Celldex Therapeutics, Inc. — Q3 2015 Form 10-Q
Reporting period: Three and nine months ended September 30, 2015. Celldex is a clinical-stage biopharmaceutical company developing immunotherapies for cancer and other difficult-to-treat diseases. The interim financial statements are unaudited.
Financial performance and liquidity
| Metric | Q3 2015 | Q3 2014 | Nine months 2015 | Nine months 2014 |
|---|---|---|---|---|
| Revenue | $1.0 million | $1.1 million | $3.7 million | $2.1 million |
| Research and development expense | $24.7 million | $26.2 million | $76.3 million | $77.4 million |
| General and administrative expense | $8.5 million | $5.0 million | $22.8 million | $14.4 million |
| Operating loss | $32.4 million | $30.3 million | $96.1 million | $90.4 million |
| Net loss | $32.0 million | $28.1 million | $94.5 million | $86.3 million |
| Basic and diluted loss per share | $0.32 | $0.31 | $0.98 | $0.97 |
- At September 30, cash and cash equivalents were $66.8 million and marketable securities were $237.8 million, totaling $304.6 million. Current assets were $309.3 million versus current liabilities of $23.6 million.
- Net cash used in operating activities for the first nine months was $85.1 million, compared with $79.3 million in 2014. Investing activities used $68.9 million; financing provided $192.8 million, largely from the March 2015 public offering.
- In March, Celldex issued 8.34 million shares for net proceeds of $188.8 million. Shares outstanding rose to 98.65 million at September 30 from 89.59 million at year-end 2014.
- Total liabilities were $34.0 million. The filing does not identify material interest-bearing debt. Revenue was small relative to operating costs; no meaningful operating margin is reported.
Changes versus the prior comparable period
- Q3 revenue declined 7%, while nine-month revenue rose 75%, principally reflecting BMS collaboration revenue and, year to date, Rockefeller University contract revenue.
- Q3 net loss widened by $3.9 million; nine-month net loss widened by $8.3 million. Higher G&A and lower investment and other income were key contributors. Q3 G&A rose 70%, including higher commercial planning costs and stock-based compensation.
- Nine-month R&D expense was nearly flat overall. Lower Rintega trial and product-development costs were substantially offset by increased personnel and costs for varlilumab and other programs.
- Investment and other income declined year over year, partly because 2014 included income connected with the TopoTarget agreement. The company recorded $8.7 million of stock-based compensation in the first nine months, compared with $4.7 million in 2014.
Outlook, programs, and risks
- Management said available cash and marketable securities were sufficient to fund planned operations for at least the next 12 months; elsewhere, it estimated funding through 2017. The longer-range estimate is subject to Rintega data and potential effects on commercial manufacturing and expansion. Management expected operating cash use and certain R&D, staffing, facility, and commercial-planning expenses to increase.
- Celldex may seek additional capital through collaborations or licensing, business combinations, debt, or equity. Availability and terms are uncertain; equity could dilute shareholders, debt could impose payments and covenants, and collaborations could reduce future product economics.
- Rintega’s Phase 3 ACT IV trial completed enrollment in December 2014. The first interim review in June 2015 recommended continuation; the company anticipated a second interim analysis in early 2016 and final data by year-end 2016, subject to event rates. Rintega had FDA Breakthrough Therapy Designation.
- In the Phase 2 ReACT study, the primary PFS6 endpoint was met; reported overall-survival results favored Rintega, including statistically significant results in the reported intent-to-treat and per-protocol analyses. These are clinical trial findings, not proof of approval or commercial success.
- METRIC, a randomized Phase 2b study of glembatumumab vedotin in triple-negative breast cancer, was projected to complete enrollment in the second half of 2016. Celldex also described ongoing varlilumab combination trials. Oncothyreon discontinued further enrollment in its varlilumab combination study after preliminary data did not show sufficient activity to proceed.
- Principal risks include clinical-trial safety and efficacy outcomes, regulatory approval, manufacturing and supplier capacity, competition, intellectual-property disputes, and the ability to finance development. Celldex reported no material changes to previously disclosed risk factors. It maintained a full valuation allowance against deferred tax assets.
Important facts for investors to verify
- Whether ACT IV reaches its event-driven interim and final analyses on the stated timetable, and what the results show.
- Whether ReACT findings are confirmed with continued follow-up and how they compare with the pivotal Rintega trial.
- METRIC enrollment progress, trial costs, and whether the study can support the intended regulatory filings.
- Cash burn and the assumptions behind management’s funding estimate through 2017, particularly if clinical or commercial plans change.
- Potential dilution or other financing needs, and the financial and strategic terms of any future collaborations or licensing arrangements.
- The 10-Q presents two liquidity horizons—at least 12 months in the financial-statement note and through 2017 in MD&A—so investors should assess the assumptions underlying each estimate.