Celldex Therapeutics, Inc. — Q3 2012 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2012. Unaudited; financial amounts below are in millions of dollars except per-share data. Celldex is a clinical-stage biopharmaceutical company developing immunotherapies and antibody-drug conjugates. Its lead programs included rindopepimut, CDX-011 and CDX-1127; Rotarix royalties were its principal reported revenue source.
Financial performance
| Metric | Q3 2012 | Q3 2011 | Nine months 2012 | Nine months 2011 |
|---|---|---|---|---|
| Total revenue | $3.11 | $2.36 | $7.56 | $6.83 |
| Research and development | $11.77 | $8.59 | $33.65 | $22.62 |
| Total operating expenses | $17.86 | $13.84 | $49.08 | $37.85 |
| Operating loss | $(14.75) | $(11.48) | $(41.53) | $(31.02) |
| Net loss | $(15.03) | $(11.77) | $(42.32) | $(32.07) |
| Basic and diluted loss per share | $(0.25) | $(0.27) | $(0.75) | $(0.85) |
- Product royalties were $3.01 million in Q3 and $7.22 million year to date, with corresponding royalty expense of the same amounts. The filing attributes these amounts to retained Rotarix royalties and amounts payable to Cincinnati Children’s Hospital Medical Center.
- At September 30, cash and cash equivalents were $23.19 million and marketable securities were $54.43 million, totaling $77.62 million. Working capital was $63.7 million.
- Term-loan balance was $12.6 million: $5.29 million current and $7.33 million long-term. The loan carries interest at the greater of LIBOR plus 6.25% or 9.50%, with maturity extended to December 2014.
- For the first nine months, operating cash use was $36.46 million, investing cash use was $12.44 million and financing provided $60.19 million. Cash increased $11.29 million from year-end 2011.
Changes versus comparable periods
- Q3 revenue rose 32%, while net loss increased by $3.26 million. For the first nine months, revenue rose 11%, while net loss increased by $10.25 million.
- R&D increased 37% in Q3 and 49% year to date, primarily as clinical trial costs rose, particularly for rindopepimut’s ACT IV and ReACT studies. Year-to-date rindopepimut program expense was $17.40 million, versus $4.25 million in 2011.
- Higher G&A also contributed to losses. Lower acquired-intangible amortization partly offset expense growth. Year-to-date operating cash use increased from $26.29 million to $36.46 million.
- Financing included $62.87 million in net proceeds from stock issuances during the first nine months, including a $43.4 million public offering and sales under the Cantor equity program. Common shares outstanding rose from 44.21 million at December 31, 2011 to 60.81 million at September 30, 2012.
Outlook, developments and risks
- Management said available cash, cash equivalents and marketable securities should fund estimated working capital needs and planned operations for at least 12 months from September 30, 2012. It also said it may seek additional capital; availability and terms are not assured, and further equity could dilute shareholders.
- Management expected operating cash use and product-development expense to rise over the next 12 months, primarily due to rindopepimut trials. The pivotal ACT IV trial and planned parallel European study were expected to cost more than $60 million over their duration. The company planned North American commercialization itself and sought a partner for markets outside North America.
- Rindopepimut was in a pivotal Phase 3 study for newly diagnosed glioblastoma and a Phase 2 recurrent-disease study. CDX-011’s EMERGE Phase 2b study was complete, but future development faced an FDA clinical hold tied to cGMP violations at a contract manufacturer. Reprocessing of available drug product was underway; failure or FDA rejection could require new manufacturing and delay further trials.
- Rotarix-related arrangements with PRF and the last relevant patent were scheduled to expire in December 2012. The filing does not quantify the resulting future revenue impact.
- The company warned that clinical outcomes, trial timing and costs, regulatory approval, manufacturing and partnering are uncertain. Failure to obtain financing could force program delays or discontinuation, earlier licensing, unfavorable financing or a sale of some or all of the business. The company reported no legal proceedings and said it believed it was in compliance with loan covenants.
Important facts for investors to verify
- Whether cash burn, trial spending and subsequent financing preserve liquidity beyond management’s stated 12-month horizon; review post-quarter Cantor sales and remaining offering capacity.
- ACT IV enrollment, follow-up, costs and clinical results, and progress and results from ReACT and other lead programs.
- FDA’s decision on CDX-011 reprocessing or an alternative manufacturing site, and the timing and cost of any subsequent study.
- Effects of the December 2012 Rotarix-related expirations on royalty receipts and the extent to which future revenue depends on partnerships or other sources.
- Share-count dilution from the public offering and ongoing equity program, alongside the company’s cash, debt repayments and financing needs.