Chimerix started to rally today after tanking on Monday due to horrible news regarding a recent Phase 3 trial of its antiviral drug brincidofovir. Analysts are reacting to the news and slashing their price targets by more than 80%. At least one firm downgraded the stock as well However, their new price targets remain comfortably ahead of the current share price.

Chimerix, Inc. (CMRX) Bounces After Bad News, Huge PT Cuts

JPMorgan downgrades Chimerix

Shares of Chimerix climbed by as much as 7.84% to $7.14 per share during regular trading hours today. Before Monday’s negative announcement about the late stage drug trial, the stock was trading at more than $35 a share.

In a report dated Dec. 28, JPMorgan analyst Jessica Fye said she downgraded Chimerix from Overweight to Neutral and hacked her price target from $65 down to $15 per share. However, that target still represents significant upside from the current trading price.

Increased rates of GVHD

Brincidofovir was being tested to prevent cytomegalovirus infections in patients following a stem cell transplant. During the first 14 weeks after the transplant, the drug proved to be effective during trials. The new Phase 3 trial focused on weeks 15 to 24 after the transplant, and the antiviral medication was found to be much less effective.

A big problem was graft-versus-host disease, which became prevalent among patients who were taking brincidofovir as compared to the control group. The disease occurs when the transplanted stem cells attack the patient’s body, which results in doctors prescribing steroids to treat the disease. The steroids suppress the patient’s immune system, making it difficult for their bodies to fight off infections like cytomegalovirus.

Monday’s news came from preliminary analysis of the Phase 3 Trial results. Chimerix management intend to release the full details at the BMT Tandem Meeting in February. Researchers are seeking the cause of the increased rate of graft-versus-host disease among patients taking brincidofovir. Also management did say that some subgroups responded well to the drug and that they plan to work with the Food and Drug Administration to figure out a regulatory plan to treat these subgroups. Fye expects the process to take some time to complete.

Chimerix must regain investors’ trust

In addition to the negative late stage SUPPRESS trial results, the JPMorgan analyst sees other overhangs Chimerix management will have to deal with in order to convince investors that the ship isn’t sinking. For example, the drug maker has halted Phase 3 brincidofovir SUSTAIN and SURPASS trials in kidney transplant patients pending analysis of the full findings of the stem cell transplant trial.

Fye notes that investors aren’t currently placing much value on brincidofovir, but she adds that graft-versus-host disease isn’t associated with solid organ transplants. As a result, she speculates that the kidney transplant studies may be more promising and not subject to the same risks as the stem cell transplant trial.

She adds that Chimerix management’s decision to halt enrollment in the two late stage kidney trials for now is probably because they want to wait until they have confirmation that there are not acute risks associated with brincidofovir. Also she believes that they want to wait for virus data from the stem cell SUPPRESS trial before they move forward with the kidney transplant trials.

Other opportunities for brincidofovir

Chimerix also said on Monday that they will continue to test the antiviral medication to treat adenovirus and smallpox. Fye notes that smallpox is a much smaller opportunity but adds that she is waiting to see whether the government signs a contract with the pharmaceutical company to stockpile the medication for smallpox treatment.

In his report also dated Dec. 28 Barclays analyst Geoff Meacham, Ph.D. also noted that the drug hasn’t failed yet. He maintained his Overweight rating on Chimerix but slashed his price target from $65 to $12 per share. He’s waiting for more clarity on whether brincidofovir will be approved following the results of the AdVise study and the resumption of trials in solid organ transplant patients. He expects both of these developments to take approximately six months. More data from the AdVise trial is expected in the second half of 2016.