Celldex Therapeutics, Inc. — 2012 Form 10-K
Reporting period: Fiscal year ended December 31, 2012; filed March 8, 2013. The company is a clinical-stage biopharmaceutical developer focused on immunotherapies. It reported no commercial product sales; reported product royalties principally relate to GlaxoSmithKline’s Rotarix vaccine.
Business and pipeline
Lead programs were rindopepimut (CDX-110), in a pivotal Phase 3 glioblastoma trial and a Phase 2 recurrent-disease trial, and CDX-011, which completed the Phase 2b EMERGE breast-cancer study. Earlier-stage programs included CDX-1135, CDX-1127, CDX-301 and CDX-1401; CDX-014 was preclinical. The company planned to retain North American rights to rindopepimut while considering partnerships where appropriate.
Financial results and liquidity
| Metric | 2012 | 2011 |
|---|---|---|
| Total revenue | $11.2 million | $9.3 million |
| Research and development expense | $47.4 million | $32.4 million |
| Total operating expense | $69.3 million | $52.7 million |
| Operating loss | $58.1 million | $43.4 million |
| Net loss | $59.1 million | $44.8 million |
| Basic and diluted loss per share | $1.02 | $1.13 |
| Net cash used in operations | $49.8 million | $35.7 million |
Revenue increased 21%, chiefly from higher Rotarix royalties. Those royalties were substantially offset by royalty expense payable to Cincinnati Children’s Hospital Medical Center; Glaxo and Pfizer accounted for 96% and 0% of 2012 revenue, respectively. The filing provides no meaningful product gross margin; commercial product sales had not begun.
Fourth-quarter 2012 revenue was $3.647 million and net loss was $16.807 million, or $0.27 per share, versus $2.433 million revenue and $12.732 million net loss, or $0.29 per share, in fourth-quarter 2011.
At year-end, cash, cash equivalents and marketable securities totaled $84.0 million; working capital was $67.4 million. Total assets were $125.5 million, total liabilities $29.8 million, and stockholders’ equity $95.8 million. The Term Loan balance was $11.3 million; it carried a minimum annual interest rate of 9.5%, was secured by substantially all assets other than intellectual property, and matured in December 2014. Management reported compliance with its covenants.
After year-end, the company raised $17.1 million net through its Cantor equity facility in January 2013 and $97.0 million net in a February 2013 public offering. Management said year-end liquidity plus these proceeds would fund planned operations for at least 12 months. The company nevertheless anticipated seeking further capital for longer-term needs. Equity financing entails dilution.
Material changes, outlook and risks
- Research and development expense rose 46%, primarily as rindopepimut clinical-trial costs increased; management expected R&D, operating cash use and commercialization-related spending to rise further.
- Rindopepimut Phase 2 studies reported median overall survival of approximately 24 months from diagnosis, but these were not randomized pivotal results. ACT IV was expected to complete enrollment by year-end 2013, with data anticipated 18–24 months after accrual; the trial was expected to cost more than $60 million. ReACT data were anticipated in the second half of 2013.
- EMERGE results suggested stronger CDX-011 activity in GPNMB-overexpressing and triple-negative breast-cancer subgroups. The company planned a randomized study suitable for accelerated approval in the second half of 2013. The study was relatively small, and crossover complicates interpretation of some comparisons.
- The FDA placed the CDX-011 Phase 2b study on partial clinical hold in 2012 because of manufacturing violations at a contract manufacturer. The FDA confirmed removal of the hold in March 2013 after reviewing the company’s response.
- Management expected a CDX-1135 pilot study and reporting of CDX-1127 data in 2013, and planned a CDX-301 transplant pilot by year-end 2013. These are forward-looking plans, not achieved outcomes.
- Rotarix-related royalties were expected to end during 2013: the U.S. patent expired in December 2012, with a Mexican patent application the remaining identified relevant right. This creates a potential reduction in the company’s limited recurring revenue.
- Key risks include continued losses and cash burn, need for additional financing, clinical-trial failure or delay, uncertain regulatory approval and commercial adoption, manufacturing and third-party reliance, competition, intellectual-property exposure, and dilution. The company reported no material legal proceedings and no off-balance-sheet arrangements.
Investor verification priorities
- Track ACT IV enrollment, cost, timing and eventual randomized survival results; distinguish historical Phase 2 comparisons from controlled evidence.
- Review the CDX-011 subgroup data, crossover treatment of patients, statistical significance, and design and execution of the planned confirmatory study.
- Reconcile cash burn and runway against post-year-end financing, upcoming trial commitments, and any further capital raises or share dilution.
- Confirm the duration and amount of Rotarix royalty receipts and the effect of the patent and royalty-agreement expirations.
- Monitor CDX-011 manufacturing readiness and whether new supply meets regulatory and clinical requirements.
The audited financial statements received an unqualified opinion from PricewaterhouseCoopers LLP; management and the auditor reported effective internal control over financial reporting as of December 31, 2012.