brincidofovir. If we experience similarsocial media campaigns in the future, we may experience significant disruption to our business which could result in losses.Recent media attention to individual patients' expanded access requests has resulted in the introduction of legislation at the local and national level referredto as "Right to Try" laws, such as the Right to Try Act, which are intended to give patients access to unapproved therapies. New and emerging legislationregarding expanded access to unapproved drugs for life-threatening illnesses could negatively impact our business in the future.A possible consequence of both activism and legislation in this area is the need for us to initiate an unanticipated expanded access program or to makebrincidofovir more widely available sooner than anticipated. We are a small company with limited resources and unanticipated trials or access programscould result in diversion of resources from our primary goals.In addition, patients who receive access to unapproved drugs through compassionate use or expanded access programs have life-threatening illnesses andhave exhausted all other available therapies. The risk for serious adverse events in this patient population is high which could have a negative impact on thesafety profile of brincidofovir, which could cause significant delays or an inability to successfully commercialize brincidofovir, which could materially harmour business. We may also need to restructure or pause ongoing compassionate use and/or expanded access programs in order to perform the controlledclinical trials required for regulatory approval and successful commercialization of brincidofovir, which could prompt adverse publicity or other disruptionsrelated to current or potential participants in such programs.If we fail to comply with the extensive legal and regulatory requirements affecting the health care industry, we could face increased costs, delays in thedevelopment of our product candidates, penalties and a loss of business.Our activities, and the activities of our collaborators, partners and third-party providers, are subject to extensive government regulation and oversight both inthe United States and in foreign jurisdictions. The FDA and comparable agencies in other jurisdictions directly regulate many of our most critical businessactivities, including the conduct of preclinical and clinical studies, product manufacturing, advertising and promotion, product distribution, adverse eventreporting and product risk management. States increasingly have been placing greater restrictions on the marketing practices of healthcare companies. Inaddition, pharmaceutical and biotechnology companies have been the target of lawsuits and investigations alleging violations of government regulations,including claims asserting submission of incorrect pricing information, impermissible off-label promotion of pharmaceutical products, payments intended toinfluence the referral of federal or state healthcare business, submission of false claims for government reimbursement, antitrust violations, violations of theForeign Corrupt Practices Act, or violations related to environmental matters. Violations of governmental regulation may be punishable by criminal, civiland administrative sanctions, including fines and civil monetary penalties and exclusion from participation in government programs, including Medicareand Medicaid. In addition to penalties for violation of laws and regulations, we could be required to delay or terminate the development of our productcandidates, or we could be required to repay amounts we received from government payers, or pay additional rebates and interest if we are found to havemiscalculated the pricing information we have submitted to the government. Whether or not we have complied with the law, an investigation into allegedunlawful conduct could increase our expenses, damage our reputation, divert management time and attention and adversely affect our business.43Our future success depends on our ability to retain key executives and to attract, retain and motivate qualified personnel.We are highly dependent on the principal members of our executive team. While we have entered into employment agreements or offer letters with each ofour executive officers, any of them could leave our employment at any time, as all of our employees are “at will” employees. To help attract, retain, andmotivate qualified employees, we use share-based incentive awards such as employee stock options and restricted stock units. Due to the decline in our stockprice that has occurred since December 2015, a large percentage of the options held by our employees are underwater. As of December 31, 2018,approximately 98% of all outstanding options had an exercise price above the closing price of the stock on that date. As a result, the current situationprovides a considerable challenge to maintaining employee motivation, as well as creating a serious threat to retention until a recovery commences. If ourshare-based compensation ceases to be viewed as a valuable benefit, our ability to attract, retain, and motivate employees could be weakened, which couldharm our results of operations.We do not maintain “key person” insurance for any of our executives or other employees. Recruiting and retaining other qualified employees for ourbusiness, including scientific and technical personnel, will also be critical to our success. There is currently a shortage of appropriately skilled executives inour industry, which is likely to continue. We also experience competition for the hiring of scientific and clinical personnel from universities and researchinstitutions. As a result, competition for skilled personnel is intense and the turnover rate can be high. We may not be able to attract and retain personnel onacceptable terms given the competition among numerous pharmaceutical and biotechnology companies for similar personnel. In addition, failure of any ofour clinical studies may make it more challenging to recruit and retain qualified personnel. The inability to recruit or loss of the services of any executive orkey employee may adversely affect the progress of our research, development and commercialization objectives.In addition, we rely on consultants and advisors, including scientific and clinical advisors, to assist us in formulating our research and development andcommercialization strategy. Our consultants and advisors may be employed by employers other than us and may have commitments under consulting oradvisory contracts with other entities that may limit their availability to us, which could also adversely affect the progress of our research, development andcommercialization objectives.Potential product liability lawsuits against us could cause us to incur substantial liabilities and to limit commercialization of any products that we maydevelop.The use of our product candidates, including brincidofovir, in clinical studies and the sale of any products for which we obtain marketing approval exposesus to the risk of product liability claims. Product liability claims might be brought against us by consumers, health care providers, pharmaceutical companiesor others selling or otherwise coming into contact with our products. On occasion, large judgments have been awarded in class action lawsuits based on drugsthat had unanticipated adverse effects. If we cannot successfully defend against product liability claims, we could incur substantial liability and costs. Inaddition, regardless of merit or eventual outcome, product liability claims may result in:•impairment of our business reputation and significant negative media attention;•withdrawal of participants from our clinical studies;•significant costs to defend the related litigation and related litigation;•distraction of management’s attention from our primary business;•substantial monetary awards to patients or other claimants;•inability to commercialize our product candidates, including brincidofovir; and•decreased demand for our product candidates, if approved for commercial sale.We currently carry $15 million in product liability insurance covering our clinical trials. Our current product liability insurance coverage may not besufficient to reimburse us for any expenses or losses we may suffer. Moreover, insurance coverage is becoming increasingly expensive and in the future wemay not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against losses due to liability. If and when weobtain marketing approval for our product candidates, we intend to expand our insurance coverage to include the sale of commercial products; however, wemay be unable to obtain product liability insurance on commercially reasonable terms or in adequate amounts. A successful product liability claim or seriesof claims brought against us could cause our stock price to decline and, if judgments exceed our insurance coverage, could adversely affect our results ofoperations and business.44Risks associated with expanding our operations to Europe could adversely affect our business.We currently have limited operations in Europe and plan to expand the scope of development activities taking place there. We have limited experience withconducting activities outside of the United States. International operations and business expansion plans are subject to numerous additional risks, including:•multiple, conflicting and changing laws and regulations such as tax laws, privacy regulations, export and import restrictions, employment,immigration and labor laws, regulatory requirements, and other governmental approvals, permits and licenses;•difficulties in staffing and managing foreign operations;•risks associated with obtaining and maintaining, or the failure to obtain or maintain, regulatory approvals for the sale or use of our products invarious countries;•complexities associated with managing government payer systems, multiple payer-reimbursement regimes or patient self-pay systems and pricecontrols;•financial risks, such as longer payment cycles, difficulty enforcing contracts and collecting accounts receivable and exposure to foreigncurrency exchange rate fluctuations;•general political and economic conditions in the countries we operate in, including terrorism and political unrest, curtailment of trade and otherbusiness restrictions;•regulatory and compliance risks that relate to maintaining accurate information and control over activities that may fall within the purview ofthe U.S. Foreign Corrupt Practices Act, its books and records provisions or its anti-bribery provisions, or similar anti-bribery or anti-corruptionlaws and regulations.Any of these risks, if encountered, could significantly increase our costs of operating internationally, prevent us from operating in certain jurisdictions, orotherwise significantly harm our future international expansion and operations, which could have a material adverse effect on our business, financialcondition and results of operations.Risks Related To Our Common StockThe market price of our common stock is likely to be volatile, and you may not be able to resell your shares at or above your purchase price.Prior to our initial public offering (IPO) in 2013, there was no public market for our common stock. The trading price of our common stock has been volatile,and is likely to continue to be volatile for the foreseeable future. Our stock price is subject to wide fluctuations in response to a variety of factors, includingthe following:•results of clinical trials of our product candidates or those of our competitors;•any delay in filing an application for any of our product candidates and any adverse development or perceived adverse development withrespect to regulatory review of that application;•failure to successfully develop and commercialize our product candidates, including brincidofovir;•termination of any of our license or collaboration agreements;•any agency or judicial enforcement actions against us;•inability to obtain additional funding;•regulatory or legal developments in the United States and other countries applicable to our product candidates;•adverse regulatory decisions;•changes in the structure of healthcare payment systems;•inability to obtain adequate product supply for our product candidates, or the inability to do so at acceptable prices;•introduction of new products, services or technologies by our competitors;•failure to meet or exceed financial projections we provide to the public;•failure to meet or exceed the estimates and projections of the investment community;•changes in the market valuations of similar companies;•market conditions in the pharmaceutical and biotechnology sectors, and the issuance of new or changed securities analysts’ reports orrecommendations;•announcements of significant acquisitions, strategic partnerships, joint ventures or capital commitments by us or our competitors;•significant lawsuits (including patent or stockholder litigation), and disputes or other developments relating to proprietary rights (includingpatents, litigation matters and our ability to obtain patent protection for our technologies);•additions or departures of key scientific or management personnel;•sales of our common stock by us or our stockholders in the future;•trading volume of our common stock;•general economic, industry and market conditions; and45•the other factors described in this “Risk Factors” section.In addition, the stock market in general, and The Nasdaq Global Market in particular, have experienced extreme price and volume fluctuations that haveoften been unrelated or disproportionate to the operating performance of these companies. Broad market and industry factors may negatively affect themarket price of our common stock, regardless of our actual operating performance.The resignation of our former Chief Executive Officer may be disruptive and our ability to successfully manage this transition could impact our business.On February 6, 2019, we announced that M. Michelle Berrey had resigned as our President and Chief Executive Officer, and that our Board of Directorscreated a new position to be known as the Office of the Chief Executive Officer, and appointed W. Garrett Nichols, Timothy W. Trost and Michael A. Alrutzas the members of the Office of the Chief Executive Officer. Leadership transitions can be difficult to manage and may cause disruptions to our operations.The leadership transition may also increase the likelihood of turnover among our employees and result in changes in our business strategy, which may createuncertainty and negatively impact our ability to execute our business strategy quickly and effectively. The Chief Executive Officer transition may alsoimpact our relationships with customers and suppliers, and create uncertainty among investors, employees, creditors and others concerning our futuredirection and performance. Any significant disruption, uncertainty or change in business strategy could adversely affect our business, financial condition andoperating results.Our principal stockholders and management own a significant percentage of our stock and will be able to exert significant control over matters subject tostockholder approval.Based upon shares of common stock outstanding as of December 31, 2018, our then executive officers, directors, 5% stockholders (known to us throughavailable information) and their affiliates beneficially owned approximately 38% of our voting stock. Therefore, these stockholders have the ability tosubstantially influence us through this ownership position. For example, these stockholders, if they choose to act together, may be able to influence theelection of directors, amendments of our organizational documents, or approval of any merger, sale of assets, or other major corporate transaction. Thisconcentration of voting power could delay or prevent an acquisition of our company on terms that other stockholders may desire.Failure to establish and maintain adequate finance infrastructure and accounting systems and controls could impair our ability to comply with thefinancial reporting and internal controls requirements for publicly traded companies.As a public company, we operate in an increasingly demanding regulatory environment, which requires us to comply with the Sarbanes-Oxley Act of 2002,and the related rules and regulations of the Securities and Exchange Commission, expanded disclosure requirements, accelerated reporting requirements andmore complex accounting rules. Company responsibilities required by the Sarbanes-Oxley Act include establishing and maintaining corporate oversight andadequate internal control over financial reporting and disclosure controls and procedures. Effective internal controls are necessary for us to produce reliablefinancial reports and are important to help prevent financial fraud.Our compliance with Section 404 of the Sarbanes-Oxley Act has required and will continue to require that we incur substantial accounting expense andexpend significant management efforts. In this or future years, our testing, or the subsequent testing by our independent registered public accounting firm,may reveal deficiencies in our internal controls that we would be required to remediate in a timely manner so as to be able to comply with the requirements ofSection 404 of the Sarbanes-Oxley Act each year. If we are not able to comply with the requirements of Section 404 of the Sarbanes-Oxley Act in a timelymanner each year, we could be subject to sanctions or investigations by the Securities and Exchange Commission, The Nasdaq Stock Market or otherregulatory authorities which would require additional financial and management resources and could adversely affect the market price of our common stock.Furthermore, if we cannot provide reliable financial reports or prevent fraud, our business and results of operations could be harmed and investors could loseconfidence in our reported financial information.Future sales and issuances of our common stock or rights to purchase common stock, including pursuant to our equity incentive plans, could result inadditional dilution of the percentage ownership of our stockholders and could cause our stock price to fall.We expect that significant additional capital will be needed in the future to continue our planned operations. To the extent we raise additional capital byissuing equity securities, our stockholders may experience substantial dilution. We may sell common stock, convertible securities or other equity securitiesin one or more transactions at prices and in a manner we determine from time to time. If we sell common stock, convertible securities or other equity securitiesin more than one transaction, investors may be materially diluted by subsequent sales. Such sales may also result in material dilution to our existingstockholders, and new investors could gain rights superior to our existing stockholders.46Pursuant to our 2013 Equity Incentive Plan (the 2013 Plan), our management is authorized to grant stock options to our employees, directors and consultants.The number of shares available for future grant under our 2013 Plan will automatically increase on January 1st each year, through January 1, 2023, by anamount equal to 4.0% of all shares of our capital stock outstanding as of December 31st of the preceding calendar year, subject to the ability of our board ofdirectors to take action to reduce the size of such increase in any given year. In addition, our board of directors may grant or provide for the grant of rights topurchase shares of our common stock pursuant to the terms of our 2013 Employee Stock Purchase Plan (ESPP). The number of shares of our common stockreserved for issuance under our ESPP will automatically increase on January 1st each year, through January 1, 2023, by an amount equal to the lesser of422,535 shares or one percent of all shares of our capital stock outstanding as of December 31st of the preceding calendar year, subject to the ability of ourboard of directors to take action to reduce the size of such increase in any given year. Unless our board of directors elects not to increase the number of sharesunderlying our 2013 Plan and ESPP each year, our stockholders may experience additional dilution, which could cause our stock price to fall.We have broad discretion in the use of the net proceeds from our financing transactions and may not use them effectively.Our management has broad discretion in the application of the net proceeds from our financing transactions. Because of the number and variability of factorsthat will determine our use of the net proceeds from our financing transactions, their ultimate use may vary substantially from their currently intended use.The failure by our management to apply these funds effectively could result in financial losses that could have a material adverse effect on our business,cause the price of our common stock to decline and delay the development of our product candidates. Pending their use, we have invested the net proceedsfrom our financing transactions in short-term, investment-grade, interest-bearing securities. These investments may not yield a favorable return to ourstockholders.Volatility in our stock price could subject us to securities class action litigation.In the past, securities class action litigation has often been brought against a company following a decline in the market price of its securities. This risk isespecially relevant for us because pharmaceutical companies have experienced significant stock price volatility in recent years, and also because our stockprice decreased significantly following announcement of results from our Phase 3 SUPPRESS trial. If we face such litigation, it could result in substantialcosts and a diversion of management’s attention and resources, which could harm our business.Comprehensive tax reform could adversely affect our business and financial condition.On December 22, 2017, President Trump signed into law the Tax Act which significantly revises the Internal Revenue Code of 1986, as amended. The TaxAct, among other things, contains significant changes to corporate taxation, including reduction of the corporate tax rate from a top marginal rate of 35% to aflat rate of 21%, limitation of the tax deduction for interest expense to 30% of adjusted earnings (except for certain small businesses), limitation of thededuction for net operating losses to 80% of current year taxable income and elimination of net operating loss carrybacks, one time taxation of offshoreearnings at reduced rates regardless of whether they are repatriated, elimination of U.S. tax on foreign earnings (subject to certain important exceptions),immediate deductions for certain new investments instead of deductions for depreciation expense over time, and modifying or repealing many businessdeductions and credits. Notwithstanding the reduction in the corporate income tax rate, the overall impact of the Tax Act is uncertain and our business andfinancial condition could be adversely affected. In addition, it is uncertain if and to what extent various states will conform to the Tax Act. The impact of thistax reform on holders of our common stock is also uncertain and could be adverse. We urge our stockholders to consult with their legal and tax advisors withrespect to this legislation and the potential tax consequences of investing in or holding our common stock.Our effective tax rate may fluctuate, and we may incur obligations in tax jurisdictions in excess of accrued amounts.Our effective tax rate is derived from a combination of applicable tax rates in the various places that we operate. In preparing our financial statements, weestimate the amount of tax that will become payable in each of such places. Nevertheless, our effective tax rate may be different than experienced in the pastdue to numerous factors, including passage of the Tax Act, the results of examinations and audits of our tax filings, our inability to secure or sustainacceptable agreements with tax authorities, changes in accounting for income taxes and changes in tax laws. Any of these factors could cause us toexperience an effective tax rate significantly different from previous periods or our current expectations and may result in tax obligations in excess ofamounts accrued in our financial statements.Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.Our U.S. net operating loss, or NOL, carryforwards generated in tax years ending on or prior to December 31, 2017, are only permitted to be carried forward for20 years under applicable U.S. tax law. Under the Tax Act, our federal NOLs generated in tax years ending after December 31, 2017, may be carried forwardindefinitely, but the deductibility of such federal NOLs47generated in tax years beginning after December 31, 2017, is limited. It is uncertain if and to what extent various states will conform to the Tax Act. Inaddition, under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, and corresponding provisions of state law, if a corporationundergoes an “ownership change,” which is generally defined as a greater than 50% change, by value, in its equity ownership over a three-year period, thecorporation’s ability to use its pre-change NOL carryforwards and other pre-change U.S. tax attributes (such as research tax credits) to offset its post-changeincome or taxes may be limited. We have determined that a Section 382 ownership change occurred in 2002 and 2007 resulting in limitations of at least$64,000 and $762,000, respectively, of losses incurred prior to the respective ownership change dates. In addition, we have determined that another Section382 ownership change occurred in 2013 with our IPO, our most recent private placement and other transactions that have occurred since 2007, resulting in alimitation of at least $6.7 million of losses incurred prior to the ownership change date. We may also experience ownership changes in the future as a result ofsubsequent shifts in our stock ownership. As a result, our pre-2018 NOL carryforwards may expire prior to being used, and our NOL carryforwards generatedin 2018 and thereafter will be subject to a percentage limitation. In addition, it is possible that we have in the past undergone, and in the future may undergo,additional ownership changes that could limit our ability to use all of our pre-change NOLs and other pre-change tax attributes (such as research tax credits)to offset our post-change income or taxes. Similar provisions of state tax law may also apply to limit our use of accumulated state tax attributes. In addition,at the state level, there may be periods during which the use of NOLs is suspended or otherwise limited, which could accelerate or permanently increase statetaxes owed. As a result, we may be unable to use all or a material portion of our NOLs and other tax attributes.Because we do not anticipate paying any cash dividends on our common stock in the foreseeable future, capital appreciation, if any, would be your solesource of gain.We have never declared or paid any cash dividends on our common stock. We currently anticipate that we will retain any future earnings for thedevelopment, operation and expansion of our business and do not anticipate declaring or paying any cash dividends for the foreseeable future. As a result,capital appreciation, if any, of our common stock would be your sole source of gain on an investment in our common stock for the foreseeable future.Provisions in our corporate charter documents and under Delaware law could make it more difficult for a third party to acquire us or increase the cost ofacquiring us, even if doing so would benefit our stockholders and may prevent attempts by our stockholders to replace or remove our current management.Some provisions of our charter documents and Delaware law may have anti-takeover effects that could discourage an acquisition of us by others, even if anacquisition would be beneficial to our stockholders and may prevent attempts by our stockholders to replace or remove our current management. Theseprovisions include:•authorizing the issuance of “blank check” preferred stock, the terms of which may be established and shares of which may be issued withoutstockholder approval which could be used to institute a “poison pill” that would work to dilute the stock ownership of a potential hostileacquirer, effectively preventing acquisitions that have not been approved by our board of directors;•allowing the authorized number of our directors to be changed only by resolution of our board of directors;•limiting the removal of directors;•creating a staggered board of directors;•requiring that stockholder actions must be effected at a duly called stockholder meeting and prohibiting stockholder actions by written consent;•eliminating the ability of stockholders to call a special meeting of stockholders; and•establishing advance notice requirements for nominations for election to the board of directors or for proposing matters that can be acted uponat duly called stockholder meetings.The amendment of any of these provisions, with the exception of the ability of our board of directors to issue shares of preferred stock and designate anyrights, preferences and privileges thereto, would require the affirmative vote of the holders of at least 66 2/3 percent of the voting power of all of our thenoutstanding common stock.These provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult forstockholders to replace members of our board of directors, which is responsible for appointing the members of our management. In addition, we are subject toSection 203 of the Delaware General Corporation Law, which generally prohibits a Delaware corporation from engaging in any of a broad range of businesscombinations with an interested stockholder for a period of three years following the date on which the stockholder became an interested stockholder, unlesssuch transactions are approved by our board of directors. This provision could have the effect of delaying or preventing a change of control, whether or not itis desired by or beneficial to our stockholders. Further, other provisions of Delaware law may also discourage, delay or prevent someone from acquiring us ormerging with us.48Risks Related to Information TechnologySignificant disruptions of information technology systems or breaches of data security could adversely affect our business.Our business is increasingly dependent on critical, complex, and interdependent information technology (IT) systems, including Internet-based systems, tosupport business processes as well as internal and external communications. The size and complexity of our IT systems make us potentially vulnerable to ITsystem breakdowns, malicious intrusion, and computer viruses, which may result in the impairment of our ability to operate our business effectively.In addition, our systems are potentially vulnerable to data security breaches-whether by employees or others-which may expose sensitive data tounauthorized persons. Such data security breaches could lead to the loss of trade secrets or other intellectual property, or could lead to the public exposure ofpersonal information (including sensitive personal information) of our employees, clinical trial patients, customers, business partners and others.Any such disruption or security breach could result in legal proceedings, liability under laws that protect the privacy of personal information, regulatorypenalties, disruptions to our operations and collaborations, and damage to our reputation, which could harm our business and results of operations.Increasing use of social media could give rise to liability, breaches of data security, or reputational damage.We and our employees are increasingly utilizing social media tools as a means of communication both internally and externally. Despite our efforts tomonitor evolving social media communication guidelines and comply with applicable rules, there is risk that the use of social media by us or our employeesto communicate about our products or business may cause us to be found in violation of applicable laws and regulations. In addition, our employees mayknowingly or inadvertently make use of social media in ways that may not comply with our social media policy or other legal or contractual requirements,which may give rise to liability, lead to the loss of trade secrets or other intellectual property, or result in public exposure of personal information of ouremployees, clinical trial patients, customers, and others. Furthermore, negative posts or comments about us or our products in social media could seriouslydamage our reputation, brand image, and goodwill.ITEM 1B. UNRESOLVED STAFF COMMENTSNone.ITEM 2. PROPERTIESOur corporate headquarters are located at 2505 Meridian Parkway, Suite 100, Durham, North Carolina 27713 in a facility we lease encompassingapproximately 24,862 square feet of office space. The leases for this facility expire in February 2021.We separately lease laboratory space in Durham andResearch Triangle Park, North Carolina, encompassing a total of approximately 10,274 square feet. The leases for this laboratory space in Durham andResearch Triangle Park expire in July 2021 and August 2021, respectively.We believe that our property and equipment are generally well maintained and in good operating condition.ITEM 3. LEGAL PROCEEDINGSNone.ITEM 4. MINE SAFETY DISCLOSURESNot applicable.49PART IIITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITYSECURITIES Market InformationOur common stock began trading on The Nasdaq Global Market on April 11, 2013 under the symbol “CMRX.” Prior to such time, there was no public marketfor our common stock. The following table sets forth the high and low sales prices per share of our common stock as reported on The Nasdaq Global Marketfor the periods indicated. Such quotations represent inter-dealer prices without retail markup, markdown or commission and may not necessarily representactual transactions. Year Ended December 31, 2018 High LowFirst Quarter$5.94 $4.58Second Quarter$5.22 $4.35Third Quarter$5.04 $3.57Fourth Quarter$4.00 $2.08 Year Ended December 31, 2017 High LowFirst Quarter$6.64 $4.33Second Quarter$6.57 $4.28Third Quarter$5.60 $4.30Fourth Quarter$5.54 $4.17Stock Performance Graph(1) The following graph shows a comparison from December 31, 2013 through December 31, 2018 of the cumulative total return for our common stock, theNasdaq Biotechnology Index (NBI) and the Nasdaq Composite Index (CCMP). The graph assumes as initial investment of $100 on December 31, 2013. Thecomparisons in the graph below are based upon historical data and are not intended to forecast or be indicative of possible future performance of our commonstock or Indexes. Comparison of Cumulative Total Return*Among Chimerix, Inc., the Nasdaq Biotechnology Index and the Nasdaq Composite Index(1) This section is not “soliciting material,” is not deemed “filed” with the SEC and is not to be incorporated by reference in any of our filings under theSecurities Act or the Exchange Act whether made before or after the date hereof and irrespective of any general incorporation language in any such filing.* Assuming the investment of $100 on 12/31/2013 (and the reinvestment of dividends thereafter) in each of (i) Chimerix, Inc.’s common stock, (ii) theNasdaq Biotechnology Index and (iii) the Nasdaq Composite Index.50StockholdersAs of February 26, 2019, there were 33 stockholders of record of our common stock, which excludes stockholders whose shares were held in nominee or streetname by brokers. The actual number of common stockholders is greater than the number of record holders, and includes stockholders who are beneficialowners, but whose shares are held in street name by brokers and other nominees. This number of holders of record also does not include stockholders whoseshares may be held in trust by other entities. Dividend PolicyWe have never declared or paid any cash dividends on our common stock. We currently intend to retain all available funds and any future earnings to supportour operations and finance the growth and development of our business. We do not intend to pay cash dividends on our common stock for the foreseeablefuture. Any future determination related to our dividend policy will be made at the discretion of our board of directors and will depend upon, among otherfactors, our results of operations, financial condition, capital requirements, contractual restrictions, business prospects and other factors our board of directorsmay deem relevant. Recent Sales of Unregistered SecuritiesNone. Securities Authorized for Issuance Under Equity Compensation PlansInformation about our equity compensation plans is incorporated herein by reference to Item 12 of Part III of this Annual Report. Purchases of Equity Securities by the Issuer and Affiliated PurchasersWe did not purchase any of our securities during the period covered by this Annual Report.ITEM 6. SELECTED FINANCIAL DATA The following selected consolidated financial data should be read together with our consolidated financial statements and related notes and “Management’sDiscussion and Analysis of Financial Condition and Results of Operations” appearing elsewhere in this Annual Report. The selected financial data in thissection are not intended to replace our consolidated financial statements and the related notes. Our historical results are not necessarily indicative of theresults that may be expected in the future. We derived the following selected Consolidated Statement of Operations and Comprehensive Loss Data for the years ended December 31, 2018, 2017, and2016 and the selected Consolidated Balance Sheet Data as of December 31, 2018 and 2017 from our audited consolidated financial statements and relatednotes appearing elsewhere in this Annual Report (in thousands, except share and per share data). 51 Years Ended December 31,Consolidated Statement of Operations and ComprehensiveLoss Data2018 2017 2016 2015 2014Revenues: Contract revenue$7,216 $4,494 $5,702 $9,214 $4,040 Collaboration and licensing revenue— — — 1,548 — Total revenues7,216 4,494 5,702 10,762 4,040Operating expenses: Research and development55,239 49,448 58,647 97,717 45,379 General and administrative23,582 27,148 25,007 31,296 17,527 Total operating expenses78,821 76,596 83,654 129,013 62,906 Loss from operations(71,605) (72,102) (77,952) (118,251) (58,866)Other (expense) income: Unrealized loss on equity investment(348) (1,160) — — — Interest income (expense) and other, net2,479 2,278 1,562 879 (446) Net loss$(69,474) $(70,984) $(76,390) $(117,372) $(59,312)Net loss per share, basic and diluted$(1.43) $(1.51) $(1.65) $(2.67) $(1.80)Weighted-average shares outstanding, basic and diluted48,593,435 46,963,430 46,267,064 43,878,326 33,003,714 Years Ended December 31,Consolidated Balance Sheet Data2018 2017 2016 2015 2014Cash and cash equivalents$81,106 $18,548 $51,463 $20,605 $128,462Short-term investments, available-for-sale (1)105,424 132,972 180,558 199,729 106,114Working capital176,492 143,337 226,360 208,658 220,390Long-term investments (1)— 76,731 47,407 124,040 52,973Total assets190,714 235,230 286,770 355,992 291,878Loan payable, net, current portion (2)— — — — 4,296Accumulated deficit(556,262) (486,788) (415,804) (339,414) (222,042)Total stockholders’ equity (deficit)$177,604 $221,810 $276,224 $335,459 $274,636 (1)Further details of investments is available in "Notes to Consolidated Financial Statements, Note 1. Fair Value of Financial Instruments" in Item 8 ofthis Annual Report.(2)Loan payable is net of debt discount.ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe following discussion and analysis should be read in conjunction with “Selected Financial Data” and our financial statements and related notesincluded elsewhere in this Annual Report. This discussion and analysis and other parts of this Annual Report contain forward-looking statements basedupon current beliefs, plans and expectations that involve risks, uncertainties and assumptions, such as statements regarding our plans, objectives,expectations, intentions and projections. Our actual results and the timing of selected events could differ materially from those anticipated in theseforward-looking statements as a result of several factors, including those set forth under “Risk Factors” and elsewhere in this Annual Report. You shouldcarefully read the “Risk Factors” section of this Annual Report to gain an understanding of the important factors that could cause actual results to differmaterially from our forward-looking statements. Please also see the section entitled “Forward-Looking Statements.” Overview Chimerix, Inc. is a biotechnology company committed to discovering, developing and commercializing medicines that address significant, unmet medicalneeds. We were founded in 2000 based on the promise of our proprietary lipid conjugate technology to unlock the potential of some of the most broad-spectrum antivirals by enhancing their antiviral activity and safety profiles in52convenient dosing regimens. Our lead compound, brincidofovir (BCV), is in development as an oral and intravenous (IV) formulation for the prevention andtreatment of DNA viruses, including smallpox, adenoviruses, and the human herpesviruses.Recent DevelopmentsAdAPT Study of Oral BrincidofovirThe AdAPT study (Adenovirus after Allogeneic Pediatric Transplantation) is open for enrollment at sites in the United States, the United Kingdom, and incontinental Europe. All currently targeted countries and clinical sites are planned to be open for enrollment by the end of the first quarter of 2019, howeveradditional sites may be added. This study is targeting enrollment of 141 pediatric allogeneic HCT recipients with confirmed AdV infection. Patients arerandomized 2:1 to receive short-course oral BCV or local standard-of-care (SOC) treatment at approximately 40 sites in Europe and the United States.The primary endpoint of the study is a comparison of AdV viral burden (as measured by AdV DNA levels in blood) over 16 weeks in subjects treated withshort-course oral BCV versus those who receive local SOC. The study is 90% powered to show the superiority of reduced adenoviral burden in BCV-treatedpatients compared to SOC. The study is also designed to evaluate the correlation of adenoviral burden (and its clearance) with clinical outcomes, includingsurvival. A strong correlation between AdV viral burden and mortality was described in data collected from the AdVance study. In the AdVance study,patients with the highest average AdV viral burden over 16 weeks had the highest observed mortality. In addition, across the pediatric patients with AdVviremia, each 1.0 log10 increase in average AdV burden over 16 weeks was associated with a two-fold increase in mortality. We have faced regulatory and siteinitiation delays in the implementation of this study. In addition, we have observed lower than anticipated incidence at the centers that have been initiated todate. Based on a thorough re-evaluation of current screening and enrollment rates, we now project that enrollment in AdAPT will be substantially delayedbeyond 2019. While some recently initiated sites are historically more active in transplantation, we continue to evaluate strategies to accelerate the time tocompletion of the study, including opening further AdAPT sites, and possibly re-considering the targeted number of patients for full enrollment. TheCompany plans to provide an update on AdAPT enrollment in mid-2019.In February 2019 we submitted a Type C meeting request with the FDA to review the AdVance data and virologic endpoints. We believe this data will helpsupport the virologic endpoint from our ongoing AdAPT clinical trial.Oral Treatment for SmallpoxWe are collaborating with the Biomedical Advanced Research and Development Authority (BARDA) for the development of BCV as a potential medicalcountermeasure for smallpox. Efficacy is to be demonstrated via two animal models under the FDA’s Animal Efficacy Rule. This rule allows for testing ofinvestigational drugs in animal models to support the effectiveness of the drug in diseases in which human clinical studies are not ethical or feasible. InJanuary 2019, we received positive preliminary top-line results of the in-life part of our adjunct rabbit smallpox study that was conducted under the AnimalEfficacy Rule. The study was designed to determine the effect of administering BCV to animals at certain times (3, 4, 5 or 6 days) after inoculation with therabbitpox virus. These preliminary results are subject to further audit, however, based on these findings the study met its primary endpoint. The toplinesurvival results are as follows: BCV treatment 3days post-infectionBCV treatment 4days post-infectionBCV treatment 5days post-infectionBCV treatment 6days post-infectionNo treatment (placebo)Overall Survival29/29 (100%)26/29 (90%)20/29 (69%)20/29 (69%)8/28 (29%)P-value vs. Group 5<0.0001<0.00010.00140.00140The differences in survival rate observed between each group of animals that received BCV and the animals that did not are statistically significant. Datafrom this study are in-line with those reported in 2015 from our first pivotal study in the rabbitpox model.In February 2019, we initiated a pivotal study in the mouse ectromelia model, which constitutes our second animal model as described in the Animal EfficacyRule. We anticipate data from this study in the second half of 2019 and, contingent upon the results of the animal efficacy studies, we plan to submitmarketing applications in 2020. 53IV Brincidofovir Progresses to Phase 2 StudiesWe are continuing to open sites in the United States and Europe for enrollment in our IV BCV Phase 2 studies in adult allogeneic HCT recipients with AdV.These studies may provide data on other viral infections such as CMV and/or BKV in patients with multi-viral infections. These studies are the first-in-patientstudies to demonstrate the safety and tolerability and pharmacokinetic profile of multiple doses of IV BCV in adult HCT recipients. We will also evaluate therelationship between dose and change from baseline in AdV in blood and stool. Data from these studies are expected to inform the design of future Phase 2/3studies. Similar to AdAPT, we have faced regulatory and site initiation delays in the implementation of these studies. We have also observed lower thananticipated incidence at the study 210/211 centers that have been initiated, which has caused enrollment to occur more slowly than expected. We plan toprovide a study update in mid-2019.Data from these studies will inform the dose and dosing regimen for our potential Multi Viral Protection (MVP)-Peds study and potential studies of IV BCVfor other DNA viruses, such as BKV or HHV-6.The improved drug concentrations in the central nervous system (CNS) achieved with IV brincidofovir in animals could support the study of IV brincidofovirin viral CNS infections such as herpes encephalitis, HHV-6 encephalitis, JC virus infection.CMX521 for NorovirusCMX521 is a nucleoside analog identified from our proprietary Chemical Library which targets the norovirus polymerase, a part of the virus that is commonto all strains and is required for viral replication. It therefore has the potential to be active against the multiple genetically diverse norovirus strains thatcirculate each year and cause disease in humans.We previously presented the safety and tolerability data from a Phase 1 study of CMX521, which supported continued development of the first smallmolecule in clinical development for prophylaxis or treatment of norovirus. Evaluation of active antiviral concentrations in gastrointestinal biopsies indicatethat improved intracellular delivery is needed prior to conducting efficacy studies. The norovirus research and development program has been pausedindefinitely. Brincidofovir Expanded Access ProgramWe continue to receive requests for BCV via our expanded access and named patient programs. During 2018, we granted almost 340 requests forbrincidofovir for the treatment of AdV, highlighting the continued unmet need in this area.Financial OverviewRevenuesTo 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 thereceipt 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 baseperformance segment, which ended on May 31, 2013, plus up to four extension periods, referred to as option segments. Subsequent option segments to thecontract are not subject to automatic renewal and are not exercisable at Chimerix’s discretion. 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 optionsegments are exercised. We are currently performing under the second and third option segments of the contract during which we may receive up to a total of$23.9 million and $14.1 million in expense reimbursement and fees, respectively. The second option segment is scheduled to end on August 1, 2019 and thethird option segments is scheduled to end on March 30, 2019. Of the $75.8 million expense reimbursement and $5.3 million in fees that we may receive,approximately $74.3 million in expense reimbursement and fees has been funded. As of December 31, 2018, of the total funding the Company had invoicedan aggregate of $62.6 million with respect to the base performance segment and the first three option segments.On December 17, 2014, we entered into a collaboration and licensing agreement with ContraVir Pharmaceuticals (Nasdaq: CTRV). In exchange for thelicense to CMX157 rights, we received an upfront payment consisting of 120,000 shares of ContraVir Series B Convertible Preferred Stock with a statedvalue of $1.2 million. In addition, we are eligible to receive clinical, regulatory and initial commercial milestones in the United States and Europe, as well asroyalties and additional milestones based on commercial sales in those territories. We recognized the upfront license fee payment from ContraVir as deferredrevenue for the year ended December 31, 2014, and during the second quarter of 2015 we completed our performance obligations and recorded $1.5 million54in revenue. In September 2016, we converted our shares of ContraVir Series B Convertible Preferred Stock into shares of ContraVir common stock.In the future, we may generate revenue from a combination of product sales, license fees, milestone payments and royalties from the sales of productsdeveloped under licenses of our intellectual property. We expect that any revenue we generate will fluctuate from quarter to quarter as a result of the timingand 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 extentany are successfully commercialized. If we fail to complete the development of our product candidates in a timely manner or obtain regulatory approval forthem, our ability to generate future revenue, and our results of operations and financial position, would be materially adversely affected. Research and Development ExpensesSince 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 expensesas they are incurred. Costs for certain development activities are recognized based on an evaluation of the progress to completion of specific tasks usinginformation and data provided to us by our vendors. We cannot determine with certainty the duration and completion costs of the current or future clinicalstudies of our product candidates. Our research and development expenses consist primarily of:•fees paid to consultants and contract research organizations (CROs), including in connection with our preclinical and clinical trials, and otherrelated clinical trial fees, such as for investigator grants, patient screening, laboratory work, clinical trial database management, clinical trialmaterial management and statistical compilation and analysis;•salaries and related overhead expenses, which include stock option, restricted stock unit (RSU) and employee stock purchase programcompensation and benefits, for personnel in research and development functions;•payments to third-party manufacturers, which produce, test and package our drug substance and drug product (including continued testing ofprocess 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.From our inception through December 31, 2018, we have incurred approximately $460.1 million in research and development expenses, of which $411.6million relates to our development of brincidofovir. These costs were largely related to the conduct of our clinical trials of brincidofovir. The table below summarizes our research and development expenses for the periods indicated (in thousands). Our direct research and development expensesconsist 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 infrastructureresources across multiple research and development programs. Years Ended December 31, 2018 2017 2016Direct research and development expenses$31,325 $24,734 $31,415Research and development personnel costs - excluding stock-based compensation13,488 13,490 15,035Research and development personnel costs - stock-based compensation5,343 7,047 7,137Indirect research and development expenses5,083 4,177 5,060 Total research and development expenses$55,239 $49,448 $58,647The successful development of our clinical and preclinical 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 remainder of the development of any of our clinical or preclinical product candidates orthe period, if any, in which material net cash inflows from these product candidates may commence. This is due to the numerous risks and uncertaintiesassociated with the development of our product candidates, including:•the uncertainty of the scope, rate of progress and expense of our ongoing, as well as any additional, clinical trials and other research anddevelopment activities;•the potential benefits of our candidates over other therapies;•the ability to market, commercialize and achieve market acceptance for any of our product candidates that we are developing or may develop inthe future;55•the results of ongoing or future clinical trials;•the timing and receipt of any regulatory approvals; and•the filing, prosecuting, defending and enforcing of patent claims and other intellectual property rights, and the expense of doing so.A change in the outcome of any of these variables with respect to the development of a product candidate could mean a significant change in the costs andtiming associated with the development of that product candidate. For example, if the FDA or another regulatory authority were to require us to conductclinical trials beyond those that we currently anticipate will be required for the completion of clinical development of a product candidate in the UnitedStates or in Europe, or if we experience significant delays in enrollment in any of our clinical trials, we could be required to expend significant additionalfinancial resources and time with respect to the development of that product candidate.BrincidofovirThe majority of our research and development resources has been focused on completing our Phase 3 trial of brincidofovir for prevention of CMV in HCTrecipients (SUPPRESS), our trial of brincidofovir as a treatment for AdV (AdVise), the AdAPT study in pediatric HCT recipients and our other clinical andpreclinical studies and other work needed to provide sufficient data supporting the safety, tolerability and efficacy of brincidofovir for approval in the UnitedStates and equivalent health authority approval outside the United States.In addition, pursuant to our contract with BARDA, we are evaluating brincidofovir for the treatment of smallpox. During the base performance segment of thecontract, we incurred significant expense in connection with the development of orthopoxvirus animal models, the demonstration of efficacy andpharmacokinetics of brincidofovir in the animal models, the conduct of an open label clinical safety study for subjects with DNA viral infections, and themanufacture and process validation of bulk drug substance and brincidofovir 100 mg tablets. During the first option segment of the contract, we performedadditional animal testing of brincidofovir. In September 2014, we initiated performance under the second option segment of the contract with BARDA andare performing additional animal testing of brincidofovir. In September 2015, we initiated performance under the third option segment which focuses onbrincidofovir chemistry, manufacturing and controls at large scale.As we progressed the development of brincidofovir, research and development expenses increased in the full-year 2018 compared to the full-year 2017. In2019, we expect research and development expenses to remain consistent compared to 2018.General and Administrative ExpensesGeneral 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. Othersignificant general and administrative expenses include the pre-launch activities for brincidofovir, accounting and legal services, cost of various consultants,director and officer liability insurance, occupancy costs and information systems.We currently anticipate that our general and administrative expenses for the full-year 2019 will remain consistent compared to the full-year 2018.Unrealized Loss on Equity InvestmentUnrealized loss on equity investment consists of the decrease in fair value of our investment in ContraVir common stock for the year ended December 31,2018. For the year ended December 31, 2017, unrealized loss on equity investment consists of the write-down in value of our investment in ContraVircommon stock which was determined to be other-than-temporarily impaired.Interest Income and Other, NetInterest income and other, net consists of interest earned on our cash, cash equivalents, short-term investments and long-term investments and realized gainsand losses on debt investments.Share-based CompensationThe Financial Accounting Standards Board (FASB) authoritative guidance requires that share-based payment transactions with employees be recognized inthe financial statements based on their fair value and recognized as compensation expense over the vesting period. Total consolidated share-basedcompensation expense of $13.1 million, $16.1 million and $16.2 million was56recognized in the years ended December 31, 2018, 2017 and 2016, respectively. The share-based compensation expense recognized included expense forstock options, RSUs and our 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 stockprice as well as assumptions including the expected volatility, expected term, risk-free interest rate, expected dividend yield, expected rate of forfeiture andthe 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 met. We evaluate theprobability 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 audited consolidated financial statements, whichhave been prepared in accordance with generally accepted accounting principles in the United States of America (GAAP). The preparation of theseconsolidated 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 believeto be reasonable under the circumstances. These estimates and assumptions form the basis for making judgments about the carrying values of assets andliabilities and the recording of revenues and expenses that are not readily apparent from other sources. Actual results and experiences may differ materiallyfrom these estimates. In addition, our reported financial condition and results of operations could vary if new accounting standards are enacted that areapplicable to our business. Our significant accounting policies are described in Note 1 to our audited consolidated financial statements for the year ended December 31, 2018 includedin this Annual Report. We believe that our accounting policies relating to revenue recognition, research and development prepaids and accruals, investmentsand share-based compensation are the most critical to understanding and evaluating our reported financial results. We have identified these policies ascritical because they both are important to the presentation of our financial condition and results of operations and require us to make judgments andestimates on matters that are inherently uncertain and may change in future periods. For more information regarding these policies, you should refer to Note 1to our audited consolidated financial statements included in this Annual Report. Revenue RecognitionThe 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 withthe criteria outlined in Accounting Standards Codification (ASC) 606 issued by the Financial Accounting Standards Board (FASB). Following thisaccounting pronouncement, a five-step approach is applied for recognizing revenue, including (1) identify the contract with a customer; (2) identify theperformance 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 brincidofovir as a medical countermeasure in theevent 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 theperformance of 1 base segment and 4 option segments. Exercise of each option segment is solely at the discretion of BARDA. Currently, option segments 1through 3 have been exercised. The Company assessed the services in accordance with the authoritative guidance and concluded that there is a potential of 5separate contracts (1 base segment and four option segments) within this agreement, each of which has a single performance obligation. The transaction pricefor each segment, based on the transaction price as defined in each segment contract, is allocated to the single performance obligation for each contract. Thetransaction price is recognized over time by measuring the progress toward complete satisfaction of the performance obligation. The progress towardcomplete satisfaction is estimated based on the costs incurred to date relative to the total estimated costs per the terms of each contract. The Companytypically invoices BARDA monthly as costs are incurred. From our inception through December 31, 2018, we have not generated any revenue from product sales. For the same period, we have generated $100.9million in grant and contract revenue. We recognize revenue under government grants and contracts as qualifying research activities are conducted based oninvoices received from company vendors. Any amounts received in advance of performance are recorded as deferred revenue until earned.57Research and Development Prepaids and AccrualsAs part of the process of preparing financial statements, we are required to estimate our expenses resulting from our obligation under contracts with vendorsand consultants and clinical site agreements in connection with our research and development efforts. The financial terms of these contracts are subject tonegotiations which vary contract to contract and may result in payment flows that do not match the periods over which materials or services are provided tous under such contracts.Our objective is to reflect the appropriate research and development expenses in our financial statements by matching those expenses with the period inwhich services and efforts are expended. We account for these expenses according to the progress of our research and development efforts. We determineprepaid and accrual estimates through discussion with applicable personnel and outside service providers as to the progress or state of communication ofclinical trials, or other services completed. We adjust our rate of research and development expense recognition if actual results differ from our estimates. Wemake estimates of our prepaid and accrued expenses as of each balance sheet date in our financial statements based on facts and circumstances known at thattime. Although we do not expect our estimates to be materially different from amounts actually incurred, our understanding of status and timing of servicesperformed relative to the actual status and timing of services performed may vary and may result in us reporting amounts that are too high or too low for anyparticular period. Through December 31, 2018, there had been no material adjustments to our prior period estimates of prepaid and accruals for research anddevelopment expenses. Our research and development prepaids and accruals are dependent upon the timely and accurate reporting of contract researchorganizations and other third-party vendors.InvestmentsInvestments consist primarily of commercial paper, corporate bonds, U.S. Treasury securities and stock of a U.S. corporation. We invest in high-credit qualityinvestments in accordance with our investment policy which minimizes the probability of loss.Available-for-sale debt securities are carried at fair value as determined by quoted market prices, with the unrealized gains and losses, net of tax, reported as aseparate component of stockholders deficit. Realized gains and losses are determined using the specific identification method and transactions are recordedon a settlement date basis in interest income (expense) and other, net. Investments with original maturities beyond three months at the date of purchase andwhich mature on, or less than twelve months from, the balance sheet date are classified as short-term. Investments with a maturity beyond twelve months fromthe balance sheet date are classified as long-term. We periodically review available-for-sale debt securities for other-than-temporary declines in fair valuebelow the cost basis and whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. We evaluate,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 changesthereto; and our intent to sell, or whether we will more likely than not be required to sell, the security before recovery of our amortized cost basis. Any suchdeclines in value judged to be other-than-temporary on available-for-sale securities are reported in other-than-temporary impairment of investment.Prior to the fourth quarter of 2017, unrealized gains and losses in equity investments were reported as a separate component of stockholders equity. For theyear ended December 31, 2017, we determined the decline in value for our investment in ContraVir common stock to be other-than temporary. As such,during the fourth quarter of 2017, we reclassified a loss of $1.2 million from accumulated other comprehensive loss, net in the Consolidated Balance Sheetsto unrealized loss on equity investment in the Consolidated Statements of Operations and Comprehensive Loss. During 2018, changes in the fair value ofequity investments were recorded to unrealzed loss on equity investment in the Consolidated Statements of Operations and Comprehensive Loss.Valuation of Share-Based CompensationWe record the fair value of share-based awards issued as of the grant date as compensation expense. We recognize compensation expense over the requisiteservice period, which is equal to the vesting period.Share-based compensation expense includes stock options, RSUs and employee stock purchase plan purchase rights and has been reported in ourConsolidated Statements of Operations and Comprehensive Loss as follows (in thousands): Years Ended December 31, 2018 2017 2016Income Statement Classification: Research and development expense$5,343 $7,047 $7,137General and administrative expense7,731 9,063 9,086 Total stock-based compensation expense$13,074 $16,110 $16,22358RSU compensation expense is based on the grant-date fair value of our common stock.We calculate the fair value of share-based compensation awards using the Black-Scholes option-pricing model. The Black-Scholes option-pricing modelrequires the use of subjective assumptions, including volatility of our common stock, the expected term of our stock options, the risk-free interest rate for aperiod that approximates the expected term of our stock options and the fair value of the underlying common stock on the date of grant. In applying theseassumptions, we considered the following factors:•We have limited operating history to estimate the volatility of our common stock price. We calculate expected volatility based on a blend ofcompany specific historical data and a group of similar publicly traded companies for which the historical information is available. For thepurpose of identifying peer companies, we consider characteristics such as industry, length of trading history, similar vesting terms and in-the-money option status. We plan to continue to use the guideline peer group volatility information until the historical volatility of our commonstock is relevant to measure expected volatility for future option grants.•We use historical exercise data to estimate expected term.•We determine the risk-free interest rate by reference to implied yields available from U.S. Treasury securities with a remaining term equal to theexpected life assumed at the date of grant.•The assumed dividend yield is based on our expectation of not paying dividends for the foreseeable future.•We estimate forfeitures based on our historical analysis of actual stock option forfeitures.The assumptions used in the Black-Scholes option-pricing model for the years ended December 31, 2018, 2017, and 2016 are set forth below:Stock Options Years Ended December 31, 2018 2017 2016Expected volatility85.83% 85.51% 85.16%Expected term (in years)5.9 5.9 6.0Weighted-average risk-free interest rate2.52% 2.02% 1.70%Expected dividend yield—% —% —%Weighted-average fair value per option$3.43 $3.71 $5.62Employee Stock Purchase Plan Years Ended December 31, 2018 2017 2016Expected volatility44.01% 77.18% 111.57%Expected term (in years)1.23 0.97 1.37Weighted-average risk-free interest rate2.56% 0.99% 0.75%Expected dividend yield—% —% —%Weighted-average option value per share$1.36 $2.65 $3.20Utilization of Net Operating Loss CarryforwardsAt December 31, 2018, we had net operating loss carryforwards for federal, state, and foreign tax purposes of approximately $465.3 million, $353.8 millionand $0.4 million, respectively. At December 31, 2017, we had net operating loss carryforwards for federal, state, and foreign tax purposes of approximately$408.1 million, $319.9 million, and $0.4 million, respectively. In addition, we had tax credit carryforwards for federal tax purposes of approximately $18.4million as of December 31, 2018, which begin to expire in 2022. The future utilization of net operating loss and tax credit carryforwards may be limited dueto changes in ownership. In general, if we experience a greater than 50 percent aggregate change in ownership of certain significant stockholders or groupsover a three-year period (a Section 382 ownership change), utilization of our pre-change net operating loss carryforwards is subject to an annual limitationunder Section 382 of the Code (and similar state laws). The annual limitation generally is determined by multiplying the value of our stock at the time ofsuch ownership change (subject to certain adjustments) by the applicable long-term tax-exempt rate. Such limitations may result in expiration of a portion ofthe pre-change net operating loss carryforwards before utilization and may be substantial. We have determined that a Section 382 ownership change occurredin592002 and 2007 resulting in limitations of at least $64,000 and $762,000, respectively, of losses incurred prior to the respective ownership change dates. Inaddition, we have determined that another Section 382 ownership change occurred in 2013 with our initial public offering, our private placements and othertransactions that have occurred since 2007, resulting in a limitation of at least $6.7 million of losses incurred prior to the ownership change date. We mayalso experience ownership changes in the future as a result of subsequent shifts in our stock ownership. Furthermore, under the Tax Act, federal net operatinglosses incurred in 2018 and in future years may be carried forward indefinitely, but the deductibility of such federal net operating losses is limited. It isuncertain if and to what extent various states will conform to the Tax Act. As a result, if we earn net taxable income, our ability to use our pre-change netoperating loss carryforwards to offset United States federal taxable income may be subject to limitations, which could potentially result in increased futuretax liability to us.RESULTS OF OPERATIONS Comparison of the Years Ended December 31, 2018 and December 31, 2017The following table summarizes our results of operations for the years ended December 31, 2018 and December 31, 2017, together with the changes in thoseitems in dollars and percentages (in thousands, except percentages): Years Ended December 31, Dollar Change % Change 2018 2017 Increase/(Decrease)Contract revenue$7,216 $4,494 $2,722 60.6 %Operating expenses: Research and development55,239 49,448 5,791 11.7 % General and administrative23,582 27,148 (3,566) (13.1)% Total operating expenses78,821 76,596 2,225 2.9 % Loss from operations(71,605) (72,102) 497 (0.7)%Other (expense) income: Unrealized loss on equity investment(348) (1,160) 812 (70.0)% Interest income and other, net2,479 2,278 201 8.8 % Net loss$(69,474) $(70,984) $1,510 (2.1)%Contract RevenueFor the year ended December 31, 2018, contract revenue increased to $7.2 million compared to $4.5 million for the year ended December 31, 2017. Theincrease of $2.7 million, or 60.6%, was related to a increase in reimbursable expenses associated with our contract with BARDA.Research and Development ExpensesFor the year ended December 31, 2018, our research and development expenses increased to $55.2 million compared to $49.4 million for the year endedDecember 31, 2017. The increase of $5.8 million, or 11.7%, was primarily related to the following:•an increase in oral brincidofovir clinical expenses of $3.2 million, which is comprised primarily of a $2.7 million increase related to theongoing AdAPT clinical study and a $1.5 million increase of supporting bioequivalent and registry studies, primarily offset by a decrease of$1.0 million related to the completion of our AdVance study;•an increase of $2.7 million in oral brincidofovir smallpox program expenses which primarily includes reimbursable BARDA contract expense;•an increase of $1.7 million of supporting research and development expenses;•an increase of $0.8 million related to IV brincidofovir development;•a decrease of $1.5 million related to compensation expense; and•a decrease of $1.3 million of development costs related to CMX521.General and Administrative ExpensesFor the year ended December 31, 2018, our general and administrative expenses decreased to $23.6 million compared to $27.1 million for the year endedDecember 31, 2017. The decrease of $3.6 million, or 13.1%, was primarily related to the following:•a decrease of $2.3 million related to compensation expense;60•a decrease of $1.0 million in costs related to an indemnification claim settled in 2018; and•a decrease of $0.3 million in global commercial readiness costs.Interest Income and Other, netFor the year ended December 31, 2018, our interest income and other, net was $2.5 million compared to interest income of $2.3 million for the year endedDecember 31, 2017. The increase of $0.2 million was attributable to higher interest rates offset by $0.4 million of realized losses on the sale of short-terminvestments.Unrealized Loss on Equity InvestmentFor the year ended December 31, 2018, unrealized loss on equity investment was $0.3 million compared to an unrealized loss on equity investment of $1.2million for the year ended December 31, 2017. These unrealized losses relate to the decrease in value of our investment in ContraVir common stock.Comparison of the Years ended December 31, 2017 and December 31, 2016The following table summarizes our results of operations for the years ended December 31, 2017 and December 31, 2016, together with the changes in thoseitems in dollars and percentages (in thousands, except for percentages): Years Ended December 31, Dollar Change % Change 2017 2016 Increase/(Decrease)Contract revenue$4,494 $5,702 $(1,208) (21.2)%Operating expenses: Research and development49,448 58,647 (9,199) (15.7)% General and administrative27,148 25,007 2,141 8.6 % Total operating expenses76,596 83,654 (7,058) (8.4)% Loss from operations(72,102) (77,952) 5,850 (7.5)%Other (expense) income: Unrealized loss on equity investment(1,160) — (1,160) * Interest income2,278 1,562 716 45.8 % Net loss$(70,984) $(76,390) $5,406 (7.1)% * Not meaningful or not calculableContract RevenueFor the year ended December 31, 2017, contract revenue decreased to $4.5 million compared to $5.7 million for the year ended December 31, 2016. Thedecrease of $1.2 million, or 21.2%, was related to a decrease in reimbursable expenses associated with our contract with BARDA. Research and Development ExpensesFor the year ended December 31, 2017, our research and development expenses decreased to $49.4 million compared to $58.6 million for the year endedDecember 31, 2016. The decrease of $9.2 million, or 15.7%, was primarily related to the following:•a decrease in oral brincidofovir clinical expenses of $6.2 million, which is comprised primarily of an $8.7 million decrease related to thecompletion of our Phase 3 SUPPRESS and AdVise trials and the closeout of our SUSTAIN and SURPASS clinical trials, and a $0.6 milliondecrease in our expanded access programs, primarily offset by an increase of $1.8 million related to start-up activities for our AdAPT study andan increase of $1.2 million related to conduct of the AdVance study;•a decrease of $1.4 million in oral brincidofovir drug manufacturing costs;•a decrease of $1.9 million related to compensation expense;•a decrease of $0.9 million related to reimbursable BARDA contract expenses; and•a decrease of $0.8 million in supporting research and development expenses; offset by61•an increase of approximately $2.4 million mainly related to our development of an IV formulation of brincidofovir, development of CMX521,our clinical candidate for norovirus, and other early stage compounds.General and Administrative ExpensesFor the year ended December 31, 2017, our general and administrative expenses increased to $27.1 million compared to $25.0 million for the year endedDecember 31, 2016. The increase of $2.1 million, or 8.6%, was primarily related to the following:•an increase of $2.0 million in global commercial readiness costs;•an increase of $1.0 million in costs related to an indemnification claim; offset by•a decrease of $0.6 million related to compensation expense.Interest IncomeFor the year ended December 31, 2017, our interest income was $2.3 million compared to interest income of $1.6 million for the year ended December 31,2016. The increase of $0.7 million was attributable to higher interest rates.Unrealized Loss on Equity InvestmentFor the year ended December 31, 2017, unrealized loss on equity investment was $1.2 million related to the other-than-temporary-impairment write-down invalue of our investment in ContraVir common stock. We recorded no other-than-temporary impairment of investment for the year ended December 31, 2016.LIQUIDITY AND CAPITAL RESOURCESWe have incurred losses since our inception in 2000 and, as of December 31, 2018, we had an accumulated deficit of $556.3 million. We anticipate that wewill continue to incur losses for at least the next several years. In connection with our ongoing AdAPT study, our IV brincidofovir trials and our smallpoxprogram, we have seen an increase in expenses. We currently expect research and development expenses to remain consistent in 2019 compared to 2018, andwe will need additional capital in the future to fund our operations, which we may obtain through one or more equity offerings, debt financings, governmentor other third-party funding, strategic alliances and licensing or collaboration arrangements.On November 8, 2017, the Company entered into an at-the-market (ATM) sales agreement with Cowen and Company, LLC to sell up to $75 million of theCompany’s common stock under a shelf registration statement filed in November 2017. As of February 26, 2019, the Company had sold an aggregate of 2.8million shares of common stock at a weighted average price per share of $4.00 for $10.9 million of proceeds net of commissions.We cannot assure you that adequate funding will be available on terms acceptable to us, if at all. Any additional equity financings will be dilutive to ourstockholders and any additional debt may involve operating covenants that may restrict our business. If adequate funds are not available through thesemeans, we may be required to curtail significantly one or more of our research or development programs, our pre-launch expenses, and any launch and othercommercialization expenses for any of our products that may receive marketing approval. We cannot assure you that we will successfully develop orcommercialize 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 short-term investments will enable us to fund our current operating expenses and capitalrequirements for at least the next 12 months. Such operating and capital requirements do not contemplate incremental expenses associated with a full scalecommercial launch of brincidofovir. However, changing circumstances beyond our control may cause us to consume capital more rapidly than we currentlyanticipate.Since our inception through December 31, 2018, we have funded our operations principally with $606.1 million from the sale of common stock and preferredstock, $37.4 million of research funding from our various National Institute of Allergy and Infectious Diseases awards, $63.4 million in revenue from ourBARDA contract, debt financings totaling $21.0 million, $17.5 million of licensing revenue, and $14.8 million from stock option and warrant exercises andpurchases under our Employee Stock Purchase Plan (ESPP). As of December 31, 2018, we had capital available to fund operations of approximately $186.5million. Cash in excess of immediate requirements is invested in accordance with our investment policy, primarily with a view to liquidity and capitalpreservation.62Cash FlowsThe following table sets forth the significant sources and uses of cash for the periods (in thousands): Years Ended December 31,Cash sources and uses:2018 2017 2016 Net cash used in operating activities$(53,725) $(50,125) $(63,815) Net cash provided by investing activities105,095 16,431 94,065 Net cash provided by financing activities11,188 779 608 Net increase (decrease) in cash and cash equivalents$62,558 $(32,915) $30,858Operating ActivitiesNet cash used in operating activities of $53.7 million for the year ended December 31, 2018 was primarily the result of our $69.5 million net loss, offset bythe change in operating assets and liabilities and the add-back of non-cash expenses. Non-cash expenses included add-backs of $13.1 million for stock basedcompensation, $0.9 million of depreciation of property and equipment, $0.4 million for a loss on the sale of investments, and $0.3 million for a loss on equityinvestment, offset by $0.9 million of amortization of discount/premium on investments. The change in operating assets and liabilities includes a decrease inprepaid expenses and other assets of $0.6 million and a decrease of $1.4 million in accounts receivable.Net cash used in operating activities of $50.1 million for the year ended December 31, 2017 was primarily the result of our $71.0 million net loss, offset bythe change in operating assets and liabilities and the add-back of non-cash expenses of $16.1 million for stock based compensation, $1.2 million for animpairment loss on financial assets and $1.1 million of depreciation of property and equipment. The change in operating assets and liabilities includes anincrease in accounts payable and accrued liabilities of $3.1 million, offset by an increase in prepaid expenses and other assets of $0.2 million and an increaseof $0.1 million in accounts receivable.Net cash used in operating activities of $63.8 million for the year ended December 31, 2016 was primarily the result of our $76.4 million net loss and thechange in operating assets and liabilities, offset by the add-back of non-cash expenses of $16.2 million for stock based compensation, $1.2 million ofamortization of premiums on investments and $1.1 million of depreciation of property and equipment. The change in operating assets and liabilities includesa decrease in accounts payable and accrued liabilities of $10.1 million, offset by a decrease in prepaid expenses and other assets of $3.2 million and adecrease of $0.9 million in accounts receivable due to a decrease in reimbursable expenses related to our contract with BARDA.Investing ActivitiesNet cash provided by investing activities of $105.1 million during the year ended December 31, 2018 was primarily the result of maturities and sale of short-term investments, offset by purchases of short-term and long-term investments. Net cash provided by investing activities of $16.4 million during the yearended December 31, 2017 was primarily the result of maturities and sales of short-term investments, offset by purchases of long-term investments. Net cashprovided by investing activities of $94.1 million during the year ended December 31, 2016 was primarily the result of maturities of short-term investments,offset by purchases of short-term and long-term investments.Financing ActivitiesNet cash provided by financing activities of $11.2 million for the year ended December 31, 2018 was primarily the result of $10.9 million in proceeds fromthe issuance of common stock, $0.7 million from the exercise of stock options and purchases under the ESPP, offset by $0.4 million in payments of deferredoffering costs. Net cash provided by financing activities of $0.8 million for the year ended December 31, 2017 was primarily the result of $0.8 million fromthe exercise of stock options and purchases under the ESPP. Net cash provided by financing activities of $0.6 million for the year ended December 31, 2016was primarily the result of $0.6 million from the exercise of stock options and purchases under the ESPP.Future Funding RequirementsTo date, we have not generated any revenue from product sales. We do not know when, or if, we will generate any revenue from product sales. We do notexpect to generate significant revenue from product sales unless and until we obtain regulatory approval of and commercialize brincidofovir or any of ourother product candidates. At the same time, we expect our expenses to increase63in connection with our ongoing development activities, particularly as we continue the research, development and clinical trials of, and seek regulatoryapproval for, our product candidates. Furthermore, subject to obtaining regulatory approval of any of our product candidates, we expect to incur significantcommercialization expenses for product sales, marketing, manufacturing and distribution. We anticipate that we will need substantial additional funding inconnection with our continuing operations. Based upon our current operating plan, we believe that our existing cash, cash equivalents and short-terminvestments, will enable us to fund our operating expenses and capital requirements for at least the next 12 months. We have based our estimates onassumptions that may prove to be wrong, and we may use our available capital resources sooner than we currently expect. Because of the numerous risks anduncertainties associated with the development and commercialization of our product candidates, we are unable to estimate the amounts of increased capitaloutlays and operating expenditures necessary to complete the development of our product candidates.Our future capital requirements will depend on many factors, including:•the willingness of the FDA and/or foreign regulators to accept the results from our AdAPT study, as well as our other completed andplanned clinical and preclinical studies and other work, as the basis for review and approval of brincidofovir for the treatment of AdVinfection;•the progress, costs, results and timing of future clinical trials of brincidofovir for other potential indications, including prevention ofmultiple DNA virus infections and treatment of AdV, BKV and smallpox;•the willingness of the FDA and/or foreign regulators to accept clinical and preclinical studies and other work, as the basis for review andapproval of brincidofovir for other potential indications;•the outcome, costs and timing of seeking and obtaining FDA and any other regulatory approvals;•the ability to continue to receive government funding;•the achievement of milestones under our agreement with ContraVir;•the number and characteristics of product candidates that we pursue, including our product candidates in preclinical development;•the ability of our product candidates to progress through clinical development successfully;•our need to expand our research and development activities;•the costs associated with securing, establishing and maintaining commercialization and manufacturing capabilities;•the costs of acquiring, licensing or investing in businesses, products, product candidates and technologies;•our ability to maintain, expand and defend the scope of our intellectual property portfolio, including the amount and timing of anypayments we may be required to make, or that we may receive, in connection with the licensing, filing, prosecution, defense andenforcement of any patents or other intellectual property rights;•our need and ability to hire additional management and scientific and medical personnel;•the effect of competing technological and market developments;•our need to implement additional internal systems and infrastructure, including financial and reporting systems; and•the economic and other terms, timing and success of our existing licensing arrangements and any collaboration, licensing or otherarrangements into which we may enter in the future.Until such time, if ever, as we can generate substantial revenue from product sales, we expect to finance our cash needs through a combination of equityofferings, debt financings, government or other third-party funding, marketing and distribution arrangements, or other collaborations, strategic alliances orlicensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interests of ourcommon stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of ourcommon stockholders. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions,such as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional funds through government or other third-partyfunding, marketing and distribution arrangements or other collaborations, strategic alliances or licensing arrangements with third parties, we may have torelinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or to grant licenses on terms that may not befavorable to us.64CONTRACTUAL OBLIGATIONS AND COMMITMENTSThe following table summarizes our contractual obligations at December 31, 2018 (in thousands): Total Less Than 1Year 1 – 3 Years 3 – 5 Years More Than 5 YearsOperating leases (1)$1,818 $786 $1,032 $— $—Total$1,818 $786 $1,032 $— $—(1)Consists of our corporate headquarters lease encompassing 24,862 square feet of office space that expires in February 2021, and our laboratoryleases encompassing a total of approximately 10,274 square feet which are located in Durham and Research Triangle Park, North Carolina andexpire in July 2021 and August 2021, respectively.In addition to the amounts set forth in the table above, we have payment obligations under license agreements that are contingent upon future events such asour achievement of specified development, regulatory and commercial milestones. We will be required to make additional payments when certain milestonesare achieved and we are obligated to pay royalties based on future product sales. As of December 31, 2018, we were unable to estimate the timing orlikelihood of achieving the milestones or making future product sales and, therefore, any related payments are not included in the table above. In connectionwith the development and commercialization of brincidofovir and CMX157 (which we have licensed to ContraVir Pharmaceuticals), in addition to royaltieson product sales, we could be required to pay UC up to an aggregate of $3.4 million in milestone payments, assuming the achievement of all applicablemilestone events under the license agreement. Under our license agreement with the University of Michigan, we are required to pay minimum royalties from2024 through the expiration of the last licensed issued patent (which we estimate to be $20,000 in the year 2024), but any additional royalties that may bepayable under the University of Michigan agreement are not estimable. Additionally, we enter into contracts in the normal course of business with CROs for clinical trials and clinical supply manufacturing and with vendors forpreclinical research studies and other services and products for operating purposes, which generally provide for termination or cancellation within 30 days ofnotice, and therefore are not included in the table above. We also have agreements with our executive officers that require the funding of specific payments, ifcertain events occur, such as a change in control or the termination of employment without cause. These potential payment obligations are not included inthe table above.Off-Balance Sheet ArrangementsDuring the periods presented, we did not have, nor do we currently have, any off-balance sheet arrangements as defined under SEC rules.ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKOur 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-termduration of our investment portfolio and the low risk profile of our investments, an immediate 10.0% change in interest rates would not have a material effecton 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 theeffect 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 cashand cash equivalents and available-for-sale investments do not contain excessive risk, we cannot provide absolute assurance that in the future ourinvestments will not be subject to adverse changes in market value. In addition, we maintain significant amounts of cash and cash equivalents at one or morefinancial 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 ofoperations for the years ended December 31, 2018 or 2017.65ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAINDEX TO CONSOLIDATED FINANCIAL STATEMENTS PageReports of Independent Registered Public Accounting Firm67Consolidated Balance Sheets as of December 31, 2018 and 201769Consolidated Statements of Operations and Comprehensive Loss for the Years Ended December 31, 2018, 2017 and 201670Consolidated Statements of Stockholders’ Equity (Deficit) for the Years Ended December 31, 2018, 2017 and 201671Consolidated Statements of Cash Flows for the Years Ended December 31, 2018, 2017 and 201672Notes to Consolidated Financial Statements7366REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Shareholders and the Board of Directors of Chimerix, Inc.Opinion on the Financial StatementsWe have audited the accompanying consolidated balance sheets of Chimerix, Inc. (the Company) as of December 31, 2018 and 2017, the relatedconsolidated statements of operations and comprehensive loss, stockholders’ equity (deficit), and cash flows for each of the three years in the period endedDecember 31, 2018, and the related notes (collectively referred to as the “consolidated financial statements“). In our opinion, the consolidated financialstatements present fairly, in all material respects, the financial position of the Company at December 31, 2018 and 2017, and the results of its operations andits cash flows for each of the three years in the period ended December 31, 2018, in conformity with U.S. generally accepted accounting principles.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company‘sinternal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control-Integrated Framework issued by theCommittee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated March 5, 2019 expressed an unqualifiedopinion thereon.Basis for OpinionThese financial statements are the responsibility of the Company‘s management. Our responsibility is to express an opinion on the Company‘s financialstatements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Companyin accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing proceduresto assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also includedevaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financialstatements. We believe that our audits provide a reasonable basis for our opinion.We have served as the Company's auditor since 2008. /s/ Ernst & Young LLPRaleigh, North CarolinaMarch 5, 201967REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Shareholders and the Board of Directors of Chimerix, Inc.Opinion on Internal Control over Financial ReportingWe have audited Chimerix, Inc.’s internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In ouropinion, Chimerix, Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2018, basedon the COSO criteria.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidatedbalance sheets of the Company as of December 31, 2018 and 2017, the related consolidated statements of operations and comprehensive loss, stockholders‘equity (deficit), and cash flows for each of the three years in the period ended December 31, 2018, and the related notes and our report dated March 5, 2019expressed an unqualified opinion thereon.Basis for OpinionThe Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness ofinternal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Ourresponsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firmregistered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and theapplicable rules and regulations of the Securities and Exchange Commission and the PCAOB.We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether effective internal control over financial reporting was maintained in all material respects.Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing andevaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considerednecessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.Definition and Limitations of Internal Control over Financial ReportingA company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reportingand the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal controlover financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairlyreflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are beingmade only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention ortimely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation ofeffectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliancewith the policies or procedures may deteriorate. /s/ Ernst & Young LLPRaleigh, North CarolinaMarch 5, 201968CHIMERIX, INC.CONSOLIDATED BALANCE SHEETS(in thousands, except share and per share data) December 31, 2018 2017ASSETS Current assets: Cash and cash equivalents$81,106 $18,548 Short-term investments, available-for-sale105,424 132,972 Accounts receivable330 1,682 Prepaid expenses and other current assets2,598 3,331 Total current assets189,458 156,533Long-term investments— 76,731Property and equipment, net of accumulated depreciation1,210 1,894Other long-term assets46 72 Total assets$190,714 $235,230LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable$4,691 $3,812 Accrued liabilities8,275 9,384 Total current liabilities12,966 13,196Lease-related obligations144 224 Total liabilities13,110 13,420Stockholders’ equity: Preferred stock, $0.001 par value, 10,000,000 shares authorized at December 31, 2018 and 2017; no shares issuedand outstanding as of December 31, 2018 and 2017— —Common stock, $0.001 par value; 200,000,000 shares authorized at December 31, 2018 and 2017; 50,735,279 and47,505,532 shares issued and outstanding at December 31, 2018 and 2017, respectively51 47 Additional paid-in capital733,907 709,514 Accumulated other comprehensive loss, net(92) (963) Accumulated deficit(556,262) (486,788) Total stockholders’ equity177,604 221,810 Total liabilities and stockholders’ equity$190,714 $235,230The accompanying notes are an integral part of the consolidated financial statements.69CHIMERIX, INC.CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS(in thousands, except share and per share data) Years Ended December 31, 2018 2017 2016Contract revenue$7,216 $4,494 $5,702Operating expenses: Research and development55,239 49,448 58,647 General and administrative23,582 27,148 25,007 Total operating expenses78,821 76,596 83,654 Loss from operations(71,605) (72,102) (77,952)Other (expense) income: Unrealized loss on equity investment(348) (1,160) — Interest income and other, net2,479 2,278 1,562 Net loss(69,474) (70,984) (76,390)Other comprehensive loss: Unrealized gain (loss) on investments, net871 (523) 324 Comprehensive loss$(68,603) $(71,507) $(76,066)Per share information: Net loss, basic and diluted$(1.43) $(1.51) $(1.65) Weighted-average shares outstanding, basic and diluted48,593,435 46,963,430 46,267,064The accompanying notes are an integral part of the consolidated financial statements.70CHIMERIX, INC.CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)(in thousands) CommonStock AdditionalPaid-in Capital Accumulated OtherComprehensiveGain (Loss) AccumulatedDeficit Total Stockholders’Equity (Deficit)Balance, December 31, 2015$46 $675,591 $(764) $(339,414) $335,459Share-based compensation— 16,223 — — 16,223Exercise of stock options— 168 — — 168Employee stock purchase plan purchases— 440 — — 440Comprehensive loss: Unrealized gain on investments, net— — 324 — 324Net loss— — — (76,390) (76,390)Total comprehensive loss (76,066)Balance, December 31, 201646 692,422 (440) (415,804) 276,224Share-based compensation1 16,109 — — 16,110Exercise of stock options— 121 — — 121Employee stock purchase plan purchases— 712 — — 712University of Michigan stock issuance— 150 — — 150Comprehensive loss: Unrealized loss on investments, net— — (523) — (523)Net loss— — — (70,984) (70,984)Total comprehensive loss (71,507)Balance, December 31, 201747 709,514 (963) (486,788) 221,810Share-based compensation1 13,073 — — 13,074Exercise of stock options— 115 — — 115Employee stock purchase plan purchases— 608 — — 608Issuance of common stock, net of issuance costs3 10,597 — — 10,600Comprehensive loss: Unrealized gain on investments, net— — 871 — 871Net loss— — — (69,474) (69,474)Total comprehensive loss (68,603)Balance, December 31, 2018$51 $733,907 $(92) $(556,262) $177,604The accompanying notes are an integral part of the consolidated financial statements.71CHIMERIX, INC.CONSOLIDATED STATEMENTS OF CASH FLOWS(in thousands) Years Ended December 31, 2018 2017 2016Cash flows from operating activities: Net loss$(69,474) $(70,984) $(76,390) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation of property and equipment860 1,091 1,063 Amortization of discount/premium on investments(852) (5) 1,223 Share-based compensation13,074 16,110 16,223 Loss on sale of investments378 — — Unrealized loss on equity investment348 1,160 — Amortization of lease-related obligations(59) (319) 132 Changes in operating assets and liabilities: Accounts receivable1,352 (83) 861 Prepaid expenses and other assets643 (168) 3,215 Accounts payable and accrued liabilities5 3,073 (10,142) Net cash used in operating activities(53,725) (50,125) (63,815)Cash flows from investing activities: Purchases of property and equipment(181) (151) (841) Purchases of short-term investments(125,611) — (23,992) Purchases of long-term investments(6,031) (162,613) (79,381) Proceeds from sales of short-term investments111,178 13,500 — Proceeds from maturities of short-term investments125,740 165,695 198,279 Net cash provided by investing activities105,095 16,431 94,065Cash flows from financing activities: Proceeds from exercise of stock options115 121 168 Proceeds from employee stock purchase plan608 712 440 Proceeds from issuance of common stock, net of commissions10,867 — — Payments of deferred offering costs(402) (54) — Net cash provided by financing activities11,188 779 608Net increase (decrease) in cash and cash equivalents62,558 (32,915) 30,858 Cash and cash equivalents: Beginning of period18,548 51,463 20,605 End of period$81,106 $18,548 $51,463Supplemental disclosure of cash flow information Non-cash addition to deferred offering costs$22 $276 $—The accompanying notes are an integral part of the consolidated financial statements.72CHIMERIX, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSNote 1. The Business and Summary of Significant Accounting PoliciesDescription of BusinessChimerix, Inc. (the Company) is a biopharmaceutical company committed to discovering, developing and commercializing medicines that improveoutcomes for immunocompromised patients. The Company was founded in 2000 based on the promise of its proprietary lipid conjugate technology tounlock the potential of some of the most broad-spectrum antivirals by enhancing their antiviral activity and safety profiles in convenient dosing regimens.The Company's lead compound, brincidofovir, is in development as an oral and intravenous (IV) formulation for the prevention and treatment of DNAviruses, including smallpox, adenoviruses, and the human herpesviruses. In addition, the Company has an active discovery program focusing on viral targetsfor which limited or no therapies are currently available.Basis of PresentationThe consolidated financial statements include the accounts of the Company, and its wholly owned subsidiaries. The accompanying consolidated financialstatements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). The preparation of theCompany’s consolidated financial statements requires estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses,and the disclosure of contingent assets and liabilities in the consolidated financial statements and accompanying notes. Although these estimates are basedon knowledge of current events and actions the Company may undertake in the future, actual results may ultimately differ from these estimates andassumptions.ReclassificationsCertain prior period amounts in the accompanying consolidated financial statements have been reclassified to conform to the current year presentation. Thesereclassifications had no effect on previously reported net income or stockholders' equity (deficit).Cash and Cash EquivalentsThe Company considers any highly liquid instrument with an original maturity of three months or less at acquisition to be a cash equivalent. Cashequivalents consist of money market funds, U.S. Treasury securities, commercial paper, and corporate bonds.InvestmentsInvestments consist primarily of commercial paper, corporate bonds, U.S. Treasury securities and stock of a U.S. corporation. The Company invests in high-credit quality investments in accordance with its investment policy which minimizes the probability of loss.Available-for-sale debt securities are carried at fair value as determined by quoted market prices, with the unrealized gains and losses, net of tax, reported as aseparate component of stockholders equity. Realized gains and losses are determined using the specific identification method and transactions are recordedon a settlement date basis in interest income and other, net. For the year ended December 31, 2018, $0.4 million of realized losses were reclassified fromaccumulated other comprehensive loss, net in the Consolidated Balance Sheets to interest income and other, net in the Consolidated Statements ofOperations and Comprehensive Loss. Investments with original maturities beyond three months at the date of purchase and which mature on, or less thantwelve months from, the balance sheet date are classified as short-term. Investments with a maturity beyond twelve months from the balance sheet date areclassified as long-term.The Company periodically reviews available-for-sale debt securities for other-than-temporary declines in fair value below the cost basis and whenever eventsor changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company evaluates, among other things, the durationand 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 tosell, or whether it will more likely than not be required to sell, the security before recovery of its amortized cost basis. The Company does not intend to sell,and is not likely to be required to sell, the available-for-sale debt securities in an unrealized loss position before recovery of the amortized cost bases of thedebt securities, which may be maturity. Any such declines in value judged to be other-than-temporary on available-for-sale debt securities are reported inother-than-temporary impairment of investment.73For the year ended December 31, 2017, the Company determined the decline in value for its investment in ContraVir Pharmaceuticals (ContraVir) commonstock to be other-than temporary. As such, during the fourth quarter of 2017, the Company reclassified a loss of $1.2 million from accumulated othercomprehensive loss, net in the Consolidated Balance Sheets to unrealized loss on equity investment the Consolidated Statements of Operations andComprehensive Loss. For the year ended December 31, 2018, the Company recorded $0.3 million, of unrealized loss related to the Company's investment inContraVir common stock to unrealized loss on equity investment in the Consolidated Statements of Operations and Comprehensive Loss. The Companyrecognizes interest income on an accrual basis in interest income and other, net in the Consolidated Statements of Operations and Comprehensive Loss.Concentration of Credit RiskFinancial instruments that potentially subject the Company to concentrations of credit risk consist of cash, cash equivalents, short-term investments, long-term investments and accounts receivable. The Company is exposed to credit risk, subject to federal deposit insurance, in the event of default by the financialinstitutions holding its cash and cash equivalents to the extent of amounts recorded on the balance sheets. Accounts receivable represent amounts due froman agency of the federal government.Accounts ReceivableAccounts receivable at December 31, 2018 and December 31, 2017 consisted of amounts billed under the Company’s contract with the BiomedicalAdvanced Research and Development Authority (BARDA). Receivables under the BARDA contract are recorded as qualifying research activities areconducted and invoices from the Company’s vendors are received. The Company carries its accounts receivable at cost less an allowance for doubtfulaccounts. On a periodic basis, the Company evaluates its accounts receivable and establishes an allowance based on its history of collections and write-offsand the current status of all receivables. The Company does not accrue interest on trade receivables. If accounts become uncollectible, they will be written offthrough a charge to the allowance for doubtful accounts. The Company has not recorded a charge to allowance for doubtful accounts as management believesall receivables are fully collectible.Fair Value of Financial InstrumentsThe carrying amounts of certain financial instruments, including accounts receivable, accounts payable and accrued expenses approximate their fair valuesdue 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 unobservableinputs when developing fair value measurements, in accordance with the fair value hierarchy. Fair value measurements for assets and liabilities where thereexists 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 realizedin an actual sale or immediate settlement of the asset or liability. Additionally, there may be inherent weaknesses in any calculation technique and changes inthe underlying assumptions used, including discount rates and estimates of future cash flows, could significantly affect the calculated current or future fairvalues. The Company utilizes fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures.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 ofthe assumptions used to determine fair value. The determination of where an asset or liability falls in the hierarchy requires significant judgment. These levelsare:•Level 1 — Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the abilityto access.•Level 2 — Valuations based on quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets orliabilities 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 December 31, 2018, the Company had cash equivalents, including money market funds and U.S. Treasury securities, and short-term investments,including U.S. Treasury securities. At December 31, 2017, the Company had cash equivalents, including money market funds, and short-term and long-terminvestments, including U.S. Treasury securities, whose value is based on using quoted market prices. Accordingly, these securities are classified as Level 1.74At December 31, 2018 and 2017, the Company had short-term investments, including stock of a U.S. corporation. The Company's investment in ContraVirPharmaceuticals (ContraVir) common stock was categorized as a Level 1 asset and had a value based on ContraVir's common stock value at December 31,2018 and 2017. For the twelve months ended December 31, 2018 and 2017, the Company recorded $0.3 million and $1.2 million, respectively, of unrealizedloss related to the Company's investment in ContraVir common stock to unrealized loss on equity investment in the Consolidated Statements of Operationsand Comprehensive Loss. For the twelve months ended December 31, 2016, the Company recorded $0.2 million of unrealized loss related to the Company'sinvestment in ContraVir common stock to unrealized gain (loss) on investments, net in the Consolidated Statements of Operations and Comprehensive Loss.At December 31, 2018, the Company had cash equivalents, including commercial paper and corporate bonds, and short-term investments including,commercial paper and corporate bonds. At December 31, 2017, the Company had cash equivalents including commercial paper. As quoted prices are notavailable for these securities, they are valued using independent pricing models or other model-based valuation techniques such as the present value of futurecash flows, adjusted for the security’s credit rating, prepayment assumptions and other factors such as credit loss assumptions. Accordingly, these securitiesare 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 additionalinformation regarding the Company's investments, please refer to Note 2, "Investments."Below is a table that presents information about certain assets measured at fair value on a recurring basis (in thousands): Fair Value Measurements December 31, 2018 Total Quoted Prices inActive Marketsfor Identical Assets(Level 1) Significant OtherObservable Inputs(Level 2) SignificantUnobservable Inputs(Level 3)Cash equivalents Money market funds$30,726 $30,726 $— $— U.S. Treasury securities11,482 11,482 — — Commercial paper29,677 — 29,677 — Corporate bonds4,008 — 4,008 — Total cash equivalents75,893 42,208 33,685 —Short-term investments U.S. Treasury securities12,589 12,589 — — Common stock of U.S. corporation38 38 — — Commercial paper60,114 — 60,114 — Corporate bonds32,683 — 32,683 — Total short-term investments105,424 12,627 92,797 — Total assets$181,317 $54,835 $126,482 $—75 Fair Value Measurements December 31, 2017 Total Quoted Prices inActive Marketsfor Identical Assets(Level 1) Significant OtherObservable Inputs(Level 2) SignificantUnobservable Inputs(Level 3)Cash equivalents Money market funds$10,816 $10,816 $— $— Commercial paper3,995 — 3,995 — Total cash equivalents14,811 10,816 3,995 —Short-term investments U.S. Treasury securities132,586 132,586 — — Common stock of U.S. corporation386 386 — — Total short-term investments132,972 132,972 — —Long-term investments U.S. Treasury securities76,731 76,731 — — Total long-term investments76,731 76,731 — — Total assets$224,514 $220,519 $3,995 $—Prepaid Expenses and Other Current AssetsPrepaid expenses and other current assets consisted of the following (in thousands): December 31, 2018 2017Prepaid research and development expenses$1,071 $1,138Interest receivable259 601Prepaid insurance382 481Other prepaid expenses and current assets886 1,111 Total prepaid expenses and other current assets$2,598 $3,331Property and EquipmentProperty and equipment are stated at cost, less accumulated depreciation. Depreciation is determined on a straight-line basis over the estimated useful lives ofthe assets, which generally range from three to five years. Leasehold improvements are amortized over the shorter of the useful life of the asset or the term ofthe related lease. Maintenance and repairs are charged against expense as incurred.Impairment of Property and EquipmentThe Company evaluates property and equipment for impairment whenever events or changes in circumstances indicate that the carrying value of an assetmay not be recoverable. If the estimated future cash flows (undiscounted and without interest charges) from the use of an asset are less than the carrying value,a write-down would be recorded to reduce the related asset to its estimated fair value. To date, no such write-downs have occurred.Deferred Lease ObligationsThe Company recognizes rent expense on a straight-line basis over the non-cancelable term of its operating lease and records the difference between cash rentpayments and the recognition of rent expense as a deferred rent liability. The Company also records landlord-funded lease incentives, such as reimbursableleasehold improvements, as a deferred rent liability, which is amortized as a reduction of rent expense over the non-cancelable term of its operating lease.76Accrued LiabilitiesAccrued liabilities consisted of the following (in thousands): December 31, 2018 2017Accrued compensation$2,469 $3,678Accrued research and development expenses4,525 3,384Accrued indemnification claim— 1,000Other accrued liabilities1,281 1,322 Total accrued liabilities$8,275 $9,384Revenue RecognitionPolicyThe 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 withthe criteria outlined in Accounting Standards Codification (ASC) 606 issued by the Financial Accounting Standards Board (FASB). Following thisaccounting pronouncement, a five-step approach is applied for recognizing revenue, including (1) identify the contract with a customer; (2) identify theperformance 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 brincidofovir as a medical countermeasure in theevent 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 theperformance of 1 base segment and 4 option segments. Exercise of each option segment is solely at the discretion of BARDA. Currently, option segments 1through 3 have been exercised. The Company assessed the services in accordance with the authoritative guidance and concluded that there is a potential of 5separate contracts (1 base segment and four option segments) within this agreement, each of which has a single performance obligation. The transaction pricefor each segment, based on the transaction price as defined in each segment contract, is allocated to the single performance obligation for each contract. Thetransaction price is recognized over time by measuring the progress toward complete satisfaction of the performance obligation. The progress towardcomplete satisfaction is estimated based on the costs incurred to date relative to the total estimated costs per the terms of each contract. The Companytypically invoices BARDA monthly as costs are incurred. The base segment and first option segment were completed prior to adoption of ASC 606. TheCompany is currently performing under the second and third option segments of the contract during which the Company may receive up to a total of $23.9million and $14.1 million in expense reimbursement and fees, respectively. The second option segment is scheduled to end on August 1, 2019 and the thirdoption segments is scheduled to end on March 30, 2019.ContraVir PharmaceuticalsThe Company entered into a license agreement with ContraVir on December 17, 2014 for the development and commercialization of CMX157 for certainantiviral indications. The Company is eligible to receive up to approximately $20 million in clinical, regulatory and initial commercial milestones as well asroyalties and additional milestones based on commercial sales. The Company assessed the agreement in accordance with the authoritative guidance andconcluded that the ContraVir contract includes multiple performance obligations, which had all been satisfied in 2015 prior to the adoption of ASC 606. TheContraVir contract has one fixed and several variable transaction amounts. The fixed fee portion of the contract was for the license to CMX157 rights. TheCompany recognized revenue for the fixed fee portion of the contract in 2015 when the performance obligations were satisfied. All variable transactionamounts, which relate to clinical, regulatory and commercial milestones as well as royalties and milestones based on commercial sales, are fully constrained.The Company will begin recognizing revenue on the variable transaction amounts when those transaction amounts are no longer fully constrained.Research and Development Prepaids and AccrualsAs part of the process of preparing financial statements, the Company is required to estimate its expenses resulting from its77obligation under contracts with vendors and consultants and clinical site agreements in connection with its research and development efforts. The financialterms 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 whichmaterials 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 theperiod in which services and efforts are expended. The Company accounts for these expenses according to the progress of its research and developmentefforts. The Company determines prepaid and accrual estimates through discussion with applicable personnel and outside service providers as to the progressor state of communication of clinical trials, or other services completed. The Company adjusts its rate of research and development expense recognition ifactual results differ from its estimates. The Company makes estimates of its prepaid and accrued expenses as of each balance sheet date in its financialstatements based on facts and circumstances known at that time. Although the Company does not expect its estimates to be materially different from amountsactually incurred, its understanding of status and timing of services performed relative to the actual status and timing of services performed may vary and mayresult in the Company reporting amounts that are too high or too low for any particular period. Through December 31, 2018, there had been no materialadjustments to the Company’s prior period estimates of prepaid and accruals for research and development expenses. The Company’s research anddevelopment prepaids and accruals are dependent upon the timely and accurate reporting of contract research organizations and other third-party vendors.Research and Development ExpensesMajor components of research and development costs include cash compensation, stock based compensation, pre-clinical studies, clinical trial and relatedclinical manufacturing, drug development, materials and supplies, legal, regulatory compliance, and fees paid to consultants and other entities that conductcertain research and development activities on the Company’s behalf. Research and development costs, including upfront fees and milestones paid tocontract research organizations, are expensed as goods are received or services rendered. Costs incurred in connection with clinical trial activities for whichthe underlying nature of the activities themselves do not directly relate to active research and development, such as costs incurred for market research andfocus groups linked to clinical strategy as well as costs to build the Company’s brand, are not included in research and development costs but are reflected asgeneral and administrative costs.Unrealized Loss on Equity InvestmentAs of December 31, 2018, unrealized loss on equity investment consists of the decrease in fair value of our investment in ContraVir common stock. As ofDecember 31, 2017, unrealized loss on equity investment consists of the write-down in fair value of our investment in ContraVir common stock which wasjudged to be other-than-temporarily impaired.Interest Income and Other, NetInterest income and other, net primarily includes interest earned on short-term and long-term investments and realized gains on the sale of short-terminvestments.Income TaxesDeferred tax assets and liabilities are determined based on differences between the financial and tax reporting bases of assets and liabilities and are measuredusing enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse. Valuation allowances are established when theCompany determines that it is more likely than not that some portion of a deferred tax asset will not be realized. The Company has incurred operating lossesfrom April 7, 2000 (inception) through December 31, 2018, and therefore has not recorded any current provision for income taxes.Additionally, the Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustainedon examination by the taxing authorities based on the technical merits of the position. The tax benefit recognized in the financial statements for a particulartax position is based on the largest benefit that is more likely than not to be realized upon settlement. Accordingly, the Company establishes reserves foruncertain tax positions.The FASB Staff Q&A, Topic 740, No. 5, Accounting for Global Intangible Low-Taxed Income (GILTI), states that an entity can make an accounting policyelection to either recognized deferred taxes for temporary basis differences expected to reverse as GILTI in future years or to provide for the tax expenserelated to GILTI in the year the tax is incurred as a period expense only. The Company has elected to account for GILTI as a period expense in the year thetax is incurred.78Share-Based CompensationThe Company measures and recognizes compensation expense for all share-based payment awards made to employees and directors, including employeestock options, restricted stock units and the employee stock purchase plan purchase rights, based on estimated fair values. The fair value of employee stockoptions and employee stock purchase plan purchase rights is estimated on the grant date using the Black-Scholes valuation model. The grant-date fair valuefor restricted stock units is based upon the market price of the Company's common stock on the date of the grant. The value of the portion of the award that isultimately expected to vest is recorded as expense over the requisite service periods. For performance-based awards compensation cost is recognized when itis probable that the performance criteria will be met.The Company estimates forfeitures at the time of grant, and revises those estimates in subsequent periods if actual forfeitures differ from its estimates. TheCompany uses historical data to estimate forfeitures and records share-based compensation expense only for those awards that are expected to vest. To theextent that actual forfeitures differ from the Company’s estimates, the difference is recorded as a cumulative adjustment in the period the estimates wererevised. For the years ended December 31, 2018, 2017 and 2016, the Company applied a forfeiture rate based on the Company’s historical forfeitures.401(k) PlanThe Company maintains a defined contribution employee retirement plan (“401(k) plan”). For the years ended December 31, 2018, 2017 and 2016, theCompany recognized expenses for matching contributions of $0.4 million, $0.3 million and $0.4 million, respectively.Basic and Dilutive Net Loss Per Share of Common StockBasic net loss per share of common stock is computed by dividing net loss by the weighted-average number of shares of common stock outstanding duringthe period, excluding the dilutive effects of warrants to purchase common stock, non-vested restricted stock, stock options, and employee stock purchaseplan 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 ofcommon stock outstanding during the period plus the potential dilutive effects of warrants to purchase common stock, non-vested restricted stock, stockoptions, and employee stock purchase plan purchase rights outstanding during the period calculated in accordance with the treasury stock method, but areexcluded 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 basicand diluted loss per share of common stock at December 31, 2018, 2017 and 2016.SegmentsThe Company operates in only one segment. The chief operating decision-makers, who are the members of the Office of the Chief Executive Officer, andmanagement use cash flows as the primary measure to manage the business and do not segment the business for internal reporting or decision making.Impact of Recently Issued Accounting StandardsIn February 2016, the FASB issued Accounting Standards Update (ASU) No. 2016-02, “Leases (Topic 842)”, and amended through subsequent ASUs, whichincreases transparency and comparability among companies accounting for lease transactions. The most significant change of this update will require therecognition of lease assets and liabilities on the balance sheet for lessees for operating lease arrangements with lease terms greater than 12 months. This ASUis effective for financial statements issued for annual periods and interim periods within those annual periods, beginning after December 15, 2018. TheCompany adopted this standard effective January 1, 2019 using the alternative adoption method allowed by ASU 2018-11. The Company elected to use thepackage of three practical expedients which allows the Company not to reassess whether contracts are or contain leases, lease classification, and whetherinitial direct costs qualify for capitalization. The Company has substantially completed its assessment over the impact of the standard and determined thatthe only material leases that the Company holds are real estate operating lease commitments. Upon adoption of the standard, the Company preliminarilyexpects to record a right of use asset and lease liability of approximately $1.6 million on its consolidated balance sheets. The finalization of the Company'sassessment may result in significant changes to its estimates that may materially impact its preliminary estimate of the cumulative effect.Impact of Recently Adopted Accounting StandardsIn May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606).” The ASU establishes a principles-based approachfor accounting for revenue arising from contracts with customers and supersedes existing revenue recognition guidance. The ASU provides that an entityshould apply a five-step approach for recognizing revenue, including (1)79identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transactionprice to the performance obligations in the contract; and (5) recognize revenue when, or as, the entity satisfies a performance obligation. Also, the entity mustprovide various disclosures concerning the nature, amount and timing of revenue and cash flows arising from contracts with customers. The FASB has issuedseveral updates to the standard which (1) deferred the original effective date to annual periods and interim periods within those annual periods beginningafter December 15, 2017, while allowing for early adoption as of January 1, 2017 (ASU 2015-14); (2) clarify the application of the principal versus agentguidance (ASU 2016-08); and (3) clarify the guidance on inconsequential and perfunctory promises and licensing (ASU 2016-10). The Company adoptedASU No. 2014-09 as of January 1, 2018 using the full retrospective approach and determined that there was no impact on its consolidated financialstatements. In preparation for adoption of the standard, the Company implemented internal controls to enable the preparation of financial information,including the assessment of the impact of the standard.In January 2016, the FASB issued ASU No. 2016-01, “Financial Instruments-Overall (Subtopic 825-10)-Recognition and Measurement of Financial Assetsand Financial Liabilities.” The new standard enhances reporting for financial instruments. The ASU is effective for financial statements issued for annualperiods and interim periods within those annual periods beginning after December 15, 2017. The Company adopted ASU No. 2016-01 on January 1, 2018 ona prospective basis. As a result of this standard, changes in fair value of available-for-sale equity securities that were previously recognized in othercomprehensive income are now recognized in earnings. As of January 1, 2018, the Company had no unrealized gains or losses in other comprehensiveincome that had to be reclassified to retained earnings.Note 2. Investments The following tables summarize the Company's short-term and long-term debt investments (in thousands): December 31, 2018 Amortized Cost Gross UnrealizedGains Gross UnrealizedLosses EstimatedFair ValueCorporate bonds$32,724 $— $(41) $32,683Commercial paper60,159 — (45) 60,114U.S. Treasury securities12,592 — (3) 12,589 Total investments$105,475 $— $(89) $105,386 December 31, 2017 Amortized Cost Gross UnrealizedGains GrossUnrealizedLosses EstimatedFair ValueU.S. Treasury securities$210,280 $— $(963) $209,317 Total investments$210,280 $— $(963) $209,317The following tables summarize the Company's debt investments with unrealized losses, aggregated by investment type and the length of time thatindividual investments have been in a continuous unrealized loss position (in thousands, except number of securities): December 31, 2018 Less than 12 Months Greater than 12 Months Total Fair Value Unrealized Loss Fair Value Unrealized Loss Fair Value Unrealized LossCorporate bonds $32,683 $(41) $— $— $32,683 $(41)Commercial paper 60,114 (45) — — 60,114 (45)U.S. Treasury securities 12,589 (3) — — 12,589 (3)Total $105,386 $(89) $— $— $105,386 $(89)Number of securities with unrealizedlosses 36 — 3680 December 31, 2017 Less than 12 Months Greater than 12 Months Total Fair Value Unrealized Loss Fair Value Unrealized Loss Fair Value Unrealized LossU.S. Treasury securities $170,390 $(871) $38,927 $(92) $209,317 $(963)Total $170,390 $(871) $38,927 $(92) $209,317 $(963)Number of securities with unrealizedlosses 39 7 46The following table summarizes the scheduled maturity for the Company's debt investments at December 31, 2018 (in thousands): December 31, 2018Maturing in one year or less$105,386Total debt investments$105,386Common stock of U.S. corporation38Total investments$105,424Note 3. Property and EquipmentProperty and equipment, net of accumulated depreciation consisted of the following (in thousands): December 31, 2018 2017Lab equipment$2,599 $2,496Leasehold improvements1,550 1,552Computer equipment1,181 1,170Office furniture and equipment520 520 Property and equipment5,850 5,738 Less accumulated depreciation(4,640) (3,844) Property and equipment, net of accumulated depreciation$1,210 $1,894Note 4. Commitments and ContingenciesLeasesThe Company leases its facilities and certain office equipment under long-term non-cancelable operating leases that expire at various dates through 2021.The Company has the following minimum rental payments under non-cancelable operating lease obligations that existed at December 31, 2018 (inthousands):Years Ending December 31,MinimumRental Payment2019$78620207972021235 Total future minimum rental payments$1,818Rent expense under non-cancelable operating leases and other month-to-month equipment rental agreements, including common area maintenance fees,totaled approximately $0.6 million, $0.5 million, and $0.7 million for the years ended December 31, 2018, 2017 and 2016, respectively.81SubleaseThe Company subleases 3,537 square feet of its office space under a non-cancelable operating lease that expires February 2021. Total future minimum rentalsunder the non-cancelable operating sublease as of December 31, 2018 are presented below (in thousands):Years Ending December 31,MinimumSublease Rentals2019$78202081202114 Total future minimum sublease rentals$173Significance of Revenue SourceThe Company is the recipient of federal research contract funds from BARDA. Periodic audits are required under the grant and contract agreements andcertain costs may be questioned as appropriate under the agreements. Management believes that such amounts in the current year, if any, are not significant.Accordingly, no provision for refundable amounts under the agreements has been made as of December 31, 2018 and 2017.Note 5. Stockholders’ Equity (Deficit)Common StockThe Company’s common stock consists of 200 million authorized shares at December 31, 2018 and 2017, and 50.7 million and 47.5 million shares issuedand outstanding at December 31, 2018 and December 31, 2017, respectively.Shares Reserved for Future IssuanceThe Company has reserved shares of common stock for future issuances as follows: December 31, 2018 2017For exercise of common stock warrants— 227,794For exercise of outstanding common stock options6,429,638 4,996,661For delivery upon vesting of outstanding restricted stock units656,169 956,299For future equity awards under the 2013 Equity Incentive Plan1,587,670 1,082,608For future purchases under the 2013 Employee Stock Purchase Plan2,120,290 1,861,472 Total shares of common stock reserved for future issuances10,793,767 9,124,834Stock OptionsIn connection with the Company’s IPO, the Company adopted the 2013 Equity Incentive Plan (the 2013 Plan). The 2013 Plan provides for the grant ofincentive stock options (ISOs), nonstatutory 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, includingofficers, non-employee directors and consultants of the Company and its affiliates. Additionally, the 2013 Plan provides for the grant of performance cashawards. ISOs may be granted only to employees. All other awards may be granted to employees, including officers, and to non-employee directors andconsultants. The number of shares of common stock reserved for issuance under the 2013 Plan will automatically increase on January 1 of each year,continuing through and including January 1, 2023, by 4.0% of the total number of shares of capital stock outstanding on December 31 of the precedingcalendar year, or a lesser number of shares determined by the Company’s board of directors.The Company estimates the fair value of its share-based awards to employees, directors and consultants using the Black-Scholes option-pricing model. TheBlack-Scholes model requires the input of highly complex and subjective assumptions, including (a)82the expected stock price volatility, (b) the calculation of expected term of the award, (c) the risk-free interest rate and (d) expected dividends. Due to theCompany’s limited operating history and historical and implied volatility data, the Company has based its estimates of expected volatility on a blend ofCompany specific historical data and a group of similar public traded companies. When selecting these public companies on which it has based its expectedstock price volatility, the Company selected companies with comparable characteristics to it, including enterprise value, risk profiles, positions within theindustry, and with historical share price information sufficient to meet the expected life of its stock options. For employee stock options, the Company useshistorical exercise data to estimate the expected life. The risk-free interest rates for the periods within the expected life of the option are based on the U.S.Treasury instrument with a life that is similar to the expected life of the option grant. The Company has never paid, and does not expect to pay, dividends inthe foreseeable future.The following table illustrates the assumptions for the Black-Scholes model used in determining the fair value of the stock options granted: Years Ended December 31, 2018 2017 2016Expected volatility85.83% 85.51% 85.16%Expected term (in years)5.9 5.9 6.0Weighted-average risk-free interest rate2.52% 2.02% 1.70%Expected dividend yield—% —% —%Weighted-average fair value per option$3.43 $3.71 $5.62A summary of activity related to the Company’s stock options is as follows: Number ofOptionsOutstanding Weighted-AverageExercise Price Weighted-AverageRemainingContractualLife (in Years) Total IntrinsicValueBalance, December 31, 20164,342,466 $17.81 8.09 Granted928,816 5.17 — Exercised(38,885) 3.98 — Forfeited(235,736) 19.10 — Balance, December 31, 20174,996,661 $15.51 7.59 Granted2,050,995 4.73 — Exercised(29,262) 3.93 — Forfeited(588,756) 12.31 — Balance, December 31, 20186,429,638 $12.41 7.37 $39,873Exercisable at December 31, 20184,119,234 $15.94 6.75 $39,873Vested or expected to vest at December 31, 20186,366,085 $12.47 7.36 $39,873As of December 31, 2018, there was approximately $8.7 million of total unrecognized compensation cost related to non-vested stock options granted underthe 2013 Plan. That compensation cost is expected to be recognized over a weighted-average period of approximately 2.00 years years.Other information regarding the Company’s stock options is as follows (in thousands, except per share data): Years Ended December 31, 2018 2017 2016Weighted-average grant-date fair value per share of options granted $3.43 $3.71 $5.62Total intrinsic value of options exercised $31 $48 $119Total fair value of shares vested $11,021 $11,786 $13,33083The following table summarizes, at December 31, 2018, by price range: (1) for stock option awards outstanding under the 2013 Plan, the number of stockoption awards outstanding, their weighted-average remaining life and their weighted-average exercise price; and (2) for stock option awards exercisableunder the 2013 Plan, the number of stock option awards exercisable and their weighted-average exercise price: Outstanding ExercisableExercise Price Range ($) Number Weighted-AverageRemainingContractualLife (in years) Weighted-AverageExercise Price Number Weighted-AverageExercise Price1.57 to 7.57 3,139,495 8.37 $4.70 1,323,880 $4.547.58 to 8.06 1,696,746 7.02 8.06 1,239,595 8.068.07 to 18.75 261,805 5.07 18.59 261,805 18.5918.76 to 39.17 559,663 5.55 25.32 556,525 25.2539.18 to 53.74 771,929 6.22 41.90 737,429 41.711.57 to 53.74 6,429,638 7.37 $12.41 4,119,234 $15.94Employee Stock Purchase PlanIn February 2013, the Company’s board of directors adopted the 2013 Employee Stock Purchase Plan (ESPP), which was subsequently ratified bystockholders and became effective in April 2013. The purpose of the ESPP is to retain the services of new employees and secure the services of new andexisting employees while providing incentives for such individuals to exert maximum efforts toward the Company’s success and that of its affiliates. TheESPP initially authorized the issuance of 704,225 shares of common stock pursuant to purchase rights granted to the Company’s employees or to employeesof any of its designated affiliates. The number of shares of common stock reserved for issuance will automatically increase on January 1 of each calendar year,from January 1, 2014 through January 1, 2023 by the least of (a) 1% of the total number of shares of common stock outstanding on December 31 of thepreceding 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). The ESPP isintended to qualify as an “employee stock purchase plan” within the meaning of Section 423 of the Internal Revenue Code of 1986. The common stockreserved for future issuance under the ESPP was automatically increased by an additional 422,535 shares on January 1, 2017 and 2018, bringing the totalnumber of shares of common stock that may be purchased under the ESPP to 2,226,261 and 2,648,796, respectively.The Company has reserved a total of 2,648,796 shares of common stock to be purchased under the ESPP, of which 2,120,290 and 1,861,472 shares remainedavailable for purchase at December 31, 2018 and 2017, respectively. Eligible employees may authorize an amount up to 15% of their salary to purchasecommon 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-monthpurchase interval. The ESPP also provides for an automatic reset feature to start participants on a new twenty-four month participation period in the event thatthe 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. TheCompany issued 163,717 and 173,822 shares of common stock pursuant to the ESPP for the year ended December 31, 2018 and 2017, respectively.Compensation expense for purchase rights under the ESPP related to the purchase discount and the “look-back” option were determined using a Black-Scholes option pricing model.The following table illustrates the assumptions for the Black-Scholes model used in determining the fair value of the ESPP purchase rights: Years Ended December 31, 2018 2017 2016Expected volatility44.01% 77.18% 111.57%Expected term (in years)1.23 0.97 1.37Weighted-average risk-free interest rate2.56% 0.99% 0.75%Expected dividend yield—% —% —%Weighted-average option value per share$1.36 $2.65 $3.20As of December 31, 2018, the Company had a liability of $0.2 million representing employees' contributions to the ESPP.84Restricted Stock UnitsFor the years ended December 31, 2018 and 2017, the Company issued RSUs to certain employees which vest based on service criteria. When vested, theRSU 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 fairvalue 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 compensationexpense over the requisite service period or vesting term. For the years ended December 31, 2018 and 2017, the Company issued 233,050 and 744,450 sharesof common stock pursuant to the vesting of RSUs, respectively.In January 2017, the Company also granted performance-based RSUs which, when vested, represent the right to be issued the number of shares of theCompany's common stock that is equal to the number of RSUs granted. The grant date fair value for performance-based RSUs is based upon the market priceof the Company's common stock on the date of the grant. For the portion of the performance-based RSUs of which the achievement of the performancecondition is considered probable, the Company recognizes stock-based compensation expense on the related estimated fair value of such RSUs ratably foreach vesting tranche from the service inception date to the end of the requisite service period. For the performance conditions that are not consideredprobable of achievement at the grant date or upon quarterly re-evaluation, prior to the event actually occurring, the Company begins recognizing the relatedstock-based compensation expense ratably when the event occurs or when the Company can determine that achievement of the performance condition isprobable. In those cases, the Company recognizes the change in estimate at the time it determines the performance condition is probable of achievement (byrecognizing stock-based compensation expense as cumulative catch-up adjustment as if the Company had estimated at the grant date that the performancecondition would have been achieved) and recognize the remaining compensation cost through the end of the requisite service period. The Company issuedno shares of common stock pursuant to the vesting of performance-based RSUs for the year ended December 31, 2018 and 2017.A summary of activity related to the Company’s RSUs is as follows: Number ofRestrictedStock UnitsOutstandingWeighted-AverageGrant-Date FairValueBalance, December 31, 2017956,299$5.08Granted153,3754.42Share issuance(233,050)5.05Forfeited(220,455)5.12Balance, December 31, 2018656,169$4.92The total unrecognized compensation cost related to the non-vested RSUs as of December 31, 2018 was $3.9 million and will be recognized over a weightedaverage period of approximately 2.14 years years.WarrantsIn February 2011, the Company issued warrants to purchase an aggregate of 5,501,215 shares of Series F redeemable convertible preferred stock at an exerciseprice of $2.045 per share. Upon the completion of the Company’s IPO in April 2013, these warrants were converted into warrants to purchase 1,549,628shares of common stock at an exercise price of $7.26 per share. At December 31, 2017, warrants for the purchase of 227,794 shares of common stock wereissued, outstanding and exercisable. The warrants were exercisable at any time and expired on February 7, 2018.85Stock-based CompensationFor awards with only service conditions and graded-vesting features, the Company recognizes compensation expense on a straight-line basis over therequisite service period. Total stock-based compensation expense was as follows (in thousands): Years Ended December 31, 2018 2017 2016Income Statement Classification: Research and development expense$5,343 $7,047 $7,137General and administrative expense7,731 9,063 9,086 Total stock-based compensation expense$13,074 $16,110 $16,223Cash received from exercises under all share-based payment arrangements for 2018, 2017 and 2016 was $0.7 million, $0.8 million and $0.6 million,respectively. There was no actual tax benefit realized for the tax deductions from exercises of the share-based payment arrangements during 2018, 2017 or2016.At-The-Market Equity OfferingOn November 8, 2017, the Company entered into an at-the-market (ATM) sales agreement with Cowen and Company, LLC to sell up to $75 million of theCompany’s common stock under a shelf registration statement filed in November 2017. During the year ended December 31, 2018, the Company sold 2.8million shares of common stock at a weighted average price per share of $4.00 for $10.9 million of proceeds net of commissions.Note 6. Income TaxesNo income tax expense or benefit has been recorded for the years ended December 31, 2018, 2017 or 2016. This is due to the establishment of a valuationallowance against the deferred tax assets generated during those periods. At December 31, 2018, the Company has concluded that it is more likely than notthat the Company may not realize the benefit of its deferred tax assets due to its history of losses. Accordingly, the net deferred tax assets have been fullyreserved.A reconciliation of the difference between the benefit for income taxes and income taxes at the statutory U.S. federal income tax rate is as follows for the yearsended December 31, 2018, 2017, and 2016 (in thousands, except percentages): 2018 2017 2016 Amount % of PretaxEarnings Amount % of PretaxEarnings Amount % of PretaxEarningsIncome tax benefit at statutory rate$(14,590) 21.0 % $(24,134) 34.0 % $(25,973) 34.0 %State income taxes(792) 1.1 % (1,090) 1.5 % (1,544) 2.0 %Research and development credits(1,798) 2.6 % (2,039) 2.9 % (2,691) 3.5 %Foreign rate differential2 — % 60 (0.1)% (2) — %Permanent items1,164 (1.7)% 1,646 (2.3)% 2,537 (3.3)%Provision to return adjustments621 (0.9)% 1,212 (1.7)% 259 (0.3)%Effect of change in federal tax rate— — % 57,950 (81.6)% — — %Effect of change in state tax rate151 (0.2)% 193 (0.3)% 1,585 (2.1)%Removal of excess tax benefit— — % (12,930) 18.2 % — — %Increase in unrecognized tax benefits450 (0.7)% 403 (0.6)% 444 (0.6)%Change in valuation allowance14,792 (21.2)% (21,271) 30.0 % 25,385 (33.2)%Net benefit$— — % $— — % $— — %86The components of deferred tax assets and liabilities at December 31, 2018 and 2017 were as follows (in thousands): December 31, 2018 2017Deferred tax assets: Domestic net operating loss carryforwards$104,708 $92,020 Foreign net operating loss carryforwards71 61 Research and development expenses1,002 763 Capitalized Section 174 expenses25 28 Research and development credits13,789 12,437 Accrued bonuses500 777 Share-based compensation7,144 6,156 Other778 983 Total gross deferred tax assets128,017 113,225 Valuation allowance(128,017) (113,225) Total deferred tax assets— —Deferred tax liabilities: Other— — Total deferred tax liabilities— — Total deferred tax assets and liabilities, net$— $—At December 31, 2018, the Company had net operating loss carryforwards for federal, state, and foreign tax purposes of approximately $465.3 million, $353.8million and $0.4 million, respectively. At December 31, 2017, the Company had net operating loss carryforwards for federal, state, and foreign tax purposesof approximately $408.1 million, $319.9 million and $0.4 million, respectively. Federal losses of $408.1 million begin to expire in 2020 and $57.2 millionof the federal losses carryforward indefinitely. The state losses begin to expire in 2019. The foreign losses do not expire. In addition, the Company has taxcredit carryforwards for federal tax purposes of approximately $18.4 million as of December 31, 2018, which begin to expire in 2022. The future utilization ofnet operating loss and tax credit carryforwards may be limited due to changes in ownership. Management has recorded a valuation allowance for all of thedeferred tax assets due to the uncertainty of future taxable income.The Company incorporated a subsidiary in the United Kingdom in 2014. However, the subsidiary has had minimal activity since inception. The subsidiaryhas primarily recorded net losses since inception and recorded a net loss as of December 31, 2018 and as such, has no undistributed earnings.The Company incorporated a subsidiary in Ireland during 2018. However, the subsidiary had minimal activity during the year and as such, has noundistributed earnings.In general, if the Company experiences a greater than 50% aggregate change in ownership of certain significant stockholders over a three-year period (aSection 382 ownership change), utilization of its pre-change net operating loss carryforwards is subject to an annual limitation under Section 382 of theInternal Revenue Code of 1986, as amended (and similar state laws). The annual limitation generally is determined by multiplying the value of theCompany’s stock at the time of such ownership change (subject to certain adjustments) by the applicable long-term tax-exempt rate. Such limitations mayresult in expiration of a portion of the net operating loss carryforwards before utilization and may be substantial. The ability of the Company to use its netoperating loss carryforwards may be limited or lost if the Company experiences a Section 382 ownership change in connection with offerings or as a result offuture changes in its stock ownership. Losses from a specific period may be subject to multiple limitations, and would generally be limited by the lowest ofthose limitations.The Company has determined that a Section 382 ownership change occurred in 2002, and as such, losses incurred prior to that date are subject to an annuallimitation of at least $64,000. Additionally, the Company has determined that a Section 382 ownership change occurred in 2007, and as such, losses incurredprior to that date are subject to an annual limitation of at least $762,000. The Company evaluated Section 382 ownership changes subsequent to 2007through September 30, 2018 and concluded that a Section 382 ownership change occurred in 2013 as a result of the initial public offering. As such, lossesincurred prior to that date are subject to an annual limitation of at least $6.7 million.87As of December 31, 2017, the Company has adopted ASU 2016-09 which is effective for public companies for annual periods beginning after December 15,2016. The ASU requires all excess tax benefits and tax deficiencies to be recognized as income tax expense or benefit in the income statement in the year inwhich they occur. As such, the Company has grossed up its net operating loss deferred tax asset to include all excess tax benefits as of December 31, 2017.The Company has determined that there may be a future limitation on the Company’s ability to utilize its entire federal R&D credit carryover. Therefore, theCompany recognized an uncertain tax benefit associated with the federal R&D credit carryover during the years ended December 31, 2018 and 2017, asfollows (in thousands):Balance at December 31, 2016$2,400 Increases related to 2017403 Increases related to prior periods473Balance at December 31, 20173,276 Increases related to 2018450 Increases related to prior periods—Balance at December 31, 2018$3,726The change in the amount of the unrecognized tax benefits accrued for prior years is due to the change in the federal tax rate and is reflected as a componentof such in the statutory rate reconciliation.The Company has determined that it had no other material uncertain tax benefits for the year ended December 31, 2018. As of January 1, 2019, due to thecarry forward of unutilized net operating losses and research and development credits, the Company is subject to U.S. federal and state income taxexaminations for the tax years 2000 through 2018. The Company recognizes accrued interest related to unrecognized tax benefits in interest expense andpenalties in operating expense. No amounts were accrued for the payment of interest and penalties at December 31, 2018.On December 22, 2017, the Tax Act was enacted into law, which reduced the federal corporate income tax rate to 21% for tax years beginning after December31, 2017. As a result of the revised tax rate, the Company adjusted its deferred tax assets as of December 31, 2017 by applying the revised 21% rate, whichresulted in a decrease to the deferred tax assets and a corresponding decrease to the valuation allowance of approximately $58 million.The Tax Act also implements a territorial tax system. Under the territorial tax system, in general, the Company's foreign earnings will no longer be subject totax in the U.S. As part of the transition to the territorial tax system the Tax Act included a mandatory deemed repatriation of all undistributed foreign earningsthat are subject to a U.S. income tax. The Company has determined that the deemed repatriation applicable to the year ended December 31, 2017 does notresult in an additional U.S. income tax liability as it has no undistributed foreign earnings.The Tax Act subjects a US shareholder to tax on global intangible low-taxed income (GILTI) earned by certain foreign subsidiaries. The FASB Staff Q&A,Topic 740, No. 5, Accounting for Global Intangible Low-Taxed Income, states that an entity can make an accounting policy election to either recognizeddeferred taxes for temporary basis differences expected to reverse as GILTI in future years or to provide for the tax expense related to GILTI in the year the taxis incurred as a period expense only. Because the Company was evaluating the provision of GILTI as of December 31, 2017, no GILTI-related deferredamounts were recorded in 2017. The Company has elected to account for GILTI in the year the tax is incurred. The Company does not have a GILTI inclusionin 2018; therefore, no GILTI tax has been recorded for the year ended December 31, 2018.The SEC staff issued Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (SAB 118) which allows theCompany to record provisional amounts during a measurement period which is similar to the measurement period used when accounting for businesscombinations. At December 31, 2017 provisional amounts were recorded related to deferred taxes for stock compensation and the deferred rate change. AtDecember 31, 2018 the measurement period has ended and the Company's accounting related to the Tax Act is complete. The Company did not make anymeasurement-period adjustments related to the provisional items recorded as of December 31, 2017.Note 7. Significant AgreementsThe Regents of the University of CaliforniaIn May 2002, the Company entered into a license agreement with The Regents of the University of California (UC) under which the Company obtained anexclusive, worldwide license to UC’s patent rights in certain inventions (the UC Patent Rights) related88to lipid-conjugated antiviral compounds and their use, including certain patents relating to brincidofovir. The license agreement was amended in September2002 in order to expand the scope of the license and again in December 2010 in order to modify certain financial terms. The agreement was amended a thirdtime in September 2011 to add additional patents related to certain metabolically stable lipid-conjugate compounds. A fourth amendment was executed inJuly 2012 to alter the rights and obligations of the parties in light of the Company’s current business plans. In April 2018, a fifth amendment was executed toalter the rights and obligations of the parties in light of the Company's current business plans and to extend the term of the agreement to the later of thelongest-lived Patent Rights (as defined in the agreement) or May 2028.Under the license agreement, the Company is permitted to research, develop, manufacture and commercialize products utilizing the UC Patent Rights for allhuman and veterinary uses, and to sublicense such rights. UC retained the right, on behalf of itself and other non-profit institutions, to use the UC PatentRights for educational and research purposes and to publish information about the UC Patent Rights.In consideration for the rights granted under the license agreement, the Company has issued UC an aggregate of 64,788 shares of common stock. Asadditional consideration, the Company is required to pay certain cash milestone payments in connection with the development and commercialization ofcompounds that are covered by the UC Patent Rights, plus certain annual fees to maintain such patents until the Company commercializes a product utilizingUC Patent Rights. In connection with the development and commercialization of brincidofovir and CMX157, the Company could be required to pay UC upto an aggregate of $3.4 million in milestone payments, assuming the achievement of all applicable milestone events under the license agreement. In addition,upon commercialization of any product utilizing the UC Patent Rights (which would include the commercialization of brincidofovir), the Company will berequired to pay low single digit royalties on net sales of such product.The license agreement requires that we diligently develop, manufacture and commercialize compounds that are covered by the UC Patent Rights, and wehave agreed to meet certain development and commercialization milestones. UC may, at its option, either terminate the license agreement or change thelicense granted from an exclusive license to a non-exclusive license if we fail to meet such development and commercialization milestones. We are currentlyin compliance with these milestone requirements.In the event the Company sublicenses a UC Patent Right (including UC Patent Rights relating to brincidofovir or CMX157) the Company is obligated to payto UC a fee, which amount will vary depending upon the amount of any payments the Company receives and the clinical development stage of thecompound being sublicensed, but which could be up to approximately 50% of the sublicense fee in certain circumstances. With respect to brincidofovir, thefee payable to UC will not exceed 5% of the sublicense fee. In addition, the Company will also be required to pay to UC a low single digit sublicense royaltyon net sales of products that use the sublicensed UC Patent Rights, but in no event will the Company be required to pay more than 50% of the royalties itreceives in connection with the relevant sublicense. Any such royalty payment will be reduced by other payments the Company is required to make to thirdparties until a minimum royalty has been reached.Biomedical Advanced Research and Development Authority (BARDA)In February 2011, the Company entered into a contract with BARDA for the advanced development of brincidofovir as a medical countermeasure in theevent of a smallpox release. Under the contract, BARDA will reimburse the Company, plus pay a fixed fee, for the research and development of brincidofoviras a broad-spectrum therapeutic antiviral for the treatment of smallpox infections. The contract consists of an initial performance period, referred to as thebase performance segment, plus up to four extension periods, referred to as option segments, each of which may be exercised at BARDA’s sole discretion. TheCompany must complete the agreed upon milestones and deliverables in each discrete work segment before the next option segment is eligible to beexercised. 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 and third option segments of the contract during which the Company may receive up to a total of$23.9 million and $14.1 million in expense reimbursement and fees, respectively. The second option segment is scheduled to end on August 1, 2019 and thethird option segments is scheduled to end on March 30, 2019. Of the $75.8 million in expense reimbursement and $5.3 million in fees that the Company mayreceive, approximately $74.3 million in expense reimbursement and fees has been funded. As of December 31, 2018, of the total funding the Company hadinvoiced an aggregate of $62.6 million with respect to the base performance segment and the first three extension periods. For the years ended December 31,2018, 2017, and 2016, the Company recognized revenue under this contract of $7.2 million, $4.5 million and $5.7 million, respectively.89ContraVir PharmaceuticalsOn December 17, 2014, the Company entered into a license agreement with ContraVir Pharmaceuticals (Nasdaq: CTRV) for the development andcommercialization of CMX157 for certain antiviral indications. Under the terms of the agreement, ContraVir has sole responsibility with respect to thecontrol of the development and commercialization of CMX157.In exchange for the license to CMX157 rights, the Company received an upfront payment consisting of ContraVir Series B Convertible Preferred Stock whichthe Company converted into shares of ContraVir common stock in 2016. As of December 31, 2018 and 2017, the fair value of the investment was recorded asa short-term investment of $38 thousand and $0.4 million, respectively.In addition, the Company is eligible to receive up to approximately $20 million in clinical, regulatory and initial commercial milestones in the United Statesand Europe, as well as royalties and additional milestones based on commercial sales in those territories. Either party may terminate the license agreementupon the occurrence of a material breach by the other party (subject to standard cure periods), or upon certain events involving the bankruptcy or insolvencyof the other party. ContraVir may also terminate the license agreement without cause on a country-by-country basis upon sixty days’ prior written notice.University of MichiganIn 2006, the Company entered into a license agreement with The Regents of the University of Michigan (UM) under which the Company obtained anexclusive, 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 tosublicense 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 in2016 and in January 2017 issued UM an aggregate of 33,058 shares of its common stock. In connection with the Company's commercialization orsublicensing of certain products covered by the license agreement, including CMX521, the Company could be required to pay royalties on net sales of suchproducts 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 uses commercially reasonable efforts to develop and make commercially available licensed products assoon as practicable. Specifically, the Company has agreed to make the first commercial sale of a licensed product by June of 2026. UM may terminate thelicense agreement if the Company materially breaches the license agreement. The Company is currently in compliance with its milestone requirements.90Note 8. Selected Quarterly Financial Data (Unaudited)The following financial information reflects all normal recurring adjustments, which are, in the opinion of management, necessary for a fair statement of theresults of the interim periods. Summarized quarterly data for 2018 and 2017 are as follows (in thousands, except share and per share data): 2018 Quarters Fourth Third Second FirstRevenue$4,864 $369 $1,193 $790Operating loss(15,419) (16,710) (19,169) (20,307)Net loss(14,956) (16,079) (18,613) (19,826)Net loss per share, basic and diluted$(0.29) $(0.33) $(0.39) $(0.42)Weighted-average shares outstanding, basic and diluted50,722,655 48,172,354 47,811,552 47,637,907 2017 Quarters Fourth Third Second FirstRevenue$1,844 $897 $675 $1,078Operating loss(18,687) (17,910) (17,245) (18,260)Net loss(19,238) (17,312) (16,680) (17,754)Net loss per share, basic and diluted$(0.41) $(0.37) $(0.36) $(0.38)Weighted-average shares outstanding, basic and diluted47,341,271 47,065,756 46,863,753 46,573,394Net loss per share is computed independently for each of the quarters presented. Therefore, the sum of the quarterly per share calculations will not necessarilyequal the annual per share calculation. Diluted weighted-average shares outstanding are identical to basic weighted-average shares outstanding and dilutednet loss per share is identical to basic net loss per share for all quarters of 2018 and 2017.Note 9. Subsequent EventsThe Company has evaluated subsequent events through the issuance date of these financial statements to ensure that this filing includes appropriatedisclosure of events both recognized in the financial statements as of December 31, 2018, and events which occurred subsequently but were not recognizedin the financial statements.ITEM. 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.ITEM 9A. CONTROLS AND PROCEDURESEvaluation of Disclosure Controls and ProceduresOur principal executive officer and principal financial officer, after evaluating the effectiveness of our disclosure controls and procedures (as defined in Rules13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended, or Exchange Act) as of December 31, 2018, have concluded that, based on suchevaluation, our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in the reports we file or submitunder the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and isaccumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similarfunctions, as appropriate to allow timely decisions regarding required disclosure.Management’s Report on Internal Control Over Financial ReportingOur management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange ActRules 13a-15(f) and 15d-15(f). Our internal control system was designed to provide reasonable assurance to our management and Board of Directorsregarding the preparation and fair presentation of published financial statements.91Our internal control over financial reporting includes those policies and procedures that:i.pertain to the maintenance of records, that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;ii.provide reasonable assurance that transactions are recorded as necessary to permit preparations of financial statements in accordance with generallyaccepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our managementand directors; andiii.provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have amaterial effect on the financial statements.All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provideonly reasonable assurance with respect to financial statement preparation and presentation. In making the assessment of internal controls over financialreporting, our management used the criteria issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework (2013 framework). Based on that assessment and those criteria, management has concluded that our internal control over financialreporting was effective as of December 31, 2018.Ernst & Young LLP, the independent registered public accounting firm that audited our financial statements included in this Annual Report, has issued anattestation report on the Company's internal control over financial reporting, a copy of which appears in Item 8 of this Annual Report.Changes in Internal Control Over Financial ReportingNo change in our internal control over financial reporting (as defined in Rules 13a-15(d) and 15d-15(d) under the Exchange Act) occurred during the lastfiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.ITEM 9B. OTHER INFORMATIONNot applicable.92PART IIIITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCEThe information required by this item and not set forth below will be set forth in the section headed “Election of Directors” and “Executive Officers” in ourProxy Statement for our 2019 Annual Meeting of Stockholders (Proxy Statement), to be filed with the SEC within 120 days after the end of the fiscal yearended December 31, 2018, and is incorporated herein by reference.We have adopted a code of ethics for directors, officers (including our principal executive officer, principal financial officer and principal accounting officer)and employees, known as the Code of Business Conduct and Ethics. The Code of Business Conduct and Ethics is available on our website athttp://www.chimerix.com under the Corporate Governance section of our Investor Relations page. We will promptly disclose on our website (i) the nature ofany amendment to the policy that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, or personsperforming similar functions and (ii) the nature of any waiver, including an implicit waiver, from a provision of the policy that is granted to one of thesespecified individuals that is required to be disclosed pursuant to SEC rules and regulations, the name of such person who is granted the waiver and the date ofthe waiver.ITEM 11. EXECUTIVE COMPENSATIONThe information required by this item will be set forth in the section headed “Executive Compensation” in our Proxy Statement and is incorporated herein byreference.ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERSThe information required by this item will be set forth in the section headed “Security Ownership of Certain Beneficial Owners and Management” in ourProxy Statement and is incorporated herein by reference.The information required by Item 201(d) of Regulation S-K will be set forth in the section headed “Executive Compensation” in our Proxy Statement and isincorporated herein by reference.ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCEThe information required by this item will be set forth in the section headed “Transactions With Related Persons” in our Proxy Statement and is incorporatedherein by reference.ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICESThe information required by this item will be set forth in the section headed “Ratification of Selection of Independent Registered Public Accounting Firm” inour Proxy Statement and is incorporated herein by reference.93PART IVITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES1. Financial Statements. The financial statements and reports of independent registered public accounting firm are filed as part of this Annual Report (see"Index to Consolidated Financial Statements" at Item 8).2. Financial Statement Schedules. No financial statement schedules are included because the information is either provided in the consolidated financialstatements, is not required under the instructions or is immaterial, and such schedules, therefore have been omitted.3. Exhibits. The following exhibits have been or are being filed herewith and are numbered in accordance with Item 601 of Regulation S-K:EXHIBIT INDEXExhibitNumber Description of Document 3.1 (1) Amended and Restated Certificate of Incorporation of the Registrant. 3.2 (1) Amended and Restated Bylaws of the Registrant. 4.1 (1) Form of Common Stock Certificate of the Registrant.10.1+ (1) Form of Indemnity Agreement by and between the Registrant and its directors and officers.10.2+ (1) Chimerix, Inc. 2002 Equity Incentive Plan and Form of Stock Option Agreement, Notice of Exercise and Form of Stock Option GrantNotice thereunder.10.3+ (1) Chimerix, Inc. 2012 Equity Incentive Plan and Form of Stock Option Agreement, Notice of Exercise and Form of Stock Option GrantNotice and Form of Restricted Stock Unit Award Agreement and Form of Restricted Stock Unit Award Grant Notice thereunder.10.4+(17) Form of Stock Option Agreement, Notice of Exercise and Form of Stock Option Grant Notice and Form of Restricted Stock Unit AwardAgreement and Form of Restricted Stock Unit Award Grant Notice under Chimerix, Inc. 2013 Equity Incentive Plan.10.5+ (2) Chimerix, Inc. 2013 Equity Incentive Plan, as amended.10.6+ (1) Chimerix, Inc. 2013 Employee Stock Purchase Plan.10.7+(25) Chimerix, Inc. Non-Employee Director Compensation Policy.10.8+ (26) Chimerix, Inc. Officer Severance Benefit Plan, as amended.10.9+ (1) Employment Offer Letter to Timothy W. Trost dated March 16, 2011.10.10+ (1) Employment Offer Letter to M. Michelle Berrey, M.D., M.P.H. dated November 7, 2012.10.11+ (3) Employment Offer Letter to William Garrett Nichols, M.D., M.S., dated August 19, 2014.10.12+ (12) Directorship Offer Letter to James M. Daly dated June 6, 2014.10.13+ (12) Directorship Offer Letter to Catherine L. Gilliss dated June 13, 2014.10.14+ (12) Directorship Offer Letter to Patrick Machado dated May 30, 2014.10.15+ (12) Directorship Offer Letter to Ronald C. Renaud, Jr. dated December 12, 2014.10.16 (1) Office Lease by and between the Registrant and ACP 2505 Meridian LLC dated September 1, 2007, as amended.10.17 (6) Lease Agreement by and between the Registrant and Northwood RTC LLC dated March 10, 2014.10.18 (5) Fifth Amendment to Office Lease dated July 2, 2014 by and between the Registrant and AREP Meridian I LLC.10.19 (9) Sixth Amendment to Office Lease dated April 28, 2015 by and between the Registrant and IVC Meridian TT O, LLC.10.20 (17) Seventh Amendment to Office Lease dated March 10, 2017 by and between the Registrant and IVC Meridian TT O, LLC.10.21 (18) Eighth Amendment to Office Lease dated July 13, 2017 by and between the Registrant and IVC Meridian TT O, LLC.10.22* (1) Contract by and between the Registrant and the Biomedical Advanced Research and Development Authority of the United StatesDepartment of Health and Human Services dated February 16, 2011, as amended.9410.23* (7) Contract modification No. 14, dated May 30, 2013, to the contract by and between the Registrant and the Biomedical AdvancedResearch and Development Authority of the United States Department of Health and Human Services dated February 16, 2011, asamended.10.24* (8) Contract modification No. 15, dated August 28, 2013, to the contract by and between the Registrant and the Biomedical AdvancedResearch and Development Authority of the United States Department of Health and Human Services dated February 16, 2011, asamended.10.25* (8) Contract modification No. 16, dated December 10, 2013, to the contract by and between the Registrant and the Biomedical AdvancedResearch and Development Authority of the United States Department of Health and Human Services dated February 16, 2011, asamended.10.26 (4) Contract modification No. 17, dated April 14, 2014, to the contract by and between the Registrant and the Biomedical AdvancedResearch and Development Authority of the United States Department of Health and Human Services dated February 16, 2011, asamended.10.27 (12) Contract modification No. 18, dated May 6, 2014, to the contract by and between the Registrant and the Biomedical AdvancedResearch and Development Authority of the United States Department of Health and Human Services dated February 16, 2011, asamended.10.28* (5) Contract modification No. 19, dated August 27, 2014, to the contract by and between the Registrant and the Biomedical AdvancedResearch and Development Authority of the United States Department of Health and Human Services dated February 16, 2011, asamended.10.29 (5) Contract modification No. 20, dated October 27, 2014, to the contract by and between the Registrant and the Biomedical AdvancedResearch and Development Authority of the United States Department of Health and Human Services dated February 16, 2011, asamended.10.30* (12) Contract modification No. 21, dated November 7, 2014, to the contract by and between the Registrant and the Biomedical AdvancedResearch and Development Authority of the United States Department of Health and Human Services dated February 16, 2011, asamended.10.31 (12) Contract modification No. 22, dated December 11, 2014, to the contract by and between the Registrant and the Biomedical AdvancedResearch and Development Authority of the United States Department of Health and Human Services dated February 16, 2011, asamended.10.32 (12) Contract modification No. 23, dated December 22, 2014, to the contract by and between the Registrant and the Biomedical AdvancedResearch and Development Authority of the United States Department of Health and Human Services dated February 16, 2011, asamended.10.33 (12) Contract modification No. 24, dated February 19, 2015, to the contract by and between the Registrant and the Biomedical AdvancedResearch and Development Authority of the United States Department of Health and Human Services dated February 16, 2011, asamended.10.34 (9) Contract modification No. 25, dated March 26, 2015, to the contract by and between the Registrant and the Biomedical AdvancedResearch and Development Authority of the United States Department of Health and Human Services dated February 16, 2011, asamended.10.35 (10) Contract modification No. 26, dated June 18, 2015, to the contract by and between the Registrant and the Biomedical AdvancedResearch and Development Authority of the United States Department of Health and Human Services dated February 16, 2011, asamended.10.36 (10) Contract modification No. 27, dated July 14, 2015, to the contract by and between the Registrant and the Biomedical AdvancedResearch and Development Authority of the United States Department of Health and Human Services dated February 16, 2011, asamended.10.37* (11) Contract modification No. 28, dated September 1, 2015, to the contract by and between the Registrant and the Biomedical AdvancedResearch and Development Authority of the United States Department of Health and Human Services dated February 16, 2011, asamended.10.38* (11) Contract modification No. 29, dated September 11, 2015, to the contract by and between the Registrant and the Biomedical AdvancedResearch and Development Authority of the United States Department of Health and Human Services dated February 16, 2011, asamended.10.39* (13) Contract modification No. 30, dated November 12, 2015, to the contract by and between the Registrant and the Biomedical AdvancedResearch and Development Authority of the United States Department of Health and Human Services dated February 16, 2011, asamended.10.40* (14) Contract modification No. 31, dated April 8, 2016, to the contract by and between the Registrant and the Biomedical AdvancedResearch and Development Authority of the United States Department of Health and Human Services dated February 16, 2011, asamended.10.41* (14) Contract modification No. 32, dated May 5, 2016, to the contract by and between the Registrant and the Biomedical AdvancedResearch and Development Authority of the United States Department of Health and Human Services dated February 16, 2011, asamended.10.42* (15) Contract modification No. 33, dated June 17, 2016, to the contract by and between the Registrant and the Biomedical AdvancedResearch and Development Authority of the United States Department of Health and Human Services dated February 16, 2011, asamended.9510.43* (16) Contract modification No. 34, dated August 3, 2016, to the contract by and between the Registrant and the Biomedical AdvancedResearch and Development Authority of the United States Department of Health and Human Services dated February 16, 2011, asamended.10.44 (17) Contract modification No. 35, dated October 21, 2016, to the contract by and between the Registrant and the Biomedical AdvancedResearch and Development Authority of the United States Department of Health and Human Services dated February 16, 2011, asamended.10.45 (17) Contract modification No. 36, dated January 23, 2017, to the contract by and between the Registrant and the Biomedical AdvancedResearch and Development Authority of the United States Department of Health and Human Services dated February 16, 2011, asamended.10.46 (18) Contract modification No. 37, dated March 27, 2017, to the contract by and between the Registrant and the Biomedical AdvancedResearch and Development Authority of the United States Department of Health and Human Services dated February 16, 2011, asamended.10.47 (19) Contract modification No. 38, dated April 3, 2017, to the contract by and between the Registrant and the Biomedical AdvancedResearch and Development Authority of the United States Department of Health and Human Services dated February 16, 2011, asamended.10.48 (19) Contract modification No. 39, dated May 11, 2017, to the contract by and between the Registrant and the Biomedical AdvancedResearch and Development Authority of the United States Department of Health and Human Services dated February 16, 2011, asamended.10.49 (19) Contract modification No. 40, dated June 16, 2017, to the contract by and between the Registrant and the Biomedical AdvancedResearch and Development Authority of the United States Department of Health and Human Services dated February 16, 2011, asamended.10.50 (20) Contract modification No. 41, dated July 24, 2017, to the contract by and between the Registrant and the Biomedical AdvancedResearch and Development Authority of the United States Department of Health and Human Services dated February 16, 2011, asamended.10.51 (20) Contract modification No. 42, dated August 25, 2017, to the contract by and between the Registrant and the Biomedical AdvancedResearch and Development Authority of the United States Department of Health and Human Services dated February 16, 2011, asamended.10.52 (20) Contract modification No. 43, dated September 22, 2017, to the contract by and between the Registrant and the Biomedical AdvancedResearch and Development Authority of the United States Department of Health and Human Services dated February 16, 2011, asamended.10.53 (20) Contract modification No. 44, dated September 28, 2017, to the contract by and between the Registrant and the Biomedical AdvancedResearch and Development Authority of the United States Department of Health and Human Services dated February 16, 2011, asamended.10.54(22) Contract modification No. 45, dated October 20, 2017, to the contract by and between the Registrant and the Biomedical AdvancedResearch and Development Authority of the United States Department of Health and Human Services dated February 16, 2011, asamended.10.55(22) Contract modification No. 46, dated November 27, 2017, to the contract by and between the Registrant and the Biomedical AdvancedResearch and Development Authority of the United States Department of Health and Human Services dated February 16, 2011, asamended.10.56*(22) Contract modification No. 47, dated December 21, 2017, to the contract by and between the Registrant and the Biomedical AdvancedResearch and Development Authority of the United States Department of Health and Human Services dated February 16, 2011, asamended.10.57(22) Contract modification No. 48, dated December 21, 2017, to the contract by and between the Registrant and the Biomedical AdvancedResearch and Development Authority of the United States Department of Health and Human Services dated February 16, 2011, asamended.10.58*(22) Contract modification No. 49, dated February 27, 2018, to the contract by and between the Registrant and the Biomedical AdvancedResearch and Development Authority of the United States Department of Health and Human Services dated February 16, 2011, asamended.10.59*(23) Contract modification No. 50, dated March 20, 2018, to the contract by and between the Registrant and the Biomedical AdvancedResearch and Development Authority of the United States Department of Health and Human Services dated February 16, 2011, asamended.9610.60*(24) Contract modification No. 51, dated May 31, 2018, to the contract by and between the Registrant and the Biomedical AdvancedResearch and Development Authority of the United States Department of Health and Human Services dated February 16, 2011, asamended.10.61*(24) Contract modification No. 52, dated July 11, 2018, to the contract by and between the Registrant and the Biomedical AdvancedResearch and Development Authority of the United States Department of Health and Human Services dated February 16, 2011, asamended.10.62(25) Contract modification No. 53, dated September 6, 2018, to the contract by and between the Registrant and the Biomedical AdvancedResearch and Development Authority of the United States Department of Health and Human Services dated February 16, 2011, asamended.10.63 Contract modification No. 54, dated December 3, 2018, to the contract by and between the Registrant and the Biomedical AdvancedResearch and Development Authority of the United States Department of Health and Human Services dated February 16, 2011, asamended.10.64** Contract modification No. 55, dated January 10, 2019, to the contract by and between the Registrant and the Biomedical AdvancedResearch and Development Authority of the United States Department of Health and Human Services dated February 16, 2011, asamended.10.65*(17) Patent Option and License Agreement by and between the Registrant and The Regents of the University of Michigan dated May 24,2006, as amended.10.66*(1) License Agreement by and between the Registrant and The Regents of the University of California dated May 13, 2002, as amended.10.67(21) Sales Agreement, dated November 8, 2017, by and between Chimerix, Inc and Cowen and Company, LLC.10.68(22) First Amendment to Industrial Building Lease dated December 14, 2017 by and between Registrant and CLPF - Research Center, LLC.10.69(23) Fifth Amendment, dated April 24, 2018, to the License Agreement by and between the Registrant and The Regents of the University ofCalifornia dated May 13, 2002, as amended.10.70+ Agreement and Release, dated February 8, 2019, by and between the Registrant and M. Michelle Berrey.10.71+ Employment Offer Letter to Michael A. Alrutz dated May 9, 2012.23.1 Consent of Ernst & Young LLP, an Independent Registered Public Accounting Firm.24.1 Power of Attorney. Reference is made to the signature page hereto.31.1 Certification of Principal Executive Officer, pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, asadopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2 Certification of Principal Financial Officer, pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, asadopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1 Certification of Principal Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2 Certification of Principal Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.101.INS XBRL Instance Document.101.SCH XBRL Taxonomy Extension Schema Document.101.CAL XBRL Taxonomy Extension Calculation Linkbase Document.101.DEF XBRL Taxonomy Extension Definition Linkbase Document.101.LAB XBRL Taxonomy Extension Label Linkbase Document.101.PRE XBRL Taxonomy Extension Presentation Linkbase Document.97+ Indicates management contract or compensatory plan. * Confidential treatment has been granted with respect to certain portions of this exhibit. Omitted portions have been filed separately withthe SEC.** Confidential treatment has been requested with respect to certain portions of this exhibit. Omitted portions have been filed separatelywith the SEC.(1) Incorporated by reference to Chimerix, Inc.’s Registration Statement on Form S-1 (No. 333-187145), as amended.(2) Incorporated by reference to Chimerix, Inc.’s Current Report on Form 8-K (No. 001-35867) filed with the SEC on June 23, 2014.(3) Incorporated by reference to Chimerix, Inc.’s Current Report on Form 8-K (No. 001-35867) filed with the SEC on September 4, 2014.(4) Incorporated by reference to Chimerix, Inc.’s Quarterly Report on Form 10-Q (No. 001-35867) filed with the SEC on May 9, 2014.(5) Incorporated by reference to Chimerix, Inc.’s Quarterly Report on Form 10-Q (No. 001-35867) filed with the SEC on November 7, 2014.(6) Incorporated by reference to Chimerix, Inc.’s Current Report on Form 8-K (No. 001-35867) filed with the SEC on March 14, 2014.(7) Incorporated by reference to Chimerix, Inc.’s Quarterly Report on Form 10-Q (No. 001-35867) filed with the SEC on August 14, 2013.(8) Incorporated by reference to Chimerix, Inc.’s Annual Report on Form 10-K (No. 001-35867) filed with the SEC on March 7, 2014.(9) Incorporated by reference to Chimerix, Inc.'s Quarterly Report on Form 10-Q (No. 001-35867) filed with the SEC on May 11, 2015.(10) Incorporated by reference to Chimerix, Inc.'s Quarterly Report on Form 10-Q (No. 001-35867) filed with the SEC on August 6, 2015.(11) Incorporated by reference to Chimerix, Inc.'s Quarterly Report on Form 10-Q (No. 001-35867) filed with the SEC on November 5, 2015.(12) Incorporated by reference to Chimerix, Inc.’s Annual Report on Form 10-K (No. 001-35867) filed with the SEC on March 6, 2015.(13) Incorporated by reference to Chimerix, Inc.’s Annual Report on Form 10-K (No. 001-35867) filed with the SEC on February 29, 2016(14) Incorporated by reference to Chimerix, Inc.’s Quarterly Report on Form 10-Q (No. 001-35867) filed with the SEC on May 9, 2016.(15) Incorporated by reference to Chimerix, Inc.’s Quarterly Report on Form 10-Q (No. 001-35867) filed with the SEC on August 8, 2016.(16) Incorporated by reference to Chimerix, Inc.’s Quarterly Report on Form 10-Q (No. 001-35867) filed with the SEC on November 7, 2016.(17) Incorporated by reference to Chimerix, Inc.’s Annual Report on Form 10-K (No. 001-35867) filed with the SEC on March 2, 2017.(18) Incorporated by reference to Chimerix, Inc.’s Quarterly Report on Form 10-Q (No. 001-35867) filed with the SEC on May 9, 2017.(19) Incorporated by reference to Chimerix, Inc.’s Quarterly Report on Form 10-Q (No. 001-35867) filed with the SEC on August 7, 2017.(20) Incorporated by reference to Chimerix, Inc.’s Current Report on Form 8-K (No. 001-35867) filed with the SEC on October 11, 2017.(21) Incorporated by reference to Chimerix, Inc.’s Current Report on Form 8-K (No. 001-35867) filed with the SEC on November 8, 2017.(22) Incorporated by reference to Chimerix, Inc.’s Annual Report on Form 10-K (No. 001-35867) filed with the SEC on March 1, 2018.(23) Incorporated by reference to Chimerix, Inc.’s Quarterly Report on Form 10-Q (No. 001-35867) filed with the SEC on May 7, 2018.(24) Incorporated by reference to Chimerix, Inc.’s Quarterly Report on Form 10-Q (No. 001-35867) filed with the SEC on August 8, 2018.98(25) Incorporated by reference to Chimerix, Inc.’s Quarterly Report on Form 10-Q (No. 001-35867) filed with the SEC on November 8, 2018.99SIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report on Form 10-Kto be signed on its behalf by the undersigned, thereunto duly authorized. Chimerix, Inc. Date:March 5, 2019 By: /s/ Michael A. Alrutz Michael A. Alrutz Principal Executive OfficerPOWER OF ATTORNEYKNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Michael A. Alrutz and Timothy W.Trost, and each of them, his true and lawful attorneys-in-fact, each with full power of substitution, for him in any and all capacities, to sign any amendmentsto this Annual Report on Form 10-K and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities andExchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact or their substitute or substitutes may do or cause to be done byvirtue hereof.Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K has been signed below by the following persons onbehalf of the registrant and in the capacities and on the dates indicated.Signature Title Date /s/ Michael A. Alrutz Principal Executive Officer March 5, 2019Michael A. Alrutz /s/ Timothy W. Trost Principal Financial and Accounting Officer March 5, 2019Timothy W. Trost /s/ Martha J. Demski Martha J. Demski Chair of the Board of Directors March 5, 2019 /s/ James M. Daly James M. Daly Member of the Board of Directors March 5, 2019 /s/ Catherine L. Gilliss Catherine L. Gilliss, PhD, RN, FAAN Member of the Board of Directors March 5, 2019 /s/ Edward F. Greissing Jr. Edward F. Greissing Jr. Member of the Board of Directors March 5, 2019 /s/ Patrick Machado Patrick Machado Member of the Board of Directors March 5, 2019 /s/ Robert J. Meyer Robert J. Meyer, MD Member of the Board of Directors March 5, 2019 /s/ Fred A. Middleton Fred A. Middleton Member of the Board of Directors March 5, 2019 /s/ Ronald C. Renaud Jr. Ronald C. Renaud Jr. Member of the Board of Directors March 5, 2019100AMENDMENT OF SOLICITATION/MODIFICATION OF CONTRACT1. CONTRACT ID CODEPAGE OF PAGES 122. AMENDMENT/MODIFICATION NO3. EFFECTIVE DATE4. REQUISITION/PURCHASE REQ. NO5. PROJECT NO. (if applicable)54See Block 16CN/A. 6. ISSUED BYCODEASPR-BARDA7. ADMINISTERED BY (if other than Item 6)CODEASPR-BARDA02ASPR-BARDA200 Independence Ave., S.W.Room 640-GWashington DC 20201ASPR-BARDA330 Independence Ave, SW, Rm G640Washington DC 202018. NAME AND ADDRESS OF CONTRACTOR (No., street, county, State and ZIP Code) (x)9A. AMENDMENT OF SOLICITATION NO.CHIMERIX, INC. 1377270CHIMERIX, INC. 2505 MERIDIAN P2505 MERIDIAN PKWY STE 340DURHAM NC 277135246 9B. DATED (SEE ITEM 11) x10A. MODIFICATION OF CONTRACT/ORDER NO. HHSO100201100013C 10B. DATED (SEE ITEM 13) 02/16/2011CODE1377270FACILITY CODE 11. THIS ITEM ONLY APPLIES TO AMENDMENTS OF SOLICITATIONS¨ The above numbered solicitation amended as set forth in Item 14. The hour and date specified for receipt of Offers ¨ is extended ¨ is not extendedOffers must acknowledge receipt of this amendment prior to the hour and date specified in the solicitation or as amended, by one of the following methods: (a) By completing Items 8 and 15, and returning _____________ copies of the amendment: (b) By acknowledging receipt of this amendment on each copy of the offer submitted; or (c) By separate letter or telegram which includes a reference to the solicitation and amendment numbers. FAILURE OF YOUR ACKNOWLEDGEMENT TO BE RECEIVED AT THE PLACE DESIGNATED FOR THE RECEIPT OF OFFERS PRIOR TO THE HOUR AND DATE SPECIFIED MAY RESULT IN REJECTION OF YOUR OFFER. If by virtue of this amendment you desire to change an offer already submitted, such change may be made by telegram or letter, provided each telegram or letter makes reference to the solicitation and this amendment, and is received prior to the opening hour and date specified.12. ACCOUNTING AND APPROPRIATION DATA (if required)N/A. 13. THIS ITEM ONLY APPLIES TO MODIFICATION OF CONTRACTS/ORDERS. IT MODIFIES THE CONTRACT/ORDER NO. AS DESCRIBED IN ITEM 14.CHECK ONEA. THIS CHANGE ORDER IS ISSUED PURSUANT TO: (Specify authority) THE CHANGES SET FORTH IN ITEM 14 ARE MADE IN THE CONTRACT ORDER NO. IN ITEM 10A. XB. THE ABOVE NUMBERED CONTRACT/ORDER IS MODIFIED TO REFLECT THE ADMINISTRATIVE CHANGES (such as changes in paying office, appropriation date, etc.) SET FORTH IN ITEM 14, PURSUANT TO THE AUTHORITY OF FAR 43 103(b) C. THIS SUPPLEMENTAL AGREEMENT IS ENTERED INTO PURSUANT TO AUTHORITY OF: D. OTHER (Specify type of modification and authority)E. IMPORTANT Contractor ý is not ¨ is required to sign this document and return ____________________ copies to the issuing office.14. DESCRIPTION OF AMENDMENT/MODIFICATION (Organized by UCF section headings, including solicitation/contract subject matter where feasible.)Tax ID Number: 33-0903395DUNS Number: 121785997A. The purpose of this no cost unilateral modification is to incorporate the following changes into the contract :1. The Contracting Officer's Representative (COR) is hereby changed from Claiborne Hughes to Danielle M. Turley.2. The total amount, scope and period of performance of all other CLINs that are currently being performed under the contract remain unchanged. This modification does not exercise any unexercised Option CLINs under the contract and does not authorize any performance of Continued . . .Except as provided herein, all terms and conditions of the document referenced in Item 9 A or 10A, as heretofore changed remains unchanged and in full force and effect.15A. NAME AND TITLE OF SIGNER (Type or print)16A. NAME AND TITLE OF CONTRACTING OFFICER (Type or print) ETHAN J. MUELLER15B. CONTRACTOR/OFFEROR15C. DATE SIGNED16B. UNITED STATES OF AMERICA16C. DATE SIGNED/s/ Michael Alrutz (Signature of person authorized to sign)12/3/18/s/Ethan J. Mueller (Signature of Contracting Officer)11/27/18NSN 7540-01-152-8070Previous edition unusable STANDARD FORM 30 (REV. 10-83)Prescribed by GSAFAR (48 CFR) 53.243CONTINUATION SHEETREFERENCE NO. OF DOCUMENT BEING CONTINUEDPAGE OFHHSO100201100013C/005422NAME OF OFFEROR OR CONTRACTORCHIMERIX, INC. 1377270ITEM NO.SUPPLIES/SERVICESQUANTITYUNITUNIT PRICEAMOUNT(A)(B)(C)(D)(E)(F) NSN 7540-01-152-8067 OPTIONAL FORM 336 (4-86) Sponsored by GSA FAR (48 CFR) 53.110[...***...] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT,MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELYWITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TORULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.AMENDMENT OF SOLICITATION/MODIFICATION OF CONTRACT1. CONTRACT ID CODEPAGE OF PAGES1 32. AMENDMENT/MODIFICATION NO.00553. EFFECTIVE DATESee Block 16C4. REQUISITION/PURCHASE REQ. NOOS2329495. PROJECT NO. (If applicable)6. ISSUED BYCODEASPR-BARDA7. ADMINISTERED BY (if other than Item 6)CODEASPR-BARDA02ASPR-BARDA200 Independence Ave., S.W.Room 640-GWashington DC 20201ASPR-BARDA330 Independence Ave, SW, Rm G640Washington DC 202018. NAME AND ADDRESS OF CONTRACTOR (No., street, county, State, and ZIP Code)CHIMERIX, INC. 1377270CHIMERIX, INC. 2505 MERIDIAN P2505 MERIDIAN PKWY STE 340DURHAM NC 277135246(x)9A. AMENDMENT OF SOLICITATION NO.9B. DATED (SEE ITEM 11)x10A. MODIFICATION OF CONTRACT/ORDER NO.HHSO100201100013CCODE: 1377270FACILITY CODE:10B. DATED (SEE ITEM 13)02/16/2011 11. THIS ITEM ONLY APPLIES TO AMENDMENTS OF SOLICITATIONSThe above numbered, solicitation is amended as set forth in item 14. The hour and date specified for receipt of Offers is extended is not extended. Offers must acknowledge receipt of this amendment prior to the hour and date specified in the solicitation or as amended by one of the following methods: (a) By completing Items 8 and 15, and returning copies of the amendment; (b) By acknowledging receipt of this amendment on each copy of the offer submitted; or (c) By separate letter or telegram which includes a reference to the solicitation and amendment numbers, FAILURE OF YOUR ACKNOWLEDGMENT TO BE RECEIVED AT THE PLACE DESIGNATED FOR THE RECEIPT OF OFFERS PRIOR TO THE HOUR AND DATE SPECIFIED MAY RESULT IN REJECTION OF YOUR OFFER. If by virtue of this amendment you desire to change an offer already submitted, such change may be made by telegram or letter, provided each telegram or letter makes reference to the solicitation and this amendment, and is received prior to the opening hour and date specified.12. ACCOUNTING AND APPROPRIATION DATA (If Required) Net Increase: $2,340,571.00See Schedule 13. THIS ITEM APPLIES ONLY TO MODIFICATIONS OF CONTRACTS/ORDERS, IT MODIFIES THE CONTRACT/ORDER NO. AS DESCRIBED IN ITEM 14 CHECK ONEA. THIS CHANGE ORDER IS ISSUED PURSUANT TO: (Specify authority) THE CHANGES SET FORTH IN ITEM 14 ARE MADE IN THE CONTRACT ORDER NO IN ITEM 10A. B. THE ABOVE NUMBERED CONTRACT/ORDER IS MODIFIED TO REFLECT THE ADMINISTRATIVE CHANGES (such as changes in paying office, appropriation date, etc.) SET FORTH IN ITEM 14, PURSUANT TO THE AUTHORITY OF FAR 43.103(b). C. THIS SUPPLEMENTAL AGREEMENT IS ENTERED INTO PURSUANT TO AUTHORITY OFxD. OTHER (Specify type of modification and authority)Bilateral: Mutual Agreement of the Parties.E. IMPORTANT: Contractor ¨ is not ý is required to sign this document and return 0 copies to the issuing office 14. DESCRIPTION OF AMENDMENT/MODIFICATION (Organized by UCF section headings, including solicitation/contract subject matter where feasible)Tax ID Number: 33-0903395DUNS Number: 121785997A. The purpose of this bilateral modification is to incorporate the following changes into the contract:1. Add cost growth funding in the amount of $2,340,571.00 (No Fixed Fee) for the purpose of funding additional time for the completion of Option 2/CLIN 0003 under Contract Number HHSO100201100013C.2. As a result of adding additional funding to Option 2/CLIN 0003 under Contract Number HHSO100201100013, Option 2/CLIN 0003 is here by revised as follows:Continued … Except as provided herein, all terms and conditions of the document referenced in Item 9A or 10A, as heretofore changed, remains unchanged and in full force and effect. 15A NAME AND TITLE OF SIGNER (type or print)M. Michelle Berrey CEO16A NAME AND TITLE OF CONTRACTING OFFICER (Type or print)ETHAN J. MUELLER 15B CONTRACTOR/OFFEROR/s/ M. Michelle Berrey15C DATE SIGNED12/21/1816B UNITED STATES OF AMERICA/s/ Ethan J. Mueller16C. DATE SIGNED1/10/19 (Signature of person authorized to sign) (Signature of Contracting Officer) NSN 7540-01-152-8070 STANDARD FORM 30 (REV 10-83)Previous edition unusable Prescribed by GSAFAR (48 CFR) 53.243[...***...] = CERTAIN CONFIDENTIAL INFORMATION OMITTEDCONTINUATION SHEETREFERENCE NO. OF DOCUMENT BEING CONTINUEDHHSO100201100013C/0055PAGE OF23NAME OF OFFEROR OR CONTRACTORCHIMERIX, INC. 1377270ITEM NO.(A)SUPPLIES/SERVICES(B)QUANTITY(C)UNIT(D)UNIT PRICE(E)AMOUNT(F) Total Estimated Cost: from $[...***...] By $2,340,571.00 to $[...***...].No Change to the Total Fixed Fee of $[...***...].Total Estimated Cost Plus Fixed Fee: From $[...***...] By $2,340,571.00 To $[...***...].3. This modification also results a change in the total amount of the contract from $[...***...] by $2,340,571.00 to $[...***...] as well as the following:Total Estimated Cost of the Contract: From $[...***...] By $2,340,571.00 To $[...***...].No Change to the Total Fixed Fee of $[...***...].Total Estimated Cost Plus Fixed Fee of the Contract: From $[...***...] By $2,340,571.00 To $[...***...].4. This modification hereby results in a increase in the total amount of the contract from $[...***...] By $2,340,571.00 to $[...***...].5. Block 15G of the SF 26, the amount of $[...***...] shall be changed to $[...***...].6. Also in Block 14 of the SF 26, the following CAN Number is added as follows:Appropriation Year: 2019; Object Class: 25016; CAN 1992019 $2,340,571.00.7. The period of performance for Option 2/CLIN 0003 of Contract Number HHSO100201100013C is hereby changed from 1 September 2014 through 30 March 2019 to 1 September 2014 through 1 August 2019.8. The Statement of Work under Contract Number HHSO100201100013 hereby remains unchanged.9. For the Option 2/CLIN 0003, cost growth for this Modification 55, Total Estimated Cost (No Fixed Fee) - $2,340,571.00, Only, the following Indirect Cost Ceiling Rates are established for which Chimerix cannot seek reimbursement in excess of the following Indirect Cost Ceiling Rates:[...***...]% Fringe, [...***...]% G&A10. The total amount, scope and period of performance of all other CLINs that are currently being performed under the contract remain unchanged. This modification does not exercise any unexercised Option CLINs under the contract and does not authorize any performance of efforts under any unexercised Option CLINs under the contract. In addition, the total amount, scope and period of performance of all unexercised Option CLINs under the contract remain unchanged. This modification also confirms that all activities under the base period of performance CLIN 0001 Continued ...NSN 7540-01-152-8067 OPTIONAL FORM 336 (4-86)Sponsored by GSAFAR (48 CFR) 53.110[...***...] = CERTAIN CONFIDENTIAL INFORMATION OMITTEDCONTINUATION SHEETREFERENCE NO. OF DOCUMENT BEING CONTINUEDHHSO100201100013C/0055PAGE OF33NAME OF OFFEROR OR CONTRACTORCHIMERIX, INC. 1377270ITEM NO.(A)SUPPLIES/SERVICES(B)QUANTITY(C)UNIT(D)UNIT PRICE(E)AMOUNT(F)3were completed as of 31 May 2013 and confirms that all activities under the Option 1/CLIN 0002 period of performance were completed as of 30 April 2015.B. This is a bilateral modification. All other terms and conditions of Contract Number HHSO100201100013C remain unchanged.Delivery Location Code: HHSHHS200 Independence Avenue, SWWashington DC 20201 USFOB: DestinationPeriod of Performance: 02/16/2011 to 08/01/2019Change Item 3 to read as follows (amount shown is the obligated amount) :[...***...] $2,340,571.00Reports and other Data Deliverables.Delivery: 11/30/2015Amount: $16,951,226.00Accounting Info:2014.1992003.25106 Appr. Yr.: 2014 CAN: 1992003 Object Class: 25106Funded: $0.00Delivery: 06/30/2017Amount: $535,016.00Accounting Info:2016.1992016.25103 Appr. Yr.: 2016 CAN: 1992016 Object Class: 25103Funded: $0.00Delivery 09/30/2018Amount: $4,091,177.00Accounting Info:2018.1992018.25106 Appr. Yr.: 2018 CAN: 1992018 Object Class: 25106Funded: $0.00Delivery: 08/01/2019Amount: $2,340,571.00Accounting Info:2019.1992019.25106 Appr. Yr.: 2019 CAN: 1992019 Object Class: 25106Funded: $2,340,571.00 NSN 7540-01-152-8067 OPTIONAL FORM 336 (4-86)Sponsored by GSAFAR (48 CFR) 53.110[...***...] = CERTAIN CONFIDENTIAL INFORMATION OMITTEDExhibit 10.70AGREEMENT AND RELEASEThis Agreement and Release (“Release”) is made and entered into by and between M. Michelle Berrey (hereinafter“Employee”), and Chimerix, Inc., a Delaware corporation (hereinafter the “Company”).WHEREAS, Employee has resigned from her employment with the Company;WHEREAS, Employee is eligible for certain benefits under a Participation Agreement between Employee and the Company(the “Participation Agreement”) under the Chimerix, Inc. Officer Severance Benefit Plan (the “Severance Plan”); andWHEREAS, the parties desire to settle fully, finally, and on a confidential basis all matters between them, including but notlimited to the employment and resignation of Employee, without any admission of liability;NOW, THEREFORE, in consideration of the premises and mutual promises contained in this Release, and other valuableconsideration to which Employee is not otherwise entitled, the receipt and sufficiency of which are hereby acknowledged, it is agreedby the parties as follows:1. Resignation of Employment. Employee agrees that her employment with the Company ended on February 5, 2019 (the“Separation Date”). Employee will be paid accrued but unused vacation on the Company’s next regular payroll date after theSeparation Date. Except as provided herein, all benefits cease as of the Separation Date.2. Consideration. As a material inducement to and in consideration for Employee entering into this Release, and subject to theterms and conditions of this Release, the Severance Plan and the Participation Agreement, the Company agrees as follows:a. As a substitute for the cash severance benefit set forth in Section 2(a)(1) of the Participation Agreement, Employee shallcontinue to receive her current base salary for a period of 18 months, commencing on the first payroll period following the effectivedate of this Release, subject to the terms and provisions (including the form of and conditions required for full payment) of theParticipation Agreement and the Severance Plan.b. Provided Employee is eligible for, and timely elects, COBRA continuation coverage, the Company will pay the fullamount of COBRA premiums as set forth in Section 2(a)(3) of the Participation Agreement for a period of up to 15 total months,subject to the terms of the Participation Agreement and the Plan.c. Employee shall become vested in the stock options and equity compensation awards to the extent shown on Exhibit Aunder the column entitled “Shares Accelerated Pursuant to Severance Plan & Participation Agreement”, pursuant to the terms ofSection 2(a)(2) of the Participation Agreement. Following the Separation Date and taking into account the vesting accelerationdescribed in the foregoing sentence, Employee shall be vested in Employee’s stock198183625 v3Exhibit 10.70options and equity awards to the extent shown on Exhibit A under the column entitled “Total Vested Shares as of Separation Date”,and Employee shall cease to vest in any further stock options and equity compensation awards and all stock options and equity awards(whether vested or unvested) will terminate pursuant to their terms. Notwithstanding the foregoing, effective immediately prior to theSeparation Date, the post-termination exercise period during which Employee may exercise Employee’s vested stock options followingthe Separation Date (which, under the terms of such options, is three months following the Separation Date) shall be extended to May5, 2020, subject to earlier termination in the event of a change in control or corporate transaction as set forth in the terms of the equityincentive plan under which the equity awards were granted. Employee understands and agrees that, with respect to any of Employee’soptions that qualify as of immediately prior to the Separation Date as “incentive stock options” under Section 422 of the InternalRevenue Code of 1986, as amended (“ISOs”), the amendment of Employee’s stock options to extend the post-termination exerciseperiod will immediately disqualify the “ISO” status of such ISOs that are “in the money” (i.e., have an exercise price per share lessthan the value of the Company’s common stock) and, with respect to any such ISOs that are not in the money, will re-start the ISOholding period for such ISOs. By executing this Release, Employee consents to the amendment of her ISOs to extend the post-termination exercise period and accelerate the ISOs to the extent described in Exhibit A and Employee expressly acknowledges thatEmployee has consulted with her tax advisors regarding these tax implications or has knowingly and voluntarily declined to do so.Except to the extent provided in this Section 2(c), the Employee’s stock options will continue to be subject to the terms and conditionsof the equity plans and stock option grant notices and agreements under which they were granted.d. Employee acknowledges that she is not eligible for the severance benefits described in this Section 2 in the absence of herexecution and non-revocation of this Release.3. Rights Reserved. By executing this Release, Employee does not waive:a. Claims or rights Employee may have with respect to vested benefits Employee has accrued under the Chimerix, Inc. 401(k)Profit Sharing Plan & Trust;b. Claims or rights Employee may have with respect to the stock options and equity compensation awards listed on ExhibitA;c. Claims or rights Employee may have which arise after the date Employee signs this Release, including those under the AgeDiscrimination in Employment Act;d. COBRA rights Employee may have under any group health plan pursuant to Code Section 4980B;e. Rights Employee may have under the provisions of this Release; andf. Claims for indemnification under the Company’s bylaws or other corporate governance documents.198183625 v3Exhibit 10.704. No Other Entitlements. Except for the compensation, monies and benefits expressly set forth in Section 2 and the rightsreserved under Section 3, Employee acknowledges that she is not entitled to any other compensation, monies or benefits from theCompany, including but not limited to compensation for vacation or other time off, bonuses, commissions, expense reimbursements, orother forms of compensation or benefits, repayments of debts, or reimbursements of expenses.5. General Release.a. By signing this Release, in consideration for the sums of money and benefits Employee is eligible to receive under thisRelease, Employee, on behalf of herself and her heirs, representatives, administrators, executors, successors and assigns, herebyirrevocably and unconditionally releases, acquits, and forever discharges to the fullest extent permitted by law, the Company and eachof its present and former divisions, parent companies, subsidiaries, affiliates, predecessors, successors and assigns, and together with allpresent and former benefit plans or policies, plan administrators, agents, directors, officers, employees, owners, representatives andattorneys of all such entities or persons and all persons acting by, through, under or in concert with any of them (collectively referred toas the “Released Parties”), from any and all charges, complaints, claims, liabilities, obligations, promises, agreements, controversies,damages, actions, causes of action, suits, rights, demands, costs, losses, debts and expenses (including attorney’s fees and costs), of anynature whatsoever, known or unknown, which Employee now has, has had, or may hereafter claim to have had against each or any ofthe Released Parties resulting from or arising out of any matter, act, omission, cause or event whatever that has previously occurred;except that Employee does not waive or release rights reserved under Section 3 of this Release or rights or claims that cannot belawfully waived. Employee understands that by signing this Release and accepting the sums of money and benefits described in thisRelease, Employee is waiving any right to pursue any claim against any of the Released Parties for payments or benefits of any kind(other than those expressly reserved in this Release), as well as claims for back pay, severance pay, liquidated damages, compensatorydamages, punitive damages, or any other losses or other damages to Employee or Employee’s property resulting from any claimedviolation of local, state or federal law, including, for example (but not limited to), claims arising under Title VII of the Civil Rights Actof 1964, the Age Discrimination in Employment Act, the Americans With Disabilities Act, the Sarbanes-Oxley Act of 2002, theRetaliatory Employment Discrimination Act, the Employee Retirement Income Security Act of 1974, The Family Medical Leave Act,the Fair Labor Standards Act, the North Carolina Wage and Hour Act, the North Carolina Retaliatory Employment DiscriminationAct, the Genetic Information Nondiscrimination Act, the North Carolina Equal Employment Practices Act, the North Carolina Personswith Disabilities Protection Act, all as amended, and claims under any other federal, state or local law pertaining to Employee’semployment or the termination of her employment.b. This Release does not waive or interfere with any rights Employee may have to file a charge of discrimination with afederal or state administrative agency, provided, however, that Employee acknowledges and agrees that she is not entitled to anypersonal recovery in any such agency proceeding.198183625 v3Exhibit 10.70c. Employee acknowledges that this Release applies both to known and unknown claims that may exist between Employeeand the Released Parties as of the date she signs this Release. Employee expressly waives and relinquishes all rights and benefits whichEmployee may have under any state or federal statute or common law principle that would otherwise limit the effect of this Release toclaims known or suspected prior to the date Employee signs this Release, and does so understanding and acknowledging thesignificance and consequences of such specific waiver. Employee acknowledges that the benefits provided by the Company underSection 2 of this Release are discretionary in nature and not required of the Company in the absence of this Release and Employee’srelease of claims herein, and constitute adequate consideration for the release.d. Employee represents that, as of the date of execution of this Release, she has not filed with any agency or court anycomplaint or lawsuit against any of the Released Parties (as defined in Section 5 of this Release), and to the best of her knowledge, hasno claim, cause of action or rights of actions against the Company arising out of or in any way connected with her employment withthe Company.e. Employee agrees that she will not seek or apply for re-employment with any of the Released Parties and Employee waivesany right to re-employment or reinstatement with the Company or any other Released Party. Employee acknowledges that it is thegeneral policy of the Company and its subsidiaries not to re-employ individuals with whom it has entered into separation agreements ofthis nature.6. No Admission of Liability or Wrongdoing. This Release will not be used or construed by any person or entity as anadmission of liability or finding that Employee’s rights were in any way violated by any of the Released Parties, and this Release maynot be offered or received in evidence in any action or proceeding as an admission of liability or wrongdoing on the part of theCompany or any other Released Party. Employee understands and agrees that the consideration received herein is accepted by her asfull and complete settlement and compromise of any and all claims, asserted or unasserted, and the payment of such consideration isnot an admission of liability by the Company.7. Confidentiality of Release. Employee shall keep the terms of this Release strictly confidential and shall not disclose anyinformation concerning the terms of this Release or provide a copy of the same to anyone, except Employee’s immediate family andlegal and financial advisors, who shall be bound to maintain the confidence of the terms of this Release. If required by law to produce acopy of this Release or to make such disclosure, Employee shall give the Company notice prior to such production or disclosure.8. No Knowledge of Wrongdoing. Except as Reported. Employee represents and promises that she has no knowledge of anyviolation of federal or state laws or regulations except those, if any, which she has previously reported in writing to the Company’sCorporate Counsel.9. Post-Termination Obligations. All payments and benefits to Employee under Section 2 of this Release shall be subject toEmployee’s compliance with the following provisions following the Separation Date:198183625 v3Exhibit 10.70a. Assistance in Litigation. Employee shall, upon reasonable notice, furnish such information and assistance to the Companyas may reasonably be required by the Company in connection with any litigation in which it is, or may become, a party, and whicharises out of facts and circumstances known to Employee. The Company shall promptly reimburse Employee for her out-of-pocketexpenses incurred in connection with the fulfillment of her obligations under this Section, provided that such expenses are incurred byEmployee during her lifetime and reimbursements are made no later than the end of the calendar year following the calendar year inwhich the expense was incurred. The expenses eligible for reimbursement under this paragraph shall not affect any expenses eligiblefor reimbursement or in-kind benefits to be provided in any other year. If Employee provides litigation assistance at the Company’srequest after the Separation Date, then the Company shall compensate Employee for the time spent in providing assistance at an hourlyrate of $300 per hour, paid within 30 days following the calendar quarter in which the assistance was provided. Employee’s rightsunder this paragraph are not subject to liquidation or exchange for any other benefit.b. Confidential Information. Employee remains bound by the obligations of the Proprietary Information and InventionsAgreement that she executed with the Company (the “PIIA”). In addition, Employee agrees that she will promptly return and deliverto the Company all documents, data and other materials and items in her possession, custody or control, wherever located, that belongto the Company and/or contain or reflect Confidential Information, including, but not limited to, any and all keys, credit cards, securitycards, computer software, disks, data, records, notebooks, correspondence, customer or supplier lists, files, forms, supplies or otherdocuments or materials, in any form or format and including, but not limited to, any printed versions or copies or other recordings ofsuch documents or materials, that have been provided or furnished to Employee by the Company or its affiliates, or have been obtainedor developed or used by Employee during the performance of Employee’s services for the Company, or in connection withEmployee’s services or any other activities for the Company. Employee agrees that prior to responding to any valid subpoena, courtorder or other legal process which would require disclosure of Confidential Information encompassed by this paragraph, she shall givethe Company prior written notice of the subpoena, court order or other legal process in sufficient time to afford the Company areasonable opportunity to challenge the subpoena, court order or other legal process.c. Noncompetition. Employee acknowledges that she remains bound by the Non-Competition and Non-Solicitation provisionsof Section 3 of the Participation Agreement; provided however, that the “Restricted Period”, as set forth in the ParticipationAgreement, shall only be a period of 9 months from the date of this Release.d. Failure to Comply. In the event that Employee shall fail to comply with any provision of this Section 9, and such failureshall continue for ten (10) days following delivery of notice thereof by the Company to Employee, all rights of Employee and anyperson claiming under or through her to payments and benefits under paragraphs (a) through (c) of Section 2 of this Release shallthereupon terminate and no person shall be entitled thereafter to receive any such payments or benefits. In addition to the foregoing:198183625 v3Exhibit 10.70i. The amount, if any, payable to Employee after the Separation Date under Section 2 shall be reduced, but not belowzero, by the amount of any remuneration for personal services earned by or payable to Employee by a business that is in competitionwith the Company within the Restricted Territory.ii. In the event of a breach or threatened breach by Employee of the provisions of this Section, the Company shallhave and may exercise any and all other rights and remedies available to the Company at law or otherwise, including but not limited toobtaining an injunction from a court of competent jurisdiction enjoining and restraining Employee from committing such violation, andEmployee hereby consents to the issuance of such injunction.10. Non-Disparagement. Employee agrees not to disparage the Company, including, without limitation, making disparagingcomments about the Company or releasing or causing to be released information for the purpose of discrediting the Company. TheCompany agrees to instruct its officers and directors not to disparage Employee, including, without limitation, making disparagingcomments about Employee or releasing or causing to be released information for the purpose of discrediting Employee.11. Section 409A Compliance. To the extent applicable, the parties hereto intend that the Severance Plan and this Release beexempt from, or if an exemption is not available, comply with Section 409A of the Internal Revenue Code of 1986, as amended andthe regulations and other guidance thereunder and any state law of similar effect (collectively “Section 409A”). The parties herebyagree that this Release shall at all times be construed in a manner to be exempt from, or if an exemption is not available, to complywith, Section 409A. The parties also agree that in no event shall any payment required to be made pursuant to this Release that isconsidered deferred compensation within the meaning of Section 409A and is not otherwise exempt from the provision thereof beaccelerated in violation of Section 409A. The parties further agree that any payment paid in connection with this Release pursuant tothe Participation Agreement and Severance Plan will be paid in accordance with the provisions of Section 5 of the Severance Plan.12. Taxes. The Company does not represent or guarantee that any particular federal or state income, payroll or other taxtreatment will result from this Release or the compensation or benefits payable pursuant to this Release. Executive is solely responsiblefor the proper tax reporting and timely payment of any income tax or interest for which she is liable as a result of this Release and thecompensation or benefits payable pursuant to this Release.13. No Attachment. No right to receive payments under this Release shall be subject to set off, offset, anticipation,commutation, alienation, sale, assignment, encumbrance, charge, pledge or hypothecation or to execution, attachment, levy or similarprocess or assignment by operation of law, and any attempt, voluntary or involuntary, to effect any such action shall be null, void andof no effect.14. ADEA Acknowledgements. Employee acknowledges the following:a. Employee has been advised by the Company that this Release affects important rights, and includes a release of any and allclaims arising out of any alleged violation of198183625 v3Exhibit 10.70Employee’s rights related to her employment with the Company or any of its predecessors, including, but not limited to, any and allclaims Employee may have under the Age Discrimination in Employment Act of 1967, as amended, 29 U.S.C. § 621, et seq. Becausethis Release affects important rights, Employee has been and is hereby advised in writing to consult with an attorney prior to executingthis Release;b. Employee is advised that she has twenty one (21) days to consider this Release and Employee may take as muchof that time as she wishes before signing. If Employee decides to accept the benefits offered herein, she must sign this Release andreturn it to Michael A. Alrutz, Senior Vice President, General Counsel at Chimerix, Inc., 2505 Meridian Parkway, Suite 100, DurhamNC 27713 before the expiration of the twenty-one (21) days. By signing below, Employee acknowledges that she received thisRelease on February 4, 2019; andc. Employee is advised that, if she signs this Release, she will have a period of seven (7) days from the date of hisacceptance to change her mind and revoke this Release. If Employee decides to revoke this Release, then she should deliver writtennotice to Michael A. Alrutz, Senior Vice President, General Counsel at Chimerix, Inc. within such 7-day period. None of the termsand conditions contained herein will be enforceable by the parties hereto until the expiration of this 7-day period, and this Release willnot become effective until such 7-day period has passed without Employee’s revocation of it.15.Miscellaneous This Release shall be binding upon and inure to the benefit of Employee, her assigns, heirs,executors, administrators, representatives, as well as the predecessors, successors, purchasers and assigns of the Company. Employeemay not assign any of her rights or delegate any of her duties under this Release. Except as preempted by federal law, this Releaseshall be governed by and construed in accordance with the laws of the State of North Carolina, without reference to its conflict of lawprovision. Any number of counterparts of this Release may be signed and delivered, each of which shall be considered an original andall of which, together, shall constitute one and the same instrument.16.Entire Agreement. This Release, with attachments, the PIIA, the Participation Agreement and the Severance Plancomprise the entire agreement and understanding of the parties with respect to the subject matter, specifically including but not limitedto any terms and conditions of employment or the termination of employment, and there are no agreements or understandings otherthan those contained herein. Further, this Release is intended to be a binding contract among the parties hereto and shall not bemodified, except by writing signed by both Employee and the Company. The provisions of this Release shall be deemed severable,and the invalidity or unenforceability of any provision (or part thereof) of this Release shall in no way affect the validity orenforceability of any other provisions (or remaining part thereof).EMPLOYEE ACKNOWLEDGES AND AGREES THAT EMPLOYEE HAS CAREFULLY READ AND FULLYUNDERSTANDS ALL THE PROVISIONS OF THIS RELEASE. EMPLOYEE ACKNOWLEDGES THAT EMPLOYEE HASNOT RELIED UPON ANY REPRESENTATION OR STATEMENT, WRITTEN OR ORAL, WHICH IS NOT SET FORTH INTHIS DOCUMENT. EMPLOYEE FURTHER ACKNOWLEDGES THAT EMPLOYEE IS ENTERING INTO THIS RELEASEVOLUNTARILY AND OF EMPLOYEE’S198183625 v3Exhibit 10.70OWN FREE WILL, WITHOUT ANY COERCION FROM ANY PERSON, INCLUDING THE COMPANY OR ANY OF ITSREPRESENTATIVES. EMPLOYEE ACKNOWLEDGES THAT EMPLOYEE FULLY AND COMPLETELYUNDERSTANDS THE TERMS AND CONDITIONS OF THIS RELEASE AND HAS VOLUNTARILY AND KNOWINGLYAGREED TO SUCH TERMS AND CONDITIONS, INCLUDING ALL RELEASES OF CLAIMS EMPLOYEE MAY HAVEAGAINST THE COMPANY OR ANY OF THE RELEASED PARTIES, IN EXCHANGE FOR VALUABLECONSIDERATION THAT EMPLOYEE IS NOT OTHERWISE ENTITLED TO RECEIVE.198183625 v3Exhibit 10.70IN WITNESS WHEREOF, the parties have executed this Release on this the 8th day ofFebruary, 2019.EMPLOYEE:/s/ M. Michelle Berrey M. Michelle BerreyCHIMERIX, INC.By: /s/ Martha J. Demski Name: Martha J. DemskiTitle: Chair of the Board of Directors198183625 v3Exhibit 10.70EXHIBIT AEMPLOYEE’S OUTSTANDING EQUITY AWARDSGrant DateType of AwardTotal SharesUnderlying Outstanding AwardsExercise Priceper ShareShares Vested as of Separation DateShares AcceleratedPursuant to SeverancePlan & Participation AgreementTotal Vested Sharesas of Separation Date1/23/2019Stock Option400,000$2.410125,000125,0001/25/2018Stock Option400,000$4.68100,000125,000225,0001/24/2017Stock Option148,000$5.1474,00046,250120,2501/24/2017RSU Award74,000N/A37,00023,12560,1255/9/2016RSU Award100,000N/A75,00025,000100,0001/8/2016Stock Option483,600$8.06362,700120,900483,6001/28/2015Stock Option184,200$39.41184,2000184,2004/9/2014Stock Option140,000$21.92140,0000140,0001/28/2014Stock Option58,713$18.7558,713058,71311/18/2012Stock Option15,161$4.2615,161015,161Total 2,003,674 1,046,774465,2751,512,049198183625 v3May 9, 2012 Michael A. Alrutz5103 Brookstone DriveDurham, NC 27713Dear Michael,Chimerix is pleased to extend an offer of employment to you for the position of Corporate Counsel reporting to TimothyTrost, Sr. Vice President and Chief Financial Officer with dotted line reporting to Kenneth Moch, President and ChiefExecutive Officer. We are hopeful that you will accept this offer and look forward to the prospect of having a mutuallysuccessful relationship with you. Your anticipated hire date will be June 1, 2012.The following are the terms of this offer:Base Salary:Your per pay period base salary will be $8,750.00 (annualized, $210,000.00). Currently, paychecksare issued semi-monthly for a total of 24 pay periods per year.Stock Options:You will be granted an option to purchase 50,000 shares of Chimerix common stock. All stock optiongrants are subject to the vesting schedule and terms and conditions outlined in the Chimerix 2012Equity Incentive Plan (“the Plan”). You will be issued a grant notice, option agreement and details ofthe Plan. Such shares shall vest over a period of four (4) years so long as you continue to provideservices to the Company, with 25% vesting one year from the vesting commencement date and thebalance vesting at the rate of 1/36 per month over the remaining three (3) years.Target Bonus:For calendar year 2012, you will be eligible for a target bonus of 15% of the base salary paid to you in2012. Such bonus is paid in 2013 and is based upon your achievement of the goals and objectivesagreed to in the performance dialog process with your manager and the formula determined by theBoard of Directors for 2012.Deferred SigningIf you remain employed with Chimerix until May 31, 2013, or ifBonus:Chimerix terminates your employment “without cause” between June 1, 2012 and May 31, 2013, thenChimerix shall pay you a bonus in the amount of $25,000 within thirty days following the earlier ofyour termination of employment “without cause” or May 31, 2013. Additionally, if you remainemployed with Chimerix until May 31, 2014 or if Chimerix terminates your employment “withoutcause” between June 1, 2013 and May 31, 2014, ChimerixMichael A. AlrutzMay 9, 2012Page 2 of 4shall pay you a bonus in the amount of $25,000 within thirty days following the earlier of yourtermination of employment without cause or May 31, 2014. For purposes of this paragraph, the term“without cause” shall mean Chimerix terminates your employment for a reason other than your jobperformance or misconduct.Your right to receive these bonus payments may not be assigned, transferred, pledged, encumbered,or attached, and any attempt, voluntary or involuntary, to effect such action shall be null, void and ofno effect. Chimerix agrees that it shall be obligated to assign this obligation to any party whichacquires all or substantially all of the assets of Chimerix. This bonus obligation shall be binding uponany successors to Chimerix. Nothing contained herein shall be construed as a contract ofemployment or to confer upon you any rights to continued employment.The bonus payments are intended to qualify as short-term deferral payments meeting therequirements of Treasury Regulations Section 1.409A-1(b)(4), and this Agreement shall be construedin accordance with that intent. References to termination of employment in this paragraph shall meanyour “separation from service” within the meaning of Internal Revenue Code Section 409A(a)(2)(A)(i).To the extent that Internal Revenue Code Section 409A applies to any payments under this letter, thisletter shall be construed consistently with the requirements of that law such that payments hereundershall not be included in your income until such payments are actually paid to you.Benefits:As an employee of Chimerix you will be eligible for comprehensive health and dental insurancebenefits for yourself and your eligible dependents, effective on the first day of employment. For 2012,Chimerix pays the entire monthly premium for this coverage. You will also be eligible for Company-paid term life insurance, short term and long-term disability insurance, effective on your hire date.Additional benefits for which you will be eligible include: accrued vacation equal to Twenty (20)days per year and twelve (12) paid holidays per calendar year. With a June 1st start date, yourvacation time in 2012 will be 10 days. You will also be eligible to participate in the Chimerix 401(k)Plan, effective on the first day of the month, following your date of hire (July 1, 2012). Full details ofgroup benefits will be provided once you are on board.Michael A. AlrutzMay 9, 2012Page 3 of 4Chimerix is an at-will employer and as such your employment must be entered into voluntarily and for no specified period.As a result, you are free to resign or the company may terminate your employment at any time, for any reason, with orwithout cause. No one other than the CEO has the authority to alter this employment relationship, either verbally or inwriting.As with all new employees, you will be asked to provide to the Company documentary evidence of your eligibility foremployment in the United States when you join the Company. Such documentation must be provided to us within threebusiness days of your date of hire, or our employment relationship with you may be terminated.Please understand it is the policy of the Company not to solicit or accept proprietary information and/or trade secrets ofother companies. If you have or have had access to trade secrets or other confidential, proprietary information developedby your former employer; the use of such information in performing your duties at Chimerix is prohibited. This may include,but is not limited to, confidential or proprietary information in the form of documents, magnetic media, software, customerlists, formulae and business plans or strategies. You will be required to execute a standard Proprietary Information andInventions Agreement with Chimerix, a copy of which is attached as Exhibit A.If you accept this offer, the terms described in this letter, together with the Proprietary Information and InventionsAgreement, shall be the terms of your employment, provided, however, that your duties are performed in accordance withall standards and policies adopted by the company. Your duties may change from time to time, depending upon the needsof the company and your skills. This letter supersedes any prior agreements, representations or promises of any kindexpress or implied, concerning your employment and it constitutes the full and complete agreement between you and theCompany.We are very excited about the prospect of your joining our team. We are confident that you have much to contribute to thesuccess of Chimerix. The strength of our technology, the quality and experience of our personnel and your presence willfacilitate this success.Michael A. AlrutzMay 9, 2012Page 4 of 4This offer expires five business days after your receipt of this letter. If the terms described herein are acceptable to you,please acknowledge your acceptance by signing below and returning the original to us in the envelope provided. You mayalso forward your acceptance via secured fax to 919-313-6781. Please keep a copy for your records.Michael, all of us at Chimerix look forward to your joining our team!With warm regards,CHIMERIX, Inc./s/ Kenneth I. Moch /s/ Timothy W. TrostKenneth I. Moch Timothy W. TrostPresident and CEO Sr. Vice President and CFO EnclosuresAccepted:/s/ Michael A. Alrutz May 11, 2012 Michael A. Alrutz DateExhibit 23.1 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMWe consent to the incorporation by reference in the following Registration Statements:1.Registration Statement (Form S-8 No. 333-187860) pertaining to the 2002 Equity Incentive Plan, 2012 Equity Incentive Plan, 2013 EquityIncentive Plan and 2013 Employee Stock Purchase Plan of Chimerix, Inc.,2.Registration Statement (Form S-8 Nos. 333-194408, 333-202582, 333-209802, 333-216396 and 333-223344) pertaining to the 2013 EquityIncentive Plan and 2013 Employee Stock Purchase Plan of Chimerix, Inc., and3.Registration Statement (Form S-3 No. 333-221412) of Chimerix, Inc.;of our reports dated March 5, 2019 with respect to the consolidated financial statements of Chimerix, Inc. and the effectiveness of internal control overfinancial reporting of Chimerix, Inc. included in this Annual Report (Form 10-K) of Chimerix, Inc. for the year ended December 31, 2018. /s/ Ernst & Young LLP Raleigh, North Carolina March 5, 2019 Exhibit 31.1 CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Michael A. Alrutz, certify that: 1. I have reviewed this Annual Report on Form 10-K for the fiscal year ended December 31, 2018 of Chimerix, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrantand have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularlyduring the period in which this report is being prepared;b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision,to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles; c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectivenessof the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscalquarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, theregistrant’s internal control over financial reporting; and 5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likelyto adversely affect the registrant’s ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control overfinancial reporting. Date:March 5, 2019 /s/ Michael A. Alrutz Michael A. Alrutz Principal Executive Officer Exhibit 31.2 CERTIFICATION OF THE PRINCIPAL FINANCIAL OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Timothy W. Trost, certify that: 1. I have reviewed this Annual Report on Form 10-K for the fiscal year ended December 31, 2018 of Chimerix, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrantand have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularlyduring the period in which this report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision,to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles;c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectivenessof the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscalquarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, theregistrant’s internal control over financial reporting; and 5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likelyto adversely affect the registrant’s ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control overfinancial reporting. Date:March 5, 2019 /s/ Timothy W. Trost Timothy W. TrostPrincipal Financial and Accounting Officer Exhibit 32.1 CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002In connection with the Annual Report on Form 10-K of Chimerix, Inc. (the “Company”) for the period ended December 31, 2018, as filed with the Securitiesand Exchange Commission on the date hereof (the “Report”), I, Michael A. Alrutz, as Principal Executive Officer of the Company, certify, pursuant to 18U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge: 1. the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and 2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date:March 5, 2019 /s/ Michael A. Alrutz Michael A. Alrutz Principal Executive Officer The foregoing certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. § 1350, and is not being filed for purposes of Section 18of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or afterthe date hereof, regardless of any general incorporation language in such filing. A signed original of this written statement required by Section 906 has beenprovided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request. Exhibit 32.2 CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002In connection with the Annual Report on Form 10-K of Chimerix, Inc. (the “Company”) for the period ended December 31, 2018, as filed with the Securitiesand Exchange Commission on the date hereof (the “Report”), I, Timothy W. Trost, as Principal Financial Officer of the Company, certify, pursuant to 18U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge: 1. the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and 2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date:March 5, 2019 /s/ Timothy W. Trost Timothy W. TrostPrincipal Financial and Accounting Officer The foregoing certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. § 1350, and is not being filed for purposes of Section 18of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or afterthe date hereof, regardless of any general incorporation language in such filing. A signed original of this written statement required by Section 906 has beenprovided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request. 

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