Celldex Therapeutics, Inc. — Q3 2018 Form 10-Q
Reporting period: Three and nine months ended September 30, 2018. Unaudited results; amounts below are in millions of dollars unless stated otherwise. Celldex is a clinical-stage biopharmaceutical company developing immunotherapies and targeted biologics; it reported no commercial product revenue.
Financial performance and liquidity
| Metric | Q3 2018 | Q3 2017 | Nine months 2018 | Nine months 2017 |
|---|---|---|---|---|
| Total revenue | $0.9 | $3.9 | $7.8 | $9.3 |
| Research and development expense | $11.9 | $21.9 | $55.2 | $72.7 |
| General and administrative expense | $3.7 | $5.3 | $14.9 | $19.1 |
| Operating loss | $(7.8) | $(32.0) | $(144.3) | $(96.0) |
| Net loss | $(7.2) | $(26.4) | $(141.8) | $(89.2) |
| Basic and diluted loss per share | $(0.04) | $(0.20) | $(0.94) | $(0.71) |
- At September 30, cash and cash equivalents were $32.8 million and marketable securities were $72.8 million, totaling $105.6 million, versus $139.4 million at year-end 2017.
- For the first nine months, operating cash use was $59.8 million, compared with $80.4 million in 2017. Investing activities provided $26.5 million and financing activities provided $25.9 million. Cash declined $7.5 million to $32.8 million.
- Total assets were $168.3 million and stockholders’ equity was $128.1 million. Total liabilities were $40.2 million, including $15.4 million of Kolltan contingent consideration; the balance sheet reports no conventional borrowings. Gross margin is not presented and is not a meaningful disclosed measure for this development-stage business.
Changes versus the comparable period
- Q3 revenue fell 76%, mainly because of lower BMS collaboration revenue and fewer services under the International AIDS Vaccine Initiative contract. Nine-month revenue declined 16%; increased BMS revenue partly offset lower contract and grant revenue.
- Q3 net loss narrowed by $19.1 million, principally because 2017 included a $13.0 million intangible impairment and 2018 had lower R&D costs. Nine-month net loss widened by $52.6 million, primarily from 2018 noncash goodwill and intangible-asset impairments.
- Nine-month R&D and G&A expenses declined 24% and 22%, respectively, reflecting reduced headcount, lower stock compensation, and lower clinical and manufacturing costs. Management cited restructuring and program prioritization.
- Shares issued and outstanding increased to 168.6 million from 138.5 million at December 31, 2017, principally due to equity financing.
Outlook, management commentary, and risks
- After the Phase 2b METRIC study of glembatumumab vedotin failed its primary endpoint, Celldex discontinued development of glembatumumab vedotin, CDX-014, and CDX-1401 and redirected resources. The company recorded a $91.0 million goodwill impairment and $18.7 million in intangible-asset impairments during the nine months.
- Priority programs included CDX-1140 (Phase 1), CDX-3379 (Phase 2 combination study), CDX-301, and varlilumab (Phase 1/2 combination study with Bristol-Myers Squibb). Development outcomes, trial timing, and costs remain uncertain; early clinical results may not predict later success.
- Management said available resources as of November 7, 2018 were expected to fund working capital and planned operations for at least 12 months from issuance. Separately, it projected funding through 2020 when including anticipated future Cantor equity-offering proceeds. Both estimates depend on financing and program costs; cash payment of future Kolltan milestones could affect runway.
- Celldex expects to pursue additional capital through equity, debt, licensing, collaborations, or other transactions, but gave no assurance financing will be available on acceptable terms. Equity could dilute shareholders; inability to raise funds could force delays or discontinuations of trials or other adverse actions.
- The company had $41.3 million of gross offering capacity remaining under its Cantor agreement at September 30, 2018. It raised $25.5 million net through the agreement in the first nine months and a further $1.6 million net in October through share sales.
- NASDAQ had notified Celldex that it did not meet the $1.00 minimum bid-price requirement, with a November 26, 2018 compliance deadline. A reverse stock split had been authorized by shareholders as a possible remedy; delisting could impair trading liquidity and access to capital.
- Other notable items: the $28.0 million nine-month gain from remeasurement of contingent consideration was noncash and reflected lower estimated milestone probabilities, including program discontinuations. The company disclosed no off-balance-sheet arrangements and said disclosure controls were effective.
Important facts for investors to verify
- Whether the company’s funding runway assumptions, including the distinction between at least 12 months of resources and the projection through 2020, remain achievable.
- Subsequent cash burn, equity issuance, dilution, remaining Cantor facility capacity, and any financing terms.
- Clinical progress and results for priority programs, especially CDX-3379’s interim futility assessment and the disclosed varlilumab study results.
- Any further pipeline changes, impairment charges, or changes to Kolltan milestone estimates and potential payment obligations.
- NASDAQ listing compliance status and whether a reverse split or market transfer was required.