Celldex Therapeutics, Inc. — 2017 Form 10-K
Reporting period: Fiscal year ended December 31, 2017; filed March 7, 2018. The filing also provides unaudited fourth-quarter results. Celldex is a clinical-stage biopharmaceutical company developing cancer immunotherapies and targeted biologics. It reported no product-sales revenue, and none of its drug candidates had FDA approval.
Financial results and liquidity
Amounts are in U.S. dollars. The company remained loss-making; revenue came from development, licensing, contracts and grants, not product sales.
| Metric | 2017 | 2016 |
|---|---|---|
| Total revenue | $12.7 million | $6.8 million |
| Research and development expense | $96.2 million | $102.7 million |
| Total operating expense | $134.3 million | $139.7 million |
| Operating loss | $121.5 million | $132.9 million |
| Net loss | $93.0 million | $128.5 million |
| Basic and diluted loss per share | $0.72 | $1.27 |
| Net cash used in operating activities | $99.9 million | $113.0 million |
- 2017 revenue increased 88%, mainly from new IAVI and Frontier agreements and higher reimbursable clinical costs under the BMS collaboration. No product royalties were reported.
- Net loss narrowed by $35.5 million, reflecting lower R&D and general and administrative expense, higher revenue, and a $24.3 million non-cash income tax benefit. The benefit included $19.1 million related to U.S. tax reform and $5.2 million related to the anti-KIT impairment.
- R&D expense declined 6%; G&A expense fell 31% to $25.0 million. A $13.0 million non-cash impairment charge was recorded for anti-KIT in-process R&D; the company also recorded an $0.8 million gain on remeasurement of Kolltan contingent consideration.
- At year-end, cash and cash equivalents were $40.3 million and marketable securities were $99.1 million, totaling $139.4 million. Working capital was $117.0 million, down from $160.3 million; total assets were $315.6 million and stockholders’ equity was $236.4 million.
- Total liabilities were $79.3 million, including $43.4 million of Kolltan contingent consideration and $6.6 million of current long-term liabilities. The filing reports no interest expense for 2017 or 2016; it does not describe material funded debt.
- Management said year-end resources, plus subsequent and anticipated Cantor equity-offering proceeds, were expected to fund planned operations through 2019. It also said it would pursue additional capital during the next 12 months. Net cash from financing was $51.3 million in 2017, primarily from stock issuance; the Cantor program had $67.6 million of gross capacity remaining at year-end.
Margins: Commercial gross margins are not applicable because Celldex had no product sales; the filing does not present a meaningful product gross-margin measure. Fourth-quarter 2017 revenue was $3.5 million and net loss was $3.8 million, compared with $1.9 million revenue and $32.3 million net loss in fourth-quarter 2016.
Material changes and operating developments
- Glembatumumab vedotin’s Phase 2b METRIC trial in triple-negative, gpNMB-overexpressing breast cancer completed enrollment at 327 patients in August 2017. Topline primary-endpoint data were expected in Q2 2018. If results were positive, management anticipated pursuing a BLA submission in the second half of 2019.
- R&D spending shifted among programs: glembatumumab vedotin expense increased to $36.9 million from $30.2 million, while varlilumab expense decreased to $14.9 million from $28.6 million. CDX-3379 and the acquired anti-KIT and TAM programs also advanced.
- Varlilumab/Opdivo Phase 2 enrollment completed in January 2018. CDX-3379 began a Phase 2 combination study in head and neck cancer in November 2017; CDX-1140 entered Phase 1 in November 2017.
- Shares outstanding rose from 120.5 million at year-end 2016 to 138.5 million at year-end 2017, including 17.7 million shares issued through the Cantor program. The company had 141.1 million shares outstanding on February 28, 2018.
Outlook, risks and unusual items
- Management expected operating losses to continue in 2018 and beyond and anticipated ongoing substantial R&D spending. Cash use and commercial-preparation costs could change depending on METRIC results and the pace of manufacturing and commercial build-out.
- Liquidity depends on further financing, collaborations or licensing. If funding is unavailable on acceptable terms, Celldex warned it could delay or discontinue programs or trials, license programs earlier than planned, or sell part or all of the business.
- Kolltan milestone consideration could total up to $172.5 million, payable in cash, shares or a combination. The $43.4 million year-end fair-value liability is an estimate; timing and amount depend on milestone achievement. Cash payment could require additional financing, while share payment could dilute stockholders.
- Key risks include clinical failure or delay, especially for the METRIC trial; regulatory and companion-diagnostic approval; manufacturing and sole-supplier dependence; competition; and patent disputes. The University of Southampton’s European patent related to varlilumab had been revoked and was under appeal. A separate ErbB3 patent appeal could affect CDX-3379 commercialization in Europe.
- Clinical signals reported for earlier studies are not proof of efficacy in later trials. The METRIC outcome remained unknown at the filing date. Glembatumumab vedotin has FDA fast-track designation, which does not guarantee approval or accelerated review.
- The company recorded a $13.0 million anti-KIT impairment after projected development and regulatory timelines changed; a further $27.0 million related intangible asset remained subject to impairment review. The Tax Cuts and Jobs Act accounting benefit was provisional and subject to further analysis.
- Auditors issued an unqualified opinion on the financial statements and concluded internal control over financial reporting was effective. The company reported no material legal proceedings and no off-balance-sheet arrangements.
Most important facts for investors to verify
- METRIC topline results and whether efficacy, safety and secondary endpoints support the stated regulatory pathway and timing.
- Actual cash burn, subsequent equity issuance, remaining ATM capacity, and whether management’s projected runway through 2019 remains achievable.
- Progress and potential cash-versus-stock dilution from Kolltan milestones, and any changes to their fair value or timing.
- Companion-diagnostic readiness, commercial-scale manufacturing capacity and supplier continuity for glembatumumab vedotin.
- Clinical updates for varlilumab combinations, CDX-3379, CDX-014, CDX-1140 and the anti-KIT program, including impairment or safety developments.