Celldex Therapeutics, Inc. — Q3 2016 Form 10-Q
Reporting period: Three and nine months ended September 30, 2016. Celldex is a clinical-stage biopharmaceutical company developing immunotherapies; it reported no product sales. Financial statements are unaudited and prepared under U.S. GAAP.
Financial performance and liquidity
| Metric | Q3 2016 | Q3 2015 | Nine months 2016 | Nine months 2015 |
|---|---|---|---|---|
| Total revenue | $2.2 million | $1.0 million | $4.9 million | $3.7 million |
| Research and development | $25.0 million | $24.7 million | $78.2 million | $76.3 million |
| General and administrative | $7.0 million | $8.5 million | $24.0 million | $22.8 million |
| Net loss | $29.6 million | $32.0 million | $96.2 million | $94.5 million |
| Net loss per share | $0.29 | $0.32 | $0.97 | $0.98 |
- Q3 operating loss was $30.0 million; nine-month operating loss was $98.1 million. The filing does not report meaningful gross or operating margins; revenue was primarily from collaborations, contracts and grants.
- At September 30, cash and cash equivalents were $31.7 million and marketable securities were $171.5 million, totaling $203.2 million. Current assets were $209.7 million versus current liabilities of $18.6 million.
- Operating cash use was $92.7 million for the first nine months, versus $85.1 million in 2015. Investing activities provided $41.1 million, largely reflecting net securities maturities and sales; financing provided $11.2 million, including $10.7 million net proceeds from the Cantor share-sale agreement.
- Total liabilities were $34.9 million, including $4.4 million current and $16.2 million long-term liabilities. The balance sheet does not identify conventional interest-bearing debt.
- Total assets were $251.9 million and stockholders’ equity was $217.1 million. Shares outstanding were 101.2 million at September 30, versus 98.7 million at December 31, 2015.
Material changes and business developments
- Q3 revenue increased 116% year over year, principally from contracts and grants, including Rockefeller research work and higher grant revenue. Nine-month revenue rose 33%, reflecting higher collaboration and grant revenue.
- Q3 net loss narrowed by $2.4 million, helped by increased revenue and lower G&A. For the nine-month period, net loss increased by $1.7 million as higher R&D and G&A more than offset increased revenue.
- Nine-month R&D spending rose 2%. Higher personnel costs and spending on glembatumumab vedotin and varlilumab were partly offset by lower Rintega-related trial costs. The company discontinued the Phase 3 Rintega study in March after an interim analysis indicated it was unlikely to meet its primary endpoint.
- Glembatumumab vedotin remained in Phase 2b testing for triple-negative breast cancer and Phase 2 testing for melanoma. In a melanoma cohort, 7 of 62 patients had confirmed responses; median progression-free survival was 4.4 months.
- On November 1, 2016, after quarter-end, Celldex agreed to acquire Kolltan Pharmaceuticals. Closing was expected by year-end, subject to conditions including approval by at least 60% of Kolltan stockholders. Consideration included approximately 19.2 million Celldex shares valued at $62.5 million based on the stated reference price, approximately 461,000 additional shares in lieu of certain severance, and potential milestone payments of up to $172.5 million.
Outlook, risks and unusual items
- Management said September 30 liquidity, together with anticipated proceeds from future Cantor share sales, was expected to fund planned operations through 2018. The Cantor agreement authorized up to $60.0 million in gross share sales; $48.8 million remained available at quarter-end. Management also cautioned that cash-paid Kolltan milestones could affect this outlook.
- The company may seek additional capital through equity or debt issuance, licensing, collaborations or business combinations. Financing may be unavailable or unfavorable; equity issuance could dilute shareholders, and insufficient funding could require delaying or reducing research and development.
- Management expected operating cash use to decrease over the next 12 months, primarily due to discontinuation of Rintega. It also expected facility costs to increase following lease amendments and investment income to decline. No formal revenue or earnings guidance was provided.
- Management planned to review and prioritize the expanded pipeline after the proposed Kolltan acquisition, potentially delaying previously disclosed studies, and said it expected to update development strategy in Q1 2017 if the deal closed.
- Development, clinical-trial, regulatory, manufacturing, collaboration and intellectual-property risks remain significant. Merger risks include failure to close, integration challenges, uncertain acquisition value, potential dilution and cash demands from contingent milestones. Management reported effective disclosure controls as of September 30, 2016.
Key facts for investors to verify
- Cash consumption and whether the stated funding horizon through 2018 remains achievable, including actual ATM proceeds and any cash-funded Kolltan milestones.
- Kolltan merger closing status, final share consideration, potential milestone terms and resulting dilution.
- Progress and clinical outcomes in the METRIC breast-cancer trial and ongoing glembatumumab vedotin and varlilumab studies.
- Whether pipeline reprioritization, including the Rintega discontinuation, changes planned trial spending or timelines.
- Revenue dependence on collaboration, contract and grant funding, and the company’s ability to secure additional capital on acceptable terms.