Celldex Therapeutics, Inc. — Q3 2017 Form 10-Q
Reporting period: Three and nine months ended September 30, 2017. Celldex is a clinical-stage biopharmaceutical company developing cancer immunotherapies and other biologics; it reported no product sales. Financial figures below are in millions, except per-share data.
Financial results and liquidity
| Metric | Q3 2017 | Q3 2016 | Nine months 2017 | Nine months 2016 |
|---|---|---|---|---|
| Revenue | $3.9 | $2.2 | $9.3 | $4.9 |
| Research and development expense | $21.9 | $25.0 | $72.7 | $78.2 |
| General and administrative expense | $5.3 | $7.0 | $19.1 | $24.0 |
| Operating loss | $(32.0) | $(30.0) | $(96.0) | $(98.1) |
| Net loss | $(26.4) | $(29.6) | $(89.2) | $(96.2) |
| Basic and diluted loss per share | $(0.20) | $(0.29) | $(0.71) | $(0.97) |
- Revenue increased 77% in Q3 and 89% year to date. Growth primarily reflected BMS clinical-trial reimbursements and new IAVI and Frontier research and manufacturing agreements.
- Revenue remained far below operating costs; the filing does not report a conventional gross margin. R&D expense declined year over year, principally from lower varlilumab and Rintega development costs, partly offset by spending on glembatumumab vedotin and other programs.
- Q3 net loss included a $13.0 million non-cash anti-KIT in-process R&D impairment, offset in part by a $4.6 million gain from remeasuring Kolltan contingent consideration and a $5.2 million income tax benefit. The nine-month impairment was also $13.0 million; the related contingent-consideration gain was $0.2 million.
- Cash and cash equivalents were $54.7 million and marketable securities $85.8 million at September 30, totaling $140.5 million, versus $189.8 million at December 31, 2016. Operating cash use was $80.4 million for the first nine months, compared with $92.7 million in 2016. Investing activities provided $59.9 million and financing activities provided $32.8 million.
- Current assets were $147.3 million and current liabilities $24.9 million. Total liabilities were $100.3 million, including $44.0 million of Kolltan contingent consideration; the filing does not identify conventional borrowings as a material liability. Potential Kolltan milestone payments could total up to $172.5 million, payable in cash, shares, or both at Celldex’s option.
Material changes and business developments
- Celldex issued 11.3 million shares through its Cantor equity program during the first nine months, generating $32.6 million net proceeds. In October, it issued another 3.9 million shares for $11.3 million net proceeds. Shares outstanding were 132.1 million at September 30 and 135.985 million at October 31.
- The anti-KIT program’s acquired IPR&D asset was partially impaired by $13.0 million after changes in projected development and regulatory timelines. The company said it would continue monitoring the remaining $27.0 million intangible asset for possible further impairment.
- Enrollment in the 327-patient METRIC Phase 2b trial of glembatumumab vedotin in triple-negative breast cancer was completed in August 2017. Management projected primary-endpoint topline data in Q2 2018, based on the observed rate of progression events.
- CDX-0159, a modified second-generation anti-KIT candidate intended to replace CDX-0158 in clinical development, was expected to complete manufacturing and IND-enabling work in 2018. A Phase 2 CDX-3379 study was anticipated to start in Q4 2017, and a Phase 1 CDX-1140 study was planned by year-end 2017.
Outlook, risks, and other items
- Management said available resources, including October equity proceeds, were expected to fund working capital and planned operations through 2018; the filing also states resources at issuance were expected to cover at least the following 12 months. The outlook could be affected by cash payment of Kolltan milestones.
- Celldex expected to seek additional capital through collaborations or licensing, business combinations, debt, or equity. It cautioned that financing may not be available on acceptable terms, equity could dilute shareholders, and debt could impose payment obligations and covenants. If funding is insufficient, programs or trials could be delayed or discontinued, or assets or the business could be sold.
- Key operating risks include clinical-trial outcomes and timing, regulatory approval, manufacturing and supplier availability, competition, intellectual property challenges, and the ability to obtain partnerships and financing. The filing reported no material changes to previously disclosed risk factors.
- Clinical commentary included ongoing or planned studies across the portfolio. Management noted METRIC’s pending readout and the need to stage some commercialization and companion-diagnostic work until after results to conserve funds. The filing emphasizes that early clinical results may not predict later-stage success.
- Disclosure controls were deemed effective as of September 30, 2017; no material change in internal control over financial reporting was reported.
Important facts for investors to verify
- METRIC’s projected Q2 2018 topline timing and whether results support further development or regulatory submissions.
- Cash burn, operating runway, and the extent of future equity issuance or other capital needs.
- Anti-KIT program progress, further impairment risk, and the timing and potential form of Kolltan milestone payments.
- Clinical and regulatory progress across key programs, including CDX-0159, CDX-3379, and CDX-1140; timelines are expectations, not assurances.