Celldex Therapeutics, Inc. — Q3 2014 Form 10-Q
Reporting period: Three and nine months ended September 30, 2014. Celldex is a clinical-stage biopharmaceutical company developing immunotherapies and antibody-drug conjugates; it reported no product sales. Financial amounts below are in U.S. dollars.
Financial results and liquidity
| Metric | Q3 2014 | Q3 2013 | Nine months 2014 | Nine months 2013 |
|---|---|---|---|---|
| Revenue | $1.1 million | $1.0 million | $2.1 million | $3.5 million |
| Operating expenses | $31.4 million | $24.2 million | $92.5 million | $62.8 million |
| Operating loss | $30.3 million | $23.3 million | $90.4 million | $59.3 million |
| Net loss | $28.1 million | $23.1 million | $86.3 million | $59.5 million |
| Basic and diluted loss per share | $0.31 | $0.29 | $0.97 | $0.76 |
| Net cash used in operations | Not stated for quarter | Not stated for quarter | $79.3 million | $52.7 million |
- At September 30, cash and cash equivalents were $32.5 million and marketable securities were $191.6 million, totaling $224.1 million. Current assets were $229.8 million; current liabilities were $21.6 million; total liabilities were $32.3 million; stockholders’ equity was $239.4 million.
- Cash and cash equivalents declined $136.9 million from year-end 2013. Net cash used in investing activities was $58.7 million, primarily reflecting net purchases of marketable securities; financing activities provided $1.2 million. Celldex reported no term-loan payments in 2014 and no interest expense for the nine-month period.
- Gross margin is not meaningful for this development-stage business; the filing reports no product revenue. The company continued to incur substantial operating losses.
Changes versus comparable periods
- Nine-month net loss increased $26.8 million, or 45%, as R&D and G&A costs rose; higher investment and other income partly offset the increase.
- Nine-month R&D expense rose 56% to $77.4 million, led by rindopepimut ($39.8 million) and glembatumumab vedotin ($20.9 million). Product development costs increased, including clinical-trial and manufacturing costs; license fees included a $2.5 million Seattle Genetics milestone related to METRIC.
- Nine-month revenue fell 40%, mainly because $2.3 million of product royalties recorded in 2013 did not recur after the relevant GlaxoSmithKline agreement ended. The 2014 period included BMS collaboration revenue and Rockefeller University research-services revenue.
- Q3 investment and other income included a $2.0 million TopoTarget milestone triggered by FDA approval of Beleodaq; the filing reports $3.0 million of TopoTarget milestone income for the nine months.
Business developments, outlook and risks
- Rindopepimut: The pivotal ACT IV Phase 3 study reached its target enrollment of 700 in October 2014; additional eligible patients in screening could enroll before formal completion. The first interim analysis was expected in mid-2015. ReACT, a Phase 2 study in recurrent glioblastoma, continued, with further data expected in November 2014.
- Glembatumumab vedotin: METRIC was amended to broaden eligibility and support a global full-approval strategy, with progression-free survival as the primary endpoint and a 300-patient target unchanged. Celldex expected enrollment to extend into 2016. A Phase 2 melanoma study was expected to begin in Q4 2014; NCI was to sponsor studies in uveal melanoma and pediatric osteosarcoma.
- Varlilumab: A Phase 1/2 collaboration with Bristol-Myers Squibb to evaluate varlilumab with nivolumab was expected to begin in Q4 2014. BMS paid $5.0 million upfront; Celldex deferred the payment and is recognizing it over an estimated five-year performance period. The companies also agreed to share clinical-development costs and granted BMS a time-limited right of first negotiation if Celldex seeks to out-license varlilumab.
- Management expected R&D cash use and expenses to increase over the next 12 months, driven chiefly by rindopepimut, glembatumumab vedotin and varlilumab trials, manufacturing, hiring and commercial planning. It said available resources would fund planned operations for more than two years; however, the financial-statement note says funds were sufficient for at least the next 12 months. These runway statements differ.
- Celldex may seek additional capital through partnerships, licensing, equity or debt, but gave no assurance that financing would be available on acceptable terms. Equity financing could dilute shareholders; debt could add payment obligations and restrictive covenants. Clinical outcomes, trial timing and costs, regulatory approval, manufacturing and intellectual-property disputes are material risks. Two European patent oppositions were filed against a patent related to varlilumab; Celldex said it would defend the patent.
- After quarter-end, Celldex entered an amended supply agreement with Biosyn and issued Biosyn 152,172 shares valued at $2.0 million for KLH supply. Management reported no material changes to previously disclosed risk factors and concluded disclosure controls were effective.
Key facts for investors to verify
- Reconcile the filing’s different cash-runway statements and assess burn rate against planned clinical-trial spending.
- Track ACT IV enrollment completion, interim-analysis timing and subsequent clinical results; interim timing was an expectation, not a result.
- Monitor METRIC’s revised design, enrollment progress and anticipated extension into 2016.
- Review the recognition and remaining obligations under the BMS upfront payment, and the conditions and economics of any future collaboration or financing.
- Confirm the effect of the Biosyn share issuance and monitor the varlilumab patent oppositions and other material legal or regulatory developments.