Celldex Therapeutics, Inc. — Q2 2016 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2016. Celldex is a clinical-stage biopharmaceutical company developing immunotherapies for cancer and other difficult-to-treat diseases; it reported no material product sales.
Financial results and liquidity
| Metric | Q2 2016 | Six months 2016 |
|---|---|---|
| Revenue | $1.4 million | $2.7 million |
| Operating expenses | $33.8 million | $70.8 million |
| Operating loss | $32.4 million | $68.1 million |
| Net loss | $32.0 million; $0.32 per share | $66.6 million; $0.67 per share |
| Cash used in operating activities | $68.7 million for the six months |
- At June 30, cash and cash equivalents were $32.5 million and marketable securities were $187.6 million, totaling $220.1 million. Marketable securities were described as high investment grade; none was considered other-than-temporarily impaired.
- Total assets were $271.2 million, current liabilities $20.0 million, total liabilities $36.5 million, and stockholders’ equity $234.7 million. The filing does not identify a conventional interest-bearing debt balance.
- Management said available resources were sufficient for at least the next 12 months and, including anticipated Cantor ATM proceeds, to fund planned operations through 2018. It also said additional capital may be needed for longer-term liquidity.
Changes versus comparable periods
- Q2 revenue decreased 36% from $2.2 million to $1.4 million, primarily because contracts and grants revenue—especially Rockefeller-related revenue—declined; BMS-related revenue increased.
- Q2 net loss improved slightly, by $0.4 million. For the first half, net loss increased $4.1 million, or about 7%, as operating expenses rose while revenue was essentially flat.
- First-half R&D expense increased 3% to $53.2 million; G&A increased 20% to $17.1 million. R&D personnel costs and stock-based compensation rose, while lower Rintega trial costs partly offset increased spending on other programs.
- Operating cash use increased from $57.4 million in the first half of 2015 to $68.7 million in 2016. Cash and marketable securities together declined from $289.9 million at year-end 2015 to $220.1 million at June 30, 2016.
Outlook, developments, and risks
- In May 2016, Celldex established a common-stock ATM program of up to $60 million. Through June it raised $2.7 million net; a further $5.0 million was raised in July. At July 31, $52.0 million of gross offering capacity remained. Equity issuance may dilute shareholders.
- Management expected operating cash use and product-development expense to decrease over the next 12 months as a result of stopping Rintega development, partly offset by higher spending on glembatumumab vedotin and varlilumab. Investment income was expected to decrease.
- The Phase 3 Rintega study was discontinued in March after an independent monitoring board concluded it was unlikely to meet its overall-survival endpoint; the treatment and control arms performed similarly. Celldex said study closure was substantially complete and it did not expect substantial additional costs.
- Key programs included glembatumumab vedotin in Phase 2b testing for triple-negative breast cancer and in Phase 2 for melanoma; varlilumab combination trials; and earlier-stage CDX-1401 and CDX-301 programs. The filing described clinical results and biomarker findings as preliminary; they do not establish future efficacy or approval.
- Principal risks include clinical-trial outcomes and timing, regulatory approval, manufacturing and clinical-supply availability, competition, intellectual-property disputes, and the ability to raise capital or secure collaborations on acceptable terms. Management reported no material changes to previously disclosed risk factors.
- A $3.5 million research and collaboration payment in April included a $1.8 million investment recorded in other assets and $1.7 million recorded as prepaid expense. The company also reported $7.9 million of stock-based compensation for the first half.
Important facts for investors to verify
- Whether cash burn and trial spending track management’s expectations, and whether the stated runway through 2018 remains supported by available liquidity and ATM sales.
- Enrollment, timing, safety, and efficacy updates for the METRIC glembatumumab vedotin study and the varlilumab combination trials.
- The full review and presentation of the discontinued Rintega Phase 3 results, and whether closure generates any further costs.
- Subsequent ATM share sales, remaining capacity, and resulting dilution; also verify the terms and obligations associated with the private-company collaboration and investment.