Celldex Therapeutics, Inc. — Q2 2020 Form 10-Q
Reporting period: Three and six months ended June 30, 2020. Figures are unaudited; dollar amounts below are in millions unless stated otherwise. Celldex is a clinical-stage biopharmaceutical company focused on immunotherapies and targeted biologics and reported no product sales.
Financial performance and liquidity
- Q2 revenue: $0.236 million, down 67% from $0.715 million in Q2 2019. Six-month revenue was $2.965 million, up 39% from $2.140 million, principally due to a $1.8 million Rockefeller-related payment in Q1.
- Losses: Q2 net loss was $11.031 million ($0.50 per share), compared with $11.779 million ($0.84 per share) a year earlier. Six-month net loss was $23.656 million ($1.20 per share), versus $29.018 million ($2.21 per share).
- Expenses: Q2 R&D was $9.705 million and G&A was $3.528 million. Six-month R&D was $21.400 million, approximately flat year over year; G&A was $7.194 million, down 18%. Operating losses were $11.365 million for Q2 and $24.231 million for the first half. Operating margins are not meaningful given minimal revenue and continuing development spending.
- Unusual/noncash items: Q2 included a $3.5 million impairment of the CDX-3379 intangible asset and a $5.132 million gain from remeasurement of Kolltan contingent consideration. The gain helped reduce reported losses and is not operating revenue. A $0.228 million noncash income tax benefit was also recorded.
- Cash and liquidity: At June 30, cash and cash equivalents were $68.027 million and marketable securities were $138.888 million, totaling $206.915 million, versus $64.383 million at December 31, 2019. Current assets were $208.992 million and current liabilities $10.841 million.
- Cash flow: Six-month operating cash use was $23.332 million, compared with $24.275 million in 2019. Investing cash use was $86.564 million, mainly reflecting net purchases of marketable securities. Financing provided $166.691 million, primarily from equity issuance.
- Capital and debt: The company raised $141.4 million net in a Q2 underwritten offering and $25.3 million net through its Cantor equity program during the first half. Shares outstanding rose to 39.094 million from 16.972 million at year-end 2019. A $2.962 million term loan was issued and repaid during the first half; no term-loan balance is shown at June 30. Total liabilities were $22.957 million, including lease liabilities and contingent/deferred obligations.
Changes versus prior periods
- Q2 revenue fell as product development and licensing revenue and contract work declined. First-half revenue increased because of the Rockefeller Transaction payment, while contract and grant revenue decreased.
- Q2 net loss narrowed by $0.748 million year over year; first-half net loss narrowed by $5.362 million. The first-half improvement was driven principally by the contingent-consideration gain and the absence of the prior-year $1.8 million other-asset impairment, partly offset by the CDX-3379 impairment.
- The company completed a substantial equity raise, increasing cash resources but materially diluting existing shareholders.
Outlook, programs, and risks
- Management said June 30 liquidity was sufficient to fund planned operations through 2023; the financial-statement note separately states liquidity at August 6 was expected to cover at least the following 12 months. Management cautioned that cash milestone payments under the Kolltan acquisition could affect runway and that additional capital may be needed for longer-term needs.
- Management expected revenue and operating cash use to remain relatively consistent over the next 12 months, with quarterly fluctuations; product-development expense was expected to increase. It anticipated lower facility expense following consolidation of Massachusetts laboratory and manufacturing facilities.
- Development focus included CDX-0159, for which management planned Phase 1b studies in chronic urticaria in fall 2020; CDX-1140, with expansion cohorts and planned combination studies; and CDX-527, for which a Phase 1 study was planned later in 2020. These are forward-looking plans, not reported outcomes.
- Celldex discontinued CDX-3379 after concluding that clinical activity did not justify combination toxicity. Its $3.5 million IPR&D asset was fully impaired. The company also reduced the estimated maximum remaining Kolltan milestone consideration to $107.5 million, contingent on milestones; a former Kolltan stockholder representative disputed the abandonment of certain milestones. The company said it could not estimate the dispute’s outcome or any potential loss.
- COVID-19 had not caused significant delays or disruptions to trials, manufacturing, or shipping as of the filing, but management identified potential risks to trial enrollment, vendors, facilities, employees, manufacturing, and shipments. Further disruptions could affect results or trigger impairment of remaining IPR&D assets.
- Other key risks include clinical and regulatory failure, dependence on early-stage candidates, financing availability and potential dilution, third-party manufacturing and research services, and intellectual-property risks. Management reported no material changes to the risk factors in its 2019 Form 10-K.
Important facts for investors to verify
- Whether the CDX-0159, CDX-1140, and CDX-527 development timelines and study plans were met, and what subsequent safety and efficacy data show.
- Actual cash burn and updated liquidity runway, including any capital raises and the choice and timing of payment for Kolltan milestones.
- Resolution of the Kolltan milestone dispute and any resulting cash, share, or other obligations.
- Whether COVID-19 or other factors delayed trials, manufacturing, or supply, and whether further impairment charges were recorded.
- The effect of the 2020 equity issuance on per-share ownership and future dilution.