Celldex Therapeutics, Inc. — Q1 2014 Form 10-Q
Reporting period: Three months ended March 31, 2014; comparative period is Q1 2013. Celldex is a clinical-stage biopharmaceutical company developing immunotherapies and antibody-drug conjugates. Financial statement amounts below are in millions of dollars, except per-share data.
Financial results and liquidity
| Metric | Q1 2014 | Q1 2013 |
|---|---|---|
| Revenue | $0.416 | $2.414 |
| Research and development expense | $27.070 | $14.090 |
| Total operating expenses | $31.905 | $19.815 |
| Operating loss | $(31.489) | $(17.401) |
| Net loss | $(29.903) | $(17.332) |
| Basic and diluted net loss per share | $(0.33) | $(0.23) |
| Net cash used in operating activities | $(31.875) | $(17.200) |
Revenue was minimal relative to expenses, so the company reported substantial operating and net losses; a positive operating margin was not reported. At March 31, cash and cash equivalents were $56.902 and marketable securities were $217.324, totaling $274.226. Current assets were $276.819 and current liabilities were $19.507. Total liabilities were $26.853, with no term-loan balance reported; the company had prepaid its term loan in full in May 2013. Stockholders’ equity was $291.846. Cash, cash equivalents and marketable securities were $274.2 million, compared with $303.0 million at year-end 2013.
Material changes from the prior period
- Net loss increased $12.6 million, or 73%, primarily due to higher R&D spending.
- R&D expense rose 92%, to $27.1 million. Product development spending increased $9.3 million, mainly for clinical trials and contract manufacturing associated with rindopepimut and glembatumumab vedotin. License fees included a one-time $2.5 million Seattle Genetics milestone following initiation of the METRIC study.
- Revenue fell 83% as $2.3 million of product royalties recorded in Q1 2013 ended following expiration of the relevant patent rights under the GlaxoSmithKline agreement. Contracts and grants revenue increased, primarily from Rockefeller University research services.
- General and administrative expense increased 46%, to $4.6 million, reflecting higher stock compensation, headcount and commercial-planning costs.
- Investment and other income increased to $1.6 million, including a $1.0 million TopoTarget payment and $0.4 million of income from New Jersey tax-benefit sales. Q1 2013 also included $0.3 million of interest expense.
- Operating cash use increased to $31.9 million from $17.2 million. Financing provided only $0.7 million in Q1 2014, versus $114.5 million in Q1 2013, when public and controlled equity offerings generated substantial proceeds. Net investing cash use was $81.3 million, largely reflecting purchases of marketable securities; the decline in cash should be considered alongside the increase in securities.
Outlook, programs and risks
- Management said available cash, cash equivalents and marketable securities would fund planned operations for more than two years. The financial-statement note separately says resources should cover estimated working capital and planned operations for at least the next twelve months; the filing does not reconcile these timeframes. Management expected operating cash use, R&D, product development, headcount and commercial-planning costs to increase over the next twelve months.
- Key programs included rindopepimut in the Phase 3 ACT IV study for newly diagnosed glioblastoma, with enrollment expected to finish in mid-2014, and the Phase 2 ReACT study for recurrent glioblastoma. Management expected specified ReACT enrollment milestones by year-end 2014 and updated data by year-end; reported interim results were not definitive and included small patient groups.
- Glembatumumab vedotin’s randomized Phase 2b METRIC study in triple-negative, gpNMB-overexpressing breast cancer began in December 2013 and was designed to seek accelerated approval. Additional Phase 2 studies in melanoma and squamous cell lung cancer were expected to start in the second half of 2014.
- Management also described plans for varlilumab combination studies and a CDX-301 pilot study in the transplant setting in 2014, and anticipated Phase 1 studies of preclinical CDX-014 in 2015. These are forward-looking plans, not assured outcomes.
- Celldex said it might seek additional capital through collaborations, licensing, business combinations, debt or equity. Financing may be unavailable or unfavorable; equity could dilute shareholders, debt could impose cash obligations and restrictive covenants, and collaborations could reduce the company’s economic participation.
- Clinical development, safety and efficacy, enrollment, regulatory approval, manufacturing and supply, intellectual property, and the ability to fund multiple trials remain material risks. The filing reported no material changes to the risk factors in the 2013 Form 10-K. Disclosure controls were assessed as effective, and no material internal-control changes were reported.
Important facts for investors to verify
- Reconcile the stated cash runway: “more than two years” in MD&A versus “at least twelve months” in the financial-statement note, and assess runway against planned higher spending.
- Track ACT IV enrollment and outcomes, and distinguish interim ReACT observations from results of adequately powered studies.
- Verify METRIC enrollment, execution and results, as well as the timing and funding of other planned trials.
- Assess the sustainability of low collaboration and grant revenue and the extent to which nonrecurring TopoTarget and tax-benefit proceeds contributed to Q1 income.
- Monitor future capital needs, potential financing terms and dilution; note that Q1 2014 operating cash use was $31.9 million.