Celldex Therapeutics, Inc. — Q1 2020 Form 10-Q
Business context and period: Unaudited results for the three months ended March 31, 2020, compared with Q1 2019. Celldex is a clinical-stage biopharmaceutical company developing immunotherapies and targeted biologics. It reported no product revenue to date. Unless noted otherwise, amounts below are in millions of dollars.
Financial results and liquidity
| Metric | Q1 2020 | Q1 2019 / comparison |
|---|---|---|
| Total revenue | $2.728 | $1.425; up 91% |
| Research and development expense | $11.695 | $11.151 |
| General and administrative expense | $3.666 | $4.896 |
| Total operating expenses | $15.595 | $19.366 |
| Operating loss | $12.867 | $17.941 |
| Net loss | $12.625 | $17.239 |
| Basic and diluted loss per share | $0.73 | $1.40 |
| Net cash used in operating activities | $12.110 | $13.233 |
Revenue growth primarily reflected a $1.8 million payment related to Rockefeller University’s January 2020 licensing of its HIV antibody portfolio to Gilead. Contracts and grants revenue fell to $0.442 million from $1.296 million, mainly because of lower work under the Duke University agreement. The company recorded no impairment charge in Q1 2020, versus $1.8 million in Q1 2019; the contingent-consideration remeasurement loss was $0.234 million versus $1.519 million.
At March 31, cash and cash equivalents were $22.724 million and marketable securities were $30.998 million, totaling $53.722 million, down from $64.383 million at year-end 2019. Current assets were $55.918 million and current liabilities $10.932 million. Total liabilities were $28.801 million; the filing does not identify conventional borrowings or provide a debt balance. The balance sheet includes operating lease liabilities and $12.719 million of contingent consideration. Gross margin is not presented.
Operating activities used $12.110 million of cash. Investing activities provided $21.965 million, largely from marketable securities sales and maturities; financing activities provided $1.637 million, primarily from stock issuance. Cash and cash equivalents increased by $11.492 million during the quarter, while cash plus marketable securities declined as securities were converted into cash and used to fund operations.
Celldex had 17.731 million common shares outstanding at March 31, compared with 16.972 million at December 31, 2019. It raised $1.6 million net through its Cantor equity sales agreement during the quarter. In April, it issued 1.2 million additional shares for $2.9 million net proceeds.
Outlook, risks, and material matters
- Going concern and funding: Management estimated that March 31 cash, cash equivalents and marketable securities would fund operating expenses and capital needs into Q2 2021. The filing nevertheless states that recurring losses and expected future losses raise substantial doubt about the company’s ability to continue as a going concern for one year after issuance. Beyond the estimated runway, operations depend on raising capital or obtaining partner funding. Potential financing could be dilutive or impose debt obligations, and failure to obtain funding could force program delays, discontinuations, early licensing, unfavorable financing, or a sale of the business.
- Spending expectations: Management expected operating cash use to remain relatively consistent over the next 12 months, with quarterly fluctuations; expected revenue and investment income to decrease; and expected facility costs to decline as Massachusetts facilities were consolidated. It expected personnel, laboratory supply, product development, and G&A costs to be generally consistent. No formal earnings or revenue guidance was provided.
- Research pipeline: Lead programs included CDX-1140 in Phase 1, CDX-3379 in Phase 2, CDX-0159 following a Phase 1a healthy-subject study, and CDX-527 with a Phase 1 study planned for the second half of 2020. Management planned studies of CDX-0159 in chronic urticaria by year-end 2020. These are development plans, not assurance of trial timing or success. R&D expense was $11.695 million, with the largest disclosed program costs for CDX-1140 ($3.136 million) and CDX-527 ($2.924 million).
- COVID-19: As of the filing, Celldex reported no significant delays or disruptions to planned or ongoing preclinical and clinical trials, manufacturing, or shipping. It warned that restrictions, enrollment challenges, facility closures, travel constraints, and supplier or contract-manufacturer disruptions could affect operations and potentially impair its $48.7 million of IPR&D assets.
- Kolltan contingency: Up to $127.5 million in adjusted future milestone consideration may be payable if milestones are achieved; payment may be in cash, shares, or both. Former Kolltan stockholders objected to Celldex’s abandonment of certain milestones. Celldex disputed the objection, was discussing possible agreement amendments, and said it could not estimate potential losses or predict the outcome.
- Other changes: The company consolidated its Massachusetts lab and manufacturing operations, with the Needham lease not to be renewed and functions and employees expected to move to Fall River during Q2 2020. Management reported effective disclosure controls and no material change in internal control over financial reporting; it reported no material changes to previously disclosed risk factors.
Most important facts for investors to verify
- Whether the stated cash runway into Q2 2021 remains achievable given operating cash burn, lower expected revenue, and funding needs.
- Progress, enrollment, safety, and results for CDX-1140, CDX-3379, CDX-0159, and CDX-527, including whether planned studies proceed on schedule.
- Use and dilution from the Cantor equity facility and any subsequent capital raises, partnerships, or other financing.
- Developments in the Kolltan milestone dispute, potential milestone achievements, and resulting cash or share obligations.
- Whether COVID-19 causes trial, manufacturing, supply, or facility disruptions or impairment of IPR&D assets.
- Whether the Rockefeller-related licensing revenue recurs; the filing attributes the Q1 increase primarily to a specific transaction payment.