Celldex Therapeutics, Inc. — Q2 2017 Form 10-Q
Reporting period: Three and six months ended June 30, 2017; filed August 8, 2017. Celldex is a clinical-stage biopharmaceutical company developing cancer immunotherapies and other biologics. Its key programs include glembatumumab vedotin, varlilumab and candidates acquired from Kolltan.
Financial results and position
Amounts below are in millions of dollars except per-share data.
| Metric | Q2 2017 | Q2 2016 | Six months 2017 | Six months 2016 |
|---|---|---|---|---|
| Revenue | $3.8 | $1.4 | $5.4 | $2.7 |
| Operating expenses | $32.8 | $33.8 | $69.4 | $70.8 |
| Operating loss | $(28.9) | $(32.4) | $(64.0) | $(68.1) |
| Net loss | $(28.6) | $(32.0) | $(62.8) | $(66.6) |
| Basic and diluted loss per share | $(0.23) | $(0.32) | $(0.51) | $(0.67) |
| Cash used in operating activities | — | $56.0 | $68.7 |
- At June 30, cash, cash equivalents and marketable securities totaled $154.0 million, versus $189.8 million at December 31, 2016. Current assets were $160.1 million and current liabilities $28.8 million.
- Total liabilities were $114.6 million. The filing does not clearly identify conventional borrowings; long-term liabilities include $48.6 million of Kolltan contingent consideration and $28.1 million of deferred tax liabilities.
- Celldex raised $21.5 million net through its Cantor at-the-market stock offering during the first half, issuing 6.7 million shares. $23.1 million of gross offering capacity remained at quarter-end.
- Revenue remained small relative to research and development spending; it primarily comprised collaboration, contract and grant revenue. The filing does not present a conventional product gross margin.
Material changes versus prior periods
- First-half revenue rose 99% year over year, chiefly from the 2017 IAVI research agreement. Q2 contracts and grants revenue was $3.1 million, including $2.3 million from IAVI.
- First-half net loss narrowed by $3.8 million. Lower R&D and general and administrative expenses, and higher revenue, more than offset a $4.4 million noncash loss from remeasuring Kolltan contingent consideration.
- First-half R&D expense fell 4% to $50.8 million. Lower Rintega and varlilumab development/manufacturing costs were partly offset by higher spending on glembatumumab vedotin and newer programs.
- Cash used in operations decreased by $12.7 million year over year. Financing cash flow increased, primarily due to the larger Cantor stock issuance.
- Shares issued and outstanding increased to 127.4 million from 120.5 million at year-end 2016; 128.3 million were outstanding as of July 31, 2017.
Outlook, commentary and risks
- Management said available liquidity at June 30, together with anticipated Cantor offering proceeds, was expected to fund planned operations through 2018; the financial statements also state resources at issuance were expected to cover at least the next 12 months. Management expected operating cash use to decrease over the next 12 months, with possible quarterly fluctuations.
- Celldex expects to seek additional capital through equity or debt issuance, licensing, collaborations or business combinations. No assurance is given that financing or partnerships will be available on acceptable terms. Equity raises may dilute shareholders; debt could impose payment obligations and restrictive covenants.
- Future Kolltan milestones could total up to $172.5 million if specified development, regulatory and commercial milestones are achieved. Celldex may elect to pay in cash, shares or a combination. The recorded fair-value liability was $48.6 million at June 30.
- For glembatumumab vedotin, target enrollment in the METRIC Phase 2b breast cancer study had been reached; formal enrollment completion was estimated by the end of September 2017. Celldex deferred some costly commercialization-readiness and companion-diagnostic work until study results, which could extend regulatory filing timelines.
- Management expected to complete enrollment across Phase 2 varlilumab/Opdivo cohorts in Q1 2018 and anticipated starting a CDX-3379 Phase 2 study in cetuximab-refractory head and neck cancer in Q4 2017.
- Key risks include clinical trial safety and efficacy, regulatory approval, capital availability, partnering, manufacturing and supply, competition, and realizing benefits from the Kolltan acquisition. The filing reported no material change to previously disclosed risk factors. Disclosure controls were assessed as effective; no material change in internal control over financial reporting was reported.
Important facts for investors to verify
- METRIC study results, enrollment close timing, and the resulting schedule and cost of regulatory and commercialization work.
- Quarterly cash burn, the durability of the stated funding runway, and actual proceeds and dilution from the remaining Cantor offering capacity.
- Clinical progress and spending for varlilumab/Opdivo, CDX-3379, CDX-0158 and other pipeline programs.
- Potential milestone achievement, valuation changes and payment form for Kolltan contingent consideration.
- Whether collaboration and grant revenue, including IAVI-related revenue, is sustained or replaced by new funding sources.