Celldex Therapeutics, Inc. — FY 2019 Form 10-K
Reporting period: Fiscal year ended December 31, 2019; the filing also presents unaudited fourth-quarter results. Amounts below are in U.S. dollars. Celldex is a clinical-stage biopharmaceutical company developing immunotherapies and targeted biologics. It reported no product sales, and all disclosed programs were company-owned.
Financial and operating results
| Metric | FY 2019 | FY 2018 |
|---|---|---|
| Revenue | $3.6 million | $9.5 million |
| Research and development expense | $42.7 million | $66.4 million |
| General and administrative expense | $15.4 million | $19.3 million |
| Operating loss | $55.0 million | $156.4 million |
| Net loss | $50.9 million | $151.2 million |
| Net loss per share | $3.51 | $14.48 |
| Net cash used in operating activities | $46.4 million | $75.2 million |
Revenue fell 63%, primarily reflecting lower revenue from the BMS collaboration and reduced contract manufacturing and research services. Revenue consisted of collaboration/licensing and contracts/grants, not product sales. The company had no positive operating margin; its operating loss was $55.0 million.
At year-end, cash and cash equivalents were $11.2 million and marketable securities were $53.2 million, totaling $64.4 million. Working capital was $55.1 million; current assets were $66.7 million and current liabilities $11.6 million. Total liabilities were $28.9 million, including operating lease liabilities and contingent/deferred obligations; the filing does not identify conventional interest-bearing debt as a material balance. Total assets were $122.9 million and stockholders’ equity $94.0 million.
Cash from financing was $16.3 million, principally net proceeds from stock issuance; investing activities provided $17.1 million, largely reflecting net sales and maturities of marketable securities. Outstanding shares increased from 12.0 million at year-end 2018 to 17.0 million at year-end 2019. The filing reports a one-for-fifteen reverse stock split effective February 8, 2019; presented share and per-share figures reflect the split.
Q4 2019: Revenue was $0.9 million, net loss was $10.4 million, and basic and diluted net loss per share was $0.64. Q4 2018 revenue was $1.8 million and net loss was $9.4 million.
Material changes and unusual items
- Annual net loss narrowed by $100.3 million, mainly because 2018 included non-cash goodwill impairment of $91.0 million and intangible-asset impairment of $18.7 million related to the discontinued Glemba program. Lower 2019 R&D spending also contributed; the smaller gain on remeasurement of contingent consideration partly offset the improvement.
- R&D expense declined 36%, reflecting lower personnel and product-development costs, including reduced clinical-trial and contract-manufacturing expenses. Spending increased on CDX-527, while the company continued development of its other principal candidates.
- Celldex recorded a $1.8 million non-cash impairment of an investment in a private company in 2019. Year-end IPR&D assets were $48.7 million; the company reported no impairment in its 2019 annual review.
- The company adopted lease accounting requirements in 2019 and recognized operating lease right-of-use assets and liabilities. This accounting change did not materially affect the statements of operations or cash flows.
Pipeline, outlook and principal risks
- CDX-1140: Phase 1 dose escalation was completed, with 1.5 mg/kg selected as the recommended dose for monotherapy and combination with CDX-301. Interim findings included limited clinical activity in a small, heavily pretreated population. Two of six patients in the 3.0 mg/kg monotherapy cohort had pneumonitis dose-limiting toxicities. Expansion cohorts, including a pembrolizumab combination cohort, were underway.
- CDX-3379: Phase 2 study in advanced head and neck cancer continued. The initial 15-patient cohort included one confirmed complete response and a reported 29% clinical benefit rate; the study was expanded to about 45 patients, including at least 15 with FAT1 mutations. These are interim, small-cohort findings and do not establish efficacy.
- CDX-0159: Phase 1a testing in healthy subjects began in November 2019. The company planned studies in chronic spontaneous and chronic inducible urticaria by year-end 2020.
- CDX-527: Celldex planned a Phase 1 study in advanced solid tumors in the second half of 2020. The filing’s development plans are forward-looking, not assured outcomes.
- Liquidity and going concern: Management expected year-end cash and investments to fund operations and capital expenditures into the first quarter of 2021. Management and the auditor identified substantial doubt about the company’s ability to continue as a going concern absent additional capital. The company expected operating losses to continue and revenue to decline over the next 12 months, while forecasting operating cash use to remain relatively consistent. Additional financing, partnerships, licensing, debt or equity issuance may be needed; equity financing could dilute shareholders.
- Kolltan obligations: Up to $127.5 million of contingent milestone consideration was identified as potentially payable after certain milestones, subject to a dispute with former Kolltan stockholders over abandoned milestones. Payment could be in cash, shares or both; the ultimate outcome was uncertain.
- COVID-19: The filing warned that the outbreak could delay trial enrollment, research, manufacturing, shipments and regulatory timelines. Its impact could not then be reasonably estimated.
- Other significant risks include clinical failure or safety issues, regulatory delays, reliance on CROs and contract manufacturers, competition, patent and licensing uncertainty, limited commercialization capability, and the need for continued access to capital.
Investor verification priorities
- Check subsequent filings and financing activity against the stated cash runway through the first quarter of 2021 and going-concern warning.
- Track trial enrollment, safety, full response data and timelines for CDX-1140 and CDX-3379; assess the limitations of interim, small-sample results.
- Verify whether the planned 2020 CDX-0159 and CDX-527 studies began and whether COVID-19 affected development schedules.
- Review the outcome of the Kolltan milestone dispute and any resulting cash obligation or shareholder dilution.
- Monitor cash burn, revenue concentration and equity issuance; 2019 revenue was concentrated, with Rockefeller University and Duke University accounting for 74% combined.
- Assess future impairment risk for the $48.7 million IPR&D asset balance and the company’s ability to fund programs without product revenue.