Celldex Therapeutics, Inc. — Q2 2019 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2019. Celldex is a development-stage biopharmaceutical company focused on immunotherapies and targeted biologics; it reported no product sales.
Financial results and liquidity
| Metric | Three months ended June 30, 2019 | Six months ended June 30, 2019 |
|---|---|---|
| Revenue | $0.7 million, down 74% year over year | $2.1 million, down 69% |
| Research and development expense | $10.1 million, down 53% | $21.2 million, down 51% |
| Net loss | $11.8 million; $0.84 per share | $29.0 million; $2.21 per share |
| Net cash used in operating activities | Not provided for the quarter | $24.3 million, versus $45.4 million in 2018 |
At June 30, cash and cash equivalents were $19.7 million and marketable securities were $61.6 million, totaling $81.3 million. Total assets were $142.2 million; total liabilities were $32.6 million. The filing does not report conventional borrowings or a debt balance. Liabilities include $14.3 million of Kolltan contingent consideration and $4.4 million of operating lease liabilities. No gross margin is reported.
Celldex raised $11.4 million net through its Cantor equity sales agreement in the first half, with $25.8 million of gross offering capacity remaining at June 30. It issued a further 201,687 shares for $0.5 million net in July. Share issuance increased dilution; 14.8 million common shares were outstanding at June 30.
Changes versus the prior comparable period
- Quarterly net loss narrowed by $4.6 million, mainly as lower R&D expense more than offset reduced revenue and a smaller gain from remeasuring contingent consideration.
- First-half net loss narrowed by $105.5 million, but the comparison is substantially affected by 2018 noncash goodwill and intangible-asset impairment charges totaling about $109.7 million. 2019 included a $1.8 million noncash impairment of an investment in a private company and a $0.5 million contingent-consideration loss; 2018 included a $21.0 million contingent-consideration gain.
- Revenue fell as the BMS combination study concluded and contract manufacturing and research services declined. Management expects revenue to decrease over the next 12 months.
- R&D reductions primarily reflected lower personnel, clinical-trial and contract-manufacturing costs. Management nevertheless expects product-development expense to increase over the next 12 months as clinical activity increases.
Outlook, programs, and risks
- Management said cash and investments at June 30, together with anticipated Cantor sales, should fund planned operations through 2020; the filing also states resources are expected to cover at least 12 months from issuance. These estimates depend on future equity sales and could be affected by cash payment of Kolltan milestones.
- Celldex plans to seek additional capital through equity or debt issuance, licensing, collaborations, or business combinations. Availability and acceptable terms are not assured; equity may dilute holders, while debt could impose payment obligations and covenants. Inadequate funding could delay or stop programs or trials, prompt early licensing, or require a sale of some or all of the business.
- CDX-3379: In the Phase 2 study in refractory head and neck cancer, interim results included one durable confirmed complete response still ongoing, one unconfirmed partial response, and stable disease in seven patients. The study was expanded to about 45 patients, including at least 15 with FAT1 mutations, to evaluate potential biomarkers; enrollment was ongoing.
- CDX-1140: Interim Phase 1 data covered 30 patients. Treatment was generally tolerated, an MTD had not been reached, and serious treatment-related events were reported in three patients. Enrollment continued.
- CDX-0159: The company planned to submit an IND and begin a Phase 1a healthy-volunteer study by year-end 2019.
- Facility actions: The Hampton, New Jersey lease was amended to reduce space. Celldex also planned to consolidate Massachusetts laboratory and manufacturing operations in 2020; management estimated a footprint reduction exceeding 35% and annual savings above $3.5 million beginning in the second half of 2020.
- Key risks include clinical and regulatory uncertainty, dependence on external financing and partnerships, possible future impairment of in-process R&D assets, and up to $127.5 million in Kolltan payments contingent on development, regulatory, or sales milestones.
Most important facts for investors to verify
- Cash burn, remaining runway, and whether Cantor sales or other financing are available on acceptable terms.
- CDX-3379 trial progress and whether the early response and FAT1/NOTCH biomarker observations hold in a larger study.
- CDX-1140 safety, dose selection, and subsequent clinical data; timing of the CDX-0159 IND and Phase 1 start.
- Potential timing and form of Kolltan milestone payments, and execution and savings from facility consolidation.
- Extent of future dilution and whether lower reported losses reflect sustainable spending changes or prior-period impairment and fair-value effects.