Celldex Therapeutics, Inc. — FY 2013 Form 10-K
Reporting period: Fiscal year ended December 31, 2013. The filing also reports fourth-quarter results. Celldex is a clinical-stage biopharmaceutical company developing immunotherapies, principally for cancer; it had no revenue from sales of its drug candidates.
Financial performance and position
| Metric | FY 2013 | FY 2012 |
|---|---|---|
| Total revenue | $4.1 million | $11.2 million |
| Research and development expense | $67.4 million | $47.4 million |
| Total operating expense | $85.6 million | $69.3 million |
| Operating loss | $81.4 million | $58.1 million |
| Net loss | $81.6 million | $59.1 million |
| Net loss per share | $1.02 | $1.02 |
| Net cash used in operations | $67.7 million | $49.8 million |
- Revenue fell 63%, mainly because Rotarix royalty revenue declined to $2.3 million from $10.8 million. The related royalty arrangement with GlaxoSmithKline expired; Celldex said it did not expect further Rotarix revenue. Contracts and grants increased to $1.6 million, largely from research services for Rockefeller University.
- R&D expense increased 42%, principally as clinical trial and manufacturing costs rose for rindopepimut and glembatumumab vedotin. General and administrative expense increased 48% to $14.8 million, including higher staffing, stock-based compensation and commercial-planning costs.
- At December 31, cash and cash equivalents were $169.4 million and marketable securities were $133.6 million, totaling $303.0 million. Working capital was $284.8 million; total assets were $347.1 million.
- Celldex raised $301.1 million net from stock issuances during 2013, including $278.6 million from an underwritten offering. Shares outstanding increased to 89.2 million at year-end from 64.4 million a year earlier.
- The company prepaid its term loan in May 2013, leaving no term-loan balance at year-end. Total liabilities were $27.3 million, including $7.0 million of long-term liabilities. The filing reports no off-balance-sheet arrangements.
- Fourth-quarter 2013 revenue was $0.6 million and net loss was $22.1 million, or $0.27 per share, compared with fourth-quarter 2012 revenue of $3.6 million and net loss of $16.8 million, or $0.27 per share.
Operating margins are not meaningful for this development-stage company with no product sales. The audited statements report comprehensive loss of $81.6 million in 2013. The independent auditor gave an unqualified opinion and reported effective internal control over financial reporting.
Material changes and business developments
- Rindopepimut: The pivotal Phase 3 ACT IV trial in newly diagnosed EGFRvIII-positive glioblastoma was enrolling internationally; Celldex projected enrollment completion in mid-2014. The Phase 2 ReACT study in recurrent disease was expanded to approximately 170 patients, with completion expected in late 2014 and data anticipated by year-end. Interim results were described as promising, but were not definitive: in 20 Avastin-naive patients per arm, median overall survival was 12.0 versus 7.9 months (p=0.16).
- Glembatumumab vedotin: Celldex initiated the randomized METRIC study in December 2013 in approximately 300 patients with triple-negative breast cancer whose tumors over-express gpNMB; the study was designed to support accelerated approval. The filing describes earlier Phase 2b EMERGE subgroup results, which should be interpreted in light of small subgroup sizes and crossover treatment.
- Earlier-stage programs: Varlilumab remained in Phase 1, with expansion-cohort data anticipated in mid-2014 and combination studies planned. Celldex planned a CDX-301 pilot study in the first half of 2014 and a collaborative Phase 2 study of CDX-1401 with CDX-301. It discontinued the CDX-1135 dense deposit disease pilot after enrolling one patient and concluded the data did not establish a feasible approval path.
- Celldex planned additional Phase 2 studies of glembatumumab vedotin in melanoma and squamous cell lung cancer in the second half of 2014. It also planned to expand commercial-planning capabilities, while retaining the option to partner selected programs.
Liquidity, outlook, risks and contingencies
- Management expected operating losses to continue in 2014 and beyond as clinical development, manufacturing and commercial-readiness costs increased. It projected higher operating cash use over the next twelve months, especially for the lead programs.
- Management stated in MD&A that year-end cash and investments were sufficient to fund planned operations for more than two years; the financial-statement note states they were sufficient for at least the next twelve months. The filing cautions that additional financing may be needed for long-term liquidity and provides no assurance it will be available on acceptable terms.
- Management estimated the full ACT IV study would cost over $70 million and METRIC over $30 million. Celldex expected approximately $3.8 million in license and milestone payments in 2014; additional contingent milestones and royalties may arise as programs progress.
- Key risks include clinical-trial failure or delays, patient enrollment, regulatory uncertainty, substantial ongoing cash burn, potential future dilution or unfavorable financing, dependence on contract manufacturers and suppliers, competition, intellectual-property challenges, and limited commercial-launch experience. The company also disclosed that historical ownership changes may limit the use of tax-loss and credit carryforwards.
- In February 2014, after the reporting date, Celldex paid Seattle Genetics a $2.5 million milestone triggered by METRIC initiation. No material legal proceedings were reported.
Important facts for investors to verify
- ACT IV and METRIC enrollment, timelines, costs, primary endpoints and eventual complete trial results; distinguish preliminary or subgroup signals from confirmatory evidence.
- The assumptions supporting the stated cash runway, including the difference between “more than two years” in MD&A and “at least the next twelve months” in the financial-statement note.
- Expected cash burn, financing plans, potential dilution and the effect of further clinical, manufacturing and commercial-preparation spending.
- The end of Rotarix royalties and whether any future partnership, grant or milestone receipts materially replace that revenue.
- Share-count changes, equity compensation and remaining contingent license, milestone and royalty obligations.