Celldex Therapeutics, Inc. — Q3 2019 Form 10-Q
Reporting period: Three and nine months ended September 30, 2019. Celldex is a clinical-stage biopharmaceutical company developing immunotherapies and targeted biologics; it reported no product sales. Financial amounts below are in U.S. dollars.
Financial results and liquidity
| Metric | Q3 2019 | Q3 2018 | Nine months 2019 | Nine months 2018 |
|---|---|---|---|---|
| Revenue | $0.5 million | $0.9 million | $2.7 million | $7.8 million |
| Research and development | $11.1 million | $11.9 million | $32.3 million | $55.2 million |
| Operating loss | $11.8 million | $7.8 million | $42.0 million | $144.3 million |
| Net loss | $11.4 million | $7.2 million | $40.4 million | $141.8 million |
| Net loss per share | $0.75 | $0.66 | $2.92 | $14.12 |
| Cash used in operating activities | Not separately presented | Not separately presented | $35.4 million | $59.8 million |
At September 30, cash, cash equivalents and marketable securities totaled $72.9 million ($16.6 million cash and equivalents; $56.3 million marketable securities), versus $94.0 million at December 31, 2018. Total assets were $131.8 million and total liabilities were $30.5 million. The filing reports no conventional borrowings; liabilities include operating leases and $12.2 million of Kolltan contingent consideration. Stockholders’ equity was $101.4 million. No operating margin was reported; given minimal revenue and ongoing development spending, the company remained loss-making.
Cash and cash equivalents declined $7.7 million during the first nine months. Investing activities provided $13.9 million, mainly reflecting net marketable-security sales and maturities; financing activities provided $13.8 million, primarily from stock issuance. Celldex sold 3.9 million shares through its Cantor equity facility for $13.8 million net proceeds, with $23.2 million of gross offering capacity remaining at quarter-end. In October, it sold another 0.2 million shares for $0.5 million net.
Changes versus the comparable period
- Q3 revenue fell 42% year over year; nine-month revenue fell 65%, mainly as BMS collaboration revenue declined after completion of the combination study and contract-service revenue decreased.
- Q3 net loss increased $4.2 million, principally because the fair-value gain on Kolltan contingent consideration was smaller than in Q3 2018.
- Nine-month net loss narrowed by $101.4 million, mainly because 2018 included $91.0 million of goodwill impairment and $18.7 million of intangible-asset impairment, and because R&D spending declined. This improvement does not indicate profitability.
- Nine-month R&D expense declined 41%, reflecting lower personnel, clinical-trial and contract-manufacturing costs. Program spending rose for CDX-1140 and CDX-527 but fell for varlilumab, the anti-KIT program and other programs.
- A $1.8 million non-cash impairment was recorded in Q1 2019 on an investment in a private company following deterioration in its financial condition.
Outlook, programs and risks
- Management believed available liquidity, together with anticipated Cantor facility proceeds, would fund planned operations through 2020; the financial-statement note also said resources at November 12, 2019 were expected to cover at least the next 12 months. These are estimates, not assurances. The company expected to pursue additional capital, and warned financing may be unavailable or dilutive.
- Management expected revenue to decrease over the next 12 months. It expected operating cash use to remain relatively consistent, with quarterly fluctuations, and investment income to decrease as cash and investment balances fell.
- Celldex planned to reduce its facility footprint by more than 35% through the Hampton lease reduction and Massachusetts facility consolidation, estimating annual savings of more than $3.5 million starting in the second half of 2020.
- Key programs included CDX-1140 in Phase 1, CDX-3379 in a Phase 2 head-and-neck cancer study with cetuximab, and CDX-0159, for which a Phase 1 study in healthy subjects was expected by year-end 2019. The company expected to open a CDX-1140/pembrolizumab cohort in Q1 2020.
- Management described promising but early clinical observations for CDX-1140 and CDX-3379; these were not established efficacy. Interim CDX-1140 data presented in November 2019, after quarter-end, included two dose-limiting pneumonitis events in six patients at the 3.0 mg/kg monotherapy dose. CDX-3379’s Phase 2 interim results included one ongoing complete response and one unconfirmed partial response among the first 15 patients; enrollment was expanded for further evaluation, including biomarkers.
- Potential Kolltan milestone payments could total up to $127.5 million if specified development, regulatory or sales milestones are achieved. Payment may be in cash, shares or a combination. If capital cannot be raised, Celldex warned it might delay or stop programs or trials, license programs earlier, raise funds on unfavorable terms, or sell all or part of the business.
- Clinical and regulatory outcomes are uncertain; the company depends on successful development of early-stage candidates, access to capital and potential collaborations. It also cited manufacturing, trial-enrollment, intellectual-property and competitive risks. The filing reported no material change to previously disclosed risk factors.
Important facts for investors to verify
- Whether cash burn and subsequent equity sales support the stated runway, and the extent of future dilution under the Cantor facility or other financing.
- Progress, enrollment, safety and efficacy in CDX-1140, CDX-3379 and CDX-0159 trials, including whether early signals are confirmed in larger studies.
- The timing and possible cash or equity impact of Kolltan milestone obligations.
- Whether the planned facility consolidation achieves the estimated savings and schedule.
- Revenue assumptions and collaboration or contract-service activity, given the sharp year-over-year decline.