Celldex Therapeutics, Inc. — Q1 2018 Form 10-Q
Reporting period: Three months ended March 31, 2018. The unaudited statements are prepared under U.S. GAAP. Celldex is a clinical-stage biopharmaceutical company developing immunotherapies and targeted biologics; it reported no product sales revenue.
Key financial metrics
| Metric | Q1 2018 | Q1 2017 or comparison |
|---|---|---|
| Revenue | $4.1 million | $1.5 million; up 165% |
| Research and development expense | $21.9 million | $25.8 million; down 15% |
| General and administrative expense | $5.6 million | $7.2 million; down 23% |
| Operating loss | $119.7 million | $35.1 million |
| Net loss | $118.1 million | $34.3 million |
| Basic and diluted loss per share | $0.84 | $0.28 |
| Net cash used in operating activities | $28.0 million | $35.3 million |
| Cash, cash equivalents and marketable securities | $123.2 million | $139.4 million at December 31, 2017 |
| Current assets / current liabilities | $131.0 million / $24.0 million | Working capital: $107.0 million |
Revenue comprised $1.0 million from product development and licensing agreements and $3.1 million from contracts and grants. The increase primarily reflected newer manufacturing and research agreements with IAVI and Frontier, plus reimbursable clinical costs under the BMS collaboration. The filing does not present a conventional gross margin; revenue was not product sales.
Q1 investing activities provided $15.5 million, mainly reflecting net sales and maturities of marketable securities. Financing activities provided $12.1 million, including $11.7 million net proceeds from issuing 4.7 million shares through the Cantor equity offering. At quarter end, $55.5 million of gross offering capacity remained. Cash and cash equivalents alone were $39.8 million.
Total liabilities were $57.3 million. The filing does not report conventional funded debt as a distinct balance-sheet item. Long-term liabilities included $29.8 million of Kolltan contingent consideration; potential milestone payments under the acquisition agreement can reach $172.5 million and may be settled in cash, stock, or a combination.
Material changes and unusual items
- Q1 net loss included non-cash charges of $91.0 million for full goodwill impairment and $18.7 million for Glemba-related intangible impairment. A $13.6 million gain from remeasuring Kolltan contingent consideration and a $0.8 million non-cash tax benefit partly offset the charges.
- The impairments followed the April 16, 2018 announcement that the Phase 2b METRIC trial of glembatumumab vedotin (Glemba) failed its primary progression-free-survival endpoint. Reported results were 2.9 months median PFS for Glemba versus 2.8 months for capecitabine; hazard ratio 0.95, p=0.76. Celldex discontinued Glemba across indications.
- R&D spending declined year over year, primarily from lower personnel and product-development costs; Glemba still accounted for $8.9 million of Q1 program R&D expense. G&A also declined, mainly due to lower personnel, commercial-planning, and professional-service costs.
- On April 24, Celldex approved a workforce reduction; the filing reports 41 employees terminated and estimates approximately $1.3 million of Q2 restructuring charges, primarily cash severance and employee-related costs.
- Pipeline reprioritization also discontinued CDX-014 and CDX-1401. The company said it would concentrate resources on CDX-1140, CDX-3379, CDX-301, and varlilumab, all still in clinical or earlier-stage development.
- ASC 606 was adopted January 1, 2018. The transition reduced accumulated deficit by $1.3 million, reduced deferred revenue by $0.8 million, and increased receivables by $0.5 million; the effect on Q1 revenue was not material.
Liquidity, outlook and risks
Management said quarter-end cash, cash equivalents and marketable securities, together with anticipated Cantor offering proceeds, were expected to fund planned operations through 2020. The financial-statement note separately says resources at May 10, 2018 were expected to cover estimated working capital and planned operations for at least 12 months. Both assessments depend on assumptions, including future financing and potential cash payment of Kolltan milestones. Celldex expected to pursue additional capital through equity, debt, licensing, collaborations, or business combinations; availability and acceptable terms were not assured.
Management expected operating cash use, personnel costs, R&D product-development expense, and G&A to decrease over the next 12 months, in part because of the restructuring and program discontinuations. Investment income was expected to decline with lower cash and investment balances. No quantified earnings or revenue guidance was provided. The company expected continuing operating losses and stated that it might need to delay or discontinue programs, trials, or other activities if it could not raise sufficient capital.
Key risks include clinical and regulatory failure, dependence on external financing and partners, dilution from equity issuance or milestone payments, and the possibility that restructuring savings will not be realized. Celldex also disclosed that its share price had been below Nasdaq’s $1.00 minimum bid-price requirement since April 16, 2018, creating a potential continued-listing risk. The company reported no off-balance-sheet arrangements and said disclosure controls were effective at the reasonable-assurance level.
Important facts for investors to verify
- Cash runway assumptions, actual cash use after Q1, and the pace and price of any further Cantor share sales or other financing.
- Execution and cash costs of the 41-person workforce reduction, including the expected $1.3 million restructuring charge and realized savings.
- Whether pipeline reprioritization changes the fair value or potential payment timing of Kolltan contingent milestones, and whether any are settled in cash or shares.
- Clinical progress, enrollment, and forthcoming results for prioritized programs, particularly the varlilumab combination study and CDX-3379 Phase 2 study.
- Nasdaq bid-price compliance and any further effects of the METRIC failure on financing capacity, asset valuations, or operations.