Part I Business Celldex Therapeutics develops immunotherapies and targeted biologics for cancer and other diseases, with four key drug candidates Overview - Celldex Therapeutics is a biopharmaceutical company developing immunotherapies and targeted biologics derived from human and bispecific antibodies to treat cancer and other diseases13 - The company's key development programs are CDX-1140, CDX-3379, CDX-0159, and CDX-527, all of which are fully owned by Celldex141517 - The company has a history of operating losses and has not yet generated commercial revenues from its drug candidates18 Clinical Development Programs - CDX-1140, a CD40 agonist, has completed dose escalation in a Phase 1 study. The recommended dose is 1.5 mg/kg for both monotherapy and in combination with CDX-301. Expansion cohorts, including a combination with KEYTRUDA® (pembrolizumab), are ongoing192229 - CDX-3379, an ErbB3 inhibitor, is in a Phase 2 study for advanced HNSCC. Interim data showed notable clinical activity, including a durable complete response, particularly in patients with FAT1 gene mutations303233 - CDX-0159, a KIT inhibitor for mast cell-driven diseases, initiated a Phase 1a study in healthy subjects in November 2019. The company plans to study it in chronic spontaneous urticaria (CSU) and chronic inducible urticarias (CINDUs) by year-end 20203841 - CDX-527 is a bispecific antibody coupling CD27 co-stimulation with PD-L1 blockade. A Phase 1 dose-escalation study in patients with advanced solid tumors is planned for the second half of 20204345 Partnerships and License Agreements - The company may enter into co-development and commercialization partnerships to advance its drug candidates, leveraging external resources and capabilities46 - Celldex has a license agreement with the University of Southampton for rights to develop human antibodies towards CD27 (used in CDX-527), with potential milestone payments up to $1.0 million and low-single-digit royalties51 - An agreement with Amgen provides exclusive rights to CDX-301, with potential milestones up to $0.9 million and low-single-digit royalties52 - Under an agreement with MedImmune for CDX-3379, Celldex may be required to pay up to $45.0 million in regulatory and development milestones and up to $125.0 million in sales-based milestones, plus tiered royalties from high single-digits to low teens54 Competition, Manufacturing, and Commercialization - The biotechnology and pharmaceutical industry is intensely competitive, with Celldex facing competition from large pharmaceutical companies and specialized firms that possess substantially greater financial, technical, and human resources57 - Celldex operates its own cGMP manufacturing facility in Fall River, Massachusetts, to produce drug substance for early-stage (Phase 1 and Phase 2) clinical trials, including for CDX-1140, CDX-301, CDX-527, and CDX-015965 - For late-stage trials and commercialization, the company relies on Contract Manufacturing Organizations (CMOs), which limits control over the manufacturing process and introduces risks related to cost, quality, and supply chain reliability6468 - The company has limited commercial experience and may choose to build its own commercial organization or pursue strategic partnerships to sell, market, and distribute its drug candidates upon approval70 Patents, Licenses and Proprietary Rights - The company's intellectual property strategy involves filing patent applications, licensing rights from others, and relying on trade secrets to protect its technology71 - Key patent applications for CDX-1140 are pending in the U.S. and major international territories, with estimated expiry dates in 2037 if issued73 - Patents for CDX-3379, licensed from MedImmune, have been issued in the U.S., Europe, and Japan with estimated expiry dates in 203274 - A U.S. patent for CDX-0159 has been issued with an estimated expiry date in 2034, with other patents issued or pending internationally77 - The company relies on confidentiality agreements with employees, consultants, and advisors to protect unpatented technology and trade secrets89 Government Regulation - The company's activities and products are significantly regulated by governmental entities, primarily the U.S. Food and Drug Administration (FDA), requiring substantial time and financial resources for product development and approval9091 - The FDA approval process for a new drug or biologic generally involves preclinical testing, submitting an Investigational New Drug (IND) application, and conducting three sequential phases of human clinical trials (Phase 1, Phase 2, and Phase 3) before submitting a Biologics License Application (BLA)9396 - The FDA offers special procedures to expedite development and review, including Fast Track designation, Priority Review, Accelerated Approval, and Breakthrough Therapy designation, for drugs that address serious conditions and unmet medical needs106107110111 - Post-approval, products are subject to continuing regulation by the FDA, including requirements for recordkeeping, reporting adverse events, cGMP compliance for manufacturing, and restrictions on marketing and promotion115117119 - Marketing products outside the U.S. requires compliance with varying regulatory requirements of other countries, such as the European Medicines Agency (EMA) in the EU, which has its own processes for marketing authorization and orphan drug designation134135 Employees and Research and Development - As of December 31, 2019, Celldex employed 130 people, with 108 engaged in or directly supporting research and development activities145 Research and Development Expenses (2017-2019) | Year | R&D Expense (in millions) | |:---|:---| | 2019 | $42.7 | | 2018 | $66.4 | | 2017 | $96.2 | Risk Factors The company faces substantial financial, development, commercialization, and IP risks, raising going concern doubts Risks Related to Our Financial Condition and Capital Requirements - There is substantial doubt about the company's ability to continue as a going concern, as cash resources are only expected to fund operations into the first quarter of 2021. This may hinder the ability to obtain future financing150151 - The company has no product revenue, an accumulated deficit of $1.0 billion as of December 31, 2019, and expects to incur future losses, requiring it to raise additional capital to fund operations154156 - Future milestone payments of up to $127.5 million to former Kolltan stockholders may be paid in cash or stock. Paying in stock would cause substantial dilution, while paying in cash would likely require raising additional capital162163 Risks Related to Development and Regulatory Approval of Drug Candidates - The company's long-term success is heavily dependent on completing R&D and obtaining regulatory approval, but clinical failure can occur at any stage, and success in early trials does not guarantee success in later trials166167177 - Health epidemics, such as the COVID-19 coronavirus outbreak, could significantly disrupt preclinical studies and clinical trials by delaying patient enrollment and affecting third-party service providers and manufacturers169170 - The drug development and approval process is lengthy, costly, and subject to extensive regulatory scrutiny from the FDA and other authorities, with no guarantee of success173175176 - Development of certain drug candidates may depend on the successful validation and approval of companion diagnostics, which are regulated as medical devices and face their own development and approval challenges192193 Risks Related to Commercialization of Our Drug Candidates - The company lacks sufficient marketing, sales, and distribution capabilities and may not succeed in building a commercial organization or entering into successful strategic partnerships205206 - Even if approved, drug candidates may not achieve broad market acceptance from physicians, patients, and third-party payors, which is critical for generating significant revenue207208 - Market acceptance and sales will depend on reimbursement policies from government authorities and private insurers, who are increasingly focused on containing healthcare costs and may not provide sufficient coverage216217 - Failure to obtain regulatory approvals in foreign jurisdictions will prevent the company from marketing its products internationally, and the approval process varies significantly by country223224 Risks Related to Reliance on Third Parties - The company relies on third parties like contract research organizations (CROs) to conduct clinical trials, and their failure to perform could delay or invalidate testing229230 - The company has limited commercial manufacturing experience and depends on Contract Manufacturing Organizations (CMOs) for late-stage clinical and commercial supplies, creating risks related to cost, quality, and supply chain reliability231232 - Reliance on third parties requires sharing trade secrets, which increases the risk of competitors discovering proprietary information through breaches of confidentiality agreements or other means244245 Risks Related to Our Capital Stock - The company's history of losses (accumulated deficit of $1.0 billion) and uncertainty of future profitability make its common stock a highly speculative investment315 - A one-for-fifteen reverse stock split was completed in February 2019 to regain NASDAQ compliance, but there is no assurance the stock price will remain compliant or that liquidity will not be adversely affected318321324 - The market price of the common stock has been and could remain highly volatile, fluctuating between a high of $11.62 and a low of $2.01 per share in 2019 (split-adjusted)323 - The ability to use net operating loss carryforwards is subject to substantial annual limitations due to ownership change rules under Section 382 of the Internal Revenue Code331332 Properties Celldex leases four key properties for its operations, including headquarters, office/lab spaces, and a manufacturing facility Significant Leased Properties | Property Location | Use | Approx. Square Feet | Lease Expiration | |:---|:---|:---:|:---| | Hampton, NJ | Headquarters, Office & Lab | 33,400 | July 2025 | | Needham, MA | Office & Lab | 46,700 | July 2020 | | Fall River, MA | Manufacturing Facility | 33,900 | July 2021 | | New Haven, CT | Office & Lab | 17,700 | April 2022 | Legal Proceedings The company reports that it is not currently a party to any material legal proceedings - Celldex is not currently involved in any material legal proceedings341 Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Celldex's common stock trades on NASDAQ under 'CLDX', underwent a reverse split in 2019, and does not pay dividends - The company's common stock trades on the Nasdaq Capital Market (NASDAQ) under the symbol "CLDX"343 - A one-for-fifteen reverse stock split of the common stock was effected on February 8, 2019343 - The company has not paid any dividends since its inception and does not plan to pay any in the foreseeable future343 Selected Financial Data Five-year financial data shows consistent net losses, a significant 2018 increase, and declining assets and equity Selected Financial Data (2015-2019) | (In thousands, except per share amounts) | 2019 | 2018 | 2017 | 2016 | 2015 | |:---|---:|---:|---:|---:|---:| | Statements of Operations Data | | | | | | | Total Revenue | $3,573 | $9,538 | $12,743 | $6,786 | $5,480 | | Research and Development | $42,672 | $66,449 | $96,171 | $102,726 | $100,171 | | Operating Loss | $(55,031) | $(156,436) | $(121,527) | $(132,916) | $(129,541) | | Net Loss | $(50,878) | $(151,184) | $(93,031) | $(128,530) | $(127,197) | | Basic and Diluted Net Loss Per Share | $(3.51) | $(14.48) | $(10.86) | $(18.99) | $(19.66) | | Balance Sheet Data (at year-end) | | | | | | | Working Capital | $55,055 | $86,477 | $117,020 | $160,346 | $264,696 | | Total Assets | $122,933 | $155,809 | $315,624 | $383,358 | $337,584 | | Total Stockholders' Equity | $94,026 | $124,060 | $236,369 | $265,431 | $290,105 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial results, noting a reduced 2019 net loss, but emphasizes significant liquidity concerns and going concern doubts Results of Operations Comparison of Operations (2019 vs. 2018) | (In thousands) | 2019 | 2018 | Change ($) | Change (%) | |:---|---:|---:|---:|---:| | Total Revenue | $3,573 | $9,538 | $(5,965) | (63)% | | R&D Expense | $42,672 | $66,449 | $(23,777) | (36)% | | G&A Expense | $15,426 | $19,269 | $(3,843) | (20)% | | Goodwill Impairment | $0 | $90,976 | $(90,976) | (100)% | | Operating Loss | $(55,031) | $(156,436) | $(101,405) | (65)% | | Net Loss | $(50,878) | $(151,184) | $(100,306) | (66)% | - The decrease in net loss in 2019 was primarily due to the absence of the $91.0 million non-cash goodwill impairment charge and $18.7 million intangible asset impairment charge recorded in 2018 related to the discontinuation of the Glemba program414423 - The increase in net loss in 2018 compared to 2017 was primarily due to the goodwill impairment charge and a significantly lower non-cash income tax benefit, partially offset by lower R&D expenses429 Liquidity and Capital Resources - The company had $64.4 million in cash, cash equivalents, and marketable securities as of December 31, 2019444 - Existing cash is expected to fund operations only into the first quarter of 2021, which raises substantial doubt about the company's ability to continue as a going concern444446 - Net cash used in operating activities decreased to $46.4 million in 2019 from $75.2 million in 2018, primarily due to lower R&D and G&A expenses448 - The company raised $16.2 million in net proceeds in 2019 through its controlled equity offering sales agreement with Cantor Fitzgerald & Co458 Quantitative and Qualitative Disclosures About Market Risk The company's short-term, high-quality investment portfolio faces immaterial market risk from interest rate changes, with no derivative use - The company's investment portfolio is sensitive to market risk, but this exposure is not considered material due to the short-term nature of the investments465467 - Investments consist primarily of money market mutual funds, municipal bonds, U.S. government agency securities, and high-grade corporate bonds465467 - The company does not utilize derivative financial instruments468 Financial Statements and Supplementary Data Audited financial statements and the auditor's report are presented, noting fair presentation but expressing substantial doubt about the company's going concern ability Report of Independent Registered Public Accounting Firm - The independent auditor, PricewaterhouseCoopers LLP, issued an opinion that the consolidated financial statements present fairly, in all material respects, the financial position of the company471 - The auditor's report includes a paragraph expressing substantial doubt about the company's ability to continue as a going concern due to recurring losses, cash outflows from operations, and the need to raise additional capital472 Consolidated Financial Statements Consolidated Balance Sheet Highlights (as of Dec 31) | (In thousands) | 2019 | 2018 | |:---|---:|---:| | Cash, Cash Equivalents & Marketable Securities | $64,383 | $94,022 | | Total Assets | $122,933 | $155,809 | | Total Liabilities | $28,907 | $31,749 | | Total Stockholders' Equity | $94,026 | $124,060 | Consolidated Statement of Operations Highlights (Year Ended Dec 31) | (In thousands) | 2019 | 2018 | 2017 | |:---|---:|---:|---:| | Total Revenues | $3,573 | $9,538 | $12,743 | | R&D Expense | $42,672 | $66,449 | $96,171 | | Goodwill Impairment | $0 | $90,976 | $0 | | Operating Loss | $(55,031) | $(156,436) | $(121,527) | | Net Loss | $(50,878) | $(151,184) | $(93,031) | Consolidated Cash Flow Highlights (Year Ended Dec 31) | (In thousands) | 2019 | 2018 | 2017 | |:---|---:|---:|---:| | Net Cash Used in Operating Activities | $(46,415) | $(75,235) | $(99,931) | | Net Cash Provided by Investing Activities | $17,080 | $29,816 | $46,468 | | Net Cash Provided by Financing Activities | $16,257 | $29,441 | $51,290 | | Net Decrease in Cash and Cash Equivalents | $(13,078) | $(15,978) | $(2,173) | Notes to Financial Statements - Note 1 reiterates that conditions raise substantial doubt about the company's ability to continue as a going concern, as existing cash is only sufficient to fund operations into Q1 2021494 - Note 8 details the full impairment of goodwill ($91.0 million) and a finite-lived intangible asset ($6.9 million) in Q1 2018 following the discontinuation of the Glemba program559564 - Note 15 explains that as of Dec 31, 2019, the company had federal and state net operating loss carryforwards of $638.9 million and $595.1 million, respectively, though their utilization is subject to limitation under Section 382605606 - Note 17 discusses the Kolltan acquisition and the remaining potential contingent milestone payments of up to $127.5 million. A dispute with former Kolltan stockholders over the abandonment of certain milestones is ongoing613614 Controls and Procedures The CEO and CFO concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2019 - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of December 31, 2019620 - Management concluded that the company's internal control over financial reporting was effective as of December 31, 2019, based on the COSO framework623 Part III Directors, Executive Officers, Compensation, and Corporate Governance Information on directors, executive officers, compensation, and corporate governance is incorporated by reference from the 2020 Proxy Statement - Information regarding Directors, Executive Officers, Corporate Governance (Item 10), Executive Compensation (Item 11), Security Ownership (Item 12), Certain Relationships and Related Transactions (Item 13), and Principal Accountant Fees and Services (Item 14) is incorporated by reference from the forthcoming 2020 Proxy Statement627628629630631 Part IV Exhibits, Financial Statement Schedules This section lists all Form 10-K exhibits, with financial statements in Item 8 and schedules omitted as not applicable - This item lists all financial statements, schedules, and exhibits filed as part of the Form 10-K633 - Financial statement schedules are omitted because the required information is not applicable or is included within the main financial statements and notes633
Celldex Therapeutics(CLDX) - 2019 Q4 - Annual Report