Celldex Therapeutics, Inc. — Q1 2019 Form 10-Q
Reporting period: Three months ended March 31, 2019. Celldex is a clinical-stage biopharmaceutical company developing immunotherapies and targeted biologics; it reported no commercial product sales. Financial amounts below are in U.S. dollars.
Financial performance and liquidity
| Metric | Q1 2019 | Q1 2018 / comparison |
|---|---|---|
| Revenue | $1.4 million | $4.1 million, down 65% |
| Research and development expense | $11.2 million | $21.9 million, down 49% |
| Operating loss | $17.9 million | $119.7 million |
| Net loss | $17.2 million; $1.40 per share | $118.1 million; $12.61 per share |
| Net cash used in operations | $13.2 million | $28.0 million |
| Cash, cash equivalents and marketable securities | $85.1 million at March 31, 2019 | $94.0 million at December 31, 2018 |
Q1 2019 total assets were $147.6 million, total liabilities $34.9 million, and stockholders’ equity $112.7 million. Current assets were $88.9 million versus current liabilities of $12.0 million. The filing does not show a separate conventional debt balance; liabilities include lease obligations and contingent consideration. Operating lease liabilities totaled $5.2 million. The filing does not provide a meaningful commercial-product gross margin.
Cash increased $7.2 million during the quarter, to $31.5 million. Investing activities provided $16.3 million, largely reflecting net maturities and sales of marketable securities; financing activities provided $4.2 million, primarily from common-stock sales. Celldex issued 883,569 shares through its Cantor equity offering for $4.2 million net proceeds and had $33.3 million of gross offering capacity remaining at quarter-end. In April, it issued another 924,167 shares for $4.1 million net.
Material changes and unusual items
- Revenue fell mainly because of lower BMS collaboration revenue and reduced services under an International AIDS Vaccine Initiative agreement.
- The much smaller year-over-year net loss chiefly reflects the absence of the prior-year $91.0 million goodwill impairment and $18.7 million intangible impairment, plus lower R&D expense. Q1 2018 also included a $13.6 million gain on contingent consideration; Q1 2019 instead recorded a $1.5 million loss on remeasurement.
- Celldex recorded a non-cash $1.8 million impairment of an investment in a private company after learning of deterioration in that company’s financial condition.
- R&D expense declined primarily from lower personnel and product-development costs, including reduced clinical-trial and contract-manufacturing expense. The company amended its Hampton, New Jersey lease, reducing leased space and extending the remaining space’s term.
- A one-for-fifteen reverse stock split took effect February 8, 2019; share and per-share figures were retroactively adjusted.
Business outlook, pipeline and risks
Management stated that cash and investments, together with anticipated Cantor offering proceeds, were expected to fund planned operations through 2020, but noted there was no assurance that future Cantor sales would occur. Separately, the financial-statement note says resources at May 7, 2019 were expected to cover estimated working capital and planned operations for at least the following 12 months. Celldex expects to pursue additional capital through equity or debt offerings, licensing, collaborations or business combinations. No specific revenue or earnings guidance was provided; management expected several expense categories to remain relatively consistent over the next 12 months, with facility expense expected to decrease following the lease-space reduction.
- Priority programs included CDX-1140, CDX-3379, CDX-301 and varlilumab. CDX-1140 was in Phase 1; interim data described 30 enrolled patients, general tolerability, no maximum tolerated dose reached, and dose-dependent biological effects. Enrollment continued.
- CDX-3379 was being studied with Erbitux in a Phase 2 trial for advanced, Erbitux-resistant head and neck cancer. Enrollment in the first stage was complete; the company reported a confirmed complete response but said it would review the full data set before determining future development.
- Potential future funding needs are uncertain and depend on clinical outcomes, development costs, collaborations and timing of receipts. Failure to obtain capital on acceptable terms could require delays or discontinuation of programs, earlier licensing, unfavorable financing or a sale of part or all of the business.
- Kolltan acquisition milestones could require payments of up to $127.5 million if specified development, regulatory or sales milestones are achieved. The fair value of the contingent consideration liability was $15.3 million at quarter-end; payment may be in cash, shares or both.
- Other material risks include clinical-trial failure or delays, regulatory uncertainty, dependence on early-stage candidates, competition, manufacturing and trial-partner availability, and intellectual-property disputes. Management reported no material changes to the risk factors in its 2018 Form 10-K.
Important facts for investors to verify
- Whether subsequent CDX-1140 and CDX-3379 trial results support continued development and planned expansion.
- Actual cash burn, remaining Cantor offering capacity, dilution from equity issuance and the timing and terms of additional financing.
- Whether contingent Kolltan milestones are triggered and how any resulting payments affect liquidity.
- Progress on cost reductions, including the effects of the lease amendment and lower R&D spending on ongoing trials.
- Whether the stated funding horizons remain achievable given clinical spending, collaboration receipts and financing availability.