Celldex Therapeutics, Inc. — Q3 2020 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2020. The unaudited statements are prepared under U.S. GAAP. Celldex is a clinical-stage biopharmaceutical company developing antibody therapies; it reported no commercial product revenue.
Financial results and liquidity
| Metric | Q3 2020 | Q3 2019 | Nine months 2020 | Nine months 2019 |
|---|---|---|---|---|
| Total revenue | $0.7 million | $0.5 million | $3.6 million | $2.7 million |
| Research and development | $10.7 million | $11.1 million | $32.1 million | $32.3 million |
| General and administrative | $3.6 million | $3.4 million | $10.8 million | $12.2 million |
| Operating loss | $14.3 million | $11.8 million | $38.6 million | $42.0 million |
| Net loss | $14.2 million | $11.4 million | $37.9 million | $40.4 million |
| Basic and diluted loss per share | $0.36 | $0.75 | $1.44 | $2.92 |
| Net cash used in operating activities | Not provided for quarter | $35.2 million | $35.4 million |
Revenue is small relative to operating expenses, so operating margins are not a useful measure of performance. Q3 net loss widened by $2.8 million, principally because the prior-year quarter included a $2.1 million gain on remeasurement of Kolltan contingent consideration, while Q3 2020 had a $0.7 million loss. Nine-month net loss improved by $2.6 million, reflecting a larger contingent-consideration gain and the absence of the prior-year $1.8 million other-asset impairment, partly offset by a $3.5 million impairment charge in 2020.
At September 30, cash and cash equivalents were $18.2 million and marketable securities were $181.4 million, totaling $199.6 million. Total current assets were $202.9 million and current liabilities $12.2 million. Total liabilities were $25.8 million; the filing reports no term-loan balance at period-end, and a $3.0 million term loan drawn and repaid during the nine-month period. The company held $229.975 million of stockholders’ equity.
Cash from financing was $171.2 million for the nine months, including $141.4 million net proceeds from a public offering and $29.6 million net proceeds from Cantor equity sales. Cash used in investing was $129.1 million, largely reflecting net purchases of marketable securities. Cash and cash equivalents increased $6.9 million to $18.2 million; combined cash, equivalents and securities increased substantially following the equity raises.
Material changes and business developments
- Nine-month revenue rose 35% to $3.6 million, primarily due to a $1.8 million payment associated with Rockefeller University’s January 2020 licensing transaction with Gilead. Contracts and grants revenue declined, mainly because of lower services performed for Duke University.
- Research and development expense was broadly stable year over year for the nine-month period. Product-development costs rose as clinical-trial and contract-manufacturing activity increased; lower laboratory supplies and other program costs partly offset this.
- Celldex recorded a non-cash $3.5 million impairment of CDX-3379 in Q2 2020 after discontinuing the program. The company reported a $4.2 million nine-month gain from remeasuring Kolltan contingent consideration, in part due to updated assumptions following that discontinuation.
- Common shares outstanding increased from 17.0 million at December 31, 2019 to 39.6 million at September 30, 2020, reflecting the public offering, Cantor sales and employee issuances.
Outlook, management commentary and risks
- Management said available cash, cash equivalents and marketable securities were expected to fund planned operations through 2023, while the financial-statement note states resources at November 5, 2020 were expected to cover at least 12 months. The longer-term estimate could be affected by cash payment of Kolltan milestones.
- Celldex may pursue licensing or collaborations, business combinations, debt or additional equity to meet longer-term funding needs. Management cautioned that financing may not be available on acceptable terms; equity could dilute shareholders, while debt could create payment obligations and restrictive covenants. It expected operating cash use to remain relatively consistent over the following 12 months, with fluctuations.
- Management expected revenue to remain relatively consistent over the following 12 months. It expected personnel and G&A expenses to remain relatively consistent, facility costs to decrease after Massachusetts facility consolidation, and product-development expense to increase.
- Pipeline focus included CDX-0159, CDX-1140 and CDX-527. CDX-0159 completed a Phase 1a study in healthy volunteers; Phase 1b studies in chronic spontaneous urticaria and chronic inducible urticaria opened to enrollment after quarter-end. CDX-1140 dose escalation was complete, with a recommended dose of 1.5 mg/kg for monotherapy and in combination with CDX-301; expansion cohorts included pembrolizumab and chemotherapy combinations. A Phase 1 study of CDX-527 began in August 2020.
- COVID-19 had not caused significant delays or disruptions to trials, manufacturing or shipping as of the filing, but could affect enrollment, service providers, facilities, travel and supply chains. Prolonged effects could harm operations and potentially impair the $45.2 million carrying value of IPR&D assets.
- Former Kolltan shareholders’ representative SRS disputes Celldex’s abandonment of certain milestones. Litigation filed in Delaware in August 2020 is ongoing; SRS asserted counterclaims, and in October 2020 objected to Celldex’s CDX-3379 milestone-abandonment notice. Celldex said it could not estimate the outcome. Up to $107.5 million of adjusted milestones may be payable if specified milestones are achieved; payment may be in cash, shares or both and may require additional funding or cause dilution.
- The company has recurring losses and depends on successful development of early-stage candidates, regulatory and clinical outcomes, continued access to capital, and potential partnerships. It reported that disclosure controls were effective and that no material change in internal control occurred during the quarter.
Most important facts for investors to verify
- Whether the stated cash runway through 2023 remains supportable as clinical spending, program plans and milestone obligations evolve.
- Clinical progress, safety and efficacy evidence for CDX-0159, CDX-1140 and CDX-527, including whether early-stage results translate into later trials.
- Resolution of the Kolltan milestone dispute, potential milestone amounts and any resulting cash needs or shareholder dilution.
- Further capital requirements and the extent to which additional equity issuance may dilute existing shareholders.
- Any COVID-19-related trial, manufacturing or supply disruption, and any impairment indicators for the remaining IPR&D assets.