Celldex Therapeutics(CLDX) - 2022 Q2 - Quarterly Report

Part I Unaudited Financial Statements The unaudited condensed consolidated financial statements for June 30, 2022, detail a $59.1 million net loss and $356.8 million in cash and equivalents Condensed Consolidated Balance Sheet Highlights (in thousands) | Indicator | June 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Assets | | | | Cash, cash equivalents & marketable securities | $356,817 | $408,250 | | Total assets | $402,961 | $444,654 | | Liabilities and Stockholders' Equity | | | | Litigation settlement payable | $15,000 | $— | | Total liabilities | $37,868 | $25,178 | | Total stockholders' equity | $365,093 | $419,476 | Condensed Consolidated Statements of Operations Highlights (in thousands) | Indicator | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | | Total revenues | $337 | $4,165 | | Research and development | $37,786 | $25,076 | | Litigation settlement related loss | $15,000 | $— | | Operating loss | $(59,653) | $(30,078) | | Net loss | $(59,054) | $(29,911) | | Basic and diluted net loss per share | $(1.26) | $(0.76) | Condensed Consolidated Statements of Cash Flow Highlights (in thousands) | Indicator | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | $(46,778) | $(30,014) | | Net cash provided by investing activities | $35,661 | $29,575 | | Net decrease in cash and cash equivalents | $(10,742) | $(390) | - The company believes its cash, cash equivalents, and marketable securities of $356.8 million as of June 30, 2022, are sufficient to fund planned operations for at least the next twelve months[20] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial condition and operations, highlighting increased net loss due to a $15.0 million litigation settlement and higher R&D expenses, while confirming liquidity through 2025 Overview Celldex focuses on developing therapeutic antibodies like Barzolvolimab and CDX-527 for inflammatory diseases and cancer, acknowledging high development costs and long timelines - The company's primary development efforts are focused on: - Barzolvolimab (CDX-0159): A monoclonal antibody for mast cell-driven diseases like Chronic Urticarias, Prurigo Nodularis (PN), and Eosinophilic Esophagitis (EoE)[68] - CDX-527: A bispecific antibody for advanced solid tumors[69] R&D Expense by Program (Six Months Ended June 30, in thousands) | Program | 2022 (In thousands) | 2021 (In thousands) | | :--- | :--- | :--- | | Barzolvolimab/Anti-KIT Program | $21,918 | $10,973 | | CDX-1140 and CDX-301 | $1,751 | $2,845 | | CDX-527 | $1,195 | $2,328 | | Other Programs | $12,922 | $8,930 | | Total R&D Expense | $37,786 | $25,076 | - The company estimates that clinical trials can take 1-5 years per phase, and total development costs often exceed $100 million for each drug candidate[71][72] Clinical Development Programs Celldex's clinical programs show Barzolvolimab progressing to Phase 2 for urticaria and expanding to other indications, while CDX-527 completes Phase 1, and CDX-1140 is deprioritized - Barzolvolimab (CSU): Positive interim Phase 1b data showed a 75.1% mean reduction in urticaria activity score (UAS7) at week 8 in the 3.0 mg/kg dose group, leading to a Phase 2 study initiation in June 2022[85][89] - Barzolvolimab (CIndU): In a Phase 1b study, 100% of patients with cold urticaria and 89% with symptomatic dermographism experienced a complete response after a single 3 mg/kg dose, with a Phase 2 study initiated in July 2022[92][96] - Barzolvolimab Expansion: Clinical development has expanded to Prurigo Nodularis (PN) with a Phase 1b study initiated in December 2021, and a Phase 2 study in Eosinophilic Esophagitis (EoE) is planned for late 2022[98][101] - CDX-1140 Deprioritization: Following a data review in June 2022, the company decided not to progress further company-sponsored studies for the CDX-1140 program, citing the need to answer questions about its optimal clinical application[108] Results of Operations Net loss significantly increased for Q2 and H1 2022 due to a $15.0 million litigation settlement and higher R&D and G&A expenses, partially offset by a $6.9 million gain Comparison of Q2 2022 vs. Q2 2021 (in thousands) | Metric | Q2 2022 | Q2 2021 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $163 | $3,480 | $(3,317) | (95)% | | R&D Expense | $20,731 | $12,356 | $8,375 | 68% | | G&A Expense | $7,154 | $4,306 | $2,848 | 66% | | Litigation Loss | $15,000 | $— | $15,000 | n/a | | Net Loss | $(36,004) | $(13,373) | $(22,631) | 169% | Comparison of Six Months 2022 vs. Six Months 2021 (in thousands) | Metric | H1 2022 | H1 2021 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $337 | $4,165 | $(3,828) | (92)% | | R&D Expense | $37,786 | $25,076 | $12,710 | 51% | | G&A Expense | $14,066 | $8,426 | $5,640 | 67% | | Litigation Loss | $15,000 | $— | $15,000 | n/a | | Net Loss | $(59,054) | $(29,911) | $(29,143) | 97% | - The increase in R&D spending was primarily driven by higher clinical trial, contract manufacturing, and contract research expenses for the barzolvolimab program[119][129] - A gain of $6.9 million on fair value remeasurement of contingent consideration was recorded for the six months ended June 30, 2022, primarily due to the decision to deprioritize the CDX-1140 program[130] Liquidity and Capital Resources Celldex held $356.8 million in cash and equivalents as of June 30, 2022, sufficient to fund operations through 2025, despite increased cash used in operating activities - The company held $356.8 million in cash, cash equivalents, and marketable securities at June 30, 2022[133] - Management believes current liquidity is sufficient to fund planned operations through 2025, though this could be impacted by the choice to pay future milestones in cash[134] - Net cash used in operating activities increased to $46.8 million for the six months ended June 30, 2022, compared to $30.0 million for the same period in 2021, mainly due to higher operating expenses[137] - The company may raise additional capital through partnerships, debt, or equity offerings to meet long-term liquidity needs, especially considering potential future milestone payments under the SRS Settlement Agreement[136] Quantitative and Qualitative Disclosures About Market Risk The company's short-term, high-grade investment portfolio is managed to preserve capital and liquidity, resulting in immaterial exposure to market risk, including interest rate changes - The company's investment strategy is to preserve principal and maintain liquidity by investing in money market funds, municipal bonds, U.S. government agency securities, and high-grade corporate bonds[141] - Due to the short-term nature of its investments, the company does not believe it has material exposure to market risk, including interest rate risk[141] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2022, with no material changes to internal control over financial reporting - The CEO and CFO concluded that as of June 30, 2022, the company's disclosure controls and procedures were effective[144] - No changes occurred during the quarter ended June 30, 2022, that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[145] Part II Legal Proceedings The company settled litigation with SRS regarding Kolltan acquisition milestone payments, replacing the original $172.5 million structure with a new one totaling up to $82.5 million - The company settled litigation with SRS concerning contingent milestone payments from the Kolltan acquisition, with a definitive settlement agreement executed on July 15, 2022[149] Revised Milestone Payment Structure vs. Original (in thousands) | Payment Trigger | New Structure | Original Structure | | :--- | :--- | :--- | | Initial Payment | $15,000,000 (paid) | N/A | | Phase 2 Completion (CDX-0159) | $15,000,000 (less $2.5M credit) | Part of up to $172.5M | | First Regulatory Approval | $52,500,000 | Part of up to $172.5M | | Total Potential Payments | Up to $82.5M | Up to $172.5M | - The initial $15 million payment was made in cash, with future payments, if due, payable in cash, stock, or a combination at the company's sole discretion[151] Risk Factors No material changes to risk factors were reported since the Annual Report on Form 10-K filed on February 28, 2022 - There were no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K filed on February 28, 2022[152] Exhibits This section lists key exhibits filed with the Form 10-Q, including settlement agreements and officer certifications - Key exhibits filed with this report include the Binding Settlement Term Sheet (10.1), the Confidential Settlement Agreement and Mutual Release (10.2), and CEO/CFO certifications (31.1, 31.2)[154]