Celldex Therapeutics, Inc. — Q3 2013 Form 10-Q
Reporting period: Three and nine months ended September 30, 2013. Celldex is a clinical-stage biopharmaceutical company developing immunotherapies, including rindopepimut for glioblastoma and glembatumumab vedotin (glemba) for cancer. Financial figures below are in U.S. dollars; unless noted, amounts are millions.
Financial performance and position
| Metric | Q3 2013 | Q3 2012 | Nine months 2013 | Nine months 2012 |
|---|---|---|---|---|
| Total revenue | $0.98 | $3.11 | $3.49 | $7.56 |
| Research and development expense | $20.42 | $11.77 | $49.60 | $33.65 |
| Operating loss | $(23.27) | $(14.75) | $(59.33) | $(41.53) |
| Net loss | $(23.14) | $(15.03) | $(59.49) | $(42.32) |
| Net loss per share | $(0.29) | $(0.25) | $(0.76) | $(0.75) |
| Operating cash used | Not provided for quarter | Not provided for quarter | $52.71 | $36.46 |
- Revenue mix: Nine-month revenue included $2.33 million of product royalties and $1.04 million of contracts and grants. Q3 royalties were zero; contracts and grants were $0.94 million, primarily reflecting research services for Rockefeller University.
- Liquidity: At September 30, cash and cash equivalents were $14.63 million and marketable securities were $121.96 million, totaling $136.59 million. Working capital was $123.2 million. Total assets were $180.96 million and total liabilities were $24.21 million.
- Debt: No term loan remained at quarter-end. Celldex prepaid it in May, paying $8.8 million principal plus $0.7 million in interest and fees; the company estimated net interest savings of approximately $0.5 million.
- Cash flows and funding: Investing activities used $63.60 million, chiefly reflecting net purchases of marketable securities. Financing provided $106.05 million, including $114.19 million of net proceeds from stock issuances and $11.03 million of term-loan payments.
Material changes versus prior comparable periods
- Q3 revenue declined 69% and nine-month revenue declined 54%, principally because Rotarix royalty revenue ended as the relevant GlaxoSmithKline patent rights expired. The remaining royalty revenue was matched by royalty expense payable to Cincinnati Children’s Hospital Medical Center.
- Net loss widened by $8.11 million in Q3 and $17.17 million for the nine-month period. R&D spending rose 73% in Q3 and 47% year to date, driven mainly by higher clinical-trial and contract-manufacturing costs for rindopepimut and glemba.
- Cash used in operations increased to $52.71 million from $36.46 million for the first nine months. General and administrative expense also rose, including higher stock-based compensation, increased headcount, and commercial planning costs.
- Celldex raised $97.0 million net in a 2013 underwritten offering and $17.1 million net under its Cantor equity program. Shares issued and outstanding rose from 64.36 million at December 31, 2012 to 81.11 million at September 30, 2013.
Outlook, commentary, and risks
- Management said available cash, cash equivalents, and marketable securities were sufficient to fund planned operations into late 2015, while also noting the company may need additional capital for longer-term needs. The filing separately states resources should cover at least the next 12 months.
- Management expected operating cash use, clinical-trial costs, contract manufacturing, and personnel expenses to increase over the following 12 months, particularly for rindopepimut and glemba. Higher anticipated cash needs reflected the expanded ReACT study, planned METRIC study, and manufacturing activity for pivotal studies.
- At the filing date, Celldex planned to initiate METRIC, a randomized glemba study in GPNMB-overexpressing triple-negative breast cancer, in Q4 2013. It also expected a ReACT update in November 2013, a CDX-1135 update in February 2014, and a CDX-301 pilot transplant study in early 2014. These were forward-looking plans, not reported outcomes.
- Key risks include clinical-trial results and timing, regulatory approval, manufacturing and supplier availability, and the ability to secure financing or partnerships on acceptable terms. Additional equity could dilute shareholders; debt could impose cash obligations and restrictive covenants; licensing or collaborations could reduce future product economics.
- The company reported no material changes to previously disclosed risk factors and no legal proceedings. Disclosure controls were assessed as effective; no material internal-control changes were reported.
Important facts for investors to verify
- Current cash burn and the assumptions supporting management’s runway estimate, especially as trial and manufacturing spending increases.
- Enrollment, timing, and eventual clinical outcomes for ACT IV and ReACT (rindopepimut) and METRIC (glemba); the reported earlier-stage results do not establish efficacy in pivotal trials.
- Whether planned studies and program updates occurred as expected, and any subsequent changes to development plans or timelines.
- Future financing needs, potential share dilution, remaining equity-issuance capacity, and the impact of the New Jersey lease and other commitments.
- Revenue and royalty disclosures: the filing reports no expected further Rotarix revenue or related Glaxo royalty expense; Rockefeller agreement revenue is recognized as services are performed.