Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 10-Q

 

xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934FORM 10-Q

 

xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended SeptemberJune 30, 20172020

 

OR

 

oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

Commission File Number: 000-15006

 

CELLDEX THERAPEUTICS, INC.

(Exact name of registrant as specified in its charter)

 

Delaware

No. 13-3191702

(State or other jurisdiction of incorporation or
organization)

(I.R.S. Employer Identification No.)

 

Perryville III Building, 53 Frontage Road, Suite 220, Hampton, New Jersey 08827

(Address of principal executive offices) (Zip Code)

 

(908) 200-7500

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $.001CLDXNasdaq Capital Market

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o¨

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o¨

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer o¨

Accelerated filer x¨

Non-accelerated filer ox

Smaller reporting company ox

(Do not check if a smaller reporting company)

Emerging growth company o¨

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o¨

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o¨ No x

 

As of OctoberJuly 31, 2017, 135,985,3292020, 39,126,448 shares of common stock, $.001 par value per share, were outstanding.

 

 

 



Table of ContentsCELLDEX THERAPEUTICS, INC.

 

CELLDEX THERAPEUTICS, INC.FORM 10-Q

 

FORM 10-Q

For the Quarterly Period Ended SeptemberJune 30, 20172020

 

Table of Contents

 

Page

Part I — Financial Information

Item 1. Unaudited Financial Statements

3

Condensed Consolidated Balance Sheets at SeptemberJune 30, 20172020 and December 31, 20162019

3

Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three and NineSix Months Ended SeptemberJune 30, 20172020 and 20162019

4

Condensed Consolidated Statements of Cash Flows for the NineSix Months Ended SeptemberJune 30, 20172020 and 20162019

5

Notes to Unaudited Condensed Consolidated Financial Statements

6

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

16

15

Item 3. Quantitative and Qualitative Disclosures About Market Risk

32

29

Item 4. Controls and Procedures

32

29

Part II — Other Information

Item 1A. Risk Factors

33

30

Item 5. Other Information

33

30

Item 6. Exhibits

33

30

SignaturesExhibit Index

35

30

Exhibit IndexSignatures

34

31

2

PART I — FINANCIAL INFORMATION

Item 1. Unaudited Financial Statements

 

CELLDEX THERAPEUTICS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

(In thousands, except share and per share amounts)

 

 

September 30, 2017

 

December 31, 2016

 

 June 30,
2020
  December 31,
2019
 

ASSETS

 

 

 

 

 

        

Current Assets:

 

 

 

 

 

        

Cash and Cash Equivalents

 

$

54,735

 

$

42,461

 

 $68,027  $11,232 

Marketable Securities

 

85,795

 

147,315

 

  138,888   53,151 

Accounts and Other Receivables

 

3,013

 

1,784

 

  329   1,015 

Prepaid and Other Current Assets

 

3,774

 

4,009

 

  1,748   1,300 

Total Current Assets

 

147,317

 

195,569

 

  208,992   66,698 

Property and Equipment, Net

 

11,308

 

13,192

 

  4,044   4,031 
Operating Lease Right-of-Use Assets, Net  3,134   3,473 

Intangible Assets, Net

 

67,815

 

81,487

 

  45,190   48,690 

Other Assets

 

2,002

 

2,134

 

  41   41 

Goodwill

 

90,976

 

90,976

 

Total Assets

 

$

319,418

 

$

383,358

 

 $261,401  $122,933 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

        

Current Liabilities:

 

 

 

 

 

        

Accounts Payable

 

$

1,278

 

$

1,740

 

 $950  $1,174 

Accrued Expenses

 

17,845

 

28,657

 

  6,467   6,499 

Current Portion of Long-Term Liabilities

 

5,792

 

4,826

 

Current Portion of Operating Lease Liabilities  1,320   1,944 
Current Portion of Other Long-Term Liabilities  2,104   2,026 

Total Current Liabilities

 

24,915

 

35,223

 

  10,841   11,643 
Long-Term Portion of Operating Lease Liabilities  1,720   1,713 

Other Long-Term Liabilities

 

75,351

 

82,704

 

  10,396   15,551 

Total Liabilities

 

100,266

 

117,927

 

  22,957   28,907 

 

 

 

 

 

Commitments and Contingent Liabilities

 

 

 

 

 

        

 

 

 

 

 

Stockholders’ Equity:

 

 

 

 

 

        

Convertible Preferred Stock, $.01 Par Value; 3,000,000 Shares Authorized; No Shares Issued and Outstanding at September 30, 2017 and December 31, 2016

 

 

 

Common Stock, $.001 Par Value; 297,000,000 Shares Authorized; 132,108,478 and 120,516,654 Shares Issued and Outstanding at September 30, 2017 and December 31, 2016, respectively

 

132

 

121

 

Convertible Preferred Stock, $.01 Par Value; 3,000,000 Shares Authorized; No Shares Issued and Outstanding at June 30, 2020 and December 31, 2019      
Common Stock, $.001 Par Value; 297,000,000 Shares Authorized; 39,093,868 and 16,972,077 Shares Issued and Outstanding at June 30, 2020 and December 31, 2019, Respectively  39   17 

Additional Paid-In Capital

 

1,025,108

 

982,255

 

  1,272,783   1,104,706 

Accumulated Other Comprehensive Income

 

2,588

 

2,541

 

  2,594   2,619 

Accumulated Deficit

 

(808,676

)

(719,486

)

  (1,036,972)  (1,013,316)

Total Stockholders’ Equity

 

219,152

 

265,431

 

  238,444   94,026 

Total Liabilities and Stockholders’ Equity

 

$

319,418

 

$

383,358

 

 $261,401  $122,933 

 

See accompanying notes to unaudited condensed consolidated financial statements

3

CELLDEX THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)

 

(In thousands, except per share amounts)

 

 

Three Months
Ended
September 30, 2017

 

Three Months
Ended
September 30, 2016

 

Nine Months
Ended
September 30, 2017

 

Nine Months
Ended
September 30, 2016

 

  Three Months
Ended
June 30, 2020  
   Three Months
Ended
June 30, 2019  
   Six Months
Ended
June 30, 2020
   Six Months
Ended
June 30, 2019
 

REVENUES:

 

 

 

 

 

 

 

 

 

                

Product Development and Licensing Agreements

 

$

1,238

 

$

493

 

$

2,488

 

$

1,551

 

 $  $195  $2,285  $325 

Contracts and Grants

 

2,686

 

1,727

 

6,799

 

3,362

 

  236   520   680   1,815 

Total Revenues

 

3,924

 

2,220

 

9,287

 

4,913

 

  236   715   2,965   2,140 

 

 

 

 

 

 

 

 

 

                

OPERATING EXPENSES:

 

 

 

 

 

 

 

 

 

                

Research and Development

 

21,915

 

25,009

 

72,707

 

78,168

 

  9,705   10,081   21,400   21,232 

General and Administrative

 

5,346

 

6,950

 

19,109

 

24,049

 

  3,528   3,908   7,194   8,804 

In-Process Research and Development Impairment

 

13,000

 

 

13,000

 

 

Gain on Fair Value Remeasurement of Contingent Consideration

 

(4,600

)

 

(200

)

 

Amortization of Acquired Intangible Assets

 

224

 

254

 

672

 

760

 

Intangible Asset Impairment  3,500      3,500    
Other Asset Impairment           1,800 
(Gain) Loss on Fair Value Remeasurement of Contingent Consideration  (5,132)  (1,017)  (4,898)  502 

Total Operating Expenses

 

35,885

 

32,213

 

105,288

 

102,977

 

  11,601   12,972   27,196   32,338 

 

 

 

 

 

 

 

 

 

                

Operating Loss

 

(31,961

)

(29,993

)

(96,001

)

(98,064

)

  (11,365)  (12,257)  (24,231)  (30,198)

Investment and Other Income, Net

 

398

 

395

 

1,611

 

1,841

 

  106   478   347   1,180 

Net Loss Before Income Tax Benefit

 

(31,563

)

(29,598

)

(94,390

)

(96,223

)

  (11,259)  (11,779)  (23,884)  (29,018)

Income Tax Benefit

 

5,200

 

 

5,200

 

 

  228      228    

Net Loss

 

$

(26,363

)

$

(29,598

)

$

(89,190

)

$

(96,223

)

 $(11,031) $(11,779) $(23,656) $(29,018)

 

 

 

 

 

 

 

 

 

                

Basic and Diluted Net Loss Per Common Share

 

$

(0.20

)

$

(0.29

)

$

(0.71

)

$

(0.97

)

 $(0.50) $(0.84) $(1.20) $(2.21)

 

 

 

 

 

 

 

 

 

                

Shares Used in Calculating Basic and Diluted Net Loss per Share

 

129,640

 

100,672

 

125,856

 

99,398

 

Shares Used in Calculating Basic and Diluted Net Loss Per Share  22,082   13,952   19,744   13,129 

 

 

 

 

 

 

 

 

 

                

COMPREHENSIVE LOSS:

 

 

 

 

 

 

 

 

 

                

Net Loss

 

$

(26,363

)

$

(29,598

)

$

(89,190

)

$

(96,223

)

 $(11,031) $(11,779) $(23,656) $(29,018)

Other Comprehensive Income:

 

 

 

 

 

 

 

 

 

Unrealized Gain (Loss) on Marketable Securities

 

11

 

(113

)

47

 

303

 

Other Comprehensive Income (Loss):                
Unrealized (Loss) Gain on Marketable Securities  (3)  36   (25)  55 

Comprehensive Loss

 

$

(26,352

)

$

(29,711

)

$

(89,143

)

$

(95,920

)

 $(11,034) $(11,743) $(23,681) $(28,963)

 

See accompanying notes to unaudited condensed consolidated financial statements

4

CELLDEX THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW

(Unaudited)

 

(In thousands)

 

 

Nine Months
Ended
September 30, 2017

 

Nine Months
Ended
September 30, 2016

 

 Six Months 
Ended
June 30, 2020
  Six Months 
Ended
June 30, 2019
 

Cash Flows from Operating Activities:

 

 

 

 

 

Cash Flows From Operating Activities:        

Net Loss

 

$

(89,190

)

$

(96,223

)

 $(23,656) $(29,018)

Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities:

 

 

 

 

 

        

Depreciation and Amortization

 

3,392

 

2,135

 

  2,313   2,505 

Amortization of Intangible Assets

 

672

 

760

 

Amortization and Premium of Marketable Securities, Net

 

(171

)

768

 

  (335)  (652)

Loss on Sale or Disposal of Assets

 

6

 

74

 

In-Process Research and Development Impairment

 

13,000

 

 

Gain on Fair Value Remeasurement of Contingent Consideration

 

(200

)

 

Income Tax Benefit

 

(5,200

)

 

(Gain) Loss on Sale or Disposal of Assets  (20)  7 
Intangible Asset Impairment  3,500    
Other Asset Impairment     1,800 
(Gain) Loss on Fair Value Remeasurement of Contingent Consideration  (4,898)  502 
Non-Cash Income Tax Benefit  (228)   

Stock-Based Compensation Expense

 

9,728

 

11,709

 

  1,408   3,157 

Non-Cash Expense

 

 

1,638

 

Changes in Operating Assets and Liabilities:

 

 

 

 

 

        

Accounts and Other Receivables

 

(1,229

)

(609

)

  686   1,992 

Prepaid and Other Current Assets

 

525

 

(325

)

  (436)  (137)

Other Assets

 

132

 

 

Accounts Payable and Accrued Expenses

 

(10,888

)

(11,560

)

  (254)  (1,598)

Other Liabilities

 

(987

)

(1,054

)

  (1,412)  (2,833)

Net Cash Used in Operating Activities

 

(80,410

)

(92,687

)

  (23,332)  (24,275)

 

 

 

 

 

        

Cash Flows from Investing Activities:

 

 

 

 

 

Cash Flows From Investing Activities:        

Sales and Maturities of Marketable Securities

 

183,683

 

194,915

 

  47,000   67,386 

Purchases of Marketable Securities

 

(122,235

)

(149,877

)

  (132,439)  (58,565)

Investment in Other

 

 

(1,801

)

Acquisition of Property and Equipment

 

(1,598

)

(2,113

)

  (1,145)  (484)

Net Cash Provided by Investing Activities

 

59,850

 

41,124

 

Proceeds from Sale or Disposal of Assets  20    
Net Cash (Used in) Provided by Investing Activities  (86,564)  8,337 

 

 

 

 

 

        

Cash Flows from Financing Activities:

 

 

 

 

 

Cash Flows From Financing Activities:        

Net Proceeds from Stock Issuances

 

32,642

 

10,666

 

  166,667   11,363 

Proceeds from Issuance of Stock from Employee Benefit Plans

 

192

 

532

 

  24   9 
Issuance of Term Loan  2,962    
Payment of Term Loan  (2,962)   

Net Cash Provided by Financing Activities

 

32,834

 

11,198

 

  166,691   11,372 

 

 

 

 

 

        

Net Increase (Decrease) in Cash and Cash Equivalents

 

12,274

 

(40,365

)

  56,795   (4,566)

Cash and Cash Equivalents at Beginning of Period

 

42,461

 

72,108

 

  11,232   24,310 

Cash and Cash Equivalents at End of Period

 

$

54,735

 

$

31,743

 

 $68,027  $19,744 

 

 

 

 

 

        

Non-cash Investing Activities

 

 

 

 

 

        

Acquisition of Property and Equipment Included in Accounts Payable and Accrued Expenses

 

$

75

 

$

65

 

Non-cash Supplemental Disclosure

 

 

 

 

 

Shares Issued to Former Kolltan Executive for Settlement of Severance

 

$

302

 

$

 

Accrued construction in progress $22  $55 

 

See accompanying notes to unaudited condensed consolidated financial statements

5

CELLDEX THERAPEUTICS, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

SeptemberJune 30, 20172020

 

(1)  Basis of Presentation

 

The accompanying unaudited condensed consolidated financial statements have been prepared by Celldex Therapeutics, Inc. (the “Company” or “Celldex”) in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and reflect the operations of the Company and its wholly-owned subsidiary.In June 2017, the Company liquidated its wholly-owned subsidiary, Celldex Therapeutics Europe GmbH. All intercompany balances and transactions have been eliminated in consolidation.

 

These interim financial statements do not include all the information and footnotes required by U.S. GAAP for annual financial statements and should be read in conjunction with the audited financial statements for the year ended December 31, 2016,2019, which are included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 14, 2017.26, 2020. In the opinion of management, the interim financial statements reflect all normal recurring adjustments necessary to fairly state the Company’s financial position and results of operations for the interim periods presented. The year-end condensed balance sheet data presented for comparative purposes was derived from audited financial statements but does not include all disclosures required by U.S. GAAP.

 

The results of operations for the interim periods are not necessarily indicative of the results of operations to be expected for any future interim period or the fiscal year ending December 31, 2017.2020.

 

At SeptemberJune 30, 2017,2020, the Company had cash, cash equivalents and marketable securities of $140.5$206.9 million. The Company has had recurring losses and incurred a loss of $89.2$23.7 million for the ninesix months ended SeptemberJune 30, 2017.2020. Net cash used in operations for the ninesix months ended SeptemberJune 30, 20172020 was $80.4$23.3 million. The Company believes that the cash, cash equivalents and marketable securities at November 7, 2017August 6, 2020 will be sufficient to meet estimated working capital requirements and fund planned operations for at least the next twelve months from the date of issuance of these financial statements.

 

During the next twelve months and beyond, the Company willmay take further steps to raise additional capital to meet its long-term liquidity needs. These capital raising activities may include,needs including, but may not be limited to, one or more of the following: the licensing of drug candidates with existing or new collaborative partners, possible business combinations, issuance of debt, or the issuance of common stock or other securities via private placements or public offerings. WhileAlthough the Company may seekhas been successful in raising capital through a number of means,in the past, there can be no assurance that additional financing will be available on acceptable terms, if at all, and the Company’s negotiating position in capital-raising efforts may worsen as existing resources are used. There is also no assurance that the Company will be able to enter into further collaborative relationships. Additional equity financings may be dilutive to the Company’s stockholders; debt financing, if available, may involve significant cash payment obligations and covenants that restrict the Company’s ability to operate as a business; and licensing or strategic collaborations may result in royalties or other terms which reduce the Company’s economic potential from products under development. The Company’s ability to continue funding its planned operations into and beyond twelve months from the issuance date is also dependent on the timing and manner of payment of future contingent milestones from the Kolltan acquisition, in the event that the Company achieves the drug candidate milestones related to those payments. The Company, at its option, may decide to pay those milestone payments in cash, shares of its common stock or a combination thereof. If

6

In December 2019, a novel strain of coronavirus, now referred to as COVID-19, surfaced in Wuhan, China. The virus continues to spread globally, has been declared a pandemic by the World Health Organization and has spread to hundreds of countries, including the United States. The impact of this pandemic has been and will likely continue to be extensive in many aspects of society, which has resulted in and will likely continue to result in significant disruptions to the global economy, as well as businesses and capital markets around the world. In an effort to halt the outbreak of COVID-19, various states, including New Jersey, Massachusetts and Connecticut, where the Company is unable to raisehas office, research and manufacturing facilities, have placed significant restrictions on travel and many businesses have announced extended closures which could adversely impact our operations. To date, the funds necessary to meet its liquidity needs, it may have to delayCompany has not experienced significant delays or discontinue the development of one or more programs, discontinue or delaydisruptions in planned and ongoing or anticipatedpreclinical and clinical trials, license out programs earlier than expected, raise fundsmanufacturing or shipping. Potential impacts to our business include delays in planned and ongoing preclinical and clinical trials including enrollment of patients, disruptions in time and resources provided by independent clinical investigators, contract research organizations, other third-party service providers, temporary closures of our facilities, disruptions or restrictions on our employees’ ability to travel, and delays in manufacturing and/or shipments to and from third party suppliers and contract manufacturers for APIs and drug product. Any prolonged negative impacts to our business could materially impact our operating results and could lead to impairments of our Intangible (IPR&D) assets with a carrying value of $45.2 million at a significant discount or on other unfavorable terms, if at all, or sell all or a part of the Company.June 30, 2020.

 

(2) Significant Accounting Policies

 

The significant accounting policies used in preparation of these condensed consolidated financial statements on Form 10-Q for the quarterly periodthree and six months ended SeptemberJune 30, 20172020 are consistent with those discussed in Note 2 to the financial statements in our Annual Report on Form 10-K for the year ended December 31, 2016,2019, except foras it relates to the adoption of new accounting standards during the first ninesix months of 20172020 as discussed below.

 

Newly-AdoptedNewly Adopted Accounting Pronouncements

 

On January 1, 2017,2020, the Company adopted a new U.S. GAAP accounting standard which involves several aspectsthat modifies certain disclosure requirements for fair value measurements. For instance, the Company is required to disclose weighted average information for significant unobservable inputs for all Level 3 fair value measurements. The adoption of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities and classificationthis new guidance did not have a material impact on the statement of cash flows. The Company electedCompany’s consolidated financial statements and related disclosures. Refer to continueNote 3 for the disclosures related to estimate forfeitures expected to occur to determine stock-based compensation expense. Upon adoption, the Company’s gross deferred tax assets and corresponding valuation allowance each increased by $17.7 million related to tax deductions from the exercise of stock options that previously would have been credited to additional paid-in-capital when realized.level 3 fair value measurements.

On January 1, 2017,2020, the Company adopted a new U.S. GAAP accounting standard which simplifies how an entitythat clarifies the interaction between the accounting guidance for collaborative arrangements and revenue from contracts with customers. The amendments clarify that certain transactions between collaborative arrangement participants should be accounted for as revenue under ASC 606, when the collaborative arrangement participant is required to test goodwill for impairment. A goodwill impairment will be measured bya customer in the amount by whichcontext of a reporting unit’s carrying value exceeds its fair value, withunit of account. The adoption of this standard did not have a material impact on our consolidated financial statements, as we have no arrangements within the amountscope of impairment not to exceed the carrying amount of goodwill.ASC 808.

 

Recent Accounting Pronouncements

 

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards BoardFASB or other standard setting bodies that are adopted by the Company as of the specified effective date. Unless otherwise discussed, the Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on the Company’s consolidated financial statements upon adoption.

 

In May 2014,June 2016, the FASB issued a new U.S GAAP accountingguidance on the Measurement of Credit Losses on Financial Instruments. The guidance requires that credit losses be reported using an expected losses model rather than the incurred losses model that is currently used, and establishes additional disclosures related to credit risks. For available-for-sale debt securities with unrealized losses, the standard that updates guidance and disclosure requirements for recognizing revenue. The new revenue recognition standard provides a five-step model for recognizing revenue from contracts with customers. The core principle is that a company should recognize revenue when it transfers goods or services to customers in an amount that reflects the consideration to which the entity expectsnow requires allowances to be entitled in exchange for those goods and services. The newrecorded instead of reducing the amortized cost of the investment. This standard will be effective for the Company on January 1, 2018 and can be applied using one of two methods: retrospectively to each prior period presented or a modified retrospective application by recognizing a cumulative-effect adjustment as a component of equity as of the date of adoption. The Company expects to adopt the new revenue standard using the modified retrospective application method. During the fourth quarter of 2017, the Company plans to finalize its assessments over the impact that these standards may have on its consolidated financial statements and disclosures. As a result of adopting this standard, the Company plans to implement additional processes and controls, including additional disclosures, to comply with the new standard.

In February 2016, the FASB issued a new U.S. GAAP accounting standard which requires that all lessees recognize the assets and liabilities that arise from leases on the balance sheet and disclose qualitative and quantitative information about its leasing arrangements. The new standard will be effective for the Company on January 1, 2019. The Company is2023. We are currently evaluating the potential impact that this standard may have on the Company’s consolidated financial statements.statements and related disclosures.

 

7

In August 2016, the FASB issued new U.S. GAAP guidance which clarifies the classification of certain cash receipts and payments in the statement of cash flows. This standard is effective for the company on January 1, 2018. The adoption of this new guidance is not expected to have a material impact on the Company’s consolidated financial statements.

 

(3)  Fair Value Measurements

 

The following tables set forth the Company’s financial assets and liabilities subject to fair value measurements:

 

 

As of
September 30, 2017

 

Level 1

 

Level 2

 

Level 3

 

 As of
June 30, 2020
  Level 1  Level 2  Level 3 

 

(In thousands)

 

 (In thousands) 

Assets:

 

 

 

 

 

 

 

 

 

                

Money market funds and cash equivalents

 

$

42,032

 

$

 

$

42,032

 

$

 

 $54,597       —  $54,597    

Marketable securities

 

85,795

 

 

85,795

 

 

  138,888      138,888    

 

$

127,827

 

$

 

$

127,827

 

$

 

 $193,485     $193,485    

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

                

Kolltan acquisition contingent consideration

 

$

44,000

 

$

 

$

 

$

44,000

 

 $7,587        $7,587 

 

$

44,000

 

$

 

$

 

$

44,000

 

 $7,587        $7,587 

 

 

 

As of
December 31, 2016

 

Level 1

 

Level 2

 

Level 3

 

 

 

(In thousands)

 

Assets:

 

 

 

 

 

 

 

 

 

Money market funds and cash equivalents

 

$

20,445

 

$

 

$

20,445

 

$

 

Marketable securities

 

147,315

 

 

147,315

 

 

 

 

$

167,760

 

$

 

$

167,760

 

$

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

Kolltan acquisition contingent consideration

 

$

44,200

 

$

 

$

 

$

44,200

 

 

 

$

44,200

 

$

 

$

 

$

44,200

 

  As of
December 31, 2019
  Level 1  Level 2  Level 3 
  (In thousands) 
Assets:                
Money market funds and cash equivalents $4,024     $4,024       — 
Marketable securities  53,151      53,151    
  $57,175     $57,175    
Liabilities:                
Kolltan acquisition contingent consideration $12,485        $12,485 
  $12,485        $12,485 

The Company’s financial assets consist mainly of cash andmoney market funds, cash equivalents and marketable securities and are classified as Level 2 within the valuation hierarchy. The Company values its marketable securities utilizing independent pricing services which normally derive security prices from recently reported trades for identical or similar securities, making adjustments based on significant observable transactions. At each balance sheet date, observable market inputs may include trade information, broker or dealer quotes, bids, offers or a combination of these data sources.

 

The following table reflects the activity for the Company’s contingent consideration liabilities measured at fair value using Level 3 inputs for the ninesix months ended SeptemberJune 30, 20172020 (in thousands):

 

 

 

Other Long-Term
Liabilities:
Contingent
Consideration

 

Balance at December 31, 2016

 

$

44,200

 

Fair value adjustments included in operating expenses

 

(200

)

Balance at September 30, 2017

 

$

44,000

 

  Other Liabilities:
Contingent
Consideration
 
Balance at December 31, 2019 $12,485 
Fair value adjustments included in operating expenses  (4,898)
Balance at June 30, 2020 $7,587 

 

The valuation technique used to measure fair value of the Company’s Level 3 liabilities, which consist of contingent consideration related to the acquisition of Kolltan in 2016, (Note 11), was primarily an income approach. The Company may be required to pay future consideration of up to $172.5 million that is contingent upon the achievement of specified development, regulatory approvals or sales-based milestone events. The significant unobservable inputs used in the fair value measurement of the contingent consideration are estimates including probability of success, discount rates and amount of time until the conditions of the milestone payments are met. As of June 30, 2020, the weighted average discount rate used in calculating the fair value of contingent consideration was 11.6% (with a range of 11.5% to 12.2%) and the weighted average amount of time until the conditions of the milestone payments are met was 3 years.

 

8

During the three and ninesix months ended SeptemberJune 30, 2017,2020, the Company recorded a $4.6$5.1 million and a $0.2$4.9 million gain on fair value remeasurement of contingent consideration, respectively, primarily due to updated assumptions for CDX-3379 related milestones due to the discontinuation of the CDX-3379 program and the passage of time. During the three and six months ended June 30, 2019, the Company recorded a reduction in$1.0 million gain and $0.5 million loss on fair value attributed to the milestones related to the Company’s anti-KIT program and partially offset by losses relatedremeasurement of contingent consideration, respectively, primarily due to changes in discount rates and the passage of time affecting remaining milestones.time. The Company’s anti-KIT program includes CDX-0158assumptions related to determining the fair value of contingent consideration include a significant amount of judgment, and CDX-0159,any changes in the underlying estimates could have a variantmaterial impact on the amount of CDX-0158. CDX-0159 is being fully developed in-house with the intention of replacing CDX-0158contingent consideration adjustment recorded in clinical development. The Company expects manufacturing and IND-enabling efforts for CDX-0159 will be completed in 2018.any given period.

 

The Company did not have any transfers in or out of Level 3 assets or liabilities between the fair value measurement classifications during the ninesix months ended SeptemberJune 30, 2017.2020.

(4)  Marketable Securities

 

The following is a summary of marketable debt securities, classified as available-for-sale:

 

 

 

Amortized
Cost

 

Gross
Unrealized
Gains

 

Gross
Unrealized
Losses

 

Fair Value

 

 

 

(In thousands)

 

September 30, 2017

 

 

 

 

 

 

 

 

 

Marketable securities

 

 

 

 

 

 

 

 

 

U.S. government and municipal obligations

 

 

 

 

 

 

 

 

 

Maturing in one year or less

 

$

13,725

 

$

5

 

$

(3

)

$

13,727

 

Maturing after one year through three years

 

 

 

 

 

Total U.S. government and municipal obligations

 

$

13,725

 

$

5

 

$

(3

)

$

13,727

 

Corporate debt securities

 

 

 

 

 

 

 

 

 

Maturing in one year or less

 

$

72,078

 

$

3

 

$

(13

)

$

72,068

 

Maturing after one year through three years

 

 

 

 

 

Total corporate debt securities

 

$

72,078

 

$

3

 

$

(13

)

$

72,068

 

Total marketable securities

 

$

85,803

 

$

8

 

$

(16

)

$

85,795

 

 

 

 

 

 

 

 

 

 

 

December 31, 2016

 

 

 

 

 

 

 

 

 

Marketable securities

 

 

 

 

 

 

 

 

 

U.S. government and municipal obligations

 

 

 

 

 

 

 

 

 

Maturing in one year or less

 

$

52,754

 

$

5

 

$

(12

)

$

52,747

 

Maturing after one year through three years

 

296

 

8

 

 

304

 

Total U.S. government and municipal obligations

 

$

53,050

 

$

13

 

$

(12

)

$

53,051

 

Corporate debt securities

 

 

 

 

 

 

 

 

 

Maturing in one year or less

 

$

94,320

 

$

 

$

(56

)

$

94,264

 

Maturing after one year through three years

 

 

 

 

 

Total corporate debt securities

 

$

94,320

 

$

 

$

(56

)

$

94,264

 

Total marketable securities

 

$

147,370

 

$

13

 

$

(68

)

$

147,315

 

  Gross Unrealized 
  Amortized
Cost
  Gains  Losses  Fair
Value
 
  (In thousands) 
June 30, 2020                
U.S. government and municipal obligations (maturing in one year or less) $79,937  $  $  $79,937 
Corporate debt securities (maturing in one year or less)  58,954   10   (13)  58,951 
Total Marketable Securities $138,891  $10  $(13) $138,888 
                 
December 31, 2019                
U.S. government and municipal obligations (maturing in one year or less) $18,509  $13  $  $18,522 
Corporate debt securities (maturing in one year or less)  34,619   13   (3)  34,629 
Total Marketable Securities $53,128  $26  $(3) $53,151 

 

The Company holds investment gradeinvestment-grade marketable securities, and none were considered to be other-than-temporarily impairedin a continuous unrealized loss position for more than twelve months as of SeptemberJune 30, 2017.2020 and December 31, 2019. The unrealized losses are attributable to changes in interest rates and the Company does not believe any unrealized losses represent other-than-temporary impairments. Marketable securities include $0.3 million and $0.6$0.2 million in accrued interest at SeptemberJune 30, 20172020 and December 31, 2016, respectively.2019.

 

(5)  Intangible Assets and Goodwill

 

Intangible Assets, Net

The table below presents information forAt June 30, 2020 and December 31, 2019, the Company’s finite-livedCompany recorded indefinite-lived intangible assets that are subject to amortizationof $45.2 million and indefinite-lived intangible assets:

 

 

 

 

September 30, 2017

 

December 31, 2016

 

 

 

Estimated
Life

 

Gross
Carrying
Amount

 

Accumulated
Amortization

 

Net Carrying
Amount

 

Gross
Carrying
Amount

 

Accumulated
Amortization

 

Net Carrying
Amount

 

 

 

(In thousands)

 

Finite-lived Intangible Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

License Rights

 

16 years

 

$

14,500

 

$

(7,175

)

$

7,325

 

$

14,500

 

$

(6,503

)

$

7,997

 

Indefinite-lived Intangible Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

IPR&D

 

Indefinite

 

60,490

 

 

60,490

 

73,490

 

 

73,490

 

Total Intangible Assets, Net

 

 

 

$

74,990

 

$

(7,175

)

$

67,815

 

$

87,990

 

$

(6,503

)

$

81,487

 

$48.7 million, respectively. Indefinite-lived intangible assets consist of acquired in-process research and development (“IPR&D”) related to the development of glembatumumab vedotin acquired in connection with the CuraGen acquisition and the development ofCDX-3379, the anti-KIT program CDX-3379(including CDX-0159) and the TAM programs acquiredprogram. The Company evaluated the CDX-3379 IPR&D asset for potential impairment as a result of the discontinuation of the CDX-3379 program. The Company concluded that the CDX-3379 IPR&D asset was fully impaired, and a non-cash impairment charge of $3.5 million was recorded for the three months ended June 30, 2020. CDX-0159 is in connection withPhase 1 development and the Kolltan acquisition.TAM program is in preclinical development. As of SeptemberJune 30, 2017, no2020, none of the Company’s IPR&D assetassets had reached technological feasibility nor did any have alternative future uses.

 

The Company performs an impairment test on IPR&D assets at least annually, or more frequently if events or changes in circumstances indicate that IPR&D assets may be impaired. During the three and nine months ended September 30, 2017, the

Company recorded a non-cash partial impairment charge of $13.0 million on the anti-KIT program IPR&D assets acquired from Kolltan. The Company determined that changes in projected development and regulatory timelines related to the anti-KIT program taken together constituted a triggering event that required the Company to evaluate the intangible asset for impairment. As part of this evaluation, the present value of probability adjusted estimated net future cash flows was used to determine the fair value of the program and compared to the carrying value of the program. As a result of this impairment assessment, the Company concluded that a non-cash partial impairment charge of $13.0 million on the anti-KIT program IPR&D asset acquired from Kolltan be recorded for the three and nine months ended September 30, 2017 for the amount the fair value of the anti-KIT program exceeded its carrying amount.

Due to the nature of IPR&D projects, the Company may experience future delays or failures to obtain regulatory approvals to conduct clinical trials, failures of such clinical trials or other failures to achieve a commercially viable product, and as a result, may recognize further impairment losses in the future.

 

9

Goodwill

(6) Other Assets

 

ThereIn 2016, the Company entered into a research and collaboration agreement with an undisclosed private company to access novel technologies and paid $3.5 million to support research activities and make an investment in the private company. The Company recorded $1.8 million to other assets related to this investment and $1.7 million was recorded to research and development expense over the term of the research activities. The stock of the private company does not have been no changesa readily determinable fair value, and therefore it is measured at cost less impairment, if any. Based on information received in April 2019, it was determined that there was a deterioration of the private company’s financial condition due to a working capital deficiency and an inability to secure additional funding as of March 31, 2019. Therefore, the carrying amountCompany concluded that the investment was impaired, and a non-cash impairment charge of goodwill$1.8 million was recorded during the ninefirst quarter of 2019. The Company assesses the private company’s financial condition on a quarterly basis. There was no change in the value of the investment during the six months ended SeptemberJune 30, 2017. The Company performs an annual impairment test of goodwill as of July 1 each year. The Company tested goodwill for impairment as of July 1, 2017 and concluded that goodwill was not impaired.2020.

 

(6)(7) Other Long-Term Liabilities

 

Other long-term liabilities include the following:

 

 

 

September 30, 2017

 

December 31, 2016

 

 

 

(In thousands)

 

Deferred Rent

 

$

669

 

$

398

 

Net Deferred Tax Liabilities related to IPR&D

 

22,854

 

28,054

 

Deferred Income from Sale of Tax Benefits

 

8,940

 

9,436

 

Accrued Lease Restructuring

 

854

 

1,154

 

Long-Term Severance

 

100

 

539

 

Contingent Milestones

 

44,000

 

44,200

 

Deferred Revenue

 

3,726

 

3,749

 

Total

 

81,143

 

87,530

 

Less Current Portion

 

(5,792

)

(4,826

)

Long-Term Portion

 

$

75,351

 

$

82,704

 

  June 30,
2020
  December 31, 
2019
 
  (In thousands) 
Net Deferred Tax Liabilities Related to IPR&D (Note 12) $2,779  $3,007 
Deferred Income From Sale of Tax Benefits  1,831   1,831 
Contingent Milestones (Note 3)  7,587   12,485 
Deferred Revenue (Note 11)  303   254 
Total  12,500   17,577 
Less Current Portion  (2,104)  (2,026)
Long-Term Portion $10,396  $15,551 

 

In November 2015, December 2014, January 2014 and January 2013, the Company received approval from the New Jersey Economic Development Authority and agreed to sell New Jersey tax benefits of $9.8 million $1.9 million, $1.1 million and $0.8 million to an independent third party for $9.2 million, $1.8 million, $1.0 million and $0.8 million, respectively.million. Under the agreement, the Company must maintain a base of operations in New Jersey for five years or the tax benefits must be paid back on a pro-rata basis based on the number of years completed. The Company recognized $0.0 million and $0.5 million in other income related to the sale of these tax benefits forduring the three and ninesix months ended SeptemberJune 30, 2017, respectively,2020 and $0.0 million and $0.6$0.2 million during the three and ninesix months ended SeptemberJune 30, 2016,2019, respectively.

 

In December 2016, the Company decided not to occupy the 11,500 square feet of expansion space (“Needham Expansion”) at its Needham, Massachusetts facility. The Company agreed to lease the Needham Expansion in August 2015 and the term of the lease expires in July 2020. In October 2017, the Company entered into a sublease agreement for the Needham Expansion. In March 2017, the Company terminated its lease in Branford, CT and consolidated its Connecticut operations in its New Haven, CT facility. The Company recorded restructuring expense of $0.2 million to general and administrative expense related to the Branford, CT lease termination. The activity related to accrued lease restructuring for the nine months ended September 30, 2017 is presented below (in thousands):

 

 

Accrued Lease
Restructuring

 

Balance at December 31, 2016

 

$

1,154

 

Expense

 

170

 

Payments

 

(470

)

Balance at September 30, 2017

 

$

854

 

(7)(8) Stockholders’ Equity

 

In May 2016, the Company and Cantor Fitzgerald & Co. (“Cantor”) entered into a controlled equity offering sales agreement (“2016(the “Cantor Agreement”) with Cantor Agreement”Fitzgerald & Co. (“Cantor”) to allow the Company to issue and sell shares of its common stock having an aggregate offering price of up to $60.0 million from time to time through Cantor, acting as agent. During the ninesix months ended SeptemberJune 30, 2017,2020, the Company issued 11,326,3636.7 million shares of its common stock underpursuant to the 2016 Cantor Agreement resulting in net proceeds to the Company of $32.6$25.3 million after deducting commission and offering expenses. At SeptemberJune 30, 2017,2020, the Company had $11.7$18.3 million remaining in aggregate gross offering price available under a prospectus supplement filed pursuant to the 2016 Cantor Agreement. In October 2017,agreement.

During the three months ended June 30, 2020, the Company completed sales under the 2016 Cantor Agreement and issued 3,871,70915,384,614 shares of its common stock in an underwritten public offering resulting in net proceeds to the Company of $11.3 million.$141.4 million, after deducting underwriting fees and offering expenses.

10

The changes in Stockholders’ Equity during the three and six months ended June 30, 2020 and 2019 are summarized below:

  Common
Stock
Shares
  Common
Stock Par
Value
  Additional
Paid-In
Capital
  Accumulated
Other
Comprehensive
Income
  Accumulated
Deficit
  Total
Stockholders’
Equity
 
  (In thousands, except share amounts) 
Consolidated Balance at December 31, 2019  16,972,077  $17  $1,104,706  $2,619  $(1,013,316) $94,026 
Shares Issued under Stock Option and Employee Stock Purchase Plans  12,573      24         24 
Shares Issued in Connection with Cantor Agreement  746,152   1   1,613         1,614 
Share-Based Compensation        686         686 
Unrealized Loss on Marketable Securities           (22)     (22)
Net Loss              (12,625)  (12,625)
Consolidated Balance at March 31, 2020  17,730,802  $18  $1,107,029  $2,597  $(1,025,941) $83,703 
Shares Issued in Connection with Cantor Agreement  5,978,452   6   23,686         23,692 
Shares Issued in Underwritten Offering  15,384,614   15   141,346         141,361 
Share-Based Compensation        722         722 
Unrealized Loss on Marketable Securities           (3)     (3)
Net Loss              (11,031)  (11,031)
Consolidated Balance at June 30, 2020  39,093,868  $39  $1,272,783  $2,594  $(1,036,972) $238,444 

  Common
Stock
Shares
  Common
Stock Par
Value
  Additional
Paid-In
Capital
  Accumulated
Other
Comprehensive
Income
  Accumulated
Deficit
  Total
Stockholders’
Equity
 
  (In thousands, except share amounts) 
Consolidated Balance at December 31, 2018  11,957,635  $12  $1,083,903  $2,583  $(962,438) $124,060 
Shares Issued under Stock Option and Employee Stock Purchase Plans  3,507      9         9 
Shares Issued in Connection with Cantor Agreement  883,569   1   4,150         4,151 
Share-Based Compensation        1,693         1,693 
Unrealized Gain on Marketable Securities           19      19 
Net Loss              (17,239)  (17,239)
Consolidated Balance at March 31, 2019  12,844,711  $13  $1,089,755  $2,602  $(979,677) $112,693 
Shares Cancelled under Stock Option and Employee Stock Purchase Plans  (222)               
Shares Issued in Connection with Cantor Agreement  1,972,428   2   7,210         7,212 
Share-Based Compensation        1,464         1,464 
Unrealized Gain on Marketable Securities           36      36 
Net Loss              (11,779)  (11,779)
Consolidated Balance at June 30, 2019  14,816,917  $15  $1,098,429  $2,638  $(991,456) $109,626 

11

 

(8)(9)  Stock-Based Compensation

 

A summary of stock option activity for the ninesix months ended SeptemberJune 30, 20172020 is as follows:

 

 

Shares

 

Weighted
Average
Exercise
Price
Per Share

 

Weighted
Average
Remaining
Contractual
Term (In Years)

 

 Shares  Weighted
Average
Exercise
Price
Per Share
  Weighted
Average
Remaining
Contractual
Term (In Years)
 

Options Outstanding at December 31, 2016

 

10,218,710

 

$

11.14

 

6.5

 

Options Outstanding at December 31, 2019  1,699,202  $44.87   8.0 

Granted

 

2,309,900

 

$

2.34

 

 

 

  1,439,175  $10.36     

Exercised

 

 

$

 

 

 

          

Canceled

 

(945,792

)

$

9.21

 

 

 

  (53,090) $46.03     

Options Outstanding at September 30, 2017

 

11,582,818

 

$

9.54

 

5.9

 

Options Vested and Expected to Vest at September 30, 2017

 

11,460,583

 

$

9.59

 

5.8

 

Options Exercisable at September 30, 2017

 

7,360,799

 

$

11.05

 

4.1

 

Options Outstanding at June 30, 2020  3,085,287  $28.76   8.69 
Options Vested and Expected to Vest at June 30, 2020  2,875,684  $30.23   8.62 
Options Exercisable at June 30, 2020  821,537  $84.93   6.39 

Shares Available for Grant Under the 2008 Plan

 

7,780,663

 

 

 

 

 

  938,178         

 

The weighted average grant-date fair value of stock options granted during the ninethree and six month period ended SeptemberJune 30, 20172020 was $1.57.$7.96 and $7.95, respectively. Stock-based compensation expense for the three and ninesix months ended SeptemberJune 30, 20172020 and 20162019 was recorded as follows:

 

 

Three months ended September 30,

 

Nine months ended September 30,

 

 Three months ended June 30,  Six months ended June 30, 

 

2017

 

2016

 

2017

 

2016

 

 2020  2019  2020  2019 

 

(In thousands)

 

 (In thousands) (In thousands) 

Research and development

 

$

1,546

 

$

2,042

 

$

5,310

 

$

5,866

 

 $342  $654  $652  $1,410 

General and administrative

 

1,193

 

1,754

 

4,418

 

5,843

 

  380   810   756   1,747 

Total stock-based compensation expense

 

$

2,739

 

$

3,796

 

$

9,728

 

$

11,709

 

 $722  $1,464  $1,408  $3,157 

 

The fair valuevalues of employee and director stock options granted during the three and nine month periodssix months ended SeptemberJune 30, 20172020 and 20162019 were valued using the Black-Scholes option-pricingoption pricing model with the following assumptions:

 

 

 

Three months ended September 30,

 

Nine months ended September 30,

 

 

 

2017

 

2016

 

2017

 

2016

 

Expected stock price volatility

 

76

%

76

%

76 — 77

%

70 — 77

%

Expected option term

 

6.0 years

 

6.0 years

 

6.0 years

 

6.0 years

 

Risk-free interest rate

 

2.0

%

1.4

%

2.0 — 2.3

%

1.4 — 1.6

%

Expected dividend yield

 

None

 

None

 

None

 

None

 

  Three months ended June 30, Six months ended June 30,
  2020 2019 2020 2019
Expected stock price volatility 97% 91% 91 – 97% 91%
Expected option term 6.0 Years 6.0 Years 6.0 Years 6.0 Years
Risk-free interest rate 0.5% 1.9 – 2.4% 0.5 – 0.6% 1.9 – 2.5%
Expected dividend yield None None None None

(9)

(10) Accumulated Other Comprehensive Income

 

The changes in accumulated other comprehensive income, which is reported as a component of stockholders’ equity, for the ninesix months ended SeptemberJune 30, 20172020 are summarized below:

 

 

 

Unrealized (Loss)
Gain on
Marketable
Securities

 

Foreign
Currency Items

 

Total

 

 

 

(In thousands)

 

Balance at December 31, 2016

 

$

(55

)

$

2,596

 

$

2,541

 

Other comprehensive gain

 

47

 

 

47

 

Balance at September 30, 2017

 

$

(8

)

$

2,596

 

$

2,588

 

  Unrealized
Gain/(Loss) on
Marketable
Securities
  Foreign
Currency Items
  Total 
  (In thousands) 
Balance at December 31, 2019 $23  $2,596  $2,619 
Other comprehensive loss  (25)     (25)
Balance at June 30, 2020 $(2) $2,596  $2,594 

 

No amounts were reclassified out of accumulated other comprehensive income during the ninesix months ended SeptemberJune 30, 2017.2020.

 

(10)

12

(11)  Revenue

 

Rockefeller University (Rockefeller)Product Development and Licensing Revenue

 

In 2013, theThe Company entered into an agreement with Rockefeller University in September 2013, as amended, with Rockefeller(the “Rockefeller Agreement”) pursuant to which the Company performs manufacturing and development services for Rockefeller University for their portfolio of antibodies against HIV. This portfolio was licensed to Gilead Sciences in January 2020 from Rockefeller University (“Rockefeller Transaction”). Pursuant to the Rockefeller Agreement, the Company received an upfront payment of $1.8 million as a result of the Rockefeller Transaction which was recorded to revenue during the first quarter of 2020. The Company is eligible to receive additional payments from Rockefeller University if this portfolio progresses through clinical and commercial development.

Contract and Grants Revenue

The Company has entered into the Rockefeller Agreement and an agreement with Duke University pursuant to which the Company performs manufacturing and research and development services for Rockefeller.on a time-and-materials basis or at a negotiated fixed-price. The Company bills Rockefeller quarterly for actual time and direct costs incurred and records those amounts to revenue in the quarter the services are performed. The Company recorded $0.3recognized $0.2 million and $1.4$0.5 million in revenue related to the Rockefeller agreementunder these agreements during the three and ninesix months ended SeptemberJune 30, 2017,2020, respectively, and $1.1 million and $1.8 million during the three and nine months ended September 30, 2016, respectively.

Bristol-Myers Squibb Company (BMS)

In 2014, the Company entered into a clinical trial collaboration with BMS to evaluate the safety, tolerability and preliminary efficacy of varlilumab and Opdivo®, BMS’s PD-1 immune checkpoint inhibitor, in a Phase 1/2 study. Under the terms of this clinical trial collaboration, BMS made a one-time payment to the Company of $5.0 million and BMS and the Company amended the terms of the Company’s existing license agreement with Medarex, which was acquired by BMS, related to the Company’s CD27 program whereby certain future milestone payments were waived and future royalty rates were reduced that may have been due from the Company to Medarex. In return, BMS was granted a time-limited right of first negotiation if the Company wishes to out-license varlilumab. The companies also agreed to work exclusively with each other to explore anti-PD-1 antagonist antibody and anti-CD27 agonist antibody combination regimens. The clinical trial collaboration provides that the companies share development costs and that the Company will be responsible for conducting the ongoing Phase 1/2 study.

The Company has determined that its performance obligations under the BMS agreement, which primarily include performing research and development, supplying varlilumab and participating in the joint development committee, should be accounted for as a single unit of accounting and estimated that its performance period under the BMS agreement would be 5 years. Accordingly, the $5.0 million up-front payment was initially recorded as deferred revenue and is being recognized as revenue on a straight-line basis over the estimated 5-year performance period using the Contingency Adjusted Performance Model (“CAPM”). The BMS agreement also provides for BMS to reimburse the Company for 50% of the external costs incurred by the Company in connection with the clinical trial. The BMS payments are recognized as revenue under the CAPM. The Company recorded $0.9 million and $2.1 million in revenue related to the BMS agreement during the three and nine months ended September 30, 2017, respectively, and $0.5$0.4 million and $1.5 million during the three and ninesix months ended SeptemberJune 30, 2016,2019, respectively.

 

International AIDS Vaccine Initiative (IAVI)Contract Assets and Liabilities

 

In 2017,At December 31, 2019 and June 30, 2020, the Company’s right to consideration under all contracts was considered unconditional, and as such, there were no recorded contract assets. At December 31, 2019 and June 30, 2020, the Company entered into an agreement with IAVI pursuant to which the Company performs research and development and manufacturing services for IAVI outlined under subsequently negotiated task orders. Revenue is recognized as services are performed under the negotiated task orders. The Company recorded $1.7 million and $4.0had $0.3 million in revenue related to the IAVI agreementcontract liabilities recorded. Revenue recognized from contract liabilities as of December 31, 2019 during the three and ninesix months ended SeptemberJune 30, 2017,2020 was $0.0 million and $0.1 million, respectively.

Frontier Biotechnologies, Inc. (Frontier)

 

In 2017, the Company entered into an agreement with Frontier pursuant to which the Company performs research and development and manufacturing services for Frontier outlined under subsequently negotiated task orders. Revenue is recognized as services are performed under the negotiated task orders. The Company recorded $0.6 million in revenue related to the Frontier agreement during both the three and nine months ended September 30, 2017.

(11) Kolltan Acquisition

In connection with the Kolltan Acquisition, effective November 29, 2016, the Company issued 18,257,996 shares of common stock of the Company in exchange for all of the share and debt interests in Kolltan. The Company also agreed to issue an aggregate of 437,901 shares of its common stock, less tax withholdings, to certain former officers of Kolltan. During the nine months ended September 30, 2017, the Company issued 91,749 shares of its common stock and at September 30, 2017, the Company’s remaining obligation is to issue 125,123 shares of its common stock, less tax withholdings, related to this severance obligation. In addition, in the event that certain specified preclinical and clinical development milestones related to Kolltan’s development programs and/or Celldex’s development programs and certain commercial milestones related to Kolltan’s drug candidates are achieved, Celldex will be required to pay Kolltan’s stockholders milestone payments of up to $172.5 million, which milestone payments may be made, at Celldex’s sole election, in cash, in shares of Celldex’s common stock or a combination of both, subject to provisions of the Merger Agreement.

The transaction was accounted for as a business combination with Celldex treated as the accounting acquirer. All of the assets acquired and liabilities assumed in the transaction are recognized at their acquisition-date fair values, while transaction costs associated with the transaction are expensed as incurred.

Purchase Price

The purchase price for Kolltan was based on the acquisition-date fair value of the consideration transferred, which was calculated based on the closing price of the Company’s common stock of $4.02 per share on November 29, 2016. The acquisition-date fair value of the consideration transferred consisted of the following (in thousands):

Fair value of common stock issued for upfront payment

 

$

73,397

 

Fair value of contingent consideration

 

44,200

 

Kolltan transaction expenses paid in cash by the Company

 

3,768

 

Total consideration transferred

 

$

121,365

 

Allocations of Assets and Liabilities

The Company has allocated the consideration transferred for Kolltan to net tangible assets, intangible assets, and goodwill. The difference between the aggregate consideration transferred and the fair value of assets acquired and liabilities assumed was allocated to goodwill. This goodwill relates to the potential synergies from the Kolltan Acquisition and deferred tax liabilities related to acquired IPR&D intangible assets. None of the goodwill is expected to be deductible for income tax purposes. The following table summarizes the fair values of the assets acquired and liabilities assumed at the acquisition date (in thousands):

Cash and cash equivalents

 

$

8,160

 

Other current and long-term assets

 

799

 

Property and equipment, net

 

2,072

 

In-process research and development (IPR&D)

 

61,690

 

Goodwill

 

82,011

 

Deferred tax liabilities, net

 

(23,393

)

Other assumed liabilities

 

(9,974

)

Total

 

$

121,365

 

The purchase price allocation has been prepared on a preliminary basis and is subject to change as additional information becomes available concerning the fair value and tax basis of the acquired assets and liabilities. Any adjustments to the purchase price allocation will be made as soon as practicable but no later than one year from the acquisition date.

Pro Forma Financial Information

If the operations of the Company and Kolltan were combined as of January 1, 2016, the unaudited pro forma net loss for the three and nine months ended September 30, 2016 would have been $35.5 million and $120.4 million, respectively, or $(0.30) and $(1.02) per share, respectively. The unaudited pro forma combined results are not necessarily indicative of the actual results that would have occurred had the acquisition been consummated at that date or of the future operations of the combined entities.

(12)  Income Taxes

Massachusetts, New Jersey and Connecticut are the three states in which the Company primarily operates or has operated and has income tax nexus. The Company’s wholly-owned subsidiary, Celldex Australia Pty Ltd, operates in Brisbane, Australia. The Company is not currently under examination by any jurisdictions for any tax year.

 

The Company has evaluated the positive and negative evidence bearing upon the realizability of its net deferred tax assets which are comprised principallyand considered its history of net operating loss carryforwards, capitalized R&D expenditures and R&D tax credit carryforwards. The Company has determinedlosses, ultimately concluding that it is more“more likely than notnot” that itthe Company will not recognize the benefits of federal, state and stateforeign deferred tax assets and, as a result,such, has maintained a full valuation allowance was maintained at Septemberon its deferred tax assets as of June 30, 20172020 and December 31, 2016 against the Company’s2019.

The net deferred tax assets.

Asliability of September$2.8 million and $3.0 million at June 30, 20172020 and December 31, 2016,2019, respectively, relates to the Company had $22.9 million and $28.1 million of deferred tax liabilities, net recorded on the balance sheet primarilytemporary differences associated with temporary differencesthe IPR&D intangible assets acquired in previous business combinations and is not deductible for tax purposes. During the quarter ended June 30, 2020, a $0.2 million non-cash income tax benefit was recorded related to the Company’s IPR&D assets. The $5.2 million decrease in deferred tax liabilities, net during the three and nine months ended September 30, 2017 was due to the partial impairment of the anti-KIT programCDX-3379 IPR&D assets.asset.

Massachusetts, New Jersey, New York and Connecticut are the jurisdictions in which the Company primarily operates or has operated and has income tax nexus. The Company is not currently under examination by these or any other jurisdictions for any tax year.

13

(13)  Net Loss Per Share

 

Basic net loss per common share is based upon the weighted-average number of common shares outstanding during the period, excluding restricted stock that has been issued but is not yet vested. Diluted net loss per common share is based upon the weighted-average number of common shares outstanding during the period plus additional weighted-average potentially dilutive common shares outstanding during the period when the effect is dilutive. In periods in which the Company reports a net loss, there is no difference between basic and diluted net loss per share because dilutive shares of common stock are not assumed to have been issued as their effect is anti-dilutive. The potentially dilutive common shares that have not been included in the net loss per common share calculations because the effect would have been anti-dilutive are as follows:

 

 

 

Nine months ended September 30,

 

 

 

2017

 

2016

 

 

 

 

 

 

 

Stock options

 

11,582,818

 

10,150,598

 

Restricted stock

 

96,668

 

60,000

 

 

 

11,679,486

 

10,210,598

 

  Six Months Ended June 30, 
  2020  2019 
Stock Options  3,085,287   1,690,074 
Restricted Stock     1,110 
   3,085,287   1,691,184 

(14) Kolltan Acquisition

On November 29, 2016, the Company acquired all of the share and debt interests of Kolltan Pharmaceuticals, Inc. (“Kolltan”), a clinical-stage biopharmaceutical company, in exchange for 1,217,200 shares of the Company’s common stock plus contingent consideration in the form of development, regulatory approval and sales-based milestones (“Kolltan Milestones”) of up to $172.5 million. The Kolltan Milestone payments, if any, may be made, at Celldex’s sole election, in cash, in shares of Celldex’s common stock or a combination of both, subject to provisions of the Merger Agreement. Certain Kolltan Milestones have been abandoned consistent with the provisions of the Merger Agreement and, because of this, as of June 30, 2020, the Company believes that the adjusted amount we may be required to pay for future consideration is up to $107.5 million contingent upon the achievement of the Kolltan Milestones.

In October 2019, the Company received a letter from the representative of Kolltan’s former stockholders notifying the Company that it objected to the Company’s abandonment of certain Kolltan Milestones relating to development, regulatory approval and sales-based milestones. The Company disagrees with their objection and believes their objection to be without merit. The Company is continuting to discuss with the representative of Kolltan’s former stockholders potential amendments to the Merger Agreement with respect to the Kolltan Milestones. There can be no assurances that an amendment to the Merger Agreement will be completed on terms acceptable to the Company or at all. At this time, the Company is unable to reasonably assess the ultimate outcome of the Company’s disagreement with the representative of Kolltan’s former stockholders over its objection to the Company’s abandonment of certain Kolltan Milestones or determine an estimate of potential losses, if any.

14

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995: This report on Form 10-Q contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 under Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements include statements with respect to our beliefs, plans, objectives, goals, expectations, anticipations, assumptions, estimates, intentions and future performance, and involve known and unknown risks, uncertainties and other factors, which may be beyond our control, and which may cause our actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. All statements other than statements of historical fact are statements that could be forward-looking statements. You can identify these forward-looking statements through our use of words such as “may,” “will,” “can,” “anticipate,” “assume,” “should,” “indicate,” “would,” “believe,” “contemplate,” “expect,” “seek,” “estimate,” “continue,” “plan,” “point to,” “project,” “predict,” “could,” “intend,” “target,” “potential” and other similar words and expressions of the future.

 

There are a number of important factors that could cause the actual results to differ materially from those expressed in any forward-looking statement made by us. These factors include, but are not limited to:

 

·our dependence on product candidates, which are still in an early development stage;

·                  our ability to successfully complete research and further development, including animal, preclinical and clinical studies, and, if we obtain regulatory approval, commercialization of glembatumumab vedotin (also referred to as CDX-011) and other drug candidates and the growth of the markets for those drug candidates;

·our ability to successfully complete research and further development, including animal, preclinical and clinical studies, and, if we obtain regulatory approval, commercialization of our drug candidates and the growth of the markets for those drug candidates;

·our anticipated timing for preclinical development, regulatory submissions, commencement and completion of clinical trials and product approvals;

·The impact of the recent outbreak of a novel strain of coronavirus on our business or on the economy generally;

·Whether the recent coronavirus outbreak will affect the timing of the completion of our planned and/or currently ongoing preclinical/clinical trials;

·our ability to negotiate strategic partnerships, where appropriate, for our drug candidates;

·our ability to manage multiple clinical trials for a variety of drug candidates at different stages of development;

·the cost, timing, scope and results of ongoing preclinical and clinical testing;

·our expectations of the attributes of our product and development candidates, including pharmaceutical properties, efficacy, safety and dosing regimens;

·the cost, timing and uncertainty of obtaining regulatory approvals for our drug candidates;

·the availability, cost, delivery and quality of clinical management services provided by our clinical research organization partners;

·the availability, cost, delivery and quality of clinical and commercial-grade materials produced by our own manufacturing facility or supplied by contract manufacturers, suppliers and partners;

·our ability to develop and commercialize products before competitors that are superior to the alternatives developed by such competitors;

15

·our ability to develop technological capabilities, including identification of novel and clinically important targets, exploiting our existing technology platforms to develop new drug candidates and expand our focus to broader markets for our existing targeted immunotherapeutics;

·the cost of paying development, regulatory approval and sales-based milestones under the merger agreement by which we acquired Kolltan, including under any future amendment to that agreement;

·our ability to realize the anticipated benefits from the acquisition of Kolltan;

·our ability to raise sufficient capital to fund our animal, preclinical and clinical studies and to meet our liquidity needs, on terms acceptable to us, or at all. If we are unable to raise the funds necessary to meet our liquidity needs, we may have to delay or discontinue the development of one or more programs, discontinue or delay ongoing or anticipated clinical trials, license out programs earlier than expected, raise funds at significant discount or on other unfavorable terms, if at all, or sell all or part of our business;

·our ability to protect our intellectual property rights and our ability to avoid intellectual property litigation, which can be costly and divert management time and attention;

·our ability to develop and commercialize products without infringing the intellectual property rights of third parties; and

·the risk factors set forth elsewhere in this quarterly report on Form 10-Q and the factors listed under the headings “Business,” “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s annual report on Form 10-K for the year ended December 31, 2019 and other reports that we file with the Securities and Exchange Commission.

 

·                  our ability to raise sufficient capital to fund our clinical studies and to meet our liquidity needs, on terms acceptable to us, or at all. If we are unable to raise the funds necessary to meet our liquidity needs, we may have to delay or discontinue the development of one or more programs, discontinue or delay ongoing or anticipated clinical trials, license out programs earlier than expected, raise funds at significant discount or on other unfavorable terms, if at all, or sell all or part of our business;

·                  our ability to negotiate strategic partnerships, where appropriate, for our programs, which may include, glembatumumab vedotin;

·                  our ability to realize the anticipated benefits from the acquisition of Kolltan and to operate the combined business efficiently;

·                  our ability to manage multiple clinical trials for a variety of drug candidates at different stages of development;

·                  the cost, timing, scope and results of ongoing safety and efficacy trials of glembatumumab vedotin, and other preclinical and clinical testing;

·                  the cost, timing, and uncertainty of obtaining regulatory approvals for our drug candidates;

·                  the availability, cost, delivery and quality of clinical management services provided by our clinical research organization partners;

·                  the availability, cost, delivery and quality of clinical and commercial-grade materials produced by our own manufacturing facility or supplied by contract manufacturers, suppliers and partners, who may be the sole source of supply;

·                  our ability to develop and commercialize products before competitors that are superior to the alternatives developed by such competitors;

·                  our ability to develop technological capabilities, including identification of novel and clinically important targets, exploiting our existing technology platforms to develop new drug candidates and expand our focus to broader markets for our existing targeted immunotherapeutics;

·                  our ability to adapt our proprietary antibody-targeted technology, or APC Targeting Technology™, to develop new, safe and effective therapeutics for oncology and infectious disease indications;

·                  our ability to protect our intellectual property rights, including the ability to successfully defend patent oppositions filed against a European patent related to technology we use in varlilumab, and our ability to avoid intellectual property litigation, which can be costly and divert management time and attention; and

·                  the factors listed under the headings “Business,” “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s annual report on Form 10-K for the year ended December 31, 2016 and other reports that we file with the Securities and Exchange Commission.

All forward-looking statements are expressly qualified in their entirety by this cautionary notice. You are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date of this report or the date of the document incorporated by reference into this report. We have no obligation, and expressly disclaim any obligation, to update, revise or correct any of the forward-looking statements, whether as a result of new information, future events or otherwise. We have expressed our expectations, beliefs and projections in good faith, and we believe they have a reasonable basis. However, we cannot assure you that our expectations, beliefs or projections will result or be achieved or accomplished.

 

OVERVIEW

 

We are a biopharmaceutical company focused on the development and commercialization of several immunotherapy technologiesimmunotherapies and other cancer-targetingtargeted biologics. Our drug candidates including antibodies, antibody-drug conjugates and other protein-based therapeutics, are derived from a broad set of complementary technologieshuman and bispecific antibodies which have the ability to engage the human immune system and/or directly inhibit tumors to treat specific types of cancer or other diseases.

Our latest stage drug candidate, glembatumumab vedotin (also referred to as CDX-011) is a targeted antibody-drug conjugate in a randomized, Phase 2b study for the treatment of triple negative breast cancer and a Phase 2 study for the treatment of metastatic melanoma. Varlilumab (also referred to as CDX-1127) is an immune modulating antibody that is designed to enhance a patient’s immune response against cancer. We established proof of principle in a Phase 1 study with varlilumab, which supported the initiation of combination studies in various indications. We also have a number of earlier stage drug candidates in clinical development, including CDX-3379, a human monoclonal antibody designed to block the activity of ErbB3 (HER3) in solid tumors; CDX-014, an antibody-drug conjugate targeting renal and ovarian cancers; CDX-1401, a targeted immunotherapeutic They are aimed at antigen presenting cells, or APCs, for cancer indications; and, CDX-301, an immune cell mobilizing agent and dendritic cell growth factor. Our drug candidates addressaddressing market opportunities for which we believe current therapies are inadequate or non-existent.

 

16

We are buildingfocusing our efforts and resources on the continued research and development of:

CDX-0159, a monoclonal antibody that specifically binds the KIT receptor and potently inhibits its activity, which recently completed a Phase 1a study in healthy subjects. We plan to study CDX-0159 in mast cell driven diseases, including, initially, initiating Phase 1b studies in chronic spontaneous urticaria (CSU) and chronic inducible urticarias (CIndUs) this fall; and,

CDX-1140, an agonist monoclonal antibody targeted to CD40, a key activator of immune response, currently being studied as a single-agent and in combination with CDX-301, a dendritic cell growth factor. Dose escalation was completed in a Phase 1 study in solid tumors and lymphoma and the recommended dose for further study was determined to be 1.5 mg/kg for both CDX-1140 monotherapy and in combination with CDX-301. Celldex has initiated multiple expansion cohorts within the study, including a combination cohort with KEYTRUDA® (pembrolizumab) in patients refractory to PD1/PDL1 treatment and plans to initiate a combination cohort with standard of care chemotherapy in patients with untreated metastatic pancreatic cancer later this year. The Company is exploring additional combination cohorts with mechanisms that we believe could be complementary or synergistic with CDX-1140;

CDX-527, a bispecific antibody that uses our proprietary highly active anti-PD-L1 and CD27 human antibodies to couple CD27 co-stimulation with blockade of the PD-L1/PD-1 pathway, for which we plan to initiate a Phase 1 study in advanced solid tumors later this year.

We are discontinuing development of CDX-3379, an ErbB3 inhibitor, and directing the resources allocated to this program to expanded development of CDX-0159 and other assets in our pipeline. CDX-3379 was in an exploratory study designed to evaluate of the utility of biomarkers for patient selection in the treatment of cetuximab-refractory head and neck squamous cell carcinoma.

We routinely work with external parties to collaboratively advance our drug candidates. In addition to Celldex-led studies, we also have an Investigator Initiated Research (IIR) program with multiple studies ongoing with our drug candidates.

Our goal is to build a fully integrated, commercial-stage biopharmaceutical company that develops important therapies for patients with unmet medical needs. OurWe believe our program assets provide us with the strategic options to either retain full economic rights to our innovative therapies or seek favorable economic terms through advantageous commercial partnerships. This approach allows us to maximize the overall value of our technology and product portfolio while best ensuring the expeditious development of each individual product.

The following table reflects Celldex-sponsored clinical studies that we are actively pursuing at this time. All Currently, all programs are currently fully owned by Celldex.

Product (generic)

Indication/Field

Status

Sponsor

Glembatumumab vedotin

Triple negative breast cancer

Phase 2b

Celldex

Glembatumumab vedotin

Metastatic melanoma (with varlilumab or CPI1)

Phase 2

Celldex

Varlilumab

Multiple solid tumors (with nivolumab)

Phase 2

Celldex2

CDX-3379

Head and neck squamous cell cancer (with cetuximab)

Phase 23

Celldex

CDX-014

Renal cell carcinoma

Phase 1

Celldex

CDX-1140

Multiple solid tumors

Phase 13

Celldex


1checkpoint inhibitor; 2BMS collaboration; 3expected to initiate by year-end 2017

We also routinely work with external parties, such as government agencies, to collaboratively advance our drug candidates. The following pipeline reflects clinical trials of our drug candidates being actively pursued by outside organizations. In addition to the studies listed below, we also have an Investigator Initiated Research (IIR) program with seven studies ongoing with our drug candidates and additional studies currently under consideration.

Product (generic)

Indication/Field

Status

Sponsor

Glembatumumab vedotin

Uveal melanoma

Phase 2

NCI (CRADA)

Glembatumumab vedotin

Squamous cell lung cancer

Phase 2

PrECOG, LLC

CDX-1401/CDX-301

Malignant melanoma

Phase 2

NCI (CRADA)

CDX-1401/atezolizumab/SGI-110

Ovarian cancer

Phase 1

NCI (CRADA)

 

The expenditures that will be necessary to execute our business plan are subject to numerous uncertainties. Completion of clinical trials may take several years or more, and the length of time generally varies substantially according to the type, complexity, novelty and intended use of a productdrug candidate. It is not unusual for the clinical development of these types of productdrug candidates to

each take five years or more, and for total development costs to exceed $100 million for each productdrug candidate. We estimate that clinical trials of the type we generally conduct are typically completed over the following timelines:

 

Clinical Phase

Estimated
Completion
Period

Phase 1

1 - 2 Years

Phase 2

1 - 5 Years

Phase 3

1 - 5 Years

17

 

The duration and the cost of clinical trials may vary significantly over the life of a project as a result of differences arising during the clinical trial protocol, including, among others, the following:

 

·                  the number of patients that ultimately participate in the trial;

·the number of patients that ultimately participate in the trial;

 

·                  the duration of patient follow-up that seems appropriate in view of results;

·the duration of patient follow-up that seems appropriate in view of results;

 

·                  the number of clinical sites included in the trials;

·the number of clinical sites included in the trials;

 

·                  the length of time required to enroll suitable patient subjects; and

·the length of time required to enroll suitable patient subjects; and

 

·                  the efficacy and safety profile of the product candidate.

·the efficacy and safety profile of the drug candidate.

 

We test potential productdrug candidates in numerous preclinical studies for safety, toxicology and immunogenicity. We may then conduct multiple clinical trials for each productdrug candidate. As we obtain results from trials, we may elect to discontinue or delay clinical trials for certain productdrug candidates in order to focus our resources on more promising productdrug candidates.

 

An element of our business strategy is to pursue the discovery, research and development of a broad portfolio of productdrug candidates. This is intended to allow us to diversify the risks associated with our research and development expenditures. To the extent we are unable to maintain a broad range of productdrug candidates, our dependence on the success of one or a few productdrug candidates increases.

 

Regulatory approval is required before we can market our productdrug candidates as therapeutic products. In order to proceed to subsequent clinical trial stages and to ultimately achieve regulatory approval, the regulatory agency must conclude that our clinical data demonstrate that our product candidates are safe and effective. Historically, the results from preclinical testing and early clinical trials (through Phase 2) have often not been predictive of results obtained in later clinical trials. A number of new drugs and biologics have shown promising results in early clinical trials but subsequently failed to establish sufficient safety and efficacy data to obtain necessary regulatory approvals.

 

Furthermore, our business strategy includes the option of entering into collaborative arrangements with third parties to complete the development and commercialization of our productdrug candidates. In the event that third parties take over the clinical trial process for one of our productdrug candidates, the estimated completion date would largely be under control of that third party rather than us. We cannot forecast with any degree of certainty which proprietary products, if any, will be subject to future collaborative arrangements, in whole or in part, and how such arrangements would affect our development plan or capital requirements. Our programs may also benefit from subsidies, grants, contracts or government or agency-sponsored studies that could reduce our development costs.

 

As a result of the uncertainties discussed above, among others, it is difficult to accurately estimate the duration and completion costs of our research and development projects or when, if ever, and to what extent we will receive cash inflows from the commercialization and sale of a product. Our inability to complete our research and development projects in a timely manner or our failure to enter into collaborative agreements, when appropriate, could significantly increase our capital requirements and could adversely impact our liquidity. These uncertainties could force us to seek additional, external sources of financing from time to time in order to continue with our business strategy. Our inability to raise additional capital, or to do so on terms reasonably acceptable to us, would jeopardize the future success of our business.

 

During the past five years through December 31, 2016,2019, we incurred an aggregate of $422.1$408.2 million in research and development expenses. The following table indicates the amount incurred for each of our significant research programs and for other identified research and development activities during the ninesix months ended SeptemberJune 30, 20172020 and 2016.2019. The amounts disclosed in the following table reflect direct research and development costs, license fees associated with the underlying technology and an allocation of indirect research and development costs to each program.

 

 

Nine Months Ended September 30,

 

 

 

2017

 

2016

 

 

 

(In thousands)

 

Glembatumumab vedotin

 

$

26,240

 

$

20,577

 

Varlilumab

 

11,956

 

22,777

 

Anti-KIT Program

 

3,223

 

 

CDX-3379

 

3,611

 

 

CDX-014

 

1,925

 

3,059

 

CDX-1401

 

617

 

3,804

 

CDX-301

 

1,058

 

3,402

 

CDX-1140

 

5,788

 

1,642

 

TAM Program

 

3,914

 

 

Rintega

 

1,429

 

14,624

 

Other Programs

 

12,946

 

8,283

 

Total R&D Expense

 

$

72,707

 

$

78,168

 

18

  Six Months Ended
June 30, 2020
  Six Months Ended
June 30, 2019
 
  (In thousands) 
CDX-0159/Anti-KIT Program $2,896  $1,974 
CDX-1140  5,069   3,195 
CDX-527  5,891   3,412 
TAM Program  1,192   2,571 
Other Programs  6,352   10,080 
Total R&D Expense $21,400  $21,232 

 

Clinical Development Programs

 

Glembatumumab VedotinCDX-0159

 

Glembatumumab vedotinCDX-0159 is an antibody-drug conjugate, or ADC, that consists of a fully humanhumanized monoclonal antibody CR011, linked to a potent cell-killing drug, monomethyl auristatin E, or MMAE. The CR011 antibodythat specifically targets glycoprotein NMB, referred to as gpNMB, thatbinds the receptor tyrosine kinase KIT and potently inhibits its activity. KIT is over-expressedexpressed in a variety of cancerscells, including breast cancer, melanoma, non-smallmast cells, and its activation by its ligand SCF regulates mast cell lung cancer, uveal melanomagrowth, differentiation, survival, chemotaxis and osteosarcoma, among others. The ADC technology, comprised of MMAEdegranulation. In certain inflammatory diseases, such as chronic spontaneous urticaria (CSU), also known as chronic idiopathic urticaria (CIU) and chronic inducible urticarias (CIndUs), mast cell degranulation plays a stable linker system for attaching it to CR011, was licensed from Seattle Genetics, Inc. and is the same as that usedcentral role in the marketed product Adcetris®. The ADConset and progression of the disease.

CDX-0159 is designed to be stable in the bloodstream. Following intravenous administration, glembatumumab vedotin targetsblock KIT activation by disrupting both SCF binding and binds to gpNMB, and upon internalization into the targeted cell, glembatumumab vedotin is designed to release MMAE from CR011 to produce a cell-killing effect. Glembatumumab vedotin is being studied across multiple indications in company-sponsored trials and in collaborative studies with external parties. The U.S. Food and Drug Administration, or FDA, has granted Fast Track designation to glembatumumab vedotin for the treatment of advanced, refractory/resistant gpNMB-expressing breast cancer. A companion diagnostic is in development for certain indications, and we expectKIT dimerization. Celldex believes that if necessary, such a companion diagnostic must be approved by the FDA or certain other foreign regulatory agencies before glembatumumab vedotintargeting KIT, CDX-0159 may be commercialized in those indications.

Treatment of Metastatic Breast Cancer:  The Phase 1/2 study of glembatumumab vedotin administered intravenously once every three weeks evaluated patients with locally advanced or metastatic breast cancer (MBC) who had received prior therapy (median of seven prior regimens). Results were published in the Journal of Clinical Oncology in September 2014. The study began with a bridging phaseable to confirm the maximum tolerated dose, or MTD,inhibit mast cell activity and then expanded into a Phase 2 open-label, multi-center study. The study supported an acceptable safety profile of glembatumumab vedotin at the pre-defined maximum dose level (1.88 mg/kg) in 6 patients. An additional 28 patients with MBC were enrolled in an expanded Phase 2 cohort (for a total of 34 treated patients at 1.88 mg/kg, the Phase 2 dose)decrease mast cell numbers to evaluate the progression-free survival (PFS) rate at 12 weeks. The 1.88 mg/kg dose exhibited an acceptable safety profile in this patient population with the most common adverse events being rash, neuropathy and fatigue. The primary anti-cancer activity endpoint, which called for at least 5 of 25 (20%) patients in the Phase 2 study portion to be progression-free at 12 weeks, was met as 9 of 27 (33%) evaluable patients were progression-free at 12 weeks. For all patients treated at the Phase 2 dose, median PFS was 9.1 weeks.

A subset of 10 patients had “triple negative disease,” a more aggressive metastatic breast cancer subtype that carries a high risk of relapse and reduced survival as well as limited therapeutic options. In these patients, the 12-week PFS rate was 60% (6/10), and median PFS was 17.9 weeks. Tumor samples from a subset of patients across all dose groups were analyzed for gpNMB expression. The tumor samples from most patients showed evidence of stromal and/or tumor cell expression of gpNMB.

The subsequent EMERGE study was a randomized, multi-center Phase 2b study of glembatumumab vedotin in 124 patients with heavily pre-treated, advanced, gpNMB-positive breast cancer. Results from EMERGE were published in the Journal of Clinical Oncology in April 2015. Patients were randomized (2:1) to receive either glembatumumab vedotin or single-agent Investigator’s Choice chemotherapy. Patients randomized to receive Investigator’s Choice were allowed to cross over to receive glembatumumab vedotin following disease progression. Activity endpoints included response rate, PFS and overall survival (OS). The final study results, as shown below, suggested that glembatumumab vedotin induced significant response rates compared to currently available therapies in patient subsets with advanced, refractory breast cancers with high gpNMB expression (expression in at least 25% of tumor cells) and in patients with triple negative breast cancer. The OS and PFS of patients treated with glembatumumab vedotin were also observed to be greatest in patients with high gpNMB expression and, in particular, in patients with triple negative breast cancer who also had high gpNMB expression.

EMERGE: Overall Response Rate and Disease Control Data (Intent-to-Treat Population)

 

 

High gpNMB Expression

 

Triple Negative
and gpNMB
Over-Expression

 

 

 

Glembatumumab
Vedotin

 

Investigator’s
Choice

 

Glembatumumab
Vedotin

 

Investigator’s
Choice

 

 

 

(n=23)

 

(n=11)

 

(n=10)

 

(n=6)

 

Response Rate

 

30

%

9

%

40

%

0

%

Disease Control Rate

 

65

%

27

%

90

%

17

%

Tumor response assessed by RECIST 1.1, inclusive of response observed at a single time point.

EMERGE: Progression Free Survival (PFS) and Overall Survival (OS) Data

 

 

High gpNMB Expression

 

Triple Negative
and gpNMB
Over-Expression

 

 

 

Glembatumumab
Vedotin

 

Investigator’s
Choice

 

Glembatumumab
Vedotin

 

Investigator’s
Choice

 

Median PFS (months)

 

2.8

 

1.5

 

3.5

 

1.5

 

 

 

p=0.18

 

 

 

p=0.0017

 

 

 

 

 

 

 

 

 

 

 

 

 

Median OS (months)

 

10.0

 

5.7

 

10.0

 

5.5

 

 

 

p=0.31

 

 

 

p=0.003

 

 

 

In December 2013, we initiated METRIC, a randomized, controlled Phase 2b study of glembatumumab vedotin in patients with triple negative breast cancer that over-expresses gpNMB. Clinical trial study sites were opened to enrollment across the U.S., Canada, Australia and the European Union. The METRIC protocol was amended in late 2014 based on feedback from clinical investigators conducting the study that the eligibility criteria for study entry were limiting their ability to enroll patients they felt were clinically appropriate. In addition, we had spoken to country-specific members of the European Medicines Agency, or EMA, and believed an opportunity existed to expand the study into the EU. The amendment expanded patient entry criteria to position it for the possibility of full marketing approval with global regulators, including the EMA, and to support improved enrollment in the study. The primary endpoint of the study is PFS, defined as the time from randomization to the earlier of disease progression or death due to any cause. PFS is an established endpoint for full approval registration studies in this patient population in both the U.S. and the EU. The sample size (n=300) and the secondary endpoint of OS remained unchanged. Since implementation of these changes, both the FDA and central European regulatory authorities have reviewed the protocol design, and we believe the METRIC study could potentially support marketing approval in both the U.S. and Europe dependent upon data results and review.

Enrollment (n=327) in METRIC was completed in August 2017. The study calls for 203 progression events for evaluation of the primary endpoint, which will be assessed based on an independent, central reading of patient scans. The sum of the data, including the secondary endpoints of response rate, overall survival, duration of response and safety, will be important in assessing clinical benefit. Based on the current rate of progression events in the study, the Company projects that topline primary endpoint data should be available in the second quarter of 2018.

Efforts to ensure delivery of manufactured drug that is ready for commercialization and a companion diagnostic, including partnering with a diagnostic company, are underway. While we have made and continue to make progress on these fronts, we have made the decision to stage some of the more costly work in these areas to begin after we have received results from the study. While this step will extend the timeline to complete our regulatory filings, we believe this is the most prudent use of our funds as we seek to advance our pipeline overall.

Treatment of Metastatic Melanoma:  The Phase 1/2 open-label, multi-center, dose escalation study evaluated the safety, tolerability and pharmacokinetics of glembatumumab vedotin in 117 patients with unresectable stage III or IV melanoma who had failed no more than one prior line of cytotoxic therapy. The MTD and resulting Phase 2 dose was determined to be 1.88 mg/kg administered intravenously once every three weeks. The study achieved its primary activity objective with an overall response rate (ORR) in the Phase 2 cohort of 15% (5/34). Median PFS was 3.3 months for patients treated with the Phase 2 dose. Glembatumumab vedotin was generally well tolerated, with the most frequent treatment-related adverse events being rash, fatigue, alopecia, pruritus, diarrhea and nausea. The development of rash, which may be associated with the presence of gpNMB in the skin, also seemed to correlate with greater PFS.

In December 2014, we initiated a single arm, single-agent, open-label Phase 2 study of glembatumumab vedotin in patients with unresectable stage III or IV melanoma, and enrollment has been completed. In May 2016, we amended the protocol to add a second cohort of patients to a glembatumumab vedotin and varlilumab combination arm to assess theprovide potential clinical benefit of the combination and to explore varlilumab’s potential biologic and immunologic effect when combined with an ADC, and enrollment has been completed. In November 2016, we amended the protocol to add a third cohort of patients evaluating glembatumumab vedotin in combination with an approved checkpoint inhibitor (i.e., nivolumab or pembrolizumab) following progression on the checkpoint inhibitor alone, and enrollment is ongoing. In September 2017, we amended the protocol again to add a fourth cohort of patients evaluating glembatumumab vedotin in combination with CDX-301 to assess the safety, tolerability and biologic activity of the combination. Following completion of this cohort and evaluation of available data, the protocol amendment also allows for the exploration of additional cohorts. The primary endpoint for each cohort is ORR, except the fourth cohort which is assessing safety and tolerability. Secondary endpoints include analyses of PFS, duration of response, OS, retrospective investigation of whether the anti-cancer activity of glembatumumab vedotin is dependent upon the degree of gpNMB expression in tumor tissue and safety of both the monotherapy and combination regimens.mast cell related diseases.

 

We presented mature data from the single-agentrecently completed a randomized, double-blind, placebo-controlled, single ascending dose escalation Phase 1a study of CDX-0159 in healthy subjects (n=32; 8 subjects per cohort, in an oral presentation6 CDX-0159; 2 placebo). Subjects received a single intravenous infusion of CDX-0159 at the 2017 American Society of Clinical Oncology Annual Meeting in June.0.3, 1.0, 3.0, or 9.0 mg/kg or placebo. The cohort enrolled 62 evaluable patients with unresectable stage IV melanoma. All patients had been heavily pre-treated (median prior therapies = 3; range 1-8) and had progressed during or after checkpoint inhibitor therapy, and almost all patients had received both ipilimumab (n=58; 94%) and anti-PD-1/anti-PD-L1 (n=58; 94%) therapy. Twelve patients presented with BRAF mutation, and fifteen had prior treatment with BRAF or BRAF/MEK targeted agents. Median overall survival (OS) for all patients was 9.0 months (95% CI: 6.1, 13.0). As previously reported in October 2016, the primary endpoint of the cohort (threshold of 6 or more objective responses in 52 evaluable patients) was exceeded. 7 of 62 (11%) patients experienced a confirmed response, and an additional three patients also experienced single timepoint partial responses. Since data were reported in October 2016, one patient converted from a confirmed partial response to a confirmed complete response. The median duration of response was 6.0 months. A 52% disease control rate (patients without progression for greater than three months) was demonstrated, and median progression free survival (PFS) for all patients was 4.4 months. Consistent with previous studies in melanoma and breast cancer, rash was associated with greater clinical benefit. Patients who experienced rash in Cycle 1 experienced a 21% confirmed response rate, a more prolonged PFS with a median of 5.5 months (p=0.006; HR=0.39) and a more prolonged OS with a median of 15.8 months (p=0.026, HR=0.44). The safety profile was consistent with prior studies of glembatumumab vedotin with rash, neutropenia and neuropathy experienced as the most significant adverse events. Pre-treatment tumor tissue was available for 59 patients. All samples were gpNMB positive, and 78% of patients had tumors with 100% of their epithelial cells expressing gpNMB. Given both the high level of expression and the intensity of expression across this patient population, identifying a potential population for gpNMB enrichment is not feasible; therefore, all patients with metastatic melanoma could be evaluated as potential candidates for treatment with glembatumumab vedotin in future studies. We intend to conduct exploratory analyses of pre-entry skin biopsies in future patients to investigate potential predictors of response to glembatumumab vedotin, given the association of rash and outcome.

Data from the second cohort, combining glembatumumab vedotin and varlilumab, were accepted for presentation at the Society for Immunotherapy of Cancer’s (SITC) 32nd Annual Meeting in November 2017. The cohort enrolled 34 patients with unresectable stage IV melanoma. All patients had been heavily pre-treated (median prior therapies = 3; range 1-8) and had progressed during or after checkpoint inhibitor (CPI) therapy (median prior CPI therapies = 2; range 1-4). Almost all patients had received ipilimumab (n=26; 76%) and/or anti-PD-1/anti-PD-L1 (n=34; 100%) therapy. Nine patients presented with BRAF mutation, and eleven had prior treatment with BRAF or BRAF/MEK targeted agents. Median PFS for all patients was 2.6 months (95% CI: 1.4, 2.8),

and median overall survival (OS) for all patients was 6.4 months (95% CI: 3.2, 8.3). One of 31 patients eligible for response evaluation experienced a confirmed partial response (3%) and an additional two patients also experienced single timepoint partial responses. 52% of patients experienced stable disease (minimum of six or more weeks). A 19% disease control rate (patients without progression for greater than three months) was demonstrated. The safety profile was consistent with prior studies of glembatumumab vedotin and there was no evidence of additive toxicity associated with the combination. Biological effects of varlilumab were consistent with prior observations and did not appear to be impacted by the addition of an antibody-drug conjugate (ADC). Modest clinical benefit in the combination could be due to multiple factors, including potential lack of sensitivity to immunotherapy in patients with checkpoint refractory disease, many of whom progressed so rapidly that they experienced a very short duration of varlilumab treatment (median 2 doses); a possible dearth of antigen presenting cells in tumors; and the potential for immune checkpoint molecules to remain unblocked without checkpoint inhibitor therapy. Planned future cohorts are designed to address some of these potential factors. No significant correlation between rash and outcome was observed, but will continue to be monitored in future cohorts.

Treatment of Other Indications:  We have entered into a collaborative relationship with PrECOG, LLC, which represents a research network established by the Eastern Cooperative Oncology Group (ECOG), under which PrECOG, LLC, is conducting an open-label Phase 1/2 study in patients with unresectable stage IIIB or IV, gpNMB-expressing, advanced or metastatic squamous cell carcinoma (SCC) of the lung, who have progressed on prior platinum-based chemotherapy. This study opened to enrollment in April 2016 and is ongoing. The study includes a dose-escalation phase followed by a two-stage Phase 2 portion (Simon two-stage design). The Phase 1, dose-escalation portion of the study is designed to assess the safety and tolerability of glembatumumab vedotin at varying dose levels. The first stage of the Phase 2 portion plans to enroll approximately 20 patients, and if at least two patients achieve a partial response or complete response, a second stage may enroll an additional 15 patients. The primary objective of the Phase 2 portion of the study is to assess the anti-tumor activity of glembatumumab vedotin in squamous cell lung cancer as measured by ORR. Secondary objectives of the study include analyses ofincluded safety and tolerability, pharmacokinetics (PK) and further assessment of anti-tumor activity across a broad range of endpoints.

We have also entered into a Cooperative Researchpharmacodynamics (tryptase and Development Agreement, or CRADA, with the National Cancer Institute, or NCI, under which NCIstem cell factor) and immunogenicity. Tryptase is sponsoring a Phase 2 study of glembatumumab vedotin in uveal melanoma. The study is a single-arm, open-label study in patients with locally recurrent or metastatic uveal melanoma. The study has a two stage design with a pre-specified activity threshold necessary in the first stage to progress enrollment to the second stage. The primary outcome measure is ORR. Secondary outcome measures include change in gpNMB expression on tumor tissue via immunohistochemistry, safety, OSan enzyme synthesized and PFS. Data from this study were presented at 9th World Congress of Melanoma in October of 2017. Two (6%) objective responses were observed in 31 patients to date and 35% of patients experienced stable disease greater than 100 days (median 5.5 months). The disease control rate (response rate + stable disease) for all patients on study was noteworthy at 61%. Median PFS was 3.2 months and median OS was 11.8 months. For patients who experienced either a partial response or stable disease, median PFS was 5.5 months and median OS has not yet been reached. The NCI is conducting exploratory immune correlates to provide insight into target saturation, antigen release and potential combination strategies.

Varlilumab

Varlilumab is a fully human monoclonal agonist antibody that binds to and activates CD27, a critical co-stimulatory molecule in the immune activation cascade. We believe varlilumab works primarilysecreted almost exclusively by stimulating T cells, an important component of a person’s immune system, to attack cancer cells. Restricted expression and regulation of CD27 enables varlilumab specifically to activate T cells, resulting in an enhanced immune response with the potential for a favorable safety profile. In preclinical studies, varlilumab has been shown to directly kill or inhibit the growth of CD27 expressing lymphomas and leukemias in in vitro and in vivo models. We have entered into license agreements with the University of Southampton, UK for intellectual property to use anti-CD27 antibodies and with Medarex (acquired by Bristol-Myers Squibb Company, or BMS) for access to the UltiMab technology to develop and commercialize human antibodies to CD27. Varlilumab was initially studied as a single-agent to establish a safety profile and assess immunologic and clinical activity in patients with cancer, but we believe the greatest opportunity for varlilumab is as an immune activator in combination with other agents. Currently, we are focusing our efforts on a Phase 1/2 clinical trial being conducted in collaboration with BMS and their PD-1 immune checkpoint inhibitor, Opdivo. Varlilumab is also being explored in combination studies, including with glembatumumab vedotin, and in ongoing and planned investigator-sponsored studies.

Single-Agent Phase 1 Study:  Data from the completed, open-label Phase 1 study of varlilumab in patients with selected malignant solid tumors or hematologic cancers were presented at the Annual Meeting of the American Society of Clinical Oncology in June 2014. Varlilumab demonstrated an acceptable safety profile and induced immunologic activity in patients that is consistent with both its proposed mechanism of action and data in preclinical models. A total of 90 patients were dosed in the study at multiple clinical sites in the U.S. of which 55 patients were dosed in dose escalation cohorts (various solid and hematologic B- and T-cell tumors), and 35 patients were dosed in the expansion cohorts (melanoma, renal cell carcinoma and Hodgkin lymphoma) at 3 mg/kg. In both the solid tumor and hematologic dose-escalations, the pre-specified maximum dose level (10 mg/kg) was reached without

identification of a maximum tolerated dose. The majority of adverse events, or AEs, related to treatment have been mild to moderate (Grade 1/2) in severity, with only three serious AEs related to treatment reported. No significant immune-mediated adverse events (colitis, hepatitis, etc.) typically associated with checkpoint blockade have been observed to date. Two patients initially experienced significant objective responses including a complete response in Hodgkin lymphoma (patient remains in remission at 2.8+ years without further anticancer therapy as of September 2016; patient no longer on study) and a partial response in renal cell carcinoma (continued at 2.5+ years without further anticancer therapy as of June 2017). A patient with renal cell carcinoma that experienced significant stable disease (4+ years) has achieved a single-time point partial response at 4.2+ years without additional anticancer therapy. Twelve patients experienced stable disease up to 14 months. As of June 2017, there are two patients continuing in long term follow-up. Final results from the study in patients with solid tumors were published in the Journal of Clinical Oncology in April 2017.

Phase 1/2 Varlilumab/Opdivo® Combination Study:  In 2014, we entered into a clinical trial collaboration with Bristol-Myers Squibb to evaluate the safety, tolerability and preliminary efficacy of varlilumab and Opdivo, Bristol-Myers Squibb’s PD-1 immune checkpoint inhibitor, in a Phase 1/2 study. Under the terms of this clinical trial collaboration, Bristol-Myers Squibb made a one-time payment to us of $5.0 million, and the companies amended the terms of our existing license agreement with Medarex (acquired by Bristol-Myers Squibb) related to our CD27 program whereby certain future milestone payments were waived and future royalty rates were reduced that may have been due from us to Medarex. In return, Bristol-Myers Squibb was granted a time-limited right of first negotiation if we wish to out-license varlilumab. The companies also agreed to work exclusively with each other to explore anti-PD-1 antagonist antibody and anti-CD27 agonist antibody combination regimens. The clinical trial collaboration provides that the companies will share development costs and that we will be responsible for conducting the Phase 1/2 study.

The Phase 1/2 study was initiated in January 2015 and is being conducted in adult patients with multiple solid tumors to assess the safety and tolerability of varlilumab at varying doses when administered with Opdivo, followed by a Phase 2 expansion to evaluate the activity of the combination in disease specific cohorts.

Data (n=36) from the Phase 1 dose escalation portion of the study were presented in an oral presentation at the American Society of Clinical Oncology Annual Meeting in June 2017. The majority of patients had PD-L1 negative tumor at baseline and presented with stage IV, heavily-pretreated disease. 80% of patients enrolled presented with refractory or recurrent colorectal (n=21) or ovarian cancer (n=8), a population expected to have minimal response to checkpoint blockade. The primary objective of the Phase 1 portion of the study was to evaluate the safety and tolerability of the combination. The combination was well tolerated at all varlilumab dose levels tested without any evidence of increased autoimmunity or inappropriate immune activation. Marked changes in the tumor microenvironment including increased infiltrating CD8+ T cells and increased PD-L1 expression, which have been shown to correlate with a greater magnitude of treatment effect from checkpoint inhibitors in other clinical studies, were observed. Additional evidence of immune activity, such as increase in inflammatory chemokines and decrease in T regulatory cells, was also noted. Notable disease control was also observed (stable disease or better for at least 3 months), considering the stage IV patient population contained mostly colorectal and ovarian cases (80%): 0.1 mg/kg varlilumab + 240 mg Opdivo: 1/5 (20%), 1 mg/kg varlilumab + 240 mg Opdivo: 5/15 (33%) and 10 mg/kg varlilumab + 240 mg Opdivo: 6/15 (40%).

Three partial responses (PR) were observed. A patient with PD-L1 negative, MMR proficient colorectal cancer, typically unlikely to respond to checkpoint blockade monotherapy, achieved a confirmed PR (95% decrease in target lesions) and, following completion of combination treatment, continues to receive treatment with Opdivo monotherapy at 22+ months. A patient with low PD-L1 (5% expression) squamous cell head and neck cancer achieved a confirmed PR (59% shrinkage) and experienced progression free survival of 6.7 months. A patient with PD-L1 negative ovarian cancer experienced a single timepoint PR (49% shrinkage) but discontinued treatment to a dose-limiting toxicity (immune hepatitis, an event known to be associated with checkpoint inhibition therapy). A subgroup analysis was conducted in patients with ovarian cancer based on an observed increase of PD-L1 and tumor-infiltrating lymphocytes in this patient population. In patients with paired baseline and on-treatment biopsies (n=13), only 15% were PD-L1 positive (> 1% tumor cells) at baseline compared to 77% during treatment (p=0.015). Patients with increased tumor PD-L1 expression and tumor CD8 T cells correlated with better clinical outcome with treatment (stable disease or better).

The Phase 2 portion of the study opened to enrollment in April 2016 and includes cohorts in colorectal cancer (n=18), ovarian cancer (n=54), head and neck squamous cell carcinoma (n=54), renal cell carcinoma (n=25) and glioblastoma (n=20). Additional dosing schedules are being explored in ovarian cancer and in head and neck squamous cell carcinoma, increasing the overall size of the study compared to the original study design. The primary objective of the Phase 2 cohorts is ORR, except glioblastoma, where the primary objective is the rate of 12-month overall survival. Secondary objectives include pharmacokinetic assessments, determining the immunogenicity of varlilumab when given in combination with Opdivo and further assessing the anti-tumor activity of combination treatment. We plan to complete enrollment across all cohorts in the Phase 2 portion of the study in the first quarter of 2018 and expect to work with BMS to present data from the study at a future medical meeting.

Anti-Kit Program: CDX-0158 and CDX-0159

KIT activation is implicated in many disease processes including some cancers, neurofibromatosis and mast cell-related diseases, including autoimmune disease. CDX-0158, a humanized monoclonal antibody, is a potent inhibitor of wildtype KIT in mast cells and has demonstrated preclinical activity versus the most common oncogenic KIT mutations founddecreases in human gastrointestinal stromal tumors (GIST) in model cell lines and in spontaneous canine mast cell tumors (an established model for mastocytoma). A Phase 1 dose escalation study in patients with advanced refractory GIST and other KIT positive tumors opened to enrollment in December 2015 to determine the maximum tolerated dose, recommend a dose for further study and characterize the safety profile. A total of 28 patients have been treated with doses up to 15 mg/kg with one patient currently continuing on treatment. Importantly, no evidence of myelosuppression (an effect commonly associated with KIT inhibition) was observed in this study. Approximately two-thirds of the patients on study had infusion reactions that were manageable with pre-medication and longer infusion times. The biomarker data showed evidence of dose-related KIT engagement, and two patients experienced partial metabolic responses on fluorodeoxyglucose (FDG)-PET scan; however, these PET responses were not associated with tumor shrinkage.

The infusion reactionsplasma tryptase levels are believed to be the result of CDX-0158 acting as an agonist on mast cells reflect a systemic reduction in vivo, where the antibody can be cross-linked by Fc receptors and cause mast cell degranulation. Given the infusion reactions, modifications have been introduced into the Fc portion of the CDX-0158 antibody to prevent these interactions, which should eliminate the potential for Fc receptor mediated agonist activity. This second-generation version, called CDX-0159, also includes modifications to increase the half-life of the antibody, giving it additional benefits over CDX-0158. Preclinical data to date with CDX-0159 have demonstrated equivalent KIT inhibition to CDX-0158, but unlike CDX-0158, CDX-0159 does not induce KIT activation when Fc receptors are used to cross-link the antibodies. CDX-0159 is being fully developed in-house with the intention of replacing CDX-0158 in clinical development. We expect manufacturing and IND-enabling efforts for CDX-0159 will be completed in 2018.

CDX-3379

CDX-3379 is a human monoclonal antibody with half-life extension designed to block the activity of ErbB3 (HER3). We believe ErbB3 may be an important receptor regulating cancer cell growth and survival as well as resistance to targeted therapies and is expressed in many cancers, including head and neck, thyroid, breast, lung and gastric cancers, as well as melanoma. We believe the proposed mechanism of action for CDX-3379 sets it apart from other drugs in development in this class due to its ability to block both ligand-independent and ligand-dependent ErbB3 signaling by binding to a unique epitope. It has a favorable pharmacologic profile, including a longer half-life and slower clearance relative to other drug candidates in this class. CDX-3379 also has potential to enhance anti-tumor activity and/or overcome resistance in combination with other targeted and cytotoxic therapies to directly kill tumor cells. Tumor cell death and the ensuing release of new tumor antigens has the potential to serve as a focus for combination therapy with immuno-oncology approaches, even in refractory patients.

A Phase 1a/1b study was conducted, including a single-agent, dose-escalation portion and combination expansion cohorts. Data from the dose-escalation portion, which completed enrollment in September 2015, and initial data from the expansion cohorts (enrollment ongoing at the time) were presented at the American Society of Clinical Oncology Annual Meeting in June 2016. The single-agent, dose-escalation portion of the study did not identify an MTD, and there were no dose limiting toxicities. The most common adverse events included rash and diarrhea and were predominantly grade 1 or 2. Four combination arms across multiple tumor types were added to evaluate CDX-3379 with several drugs that target EGFR, HER2 or BRAF. They include combinations with Erbitux® (n=16), Tarceva® (n=8), Zelboraf® (n=4) and Herceptin® (n=10). Patients had advanced disease and were generally heavily pretreated. Across the combination arms, the most frequent adverse events were diarrhea, nausea, rash and fatigue. Objective responses were observed in the Erbitux and Zelboraf combination arms. In the Erbitux arm, there was one complete response in a patient with head and neck cancer, who had been previously treated with Erbitux and was refractory. In the Zelboraf arm, there were two partial responses in patients who had lung cancer, one of whom had been previously treated with Tafinlar® and was considered refractory. We have finalized plans for advancement into an open-label Phase 2 study in approximately 30 patients with recurrent/metastatic head and neck squamous cell cancer who are refractory to Erbitux (cetuximab). We anticipate initiating this study in the fourth quarter of 2017. The primary objective of the study is objective response rate. Second objectives include assessments of clinical benefit response (CBR), duration of response (DOR), PFS and OS, and safety and pharmacokinetics associated with the combination.

CDX-1401

CDX-1401, developed from our APC Targeting Technology, is an NY-ESO-1-antibody fusion protein for immunotherapy in multiple solid tumors. CDX-1401, which is administered with an adjuvant, is composed of the cancer-specific antigen NY-ESO-1 fused to a fully human antibody that binds to DEC-205 for efficient delivery to dendritic cells. Delivery of tumor-specific proteins directly to dendritic cells in vivo elicits potent, broad, anti-tumor immune responses across populations with different genetic

backgrounds. In humans, NY-ESO-1 has been detected in 20% to 30% of melanoma, lung, esophageal, liver, gastric, ovarian and bladder cancers, and up to 70% of synovial sarcomas, thus representing a broad opportunity. CDX-1401 is being developed for the treatment of malignant melanoma and a variety of solid tumors which express the cancer antigen NY-ESO-1. Preclinical studies have shown that CDX-1401 treatment results in activation of human T cell responses against NY-ESO-1.

We have completed a Phase 1 study of CDX-1401 which assessed the safety, immunogenicity and clinical activity of escalating doses of CDX-1401 with TLR agonists (resiquimod and/or poly-ICLC) in 45 patients with advanced malignancies refractory to all available therapies. Results were published in Science Translational Medicine in April 2014. Sixty percent of patients had confirmed NY-ESO expression in archived tumor samples. Thirteen patients maintained stable disease for up to 13.4 months with a median of 6.7 months. Treatment indicates an acceptable safety profile to date, and there were no dose limiting toxicities. A variety of immune activation parameters were observed. Humoral responses were elicitedburden in both NY-ESO-1 positive and negative patients. NY-ESO-1-specific T cell responses were absent or low at baseline, but increased post-vaccination in 56% of evaluable patients, including both CD4 and/or CD8 T cell responses. Robust immune responses were observed with CDX-1401 with resiquimod and poly-ICLC alonehealthy volunteers and in combination. Long-term patient follow up suggested that treatment with CDX-1401 may predispose patients to better outcomes on subsequent therapy with checkpoint inhibitors. Of the 45 patients in the Phase 1 study, eight went on to receive subsequent therapy of either Yervoy® or an investigational checkpoint inhibitor within 3 months of CDX-1401, and six of these patients had objective tumor regression. Six patients with melanoma received Yervoy within three months of treatment with CDX-1401, and four (67%) had objective tumor responses, including one complete response, which compares favorably to the overall response rate of 11% previously reported in metastatic melanoma patients treated with single-agent Yervoy. In addition, two patients with non-small cell lung cancer received an investigational checkpoint blockade within two months of completing treatment with CDX-1401, and both achieved partial responses. Together with Roche, we are supporting an investigator initiated study of CDX-1401 in combination with Tecentriq® (atezolizumab; anti-PD-L1) in patients with lung cancer.

CDX-1401’s potential activity is being explored in investigator sponsored and collaborative studies. A Phase 2 study of CDX-1401 in combination with CDX-301 is being conducted in malignant melanoma by the Cancer Immunotherapy Trials Network (CITN) under a CRADA with the Cancer Therapy Evaluation Program of the NCI. This study was designed to determine the activity of CDX-1401 with or without CDX-301 in melanoma. The primary outcome measure of the study is immune response to NY-ESO-1. Secondary outcome measures include analysis and characterization of peripheral blood mononuclear cells (dendritic cells, T cells, natural killer cells, etc.), additional immune monitoring, safety and clinical outcomes (survival and time to tumor recurrence). Enrollment is complete, and initial results were presented at the 2016 American Society of Clinical Oncology (ASCO) Annual Meeting. The data confirmed that CDX-1401 is capable of driving NY-ESO-1 immunity and further demonstrated the potential of CDX-301 as a combination agent for enhancing tumor specific immune responses. The NCI and CITN are planning to enroll additional cohorts to investigate alternative regimens of CDX-301.

In September 2017, a randomized, open-label Phase 1/2 study of CDX-1401 in combination with atezolizumab and SGI-110 opened to enrollment in recurrent ovarian, fallopian tube, or primary peritoneal cancer. This study is being conducted under a CRADA with the NCI Division of Cancer Treatment and Diagnosis and is designed to determine the activity of atezolizumab alone, atezolizumab plus SGI-110 and atezolizumab plus SGI-110 plus CDX-1401. The primary outcome of the Phase 1 dose escalation study is safety and only evaluates atezolizumab alone and in combination with SGI-110. The Phase 2 portion of the study is expected to add CDX-1401. The primary outcome of the Phase 2 portion of the study is a comparison of PFS between the three cohorts.

Other studies are being considered through investigator-sponsored and collaborative agreements.

CDX-301

CDX-301, a recombinant FMS-like tyrosine kinase 3 ligand, or Flt3L, is a hematopoietic cytokine that uniquely expands dendritic cells and hematopoietic stem cells in combination with other agents to potentiate the anti-tumor response. Depending on the setting, cells expanded by CDX-301 promote either enhanced or permissive immunity. CDX-301 is in clinical development for multiple cancers, in combination with vaccines, adjuvants and other treatments that release tumor antigens. We licensed CDX-301 from Amgen Inc. in March 2009 and believe CDX-301 may hold significant opportunity for synergistic development in combination with other proprietary molecules in our portfolio.

A Phase 1 study of CDX-301 evaluated seven different dosing regimens of CDX-301 to determine the appropriate dose for further development based on safety, tolerability and biological activity. The datadisease. Data from the study were featured in a late breaking presentation at the European Academy of Allergy and Clinical Immunology (EAACI) Annual Congress 2020 in June. CDX-0159 demonstrated a favorable safety profile as well as profound and durable reductions of plasma tryptase, consistent with previous clinical experience and demonstrated that CDX-301 has an acceptable safety profile to date and can mobilize hematopoietic stemsystemic mast cell (HSC) populations in healthy volunteers.suppression.

At the 2016 ASCO Annual Meeting, initial results from a Phase 2 study of CDX-1401 in combination with CDX-301 in malignant melanoma were presented that further demonstrated the value of CDX-301 as a combination agent for enhancing tumor specific immune responses. The Phase 2 study was conducted by the Cancer Immunotherapy Trials Network, or CITN, under a CRADA with the Cancer Therapy Evaluation Program

·Most common adverse events were mild infusion-related reactions, all of which spontaneously resolved without intervention. Mild and asymptomatic decreases in neutrophil and white blood cell count were observed in laboratory testing.

·A single dose of CDX-0159 suppressed plasma tryptase levels in a dose-dependent manner, indicative of systemic mast cell suppression. Tryptase suppression below the level of detection was observed after a single 1.0 mg/kg dose and was maintained for more than 2 months at single doses of both 3.0 and 9.0 mg/kg of CDX-0159. A subset of subjects from the 3mg/kg and 9 mg/kg cohorts agreed to continued follow up for tryptase suppression which remained below the level of detection for over 3 months (14 weeks) in 50% of subjects and over 4 months (18 weeks) in all subjects, respectively.

·Dose dependent increases in plasma stem cell factor mirror decreases in tryptase, consistent with allosteric blockade of stem cell factor to KIT and demonstrate complete target engagement in vivo.

·Long serum half-life and non-immunogenic profile support a convenient dosing schedule.

19

·Enhanced PK profile and durable tryptase suppression at low doses support re-formulation for sub-cutaneous administration.

These data support expansion of the NCI. Based on these resultsCDX-0159 program into mast cell driven diseases, including initially studies in forms of chronic urticaria (CU) given the CITNcentral role mast cells are known to play in the etiology of CU. Celldex plans to initiate Phase 1b studies of CDX-0159 this fall in patients with chronic spontaneous urticaria (CSU) and chronic inducible urticaria (CIndU), diseases where mast cell degranulation plays a central role in the onset and progression of the disease. The prevalence of CSU and CIndU is planningapproximately 0.5-1% of the total population or up to enroll additional cohorts1 to investigate alternative regimens3 million patients in the United States alone (Weller et al. 2010. Hautarzt. 61(8), Bartlett et al. 2018. DermNet. Org). CSU presents as itchy hives, angioedema or both for at least six weeks without a specific trigger; multiple episodes can play out over years or even decades. About 50% of CDX-301. Other studies are being considered through investigator-sponsored and collaborative agreements.

CDX-014

CDX-014patients with CSU achieve symptomatic control with antihistamines or leukotriene receptor antagonists. Omalizumab, an IgE inhibitor, provides relief for roughly half of the remaining antihistamine/leukotriene refractory patients. Consequently, there is a human monoclonal ADCneed for additional therapies. CIndUs are forms of urticaria that targets T cell immunoglobulin and mucin domain 1,have an attributable cause or TIM-1. TIM-1 expression is upregulated in several cancers, most notably renal cell and ovarian carcinomas, and istrigger associated with a more malignant phenotype of renal cell carcinoma (RCC) and tumor progression. TIM-1 has restricted expression in healthy tissues, making it potentially amenable to an ADC approach. The TIM-1 antibody is linked to MMAE using Seattle Genetics’ proprietary technology. The ADC is designed to be stable in the bloodstream but to release MMAE upon internalization into TIM-1-expressing tumor cells,them, typically resulting in a targeted cell-killing effect. CDX-014 has shown anti-tumor activity in preclinical models of ovarianhives or wheals. Celldex is exploring cold-induced and renal cancers.

In July 2016, we announced that enrollment had opened in a Phase 1/2 study of CDX-014 to patients with both cleardermographism (scratch-induced) urticarias. Celldex is also exploring additional mast cell and papillary RCC. The Phase 1 dose-escalation portion of the study is evaluating cohorts of patients receiving increasing doses of CDX-014 to determine the maximum tolerated dose and a recommended dosedriven diseases for Phase 2 study. We anticipate expanding the Phase 1 study to encompass additional TIM-1 expressing tumor types and alternate dosing regimens. The Phase 2 portion of the study plans to enroll approximately 25 patients to assess the anti-tumor activity of CDX-014 at the recommended dose in advanced renal cell carcinoma as measured by objective response rate. Secondary objectives include safety and tolerability, pharmacokinetics, immunogenicity and additional measures of anti-tumor activity.

future development.

CDX-1140

 

CDX-1140 is a fully human agonist monoclonal antibody targeted to CD40, a key activator of immune response, which is found on dendritic cells, macrophages and B cells and is also expressed on many cancer cells. Potent CD40 agonist antibodies have shown encouraging results in early clinical studies; however, systemic toxicity associated with broad CD40 activation has limited their dosing. CDX-1140 has unique properties relative to other CD40 agonist antibodies: potent agonist activity is independent of Fc receptor interaction, contributing to more consistent, controlled immune activation; CD40L binding is not blocked, leading to potential synergistic effects of agonist activity near activated T cells in lymph nodes and tumors; and the antibody does not promote cytokine production in whole blood assays. CDX-1140 has shown direct anti-tumor activity in preclinical models of lymphoma.

Preclinical data, including the IND-enabling toxicology study of CDX-1140, were accepted for presentation at the Society for Immunotherapy of Cancer’s (SITC) 32nd Annual Meeting in November 2017. This toxicology studystudies of CDX-1140 clearly demonstratesdemonstrate strong immune activation effects and low systemic toxicity. The No Observable Adverse Effect Level (NOAEL) for CDX-1140 was determined to be 10 mg/kg in this study. The datatoxicity and support the design of the Phase 1 study of CDX-1140 to rapidly identify the dose for characterizing single-agent and combination activity. The Company believes that the potential for CDX-1140 will be best defined in combination studies with other immunotherapies or conventional cancer treatments.

 

We plan to initiateinitiated a Phase 1 study of CDX-1140 by year-endin November 2017. This study which is expected to enroll up to approximately 105220 patients with recurrent, locally advanced or metastatic solid tumors and B cell lymphomas. The study is designed to determine the maximum tolerated dose, or MTD, during a dose-escalation phase (0.01 to 3.0 mg/kg once every four weeks until confirmed progression or intolerance) and to recommend a dose level for further study in a subsequent expansion phase. The expansion is designed to further evaluate the tolerability and biologic effects of selected dose(s) of CDX-1140 in specific tumor types. Secondary objectives include assessments of safety and tolerability, pharmacodynamics, pharmacokinetics, immunogenicity and additional measures of anti-tumor activity, including clinical benefit rate. We believe that the potential for CDX-1140 will be best defined in combination studies with other immunotherapies or conventional cancer treatments.

 

In support of this, the Phase 1 study protocol also allows for the exploration of CDX-1140 in combination with CDX-301 at a fixed dose of CDX-301 and escalating doses of CDX-1140. Dendritic cells, which express CD40, are often rare or missing from the tumor microenvironment and are critical for initiating anti-tumor immunity. CDX-301, a recombinant FMS-like tyrosine kinase 3 ligand, or Flt3L, is a hematopoietic cytokine that uniquely expands dendritic cells and hematopoietic stem cells, and in combination with other agents may potentiate anti-tumor responses. CDX-301 is being utilized as a priming agent in this study to increase the number of dendritic cells in blood and tissue available for CDX-1140 activation. CDX-1140 should, in turn, activate and mature the dendritic cells, an important step for enhancing anti-tumor immune responses.

20

Interim data from this ongoing study were presented at the Society for Immunotherapy of Cancer’s (SITC) 34th Annual Meeting in November 2019. CDX-1140 monotherapy dose escalation in the study is complete and the maximum tolerated dose and recommended Phase 2 dose was defined as 1.5 mg/kg every four weeks. CDX-1140 monotherapy and combination with CDX-301 was generally well tolerated, with mostly grade 1 or grade 2 drug related adverse events reported. Two patients out of six experienced pneumonitis as dose limiting toxicities (DLTs) in the CDX-1140 3.0 mg/kg monotherapy cohort. There were no DLTs observed in the CDX-301 combination cohorts up to 0.72 mg/kg CDX-1140. A cohort of CDX-1140 at 1.5 mg/kg plus CDX-301, which was ongoing at the time of data release, has subsequently completed dose escalation with no DLTs observed; therefore, the recommended dose of CDX-1140 in combination with CDX-301 is 1.5mg/kg.

As of the cut-off date for data reporting for SITC, 62 patients with advanced refractory solid tumors or lymphoma were enrolled and 38 patients had pre- and post-treatment scans available. Patients were heavily pretreated (median of 4 prior therapies) and per protocol were required to have received all standard of care treatments prior to study entry. CDX-1140 demonstrated clinical and biological activity in the study.

Two of five patients with head and neck squamous cell carcinoma (HNSCC) treated with CDX-1140 doses of 0.72 mg/kg or higher experienced clinical activity. The first patient experienced dramatic shrinkage of a large, protruding neck mass on physical exam after two doses of CDX-1140 at 1.5 mg/kg with documented evidence of tumor necrosis/cavitation on CT scan. This patient also reported decreased tumor pain. A second patient experienced cavitation of greater than 50% of lung metastases on CT scan after one dose of CDX-1140 3 mg/kg.

A patient with gastroesophageal carcinoma experienced a RECIST response after two cycles of CDX-1140 0.36 mg/kg plus CDX-301 that included 41% shrinkage of liver and lymph node target lesions, with near complete resolution of the liver lesion. This response was durable for four months.

Six patients experienced stable disease (n=4 CDX-1140 monotherapy; n=2 CDX-1140/CDX-301 combination) with a duration of 1.8 months to 5.4 months.

One patient experienced immune unconfirmed progressive disease on their first scan and continued on treatment for 10+ months without confirmation of progressive disease at CDX-1140 0.09 mg/kg plus CDX-301.

Potent pharmacological effects associated with immune activation were also observed, including transient induction of inflammatory cytokines and chemokines associated with dendritic cell and T cell activation at higher dose levels. Similar activation was observed with each cycle of therapy. Peripheral blood immune cells had upregulated immune activation markers and CDX-301 markedly increased the number of dendritic cells and was associated with higher IL-12p40 induction, a key molecule for inducing anti-tumor T cell responses.

CDX-1140 monotherapy expansion cohorts in HNSCC, renal cell carcinoma and gastroesophageal adenocarcinoma have been added to the study, along with a combination cohort of CDX-1140 and CDX-301 in HNSCC. In addition, we have prioritized a cohort to evaluate CDX-1140 in combination with KEYTRUDA® (pembrolizumab), Merck’s anti-PD-1 therapy, under a clinical trial collaboration agreement with Merck (known as MSD outside of the U.S. and Canada). The cohort is designed to characterize the safety, pharmacodynamics and activity of CDX-1140 in combination with pembrolizumab in patients refractory to PD1/PDL1 treatment. Enrollment is ongoing. We also plan to initiate a cohort in combination with standard of care chemotherapy in patients with previously untreated metastatic pancreatic cancer later this year. The Company is exploring additional combination cohorts with mechanisms that we believe could be complementary or synergistic with CDX-1140.

CDX-527

CDX-527 is the first candidate from Celldex’s bispecific antibody platform. Bispecifics provide opportunities to engage two independent pathways involved in controlling immune responses to tumors. CDX-527 uses Celldex’s proprietary highly active anti-PD-L1 and CD27 human antibodies to couple CD27 co-stimulation with blockade of the PD-L1/PD-1 pathway to help prime and activate anti-tumor T cell responses through CD27 costimulation, while preventing PD-1 inhibitory signals that subvert the immune response.

21

Celldex’s prior clinical experience with combining CD27 activation and PD-1 blockade provide the rationale for linking these two pathways into one molecule. Preclinical data presented at the SITC 34th Annual Meeting in November 2019 demonstrated that CDX-527 is more potent at T cell activation and anti-tumor immunity than the combination of parental monoclonal antibodies.

Later this year, Celldex plans to initiate a Phase 1 dose-escalation study in up to ~90 patients with advanced or metastatic solid tumors that have progressed during or after standard of care therapy to be followed by tumor-specific expansion cohorts. The study is designed to determine the maximum tolerated dose, or MTD, during a dose-escalation phase and to recommend a dose level for further study in the subsequent expansion phase. The expansion is designed to further evaluate the tolerability, biologic and anti-tumor effects of selected dose level(s) of CDX-527 in specific tumor types.

CDX-3379

CDX-3379 is a human monoclonal antibody with half-life extension designed to block the activity of ErbB3 (HER3). We believe ErbB3 may be an important receptor regulating cancer cell growth and survival as well as resistance to targeted therapies. ErbB3 is expressed in many cancers, including head and neck, thyroid, breast, lung and gastric cancers, as well as melanoma. CDX-3379 was recently evaluated in a Phase 2 open-label exploratory study in combination with Erbitux in patients with human papillomavirus (HPV) negative, Erbitux-resistant, advanced HNSCC who have previously been treated with an anti-PD1 checkpoint inhibitor, a population with limited options and a particularly poor prognosis.

The study was initially designed as a Simon two-stage design with an interim futility analysis following enrollment of the first 13 patients. According to the study design, if at least one patient achieved an objective response in the first stage, enrollment could progress to the second stage. The primary endpoint of the study was objective response rate (ORR). Secondary endpoints included assessments of clinical benefit response (CBR), duration of response (DOR), progression-free survival (PFS), overall survival (OS), and safety and pharmacokinetics associated with the combination. Enrollment to the first stage of the Phase 2 study (n=15) was completed and interim data were presented at the 2019 ASCO Annual Meeting in June. A durable confirmed complete response (11+ months) and an unconfirmed partial response (uPR) in a patient that had not received cetuximab were observed; 7 patients experienced stable disease (47%; includes uPR). CDX-3379 in combination with cetuximab was generally associated with target-mediated adverse events of diarrhea and rash and dose reductions and/or delays to the combination therapy in the majority of patients were contemplated to have potentially impacted the magnitude of anti-tumor activity in the study. The analysis presented at ASCO also suggested that observed antitumor activity with CDX-3379 across the Phase 1 and Phase 2 studies might be associated with somatic mutations in the FAT1 and NOTCH1-3 genes—genes associated with tumor suppression.

Based on these biomarker observations and the clinical activity observed in the Phase 2 study, the study was amended and expanded to add an additional 30 patients to allow for an evaluation of the utility of biomarkers for patient selection. Enrollment of the first 15 patients in this expansion cohort was recently completed. One patient experienced an ongoing objective response (7%) and 5 (33%) patients experienced stable disease on at least one tumor assessment. Consistent with the first cohort, the combination of CDX-3379 and cetuximab appears to result in synergistic toxicity with target mediated adverse events of diarrhea and rash. While diarrhea prophylaxis implemented in second cohort appeared to have been effective in ameliorating severity of symptoms it did not decrease the frequency and the incidence of severe rash increased, resulting in dose reductions and/or delays to the combination therapy in the majority of patients. When considered together, the emerging clinical activity data is not adequate to justify the significant toxicity of the combination and the results do not support continued development of the combination, regardless of pending biomarker data. As a result, Celldex is discontinuing development of CDX-3379 and the resources allocated to this program will be focused on expanded development of CDX-0159 and additional assets in our pipeline.


CRITICAL ACCOUNTING POLICIES

 

See Note 2 to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for information regarding newly-adoptednewly adopted and recent accounting pronouncements. See also Note 2 to our financial statements included in our Annual Report on Form 10-K for the year ended December 31, 20162019 for a discussion of our critical accounting policies. There have been no material changes to such critical accounting policies. We believe our most critical accounting policies include accounting for contingent consideration, revenue recognition, impairment ofintangible and long-lived assets, research and development expenses and stock-based compensation expense.

RESULTS OF OPERATIONS

 

Three Months Ended SeptemberJune 30, 20172020 Compared with Three Months Ended SeptemberJune 30, 20162019

 

 

Three Months Ended
September 30,

 

Increase/
(Decrease)

 

Increase/
(Decrease)

 

 Three Months Ended
June 30,
  Increase/
(Decrease)
  Increase/
(Decrease)
 

 

2017

 

2016

 

$

 

%

 

 2020  2019  $  % 

 

(In thousands)

 

 (In thousands) 

Revenue:

 

 

 

 

 

 

 

 

 

Revenues:                

Product Development and Licensing Agreements

 

$

1,238

 

$

493

 

$

745

 

151

%

 $  $195  $(195)  (100)%

Contracts and Grants

 

2,686

 

1,727

 

959

 

56

%

  236   520   (284)  (55)%

Total Revenue

 

$

3,924

 

$

2,220

 

$

1,704

 

77

%

 $236  $715  $(479)  (67)%

Operating Expense:

 

 

 

 

 

 

 

 

 

Operating Expenses:                

Research and Development

 

21,915

 

25,009

 

(3,094

)

(12

)%

  9,705   10,081   (376)  (4)%

General and Administrative

 

5,346

 

6,950

 

(1,604

)

(23

)%

  3,528   3,908   (380)  (10)%

In-Process Research and Development Impairment

 

13,000

 

 

13,000

 

n/a

 

Intangible Asset Impairment  3,500      3,500   n/a 

Gain on Fair Value Remeasurement of Contingent Consideration

 

(4,600

)

 

4,600

 

n/a

 

  (5,132)  (1,017)  4,115   405%

Amortization of Acquired Intangible Assets

 

224

 

254

 

(30

)

(12

)%

Total Operating Expense

 

35,885

 

32,213

 

3,672

 

11

%

  11,601   12,972   (1,371)  (11)%

Operating Loss

 

(31,961

)

(29,993

)

1,968

 

7

%

  (11,365)  (12,257)  (892)  (7)%

Investment and Other Income, Net

 

398

 

395

 

3

 

1

%

  106   478   (372)  (78)%

Net Loss Before Income Tax Benefit

 

(31,563

)

(29,598

)

1,965

 

7

%

  (11,259)  (11,779)  (520)  (4)%

Income Tax Benefit

 

5,200

 

 

5,200

 

n/a

 

  228      228   n/a 

Net Loss

 

$

(26,363

)

$

(29,598

)

$

(3,235

)

(11

)%

 $(11,031) $(11,779) $(748)  (6)%

 

Net Loss

 

The $3.2$0.7 million decrease in net loss for the three months ended SeptemberJune 30, 2017,2020, as compared to the three months ended SeptemberJune 30, 2016,2019, was primarily the result of a decreasean increase in research and development and general and administrative expenses, the gain on fair value remeasurement of contingent consideration, and the income tax benefit recognizedpartially offset by the in-process research and development impairment.

increase in non-cash intangible asset impairment expense.

Revenue

 

The $0.7$0.2 million increasedecrease in product development and licensing agreements revenue for the three months ended SeptemberJune 30, 2017,2020, as compared to the three months ended SeptemberJune 30, 2016,2019, was primarily due to an increasea decrease in reimburseable clinical trial expenses from BMS associated withrevenue under the Phase 1/2 study of varlilumab and Opdivo®, BMS’s PD-1 immune checkpoint inhibitor.Rockefeller Agreement. The $1.0$0.3 million increasedecrease in contracts and grants revenue for the three months ended SeptemberJune 30, 2017,2020, as compared to the three months ended SeptemberJune 30, 2016,2019, was primarily related to a decrease in services performed under our IAVI and Frontier agreements pursuant to which we perform manufacturing and R&D services for IAVIresearch and Frontier.development agreement with Duke University. We expect revenue to remain relatively consistent over the next twelve months, although there may be fluctuations on a quarterly basis.

 


Research and Development Expense

 

Research and development expenses consist primarily of (i) personnel expenses, (ii) laboratory supply expenses relating to the development of our technology, (iii) facility expenses (iv) license fees and (v)(iv) product development expenses associated with our productdrug candidates as follows:

 

 

 

Three Months Ended
September 30,

 

Increase/
(Decrease)

 

Increase/
(Decrease)

 

 

 

2017

 

2016

 

$

 

%

 

 

 

(In thousands)

 

Personnel

 

$

8,933

 

$

8,940

 

$

(7

)

n/a

 

Laboratory Supplies

 

1,230

 

1,114

 

116

 

10

%

Facility

 

2,056

 

1,537

 

519

 

34

%

License Fees

 

162

 

942

 

(780

)

(83

)%

Product Development

 

7,316

 

10,697

 

(3,381

)

(32

)%

  Three Months Ended
June 30
  Increase/
(Decrease)
 
  2020  2019  $  % 
  (In thousands) 
Personnel $5,216  $5,408  $(192)  (4)%
Laboratory Supplies  775   1,257   (482)  (38)%
Facility  1,758   1,558   200   13%
Product Development  1,023   827   196   24%

Personnel expenses primarily include salary, benefits, stock-based compensation and payroll taxes and were relatively consistenttaxes. The $0.2 million decrease in personnel expenses for the three months ended SeptemberJune 30, 2017,2020, as compared to the three months ended SeptemberJune 30, 2016. Increases in salary expenses were offset by2019, was primarily due to lower stock basedstock-based compensation expense. We expect personnel expenses to remain relatively consistent over the next twelve months, although there may be fluctuations on a quarterly basis.

 

Laboratory supplies expenses include laboratory materials and supplies, services, and other related expenses incurred in the development of our technology. The $0.1$0.5 million increasedecrease in laboratory supplies expensesupply expenses for the three months ended SeptemberJune 30, 2017,2020, as compared to the three months ended SeptemberJune 30, 2016,2019, was primarily due to higherlower laboratory services expenses.materials and supplies purchases. We expect laboratory supplies expense to remain relatively consistent over the next twelve months, although there may be fluctuations on a quarterly basis.

Facility expenses include depreciation, amortization, utilities, rent, maintenance, and other related expenses incurred at our facilities. The $0.5 million increase in facility expenses for the three months ended September 30, 2017, as compared to the three months ended September 30, 2016, was primarily due to the addition of the New Haven facility that we acquired with the Kolltan Acquisition and higher depreciation expense of $0.3 million. We expect facility expenses to remain relatively consistent over the next twelve months, although there may be fluctuations on a quarterly basis.

 

License fees expense includes annual licenseFacility expenses include depreciation, amortization, utilities, rent, maintenance fees and milestone payments due upon the achievement of certain development, regulatory and/or commercial milestones.other related expenses incurred at our facilities. The $0.8$0.2 million decreaseincrease in license feefacility expenses for the three months ended SeptemberJune 30, 2017,2020, as compared to the three months ended SeptemberJune 30, 2016,2019, was primarily due to higher variable lease expense, including common area maintenance and utilities, in the timingsecond quarter of certain development and/or regulatory milestones achieved by our drug candidates.2020. We expect license fees expensefacility expenses to remain relatively consistentdecrease over the next twelve months although there may be fluctuations onas a quarterly basis.result of the consolidation our Massachusetts lab and manufacturing facilities in the second quarter of 2020. In July 2020, we extended the term of its Fall River lease through July 2023.

 

Product development expenses include clinical investigator site fees, external trial monitoring costs, data accumulation costs, contracted research and outside clinical drug product manufacturing. The $3.4$0.2 million decreaseincrease in product development expenses for the three months ended SeptemberJune 30, 2017,2020, as compared to the three months ended SeptemberJune 30, 2016,2019, was primarily the result of decreasesdue to an increase in varlilumab contract manufacturing and clinical trialstrial expenses of $1.7$0.4 million, and $1.0 million, respectively.partially offset by a decrease in contract research expenses of $0.2 million. We expect product development expenses to increase over the next twelve months, although there may be fluctuations on a quarterly basis.

General and Administrative Expense

The $0.4 million decrease in general and administrative expenses for the three months ended June 30, 2020, as compared to the three months ended June 30, 2019, was primarily due to lower stock-based compensation expense. We expect general and administrative expenses to remain relatively consistent over the next twelve months, although there may be fluctuations on a quarterly basis.

 

Intangible Asset Impairment

We evaluated the CDX-3379 IPR&D asset for potential impairment as a result of the discontinuation of the CDX-3379 program. We concluded that the CDX-3379 IPR&D asset was fully impaired, and a non-cash impairment charge of $3.5 million was recorded for the three months ended June 30, 2020.


Gain on Fair Value Remeasurement of Contingent Consideration

The $5.1 million gain on fair value remeasurement of contingent consideration for the three months ended June 30, 2020 was primarily due to updated assumptions for CDX-3379 related milestones due to the discontinuation of the CDX-3379 program. The $1.0 million gain on fair value remeasurement of contingent consideration for the three months ended June 30, 2019 was primarily due to changes in discount rates and the passage of time.

Investment and Other Income, Net

The $0.4 million decrease in investment and other income, net for the three months ended June 30, 2020, as compared to the three months ended June 30, 2019, was primarily due to lower levels of cash and investment balances. We anticipate investment income to increase over the next twelve months due to higher levels of cash and investment balances and higher other income related to our sale of New Jersey tax benefits.

Income Tax Benefit

During the quarter ended June 30, 2020, a $0.2 million non-cash income tax benefit was recorded related to the impairment of the CDX-3379 IPR&D asset.

Six Months Ended June 30, 2020 Compared with Six Months Ended June 30, 2019

  Six Months Ended
June 30,
  Increase/
(Decrease)
  Increase/
(Decrease)
 
  2020  2019  $  % 
     (In thousands)    
Revenues:                
Product Development and Licensing Agreements $2,285  $325  $1,960   603%
Contracts and Grants  680   1,815   (1,135)  (63)%
Total Revenue $2,965  $2,140  $825   39%
Operating Expenses:                
Research and Development  21,400   21,232   168   1%
General and Administrative  7,194   8,804   (1,610)  (18)%
Intangible Asset Impairment  3,500      3,500   n/a 
Other Asset Impairment     1,800   (1,800)  (100)%
(Gain) Loss on Fair Value Remeasurement of Contingent Consideration  (4,898)  502   5,400   1,076%
Total Operating Expense  27,196   32,338   (5,142)  (16)%
Operating Loss  (24,231)  (30,198)  (5,967)  (20)%
Investment and Other Income, Net  347   1,180   (833)  (71)%
Net Loss Before Income Tax Benefit  (23,884)  (29,018)  (5,134)  (18)%
Income Tax Benefit  228      228   n/a 
Net Loss $(23,656) $(29,018) $(5,362)  (18)%

Net Loss

The $5.4 million decrease in net loss for the six months ended June 30, 2020, as compared to the six months ended June 30, 2019, was primarily the result of an increase in the gain on fair value remeasurement of contingent consideration and a decrease in non-cash other asset impairment expense, partially offset by an increase in intangible asset impairment expense.


Revenue

The $2.0 million increase in product development and licensing agreements revenue for the six months ended June 30, 2020, as compared to the six months ended June 30, 2019, was primarily due to the $1.8 million received from the Rockefeller Transaction. The $1.1 million decrease in contracts and grants revenue for the six months ended June 30, 2020, as compared to the six months ended June 30, 2019, was primarily related to a decrease in services performed under our manufacturing and research and development agreement with Duke University.

Research and Development Expense

Research and development expenses consist primarily of (i) personnel expenses, (ii) laboratory supply expenses relating to the development of our technology, (iii) facility expenses and (iv) product development expenses associated with our drug candidates as follows:

  Six Months Ended
June 30,
  Increase/
(Decrease)
 
  2020  2019  $  % 
     (In thousands)    
Personnel $10,832  $11,162  $(330)  (3)%
Laboratory Supplies  2,235   2,053   182   9%
Facility  3,487   3,454   33   1%
Product Development  2,829   2,522   307   12%

Personnel expenses primarily include salary, benefits, stock-based compensation and payroll taxes. The $0.3 million decrease in personnel expenses for the six months ended June 30, 2020, as compared to the six months ended June 30, 2019, was primarily due to lower stock-based compensation expense.

Laboratory supplies expenses include laboratory materials and supplies, services, and other related expenses incurred in the development of our technology. The $0.2 million increase in laboratory supply expenses for the six months ended June 30, 2020, as compared to the six months ended June 30, 2019, was primarily due to higher laboratory materials and supplies purchases.

Facility expenses include depreciation, amortization, utilities, rent, maintenance and other related expenses incurred at our facilities. Facility expenses for the six months ended June 30, 2020 were consistent with the six months ended June 30, 2019.

Product development expenses include clinical investigator site fees, external trial monitoring costs, data accumulation costs, contracted research and outside clinical drug product manufacturing. The $0.3 million increase in product development expenses for the six months ended June 30, 2020, as compared to the six months ended June 30, 2019, was primarily due to an increase in clinical trial and contract manufacturing expenses of $0.9 million, partially offset by a decrease in contract research expenses of $0.6 million.

General and Administrative Expense

 

The $1.6 million decrease in general and administrative expenses for the threesix months ended SeptemberJune 30, 2017,2020, as compared to the threesix months ended SeptemberJune 30, 2016,2019, was primarily due to lower commercial planning costs of $0.7 million and lower stock-based compensation of $0.6 million. We expect general and administrative expense to remain relatively consistent over the next twelve months, although there may be fluctuations on a quarterly basis.expense.

 

In-Process Research and DevelopmentIntangible Asset Impairment

 

We evaluated the CDX-3379 IPR&D asset for potential impairment as a result of the discontinuation of the CDX-3379 program. We concluded that the CDX-3379 IPR&D asset was fully impaired, and a non-cash impairment charge of $3.5 million was recorded for the three months ended June 30, 2020.


Other Asset Impairment

We concluded that the Company’s investment in an undisclosed private company was impaired as a result of a deterioration in the private company’s financial condition and recorded a non-cash impairment charge of $13.0$1.8 million on the anti-KIT program IPR&D assets acquired from Kolltan during the three months ended September 30, 2017. This impairment charge was related to changes in projected development and regulatory timelines regarding the anti-KIT program.first quarter of 2019.

 

Gain on Fair Value Remeasurement of Contingent Consideration

 

The $4.6$4.9 million gain on fair value remeasurement of contingent consideration for the threesix months ended SeptemberJune 30, 20172020 was primarily due to a reduction in fair value attributedupdated assumptions for CDX-3379 related milestones due to milestones related to our anti-KIT program. This gain was partially offset by losses related to changes in discount ratesthe discontinuation of the CDX-3379 program and the passage of time affecting remaining milestones. See Note 3 to the financial statements included herein for a discussion of the contingent consideration that may be payable related to the Kolltan Acquisition.

Amortization Expense

Amortization expenses for the three months ended September 30, 2017 were relatively consistent with the three months ended September 30, 2016. We expect amortization expense of acquired intangible assets to remain consistent over the next twelve months.

Investment and Other Income, Net

Investment and other income, net for the three months ended September 30, 2017 was consistent with the three months ended September 30, 2016. We anticipate investment income to decrease over the next twelve months primarily due to lower levels of cash and investment balances.

Income Tax Benefit

time. The income tax benefit relates to a $5.2$0.5 million decrease in deferred tax liabilities, net during the three months ended September 30, 2017. This decrease was due to the partial impairment of the anti-KIT program IPR&D assets.

Nine Months Ended September 30, 2017 Compared with Nine Months Ended September 30, 2016

 

 

Nine Months Ended
September 30,

 

Increase/
(Decrease)

 

Increase/
(Decrease)

 

 

 

2017

 

2016

 

$

 

%

 

 

 

(In thousands)

 

Revenue:

 

 

 

 

 

 

 

 

 

Product Development and Licensing Agreements

 

$

2,488

 

$

1,551

 

$

937

 

60

%

Contracts and Grants

 

6,799

 

3,362

 

3,437

 

102

%

Total Revenue

 

$

9,287

 

$

4,913

 

$

4,374

 

89

%

Operating Expense:

 

 

 

 

 

 

 

 

 

Research and Development

 

72,707

 

78,168

 

(5,461

)

(7

)%

General and Administrative

 

19,109

 

24,049

 

(4,940

)

(21

)%

In-Process Research and Development Impairment

 

13,000

 

 

13,000

 

n/a

 

Gain on Fair Value Remeasurement of Contingent Consideration

 

(200

)

 

200

 

n/a

 

Amortization of Acquired Intangible Assets

 

672

 

760

 

(88

)

(12

)%

Total Operating Expense

 

105,288

 

102,977

 

2,311

 

2

%

Operating Loss

 

(96,001

)

(98,064

)

(2,063

)

(2

)%

Investment and Other Income, Net

 

1,611

 

1,841

 

(230

)

(12

)%

Net Loss Before Income Tax Benefit

 

(94,390

)

(96,223

)

(1,833

)

(2

)%

Income Tax Benefit

 

5,200

 

 

5,200

 

n/a

 

Net Loss

 

$

(89,190

)

$

(96,223

)

(7,033

)

(7

)%

Net Loss

The $7.0 million decrease in net loss for the nine months ended September 30, 2017, as compared to the nine months ended September 30, 2016, was primarily the result of an increase in contracts and grants revenue, a decrease in general and administrative and research and development expenses and the income tax benefit recognized offset by the in-process research and development impairment.

Revenue

The $0.9 million increase in product development and licensing agreements revenue for the nine months ended September 30, 2017, as compared to the nine months ended September 30, 2016, was primarily due to an increase in reimburseable clinical trial expenses related to our BMS agreement. The $3.4 million increase in contracts and grants revenue for the nine months ended September 30, 2017, as compared to the nine months ended September 30, 2016, was primarily related to our IAVI and Frontier agreements executed in 2017.

Research and Development Expense

 

 

Nine Months Ended
September 30,

 

Increase/
(Decrease)

 

Increase/
(Decrease)

 

 

 

2017

 

2016

 

$

 

%

 

 

 

(In thousands)

 

Personnel

 

$

28,079

 

$

26,551

 

$

1,528

 

6

%

Laboratory Supplies

 

3,541

 

2,774

 

767

 

28

%

Facility

 

6,649

 

4,421

 

2,228

 

50

%

License Fees

 

479

 

1,381

 

(902

)

(65

)%

Product Development

 

26,965

 

36,950

 

(9,985

)

(27

)%

The $1.5 million increase in personnel expenses for the nine months ended September 30, 2017, as compared to the nine months ended September 30, 2016, was primarily due to an increase in salaries expense and headcount related to the Kolltan acquisition.

The $0.8 million increase in laboratory supplies expense for the nine months ended September 30, 2017, as compared to the nine months ended September 30, 2016, was primarily due to higher manufacturing supply purchases.

The $2.2 million increase in facility expenses for the nine months ended September 30, 2017, as compared to the nine months ended September 30, 2016, was primarily due to the addition of our New Haven facility that we acquired with the Kolltan acquisition and higher depreciation expense of $1.3 million. In March 2017, the Company terminated its lease in Branford, CT and consolidated its Connecticut operations in its New Haven facility.

The $0.9 million decrease in license fees expense for the nine months ended September 30, 2017, as compared to the nine months ended September 30, 2016, was due to the timing of certain development and/or regulatory milestones achieved by our drug candidates.

The $10.0 million decrease in product development expenses for the nine months ended September 30, 2017, as compared to the nine months ended September 30, 2016, was primarily the result of (i) decreases in varlilumab and Rintega contract manufacturing expenses of $6.8 million and $2.5 million, respectively, partially offset by an increase in glembatumumab vedotin contract manufacturing expenses of $2.6 million and (ii) decreases in Rintega and varlilumab clinical trial costs of $5.1 million and $1.9 million, respectively, partially offset by increases in glembatumumab vedotin, anti-KIT and CDX-3379 clinical trial costs of $3.3 million.

General and Administrative Expense

The $4.9 million decrease in general and administrative expenses for the nine months ended September 30, 2017, as compared to the nine months ended September 30, 2016, was primarily due to lower commercial planning costs of $3.1 million and lower stock-based compensation of $1.4 million.

In-Process Research and Development Impairment

We recorded a non-cash impairment charge of $13.0 million on the anti-KIT program IPR&D assets acquired from Kolltan during the nine months ended September 30, 2017. This impairment charge was related to changes in projected development and regulatory timelines regarding the anti-KIT program.

Gain on Fair Value Remeasurement of Contingent Consideration

The $0.2 million gain on fair value remeasurement of contingent consideration for the ninesix months ended SeptemberJune 30, 20172019 was primarily due to a reduction in fair value attributed to the milestones related to our anti-KIT program, partially offset by losses related to changes in discount rates and the passage of time affecting remaining milestones.time.

 

Amortization Expense

Amortization expenses for the nine months ended September 30, 2017 were relatively consistent as compared to the nine months ended September 30, 2016.

Investment and Other Income, Net

 

The $0.2$0.8 million decrease in investment and other income, net for the ninesix months ended SeptemberJune 30, 2017,2020, as compared to the ninesix months ended SeptemberJune 30, 2016,2019, was primarily due to lower levels of cash and investment balances.balances and lower other income related to our sale of New Jersey tax benefits.

 

Income Tax Benefit

 

The deferredDuring the quarter ended June 30, 2020, a $0.2 million non-cash income tax benefit relateswas recorded related to a $5.2 million decrease in deferred tax liabilities, net during the nine months ended September 30, 2017. This decrease was due to the partial impairment of the anti-KIT programCDX-3379 IPR&D assets.asset.

LIQUIDITY AND CAPITAL RESOURCES

 

Our cash equivalents are highly liquid investments with a maturity of three months or less at the date of purchase and consist primarily of investments in money market mutual funds with commercial banks and financial institutions. We maintain cash balances with financial institutions in excess of insured limits. We do not anticipate any losses with respect to such cash balances. We invest our excess cash balances in marketable securities, including municipal bond securities, U.S. government agency securities and high-grade corporate bonds that meet high credit quality standards, as specified in our investment policy. Our investment policy seeks to manage these assets to achieve our goals of preserving principal and maintaining adequate liquidity.

 

The use of our cash flows for operations has primarily consisted of salaries and wages for our employees; facility and facility-related costs for our offices, laboratories and manufacturing facility; fees paid in connection with preclinical studies, clinical studies, contract manufacturing, laboratory supplies and services; and consulting, legal and other professional fees. To date, the primary sources of cash flows from operations have been payments received from our collaborative partners and from government entities.entities and payments received for contract manufacturing and research and development services provided by us. The timing of any new contract manufacturing and research and development agreements, collaboration agreements, government contracts or grants and any payments under these agreements, contracts or grants cannot be easily predicted and may vary significantly from quarter to quarter.

 

At SeptemberJune 30, 2017,2020, our principal sources of liquidity consisted of cash, cash equivalents and marketable securities of $140.5$206.9 million. We have had recurring losses and incurred a net loss of $89.2$23.7 million for the ninesix months ended SeptemberJune 30, 2017.2020. Net cash used in operations for the ninesix months ended SeptemberJune 30, 20172020 was $80.4$23.3 million. We believe that the cash, cash equivalents and marketable securities at SeptemberJune 30, 2017, combined with the $11.3 million in net proceeds from sales of common stock under the Cantor agreement during October 2017,2020 are sufficient to meet estimated working capital requirements and fund planned operations through 2018; however, this2023. This could be impacted if we elected to pay Kolltan contingent consideration related to the Kolltan acquisition,milestones, if any, in cash.

 


During the next twelve months, we willmay take further steps to raise additional capital to meet our long-term liquidity needs.  Our capital raising activities may include,needs including, but may not be limited to, one or more of the following: the licensing of drug candidates with existing or new collaborative partners, possible business combinations, issuance of debt, or the issuance of common stock or other securities via private placements or public offerings. WhileAlthough we may seekhave been successful in raising capital through a number of means,in the past, there can be no assurance that additional financing will be available on acceptable terms, if at all, and our negotiating position in capital-raisingcapital raising efforts may worsen as existing resources are used. There is also no assurance that we will be able to enter into further collaborative relationships. Additional equity financings may be dilutive to our stockholders; debt financing, if available, may involve significant cash payment obligations and covenants that restrict our ability to operate as a business; and licensing or strategic collaborations may result in royalties or other terms which reduce our economic potential from products under development. Our ability to continue funding our planned operations into and beyond twelve months from the issuance date is also dependent on the timing and manner of payment of future contingent milestones from the Kolltan acquisition, in the event that we achieve the drug candidate milestones related to those payments. We may decide to pay those milestone payments in cash, shares of our common stock or a combination thereof. If we are unable to raise the funds necessary to meet our long-term liquidity needs, we may have to delay or discontinue the development of one or more programs, discontinue or delay ongoing or anticipated clinical trials, license out programs earlier than expected, raise funds at a significant discount or on other unfavorable terms, if at all, or sell all or a part of our business.

 

Operating Activities

 

Net cash used in operating activities was $80.4$23.3 million for the ninesix months ended SeptemberJune 30, 20172020 as compared to $92.7$24.3 million for the ninesix months ended SeptemberJune 30, 2016.2019. The decrease in net cash used in operating activities was primarily due to a decrease in net loss of $7.0 milliongeneral and changesadministrative expenses and an increase in operating assetscash received related to product development and liabilities.licensing agreements. We expect that cash used in operating activities will decreaseremain relatively consistent over the next twelve months, although there may be fluctuations on a quarterly basis.

 

We have incurred and will continue to incur significant costs in the area of research and development, including preclinical studies and clinical trials, as our drug candidates are developed. We plan to spend significant amounts to progress our current drug candidates through the clinical trial and commercialization process as well as to develop additional drug candidates. As our drug candidates progress through the clinical trial process, we may be obligated to make significant milestone payments.

 

Investing Activities

 

Net cash provided byused in investing activities was $59.9$86.6 million for the ninesix months ended SeptemberJune 30, 20172020 as compared to $41.1 million for the nine months ended September 30, 2016. The increase in net cash provided by investing activities of $8.3 million for the six months ended June 30, 2019. The increase in net cash used in investing activities was primarily due to net purchases of marketable securities for the six months ended June 30, 2020 of $85.4 million as compared to net sales and maturities of marketable securities for the nine months ended September 30, 2017 of $61.4 million as compared to $45.0$8.8 million for the ninesix months ended SeptemberJune 30, 2016.2019.

Financing Activities

 

Net cash provided by financing activities was $32.8$166.7 million for the ninesix months ended SeptemberJune 30, 20172020 as compared to $11.2$11.4 million for the ninesix months ended SeptemberJune 30, 2016. Net proceeds from stock issuances pursuant to employee benefit plans were $0.2 million during2019.

During the ninesix months ended SeptemberJune 30, 2017 as compared to $0.5 million for the nine months ended September 30, 2016.

In May 2016, we entered into a controlled equity offering sales agreement with Cantor Fitzgerald & Co. to allow us to issue and sell shares of our common stock having an aggregate offering price of up to $60.0 million from time to time through Cantor, acting as agent. During the nine months ended September 30, 2017 and 2016,2020, we issued 11,326,363 and 2,395,9496.7 million shares respectively, of our common stock under this agreement withour Cantor Agreement resulting in net proceeds of $25.3 million after deducting commission and offering expenses. At June 30, 2020, we had $18.3 million remaining in aggregate gross offering price available under the agreement.

During the three months ended June 30, 2020, the Company issued 15,384,614 shares of its common stock in an underwritten public offering resulting in net proceeds to usthe Company of $32.6$141.4 million, and $10.7 million, respectively, after deducting commissionunderwriting fees and offering expenses.

 


AGGREGATE CONTRACTUAL OBLIGATIONSAggregate Contractual Obligations

 

The disclosures relating to our contractual obligations reported in our Annual Report on Form 10-K for the year ended December 31, 20162019 which was filed with the SEC on March 14, 201726, 2020 have not materially changed since we filed that report.

OFF-BALANCE SHEET ARRANGEMENTS

We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined under SEC rules. 

Item 3.Quantitative and Qualitative Disclosures about Market Risk

Item 3.Quantitative and Qualitative Disclosures about Market Risk

 

We own financial instruments that are sensitive to market risk as part of our investment portfolio. Our investment portfolio is used to preserve our capital until it is used to fund operations, including our research and development activities. None of these market-risk sensitive instruments are held for trading purposes. We invest our cash primarily in money market mutual funds. These investments are evaluated quarterly to determine the fair value of the portfolio. From time to time, we invest our excess cash balances in marketable securities including municipal bond securities, U.S. government agency securities and high-grade corporate bonds that meet high credit quality standards, as specified in our investment policy. Our investment policy seeks to manage these assets to achieve our goals of preserving principal and maintaining adequate liquidity. Because of the short-term nature of these investments, we do not believe we have material exposure due to market risk. The impact to our financial position and results of operations from likely changes in interest rates is not material.

 

We do not utilize derivative financial instruments. The carrying amounts reflected in the consolidated balance sheet of cash and cash equivalents, accounts receivables and accounts payable approximatesapproximate fair value at SeptemberJune 30, 20172020 due to the short-term maturities of these instruments.

Item 4.Controls and Procedures

Item 4.Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures.

 

As of SeptemberJune 30, 2017,2020, we evaluated, with the participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of SeptemberJune 30, 2017.2020. Our disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within time periods specified by the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

 

Changes in Internal Control Over Financial Reporting.

 

There were no changes in our internal control over financial reporting during the quarter ended SeptemberJune 30, 20172020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.


PART II — OTHER INFORMATION

 

Item 1A.Risk Factors

Item 1A.Risk Factors

 

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2016,2019, which could materially affect our business, financial condition or future results. The risks described in our Annual Report on Form 10-K may not be the only risks facing the Company. Additional risks and uncertainties not currently known to the Company or that the Company currently deems to be immaterial also may materially adversely affect the Company’s business, financial condition and/or operating results.

 

There were no material changes to the risk factors previously disclosed in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 14, 2017.26, 2020.

Item 5.Other Information

Item 5.Other Information

 

On November 1, 2017,August 4, 2020, we determined that we should record a non-cash partial impairment charge of $13.0$3.5 million should be recorded for the three months ended SeptemberJune 30, 20172020 related to our anti-KITCDX-3379 program. The anti-KITCDX-3379 program was acquired as part of our acquisition of Kolltan Pharmaceuticals, Inc.inInc. in the fourth quarter of 2016. We determined that changes in projectedthe discontinuation of development and regulatory timelines related to the anti-KIT programof CDX-3379 constituted a triggering event that required us to evaluate the intangible asset for impairment. The time periods to receive approvals from the FDA and other regulatory agencies are subject to uncertainty and therefore we will continue to evaluate the development progress for the anti-KIT program and monitor the remaining $27.0 million intangible asset for further impairment. See Note 5 to the consolidated financial statements included elsewhere in this quarterly report on Form 10-Q for further discussion of this impairment charge.

Item 6.Exhibits

Item 6.Exhibits

 

The exhibits filed as part of this quarterly report on Form 10-Q are listed in the exhibit index immediately preceding the exhibitsincluded herewith and are incorporated by reference herein.

EXHIBIT INDEX

 

Exhibit
No.

Description

3.1

*10.1

Third Restated CertificateExtension of Incorporation ofLease Agreement between the Company incorporated by reference to Exhibit 3.1and University of the Company’s Registration Statement on Form S-4 (Reg. No. 333-59215), filedMassachusetts Dartmouth dated as of July 16, 1998 with the Securities and Exchange Commission.1, 2020

3.2

*31.1

Certificate of Amendment of Third Restated Certificate of Incorporation of the Company, incorporated by reference to Exhibit 3.1 of the Company’s Registration Statement on Form S-4 (Reg. No. 333-59215), filed July 16, 1998 with the Securities and Exchange Commission.

3.3

Second Certificate of Amendment of Third Restated Certificate of Incorporation of the Company, incorporated by reference to Exhibit 3.2 of the Company’s Registration Statement on Form S-4 (Reg. No. 333-59215), filed July 16, 1998 with the Securities and Exchange Commission.

3.4

Third Certificate of Amendment of Third Restated Certificate of Incorporation of the Company, incorporated by reference to Exhibit 3.1 of the Company’s Quarterly Report on Form 10-Q, filed May 10, 2002 with the Securities and Exchange Commission.

3.5

Fourth Certificate of Amendment of Third Restated Certificate of Incorporation of the Company, incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K, filed on March 11, 2008 with the Securities and Exchange Commission.

3.6

Fifth Certificate of Amendment of Third Restated Certificate of Incorporation of the Company, incorporated by reference to Exhibit 3.2 of the Company’s Current Report on Form 8-K, filed on March 11, 2008 with the Securities and Exchange Commission.

3.7

Sixth Certificate of Amendment of Third Restated Certificate of Incorporation of the Company, incorporated by reference to Exhibit 3.7 of the Company’s Quarterly Report on Form 10-Q, filed November 10, 2008 with the Securities and Exchange Commission.

10.1

Employment Agreement, dated October 3, 2017, by and between Margo Heath-Chiozzi and Celldex Therapeutics., Inc., incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K, filed on October 3, 2017 with the Securities and Exchange Commission.

*31.1

Certification of President and Chief Executive Officer

*31.2

Certification of Senior Vice President and Chief Financial Officer

**32.1

Section 1350 Certifications

*101

XBRL Instance Document.

*101

XBRL Taxonomy Extension Schema Document.

*101

XBRL Taxonomy Extension Calculation Linkbase Document.

*101

XBRL Taxonomy Extension Definition Linkbase Document.

*101

XBRL Taxonomy Extension Label Linkbase Document.

*101

XBRL Taxonomy Extension Presentation Linkbase Document.

 


*       Filed herewith.

**       Furnished herewith.


*

Filed herewith.

**

Furnished herewith.

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

CELLDEX THERAPEUTICS, INC.

BY:

/s/ ANTHONY S. MARUCCI

Dated: November 7, 2017

August 6, 2020

Anthony S. Marucci

President and Chief Executive Officer

(Principal Executive Officer)

/s/ SAM MARTIN

Dated: November 7, 2017

August 6, 2020

Sam Martin

Senior Vice President and Chief Financial Officer

(Principal Financial and Accounting Officer)

 


35