Celldex Therapeutics, Inc. — Q3 2022 Form 10-Q
Business context and period. Unaudited results cover the quarter and nine months ended September 30, 2022; balance-sheet comparisons are with December 31, 2021. Celldex is a clinical-stage biopharmaceutical company developing antibody therapeutics. Its lead program, barzolvolimab (CDX-0159), targets KIT and is being studied in mast-cell-driven diseases. The company reported no commercial product revenue.
Financial highlights
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Revenue | $0.4 million | $0.2 million | $0.7 million | $4.3 million |
| Operating expenses | $28.1 million | $21.0 million | $88.1 million | $55.2 million |
| Operating loss | $27.7 million | $20.8 million | $87.3 million | $50.9 million |
| Net loss | $26.8 million | $20.5 million | $85.8 million | $50.4 million |
| Net loss per share, basic and diluted | $0.57 | $0.45 | $1.83 | $1.21 |
Research and development expense was $21.6 million in Q3 and $59.4 million for the first nine months, up 59% and 54%, respectively. The nine-month increase primarily reflected higher barzolvolimab clinical-trial and manufacturing costs, increased personnel and stock-based compensation. General and administrative expense rose 12% in Q3 and 45% year to date. The company remains loss-making, so conventional profit margins are not meaningful.
At September 30, cash and cash equivalents were $18.6 million and marketable securities were $304.9 million, totaling $323.5 million. Current assets were $334.6 million versus current liabilities of $16.3 million. Total liabilities were $23.8 million, including operating lease liabilities; the filing reports no conventional borrowings. Stockholders’ equity was $345.4 million.
For the first nine months, operating cash use was $82.0 million, compared with $46.4 million in 2021. Investing activities provided $58.7 million, largely reflecting net maturities and sales of securities; financing provided $2.7 million, primarily from employee plans, versus $271.9 million in 2021 following a public stock offering. Cash and cash equivalents declined $20.6 million during the period. Unrealized losses on marketable securities were $2.0 million for the nine months; accumulated other comprehensive income ended at a $0.1 million loss.
Material changes and unusual items
- Q3 net loss increased $6.3 million year over year, principally due to higher R&D, partly offset by the absence of the prior-year $3.5 million noncash impairment charge and a prior-year contingent-consideration gain.
- Nine-month net loss increased $35.5 million. Drivers included increased R&D and G&A and a $15.0 million SRS litigation-settlement charge, partly offset by a $6.9 million noncash gain from remeasuring Kolltan contingent consideration after Celldex deprioritized CDX-1140.
- Contracts and grants revenue fell $3.6 million year over year for the nine months, mainly because fewer services were performed under agreements with Rockefeller University and Gilead Sciences. Q3 revenue increased modestly, mainly from an SBIR grant.
- Celldex paid the $15.0 million initial SRS settlement payment in Q3. The agreement replaces prior milestone terms with a further $15.0 million payment upon successful completion of a CDX-0159 Phase 2 trial, subject to a $2.5 million contractual credit, and $52.5 million upon the first qualifying FDA or EMA approval. Future payments may be made in cash, shares, or both, at Celldex’s option.
- Marketable securities had $2.7 million of gross unrealized losses at September 30, attributed by the company to interest-rate changes; Celldex said the securities were investment grade and the losses were not other-than-temporary impairments.
Outlook, management commentary and risks
Management stated that available cash, cash equivalents and marketable securities were sufficient to fund planned operations through 2025, while noting that this runway could be affected by any cash payment of future SRS milestones. The financial-statement note separately says resources at the filing date are expected to cover at least the next 12 months. Celldex expects operating cash use, barzolvolimab-related R&D, and product-development costs to increase over the next 12 months; it also expected contract revenue to rise with Rockefeller University services and investment income to benefit from higher rates.
- Phase 2 studies of barzolvolimab in chronic spontaneous urticaria and chronic inducible urticaria began in 2022. The filing describes positive interim Phase 1b CSU results, but these are early-stage data and do not establish later-stage efficacy or approval.
- Celldex planned to initiate a Phase 2 EoE study in the first half of 2023. CDX-585 was completing CMC and IND-enabling work, with clinic entry expected in 2023.
- After period-end, in November 2022, Celldex disclosed that it would close and discontinue the CDX-527 study following an ovarian-cancer expansion that did not meet internal timelines and results that did not meet internal hurdles.
- Clinical development, regulatory approval, trial enrollment, manufacturing and third-party service-provider execution are uncertain. COVID-19 could cause delays or disruptions; prolonged negative impacts could affect results and potentially impair the $27.2 million IPR&D asset.
- Celldex may seek capital through licensing, collaborations, business combinations, debt or equity offerings. Availability and terms are uncertain; equity could dilute shareholders, while debt could impose payment obligations and covenants. Inability to obtain funding could force program or trial delays, earlier licensing, unfavorable financing or a sale of the business.
- The company reported recurring losses and no material changes to previously disclosed risk factors. Disclosure controls were assessed as effective at the reasonable-assurance level.
Important facts for investors to verify
- Whether stated cash runway through 2025 remains valid as clinical spending grows, and how it relates to the note’s separate at-least-12-month statement.
- Progress, enrollment, safety and clinical outcomes in barzolvolimab’s Phase 2 studies, including the planned EoE program.
- Timing and potential amount of SRS milestone obligations, and whether any are paid in cash, stock or a combination.
- R&D and operating cash-use trends, including the effect of the CDX-527 discontinuation and other pipeline prioritization decisions.
- Interest-rate and liquidity exposure in the available-for-sale securities portfolio, and any future financing or dilution.