Celldex Therapeutics, Inc. — Q2 2018 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2018. Celldex is a clinical-stage biopharmaceutical company developing immunotherapies and targeted biologics. Following the METRIC trial failure, it prioritized CDX-1140, CDX-3379, CDX-301 and varlilumab, and discontinued glembatumumab vedotin (Glemba), CDX-014 and CDX-1401.
Financial performance
| Metric | Q2 2018 | Q2 2017 | Six months 2018 | Six months 2017 |
|---|---|---|---|---|
| Revenue | $2.8m | $3.8m | $6.8m | $5.4m |
| Operating loss | $(16.9)m | $(28.9)m | $(136.5)m | $(64.0)m |
| Net loss | $(16.4)m | $(28.6)m | $(134.5)m | $(62.8)m |
| Net loss per share | $(0.11) | $(0.23) | $(0.93) | $(0.51) |
| Operating cash used | Not stated separately | Not stated separately | $45.4m | $56.0m |
Q2 revenue fell 28%, as increased BMS collaboration revenue was more than offset by lower contract and grant revenue. First-half revenue rose 27%, mainly from the BMS agreement. Q2 R&D expense declined 14% to $21.4m and G&A declined 14% to $5.6m. First-half R&D fell 15% to $43.3m and G&A fell 19% to $11.2m. No gross margin is reported; as a development-stage company, Celldex reported operating and net losses.
First-half net loss increased by $71.7m year over year, primarily because of non-cash impairment charges: $91.0m for all goodwill and $18.7m for Glemba-related intangible assets. These charges were partly offset by a $21.0m gain from remeasuring Kolltan contingent consideration and lower R&D expense. The contingent consideration liability was $22.4m at June 30, down from $43.4m at year-end. The Q2 remeasurement gain was $7.4m.
Balance sheet and liquidity
- Cash and cash equivalents were $43.9m and marketable securities were $70.1m at June 30, for combined liquidity of $114.0m, versus $139.4m at December 31, 2017.
- Current assets were $120.3m and current liabilities $20.0m (about 6.0x current coverage). Total liabilities were $50.3m; the filing does not identify conventional funded debt as a balance-sheet line item.
- First-half investing cash inflow was $28.7m, largely reflecting net maturities and sales of marketable securities; financing cash inflow was $20.3m, including $20.0m net proceeds from stock sales. Cash increased $3.6m to $43.9m.
- Celldex sold 17.95m shares through its Cantor equity facility in the first half and had $47.0m of gross offering capacity remaining at June 30. In July, it sold another 5.69m shares for $2.8m net proceeds.
Management stated that June 30 liquidity, together with anticipated future Cantor proceeds, was expected to fund planned operations through 2020. The financial-statement note separately says resources at August 8 were expected to cover at least the next 12 months. Management intends to seek additional capital; the runway could be affected by cash payment of Kolltan milestones, and future financing is not assured.
Material developments, outlook and risks
- The Phase 2b METRIC study of Glemba failed its primary progression-free-survival endpoint: median PFS was 2.9 months versus 2.8 months for capecitabine (hazard ratio 0.95; p=0.76). Celldex discontinued Glemba across indications.
- After pipeline prioritization, Celldex reduced its workforce and recorded $1.2m severance expense; it also recorded $0.4m for a facility lease restructuring. Management expected restructuring and program cuts to reduce personnel, product-development, G&A and operating cash costs.
- The prioritized clinical portfolio included Phase 1 CDX-1140, Phase 2 CDX-3379, CDX-301 and varlilumab. Reported combination-study data included a 14% response rate in the ovarian cancer cohort and 15% in the head-and-neck cohort; these were study results, not guidance.
- Major risks include clinical-trial failure or delay, regulatory uncertainty, ongoing cash needs and potential dilution or restrictive financing terms. Celldex may need to delay or discontinue programs or seek unfavorable financing if it cannot raise capital or establish collaborations.
- NASDAQ notified Celldex on May 29 that it did not meet the $1.00 minimum bid-price requirement; it had 180 days to regain compliance. Stockholders authorized the board to implement a 1-for-10 to 1-for-15 reverse split, but no response decision had been made.
Important facts for investors to verify
- Whether subsequent clinical results support the prioritized pipeline, particularly CDX-1140, CDX-3379 and varlilumab.
- Actual cash burn, remaining Cantor offering capacity and the company’s financing needs relative to its stated runway.
- Potential timing and payment form of Kolltan milestones, which could materially affect liquidity.
- Progress toward NASDAQ bid-price compliance and whether the board uses its reverse-split authority.
- Whether restructuring produces expected savings and whether further impairments or program changes are required.