Item 1. BUSINESS
Overview
Celldex Therapeutics, Inc., which we refer to as "Celldex," "we," "us," "our" or the "Company," is a biopharmaceutical company focused on
the development and commercialization of several immunotherapy technologies and other cancer-targeting biologics. Our drug candidates, including antibodies, antibody-drug conjugates and other
protein-based therapeutics, are derived from a broad set of complementary technologies 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 principal in a Phase 1 study with varlilumab, which supported the initiation of several combination studies in
various indications. We also have a number of earlier stage drug candidates in clinical development, including CDX-1401, a targeted immunotherapeutic aimed at antigen presenting cells, or APCs, for
cancer indications; CDX-301, an immune cell mobilizing agent and dendritic cell growth factor; and CDX-014, an antibody-drug conjugate targeting renal and ovarian cancers. In November 2016, we
completed the acquisition of Kolltan Pharmaceuticals, Inc. (Kolltan), a privately held company focused on the discovery and development of novel, antibody-based drugs targeting receptor
tyrosine kinases (RTKs). This acquisition added the following drug candidates to our clinical pipeline: CDX-0158 (formerly KTN0158), a humanized monoclonal antibody (mAb) currently in a Phase 1
dose escalation study in refractory gastrointestinal stromal tumors (GIST) and other KIT positive tumors; and, CDX-3379 (formerly KTN3379; MEDI3379), a human monoclonal antibody which recently
completed a Phase 1b study in patients with solid tumors. We also acquired the TAM program, a broad antibody discovery effort to generate antibodies that modulate the TAM family of RTKs,
comprised of Tyro3, AXL and MerTK, which are expressed on tumor-infiltrating macrophages, dendritic cells and some tumors. Our drug candidates address market opportunities for which we believe current
cancer therapies are inadequate or non-existent.
We
are building a fully integrated, commercial-stage biopharmaceutical company that develops important therapies for patients with unmet medical needs. 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 programs are currently fully-owned by Celldex.
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Product (generic)
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Indication/Field
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Status
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Sponsor
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Glembatumumab vedotin
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Triple negative breast cancer
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Phase 2b
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Celldex
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Glembatumumab vedotin
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Metastatic melanoma (with varlilumab or CPI*)
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Phase 2
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Celldex
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Varlilumab
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Multiple solid tumors (with nivolumab)
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Phase 2
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Celldex**
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CDX-0158
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Gastrointestinal and other KIT-postive tumors
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Phase 1
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Celldex
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CDX-3379
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Multiple solid tumors (in combination regimens)
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Phase 1
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Celldex
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CDX-014
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Renal cell carcinoma
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Phase 1
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Celldex
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-
*
-
checkpoint
inhibitor
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**
-
BMS
collaboration
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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.
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Product (generic)
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Indication/Field
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Status
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Sponsor
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Glembatumumab vedotin
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Uveal melanoma
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Phase 2
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NCI (CRADA)
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Glembatumumab vedotin
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Squamous cell lung cancer
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Phase 2
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PrECOG, LLC
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CDX-1401/CDX-301
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Multiple solid tumors
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Phase 2
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CITN
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Our
future success depends upon many factors, including our ability, and that of any licensees and collaborators that we may have, to successfully develop, obtain regulatory approval for
and commercialize our drug candidates, as well as any related companion diagnostic tests. We have had no commercial revenues from sales of our drug candidates, and we have had a history of operating
losses. It is possible that we may not be able to successfully develop, obtain regulatory approval for, or commercialize, our drug candidates, and we are subject to a number of risks that you should
be aware of before investing in us. These risks are described more fully in "Item 1A. Risk Factors."
Clinical Development Programs
As previously disclosed, it is our intention to integrate Kolltan without increasing our planned cash burn for 2017. Following the addition of
the Kolltan programs, we undertook a full review of our pipeline and associated programs to identify priority areas that we believe have the highest probability of potentially impacting disease while
also identifying areas for improved efficiency and cost savings. The adjustments are reflected in the following clinical pipeline program update.
Glembatumumab Vedotin
Glembatumumab vedotin is an antibody-drug conjugate, or ADC, that consists of a fully human monoclonal antibody, CR011, linked to a potent
cell-killing drug, monomethyl auristatin E, or MMAE. The CR011 antibody specifically targets glycoprotein NMB, referred to as gpNMB that is over-expressed in a variety of cancers including breast
cancer, melanoma, non-small cell lung cancer, uveal melanoma and osteosarcoma, among others. The ADC technology, comprised of MMAE and a stable linker system for attaching it to CR011, was licensed
from Seattle Genetics, Inc. and is the same as that used in the marketed product Adcetris®. The ADC is designed to be stable in the bloodstream. Following intravenous
administration, glembatumumab vedotin targets 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 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 expect that, if necessary, such a companion diagnostic must be approved by the FDA or certain other foreign regulatory agencies before glembatumumab vedotin
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 phase to confirm the maximum tolerated dose, or MTD, and then expanded into a Phase 2 open-label,
multi-center study. The study supported an acceptable safety profile of glembatumumab
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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) 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)
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High gpNMB Expression
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Triple Negative and
gpNMB Over-Expression
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Glembatumumab
Vedotin
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Investigator's
Choice
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Glembatumumab
Vedotin
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Investigator's
Choice
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(n=23)
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(n=11)
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(n=10)
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(n=6)
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Response Rate
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30
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%
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9
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%
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40
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%
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0
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%
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Disease Control Rate
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65
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%
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27
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%
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90
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%
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17
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%
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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
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High gpNMB Expression
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Triple Negative and gpNMB
Over-Expression
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Glembatumumab
Vedotin
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Investigator's
Choice
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Glembatumumab
Vedotin
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Investigator's
Choice
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Median PFS (months)
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2.8
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1.5
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3.5
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1.5
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p=0.18
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p=0.0017
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Median OS (months)
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10.0
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5.7
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10.0
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5.5
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p=0.31
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p=0.003
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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 are open 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 as 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. Based on consistent improvements in enrollment trends to the METRIC study over the last several months, we anticipate that study enrollment will be
completed by the end of September 2017. Efforts to ensure delivery of manufactured drug that is ready for commercialization and a companion diagnostic, including partnering with a diagnostic company,
are underway.
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 (n=60)
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 the potential clinical
benefit of the combination and to explore varlilumab's potential biologic and immunologic effect when combined with an ADC. In November 2016, we amended the protocol again 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. Both
additional cohorts are open to enrollment. The primary endpoint for each cohort is ORR. 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.
We
presented data from the single-agent cohort at the European Society for Medical Oncology (ESMO) Congress in October 2016. The cohort enrolled 62 evaluable patients with unresectable
stage III (n=1; 2%) or stage IV (n=61; 98%) melanoma. All patients had progressed after checkpoint inhibitor therapy, and almost all patients had received both ipilimumab (n=58; 94%) and
anti-PD-1/anti-PDL-1 (n=58; 94%) therapy. Twelve patients presented with BRAF mutation, and
eleven had prior treatment with BRAF or BRAF/MEK targeted agents. The primary endpoint of the cohort (6 or more objective responses in the first 52 patients enrolled) was exceeded. Seven of 62 (11%)
patients experienced a confirmed response, and an additional three patients also experienced
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single
timepoint responses. 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
PFS for all patients was 4.4 months. In addition, patients who experienced rash in the first cycle of treatment had a 20% confirmed response rate and a more prolonged PFS of 5.5 months
[p=0.054; hazard rating=0.52 (0.27, 1.02)]. We also intend to conduct exploratory analyses of pre-entry skin biopsies in future patients to investigate potential predictors of
response to glembatumumab vedotin, given the potential association of rash and outcome.
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. 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 will assess the safety and
tolerability of glembatumumab vedotin at the current dose of 1.9 mg/kg and then 2.2 mg/kg in order to determine whether higher dosing is feasible in this population. 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 of safety and tolerability and further assessment of anti-tumor activity across a broad range of endpoints.
We
have also entered into a Cooperative Research and Development Agreement, or CRADA, with the National Cancer Institute, or NCI, under which NCI is sponsoring two studies of
glembatumumab vedotinone in uveal melanoma and one in osteosarcoma. The uveal melanoma study is a single-arm, open-label study in patients with locally recurrent or metastatic uveal
melanoma and is currently open to enrollment. The primary outcome measure is ORR. Secondary outcome measures include change in gpNMB expression on tumor tissue via immunohistochemistry, safety, OS and
PFS. We expect data from this study will be presented at a future medical meeting in the first half of 2017. The osteosarcoma study is a single-arm, open-label, evaluation of adolescent and adult
patients with recurrent or refractory osteosarcoma. The co-primary objectives are to determine whether glembatumumab vedotin therapy either increases the disease control rate at 4 months in
patients with recurrent measurable osteosarcoma as compared to historical experience and/or whether glembatumumab vedotin therapy produces an objective response rate greater than 20% in patients
without previous eribulin (eribulin mesylate) treatment. Secondary outcome measures include safety,
pharmacokinetics and the relation of gpNMB expression as measured by immunohistochemistry to clinical response. The study had a two stage design with a pre-specified activity threshold necessary in
the first stage to progress enrollment to the second stage. The study did not meet the activity threshold for progressing to stage 2 and therefore no additional patients will be enrolled. We
expect data from this study will be presented at a future medical meeting.
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 primarily 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
vitro
and
in vivo
models. We have entered into license agreements with
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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 in November 2014. Varlilumab to date has shown 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 56 patients were dosed in dose escalation
cohorts (various solid and hematologic B-cell tumors), and 34 patients were dosed in the expansion cohorts (melanoma and RCC) 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 experienced significant objective responses including a complete response in Hodgkin lymphoma (continued at 33.1+
months as of September 2016; patient no longer on study) and a partial response in renal cell carcinoma of 27.7+ months (as of September 2016). Thirteen patients experienced stable disease with a
range of 3-47.3+ months (as of September 2016). As of December 2016, there are two patients continuing in long term follow-up.
Phase 1/2 Varlilumab/Opdivo® Combination Study:
In May 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. The Phase 1 dose escalation portion of the study,
conducted in patients with solid tumors, has completed enrollment (n=36) and primarily enrolled patients with colorectal and ovarian cancer.
Data
were presented from the Phase 1 portion of the varlilumab and Opdivo study in a poster at the American Association for Cancer Research (AACR) Annual Meeting in April 2016.
The primary objective of the Phase 1 portion of the study was to evaluate the safety and tolerability of the combination. The combination showed acceptable tolerability and safety across all
dose levels without
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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, were also noted. In a subset of patients (n=17) on study who had both pre- and post-tumor biopsies available, preliminary
evidence suggest a correlation between biomarker data and stable disease or better in seven of these patients (4 ovarian cancer, 2 colorectal cancer, 1 squamous cell carcinoma of the head and neck).
All dose levels of the combination therapy showed an acceptable tolerability and safety profile, without identification of a maximum tolerated dose. In the Phase 2 portion of the study,
varlilumab is administered at 3 mg/kg in the majority of cohorts, based upon cumulative data across multiple studies.
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). Based on a recent protocol amendments, additional dosing schedules are being explored in ovarian cancer (versus renal cell carcinoma) and,
as previously disclosed, 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 pharmacokinetics 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 will work with BMS to present data from the study at a future medical meeting.
Phase 1/2 Varlilumab/Tecentriq® Combination Study:
In March 2015, we entered into a clinical trial collaboration with Roche to
evaluate
the safety, tolerability and preliminary efficacy of varlilumab and Tecentriq (anti-PDL1), Roche's cancer immunotherapy, in a Phase 1/2 study. Under the terms of this agreement, Roche is providing
study drug, and we are responsible for conducting and funding the study. The Phase 1 portion of the study is being conducted in bladder cancer and renal cell carcinoma, and the primary outcome
is safety and tolerability. The Phase 1 portion of the study completed enrollment in the third quarter of 2016. Patients continue to be followed, and we expect data from this study will be
presented at a future medical meeting. Given the advancement of varlilumab into a broad Phase 2 study in combination with Opdivo and our efforts to identify areas for cost-containment, we will
not be advancing the varlilumab/Tecentriq study to Phase 2.
Phase 1/2 Varlilumab/Sutent® Combination Study:
In May 2015, we initiated a Phase 1/2 safety and tolerability study examining the
combination of varlilumab and Sutent in patients with metastatic clear cell renal cell carcinoma. The Phase 1 portion of the study assesses the safety and tolerability of varlilumab at varying
doses when administered with Sutent. The Phase 1 portion of the study completed enrollment in the fourth quarter of 2016. Patients continue to be followed, and data from this study will be
presented at a future medical meeting. Given the advancement of varlilumab into a broad Phase 2 study in combination with Opdivo and our efforts to identify areas for cost-containment, we will
not be advancing the varlilumab/Sutent study to Phase 2.
Phase 1/2 Varlilumab/Yervoy® +/- CDX-1401 Combination Study:
In April 2015, we initiated a Phase 1/2 safety pilot and expansion
study
examining the combination of varlilumab and Yervoy in patients with stage III or IV metastatic melanoma. Since initiating the study, the standard of care has evolved, and there has been
increasing physician reluctance to use Yervoy in this setting. As such, given the broad development strategy in place for varlilumab, as previously disclosed, this study was closed to enrollment in
the third quarter of 2016.
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CDX-0158
CDX-0158 (formerly KTN0158), is a humanized monoclonal antibody designed to inhibit KIT activation in tumor cells and mast cells. KIT is
expressed in many tumor types including gastrointestinal stromal tumors (or GIST), sarcomas, small cell lung cancer, melanoma, acute myeloid leukemia (AML) and mast cell leukemia. It has also been
implicated in asthma and neurofibromatosis. We are currently developing CDX-0158 for the treatment of GIST. Small molecule drugs currently approved to treat GIST inhibit mutant KIT, but acquired
resistance develops via secondary, drug-resistant KIT mutations in the majority of patients over time. CDX-0158 is designed to uniquely prevent KIT activation by inhibiting both receptor dimerization
and ligand binding. CDX-0158 has demonstrated preclinical activity versus the most common c-KIT mutations in human GIST, including treatment of mastocytoma in a canine model.
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. Enrollment is ongoing. Upon completion of Phase 1 assuming a successful outcome, we plan to develop CDX-0158 in
patients with refractory GIST given the significant unmet need for these patients.
Preclinical
data published in
Molecular Cancer Therapeutics
in January 2017 demonstrate that KIT inhibition in certain immune cells with
CDX-0158 enhances the activity of checkpoint blockade, providing additional opportunities for combination therapy. This mechanism may also be effective with other immunotherapies, in particular with
our CD27 agonist, varlilumab.
CDX-3379
CDX-3379 (formerly KTN3379 and MEDI3379) 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.
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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 are currently exploring plans for advancement into
Phase 2 study.
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. We are developing CDX-1401 for the treatment of malignant melanoma and a variety of solid tumors which express the cancer antigen NY-ESO-1, which we licensed from the
Ludwig Institute for Cancer Research in 2006. 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
elicited 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 alone 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, 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
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supporting
an investigator initiated study of CDX-1401 in combination with Tecentriq® 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
metastatic 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 in June 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. 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 data from the study were consistent with previous clinical experience and demonstrated that CDX-301 has an acceptable safety profile to date and can mobilize hematopoietic
stem cell (HSC) populations in healthy volunteers. Based on the safety profile and the clinical and preclinical data to date, we initiated a pilot clinical study of CDX-301 for the mobilization and
transplantation of allogeneic hematopoietic stem cells in patients with hematological malignancies undergoing hematopoietic stem cell transplantation. Preliminary results from this Phase 2
study were presented at the annual meeting of the American Society for Blood and Marrow Transplantation in February 2016. These preliminary data from three donor/patient pairs showed that CDX-301
given as a single agent has an acceptable safety profile and mobilized hematopoietic stem cells in healthy donors. The stem cell graft contained notable increases in naïve lymphocytes
and plasmacytoid dendritic cells consistent with preclinical data suggesting a possible better outcome. Recipients experienced successful engraftment in an expected time frame. Given that
hematopoietic stem cell transplantation is outside of our core focus, in an effort to prioritize human and capital resources, we announced in May 2016 that we decided not to advance CDX-301 in this
particular indication at this time.
In
June, at the 2016 ASCO Annual Meeting, initial results from a Phase 2 study of CDX-1401 in combination with CDX-301 in metastatic 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 of the NCI. Based on these results the CITN is planning to enroll additional cohorts to investigate alternative regimens of CDX-301. Other
studies are being considered through investigator-sponsored and collaborative agreements.
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CDX-014
CDX-014 is a human monoclonal ADC that targets T cell immunoglobulin and mucin domain 1, or TIM-1. TIM-1 expression is upregulated in several
cancers, most notably renal cell and ovarian carcinomas, and is 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, resulting in a targeted cell-killing effect. CDX-014 has shown anti-tumor activity in preclinical models of
ovarian and renal cancer. In July 2016, we announced that enrollment had opened in a Phase 1/2 study of CDX-014 to patients with both clear 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 dose for Phase 2 study. We anticipate the
Phase 1 dose-escalation portion of the study will complete enrollment by year-end 2017. 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.
Rintega
On March 7, 2016, we announced that our Phase 3 study of Rintega® in patients with newly diagnosed EGFRvIII-positive
glioblastoma was being discontinued. This decision was made based on the outcome of a preplanned interim analysis conducted by an independent Data Safety and Monitoring Board (DSMB). The DSMB
determined that continuation of the study would not result in reaching statistical significance for the primary endpoint of the study, overall survival in patients with minimal residual disease, as
both the Rintega arm and the control arm were performing
on par with each other. In the ACT IV study, Rintega performed consistently with prior Phase 2 studies but the control arm significantly outperformed expectations (Hazard ratio = 0.99;
median OS: Rintega 20.4 months vs. control 21.1 months). Based on this recommendation, we discontinued the study. Data from the ACT IV study were presented at the Society for
Neuro-Oncology Annual Meeting in November 2016. All patients on the Rintega arm of the ACT IV study, prior Phase 2 studies and existing compassionate use recipients have been offered ongoing
access to Rintega on a compassionate use basis, and we continue to support new requests for compassionate use in recurrent glioblastoma on a limited basis. Study closure activities are complete, and
we continue to anticipate that we will not incur substantial additional costs related to Rintega.
Development Strategy
Immunotherapy Platform:
We believe there is untapped potential in immunotherapy that can be captured through the right combination and/or sequence of therapeutic
agents. Immunotherapy approaches have encountered difficulties when following standard drug development. The mechanisms of action are complex; activity is generally not dependent on highest tolerated
dose; and patient response is highly variable. Our understanding of the immune system, cancer's effect on immune mediated mechanisms and the impact of conventional therapies on the immune system
provide a new rationale for combining therapies that may lead to significant clinical benefit for patients with cancer.
Our
intent is to leverage this knowledge and the availability of good, tested products that may not have optimal clinical activity as a monotherapy, but which we believe may be very
effective in combination approaches. Our goal is to design and develop targeted products that maximize the
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efficacy
of immunotherapy regimens through combinations of therapeutic agents in significant and growing markets. We establish governmental and corporate alliances to fund development when appropriate
and intend to commercialize our products either through our own direct selling efforts or,
for products which we cannot develop ourselves through to commercialization, through corporate partners. This approach allows us to maximize the overall value of our technology and product portfolios
while best ensuring the expeditious development of each individual product.
Factors
that may significantly harm our commercial success, and ultimately the market price of our common stock, include but are not limited to, announcements of technological
innovations or new commercial products by our competitors, disclosure of unsuccessful results of clinical testing or regulatory proceedings and governmental approvals, adverse developments in patent
or other proprietary rights, public concern about the safety of products developed by us and general economic and market conditions. See "Item 1A. Risk Factors."
Partnerships
We may enter into co-development and commercialization partnerships for any of our programs where appropriate, including glembatumumab vedotin.
In the past, we have entered into collaborative partnership agreements with pharmaceutical and other companies and organizations that provided financial and other resources, including capabilities in
research, development, manufacturing, and sales and marketing, to support our research and development programs and may enter into more of them in the future.
Partnership
agreements may terminate without benefit to us if the underlying products are not fully developed. If we fail to meet our obligations under these agreements, they could
terminate and we might need to enter into relationships with other collaborators and to spend additional time, money, and other valuable resources in the process. We cannot predict whether our
collaborators will continue their development efforts or, if they do, whether their efforts will achieve success. Many of our collaborators face the same kinds of risks and uncertainties in their
businesses that we face. A delay or setback to a partner will, at a minimum, delay the commercialization of any affected drug candidates, and may ultimately prevent it. Moreover, any partner could
breach its agreement with us or otherwise not use best efforts to promote our products. A partner may choose to pursue alternative technologies or products that compete with our technologies or drug
candidates. In either case, if a partner failed to successfully develop one of our drug candidates, we would need to find another partner. Our ability to do so would depend upon our legal right to do
so at the time and whether the product remained commercially viable.
Research Collaboration and License Agreements
We have entered into license agreements whereby we have received licenses or options to license technology, specified patents and/or patent
applications. These license and collaboration agreements generally provide for royalty payments equal to specified percentages of product sales, annual license maintenance fees, continuing patent
prosecution costs and potential future milestone payments to third parties upon the achievement of certain development, regulatory and/or commercial milestones. Summarized below are our significant
research collaboration and license agreements for our later-stage drug candidates.
Medarex, Inc. (Medarex), which was acquired by Bristol-Myers Squibb Company
We and Medarex have entered into an assignment and license agreement, as amended, that provides for the assignment of certain patent and other
intellectual property rights and a license to certain Medarex technology related to the Company's APC Targeting Technology and an anti-mannose receptor product. Under the terms of the
agreement, we may be required to pay royalties
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in
the low-single digits on any net product sale of a Licensed Royalty-Bearing Product or Anti-Mannose Product to Medarex until the later of (i) the expiration of the last to expire applicable
patent and (ii) the tenth anniversary of the first commercial sale of such licensed product.
We
and Medarex have also entered into a research and commercialization agreement, as amended, that provides that we may be required to pay Medarex milestones of up to $7.0 million
upon obtaining first approval for commercial sale in a first indication of a product containing a licensed antibody and royalty payments in the low-to-mid single digits on any net product sales with
respect to the development of any products containing such licensed antibodies until the later of (i) the expiration of the last to expire applicable patent and (ii) the tenth
anniversary of the first commercial sale of such licensed product. In September 2010, we exercised an option under our research and commercialization agreement, whereby we licensed from Medarex access
to the UltiMab technology to develop and commercialize human antibodies to CD27, including varlilumab. In connection with the clinical trial collaboration we entered into with BMS in May 2014, we and
BMS agreed to waive certain future
milestone payments and to reduce future royalty rates that we may have owed Medarex in connection with any CD27 program.
Rockefeller University (Rockefeller)
In November 2005, we and Rockefeller entered into a license agreement for the exclusive worldwide rights to human DEC-205 receptor, with the
right to sublicense the technology. The license grant is exclusive except that Rockefeller may use and permit other nonprofit organizations to use the human DEC-205 receptor patent rights for
educational and research purposes. We may be required to pay Rockefeller milestones of up to $3.8 million upon obtaining first approval for commercial sale in a first indication of a product
targeting the licensed receptor and royalty payments in the low-to-mid single digits on any net product sales with respect to development and commercialization of the human DEC-205 receptor.
University of Southampton, UK (Southampton)
In November 2008, we entered into a license agreement with Southampton to develop human antibodies towards CD27, a potentially important target
for immunotherapy of various cancers. We may be required to pay Southampton milestones of up to approximately $1.0 million upon obtaining first approval for commercial sale in a first
indication and royalty payments in the low-single digits on any net product sales with respect to development and commercialization of varlilumab.
Amgen Inc. (Amgen)
In March 2009, we entered into a license agreement with Amgen to acquire the exclusive rights to CDX-301 and CD40 ligand, or CD40L. CDX-301 and
CD40L are immune modulating molecules that increase the numbers and activity of immune cells that control immune responses. We may be required to pay Amgen milestones of up to $0.9 million upon
obtaining first approval for commercial sale in a first indication and royalty payments in the low-single digits on any net product sales with respect to development and commercialization of the
technology licensed from Amgen, including CDX-301.
Amgen Fremont (formerly Abgenix)
In connection with our acquisition of CuraGen Corporation in 2009, we assumed the license agreement between CuraGen and Amgen Fremont (successor
in-interest to Abgenix) to develop fully-human monoclonal antibody therapeutics. In May 2009, an amendment to the license agreement was entered into related to CuraGen's exclusive rights to develop
and commercialize glembatumumab vedotin, CDX-014 and antibodies to 10 other licensed antigens. Under the amendment, CuraGen and
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Amgen
Fremont agreed to modify the terms of their existing cross-license of antigens whereby our amended license is fully paid-up and royalty-free.
Seattle Genetics, Inc. (Seattle Genetics)
In connection with our acquisition of CuraGen, we assumed the license agreement between CuraGen and Seattle Genetics whereby CuraGen acquired
the rights to proprietary ADC technology, with the right to sublicense, for use with its proprietary antibodies for the potential treatment of cancer. Under the terms of the agreement, we have the
responsibility of using commercially reasonable efforts to develop, commercialize and market such treatment. In furtherance of these responsibilities, technical assistance from Seattle Genetics is
available to us as necessary. We may be required to pay Seattle Genetics milestones of up to $5.0 million and $8.5 million for glembatumumab vedotin and CDX-014, respectively, upon
obtaining first approval for commercial sale in a first indication and royalty payments in the mid-single digits on any net product sales with respect to development and commercialization of these
drug candidates. The term of the agreement varies country to country and may be until the later of the expiration of the last relevant patent or the 10
th
anniversary of the first
commercial sale. The agreement allows us to terminate with prior written notice, with both parties being able to terminate the agreement for an uncured material breach or insolvency of the other
party.
Competition
The biotechnology and pharmaceutical industry is intensely competitive and subject to rapid and significant technological change. Many of the
products that we are attempting to develop and commercialize will be competing with existing therapies. Other companies are pursuing the development of new therapies that target the same diseases and
conditions that we are targeting and may compete directly with our drug candidates. We face competition from companies, major universities and research institutions in the United States and abroad,
including a number of large pharmaceutical companies, as well as firms specialized in the development and production of vaccines, adjuvants and immunotherapeutic delivery systems. Some of our
competitors possess substantially greater financial, technical and human resources than we possess.
Competitors
that we are aware of that have initiated a pivotal study or have obtained marketing approval for a potential competitive drug/device for glembatumumab vedotin in the
treatment of breast cancer include AbbVie, Astellas, AstraZeneca, Bristol-Myers Squibb, Immunomedics, Merck, Nektar, Novartis, Pfizer, Roche, and Tesaro.
Our
competitors may utilize discovery technologies and techniques or partner with collaborators in order to develop products more rapidly or successfully than us or our collaborators are
able to. In addition, some competitors have significantly greater experience than we have in conducting preclinical and nonclinical testing and human clinical trials of drug candidates, scaling up
manufacturing operations and obtaining regulatory approvals of drugs and manufacturing facilities. Accordingly, our competitors may succeed in obtaining regulatory approval for drugs more rapidly than
we do. If we obtain regulatory approval and commence commercial sales of our drug candidates, we also will compete with respect to manufacturing efficiency and sales and marketing capabilities, areas
in which we currently have limited experience.
In
addition, academic institutions, government agencies and other public and private organizations conducting research may seek patent protection with respect to potentially competitive
products or technologies and may establish exclusive collaborative or licensing relationships with our competitors. Moreover, technology controlled by third parties that may be advantageous to our
business may be acquired or licensed by our competitors, thereby preventing us from obtaining technology on commercially reasonable terms, if at all. We will also compete for the services of third
parties that may have already developed or acquired internal biotechnology capabilities or made commercial
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arrangements
with other biopharmaceutical companies to target the diseases on which we have focused both in the U.S. and outside of the U.S.
We
also face competition in recruiting and retaining highly qualified scientific personnel and consultants and in the development and acquisition of technologies.
Our
competitive position will depend upon our ability to attract and retain qualified personnel, obtain patent protection or otherwise develop proprietary products or processes and
secure sufficient capital resources for the often lengthy period between technological conception and commercial sales. We will require substantial capital resources to complete development of some or
all of our drug candidates, obtain the necessary regulatory approvals and successfully manufacture and market our drug candidates. In order to secure capital resources, we anticipate having to sell
additional capital stock, which would dilute existing stockholders. We may also attempt to obtain funds through research grants and agreements with commercial collaborators. However, these types of
funding are uncertain because they are at the discretion of the organizations and companies that control the funds. As a result, we may not receive any funds from grants or collaborations.
Alternatively, we may borrow funds from commercial lenders, likely at high interest rates, which would increase the risk of any investment in us.
Manufacturing
We have limited experience in commercial manufacturing. Our ability to conduct late-stage clinical trials, as well as manufacture and
commercialize our drug candidates will depend on the ability of such third parties to manufacture our drug candidates on a large scale at a competitive cost and in accordance with current Good
Manufacturing Practices, or cGMP, and U.S. and foreign regulatory requirements, if applicable. We rely on contract manufacturing organizations, or CMO, to manufacture mAb intermediate, drug substance,
and drug candidate for our late-stage clinical study of glembatumumab vedotin as well as for potential future commercial supplies. We also rely on CMOs for packaging, labeling, storage and shipping of
drug product. In order for us to establish our own commercial manufacturing facility, we would require substantial additional funds and would need to hire and retain significant additional personnel
and comply with extensive cGMP regulations applicable to such a facility. The commercial manufacturing facility would also need to be licensed for the production of our drug candidates by the FDA. We
therefore work with CMOs under established manufacturing arrangements that comply with the FDA's requirements and other regulatory standards, although there is no assurance that the manufacturing will
be successful.
To
date, we have utilized CMOs for the manufacture of clinical trial supplies of glembatumumab vedotin. In the second half of 2016, we established a relationship with Patheon Biologics
in Brisbane,
Australia to manufacture the glembatumumab vedotin mAb intermediate due to being informed by Lonza Biologics, our previous CMO, that the bioreactors used to manufacture glembatumumab vedotin will be
decommissioned and would not be available for commercialization. We also have a relationship with Piramal Healthcare UK Ltd. to manufacture the antibody drug conjugate with the vcMMAE
linker-toxin. The drug substance is then filled and packaged at Piramal Lexington or BSP Pharma. We rely on MilliporeSigma for supplying suitable quantities of vcMMAE. Any manufacturing failures or
delays by our glembatumumab vedotin contract manufacturers or suppliers of materials could cause delays in our glembatumumab vedotin clinical studies, including the METRIC study and/or a BLA filing
and, if regulatory approval is obtained, commercial launch of glembatumumab vedotin.
We
also utilize CMOs for the manufacture of varlilumab for global clinical trials and potential commercialization. We have established relationships with Patheon Biologics in
St. Louis for the manufacture of varlilumab drug substance and Vetter Pharma for the manufacture of varlilumab drug product. Any manufacturing failures or delays by our varlilumab CMOs could
cause delays in our varlilumab clinical studies.
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We operate our own cGMP manufacturing facility in Fall River, Massachusetts, to produce drug substance for our current and planned early-stage clinical trials.
Our Fall River manufacturing facility has 250L and 1000L bioreactor capacity and is able to manufacture in compliance with FDA regulations, allowing us to distribute potential products to clinical
sites in the U.S. for early-stage clinical trials. We currently manufacture CDX-1401, CDX-301 and CDX-1140 drug substance and CDX-014 mAb intermediate in our Fall River facility for our current and
planned Phase 1 and Phase 2 clinical trials. CDX-014, an antibody-drug conjugate, is then manufactured by Lonza (Visp). We expect that our existing clinical supplies of CDX-3379 and
CDX-0158 will be sufficient to carry out our current planned clinical development. Additional manufacturing is under review and may involve utilization of the Fall River facility and/or a CMO. All
products are then filled and packaged at contract manufacturers. Any manufacturing failures or compliance issues at contract manufacturers could cause delays in our Phase 1 and Phase 2
clinical studies for these drug candidates.
The
manufacturing processes for our drug candidates and immunotherapeutic delivery systems utilize known technologies. We believe that the drug candidates we currently have under
development can be scaled up to permit manufacture in commercial quantities. However, there can be no assurance that we will not encounter difficulties in scaling up the manufacturing processes.
While
we believe that there is currently sufficient capacity worldwide for the production of our potential products through CMOs, establishing long-term relationships with contract
manufacturers and securing multiple sources for the necessary quantities of clinical and commercial materials required can be a challenge due to increasing industry demand for CMO services. Qualifying
the initial source of clinical and ultimately commercial material is a time consuming and expensive process due to the highly regulated nature of the pharmaceutical/biotech industry. These costs may
be mitigated by the economies of scale realized in commercial manufacture and product sales. The key difficulty in qualifying more than one source for each product is the duplicated time and expense
in doing so without the potential to mitigate these costs if the secondary source is never utilized.
We
currently rely on sole suppliers for key components of our drug candidates, including vcMMAE for glembatumumab vedotin and Hiltonol® for CDX-1401. While we work with the
suppliers of these key components to ensure continuity of supply, no assurance can be given that these efforts will be successful. In addition, due to regulatory requirements relating to the
qualification of suppliers, we may not be able to establish additional or replacement sources on a timely basis or without excessive cost. If our suppliers were to terminate our arrangements or fail
to meet our supply needs we might be forced to delay our development programs or we could face disruptions in the distribution and sale of any drugs for which we obtain regulatory approval.
Use
of third party manufacturers limits our control over and ability to monitor the manufacturing process. As a result, we may not be able to detect a variety of problems that may arise
and may face additional costs in the process of interfacing with and monitoring the progress of our contract manufacturers. If third party manufacturers fail to meet our manufacturing needs in an
acceptable manner, we would face delays and additional costs while we develop internal manufacturing capabilities or find alternate third party manufacturers. It may not be possible to have multiple
third party manufacturers ready to supply us with needed material at all or without incurring significant costs.
Commercial Organization
We have a focused commercial team with broad experience in marketing, sales, distribution and product reimbursement. We have also developed the
capability to provide current and future market insights to our research and development organization regarding glembatumumab vedotin and our earlier-stage drug candidates. In the future, we may
choose to expand our commercial team and build a full-scale commercial organization which we believe could provide us the opportunity to retain marketing rights to our drug candidates and
commercialize such products ourselves where we deem
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appropriate
or pursue strategic partnerships to develop, sell, market and distribute our drug candidates where we deem appropriate. We may also choose to enter into strategic partnerships to develop,
sell, market and distribute our other drug candidates, including glembatumumab vedotin.
Patents, Licenses and Proprietary Rights
In general, our intellectual property strategy is to protect our technology by filing patent applications and obtaining patent rights covering
our own technology, both in the United States and in foreign countries that we consider important to our business. In addition, we have acquired and will seek to acquire as needed or desired,
exclusive rights of others through assignment or license to complement our portfolio of patent rights. We also rely on trade secrets, unpatented know-how and technological expertise and innovation to
develop and maintain our competitive position.
Patents
The successful development and marketing of products by us will depend in part on our ability to create and maintain intellectual property,
including patent rights. We are the owner or exclusive licensee to proprietary patent positions in the areas of immunotherapy technologies, vaccine technologies, antibody technologies and complement
inhibitor technology. Although we continue to pursue patent protection for our products, no assurance can be given that any pending application will issue as a patent, that any issued patent will have
a scope that will be of commercial benefit or that we will be able to successfully enforce our patent position against infringers. We routinely review our patent portfolio and adjust our strategies
for prosecution and maintenance of individual cases according to a number of factors including program priorities, stage of development and patent term.
We
own or license rights under more than 300 granted patents and national and regional patent applications in the U.S. and in major international territories covering inventions relating
to our business. The key patents and patent applications owned by us or licensed to us that we consider important to our business include the following (the indicated and estimated patent expiry dates
do not include any possible Patent Term Extensions (PTEs) or Supplementary Protection Certificates (SPCs), if these may be secured in due course):
-
-
Our patent portfolio for glembatumumab vedotin includes issued patents in the U.S., Europe, Japan, Australia and Canada. If maintained to full
term in due course, these would have estimated patent expiry dates in 2025. In addition, patent rights relating to the toxin and conjugation technology used in glembatumumab vedotin have been licensed
from Seattle Genetics. The patent rights from Seattle Genetics include issued patents and pending applications in Australia, Canada, Europe, the U.S. and Japan which include composition of matter
claims relating to the toxin and conjugation technology. If maintained to full term in due course, the main Seattle Genetics patent rights would have estimated patent expiry dates ranging from 2023 in
Europe to 2026 in the U.S.
-
-
We have licensed rights from the University of Southampton under issued U.S., European and Japanese patents and under a pending patent
application in Canada relating to the technology used in varlilumab. Further patent applications are also pending in the U.S., Europe and Japan. If and where issued and maintained to full term in due
course, these would have estimated patent expiry dates in 2027. In July 2013, the United States Patent and Trademark Office issued a patent to the University of Southampton, that we have exclusive
license to under our license agreement, which broadly supports varlilumab. The patent includes 18 claims covering various methods of treating cancer using agonistic anti-human CD27 antibodies and
relates, among other things, directly to our CD27 antibody program and therapeutic uses of varlilumab. In September 2014, two European patent oppositions were filed against the University of
Southampton European patent and at a hearing on November 23, 2016 the European Patent
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Office
(EPO) revoked the European patent on the ground of lack of inventive step. We intend to appeal this decision and to defend the European patent vigorously in cooperation with the University of
Southampton. This EPO decision does not affect the later filed Celldex patents and applications for varlilumab. We also have an issued U.S. patent which covers varlilumab as a composition of matter.
If maintained to full term this patent would have an estimated patent expiry date in 2034 (including additional term due to Patent Term Adjustment). We also have corresponding patent applications in
the major international territories which, if issued and maintained to full term in due course, would have estimated patent expiry dates in 2031.
-
-
We have issued U.S. patents relating to the technology used in CDX-1401 which have estimated patent expiry dates in at least 2028 (not
including increases of term due to Patent Term Adjustment). We have a corresponding issued European patent and further patents and pending patent applications in other international territories
(including Japan, Australia, Canada, China, India, Republic of Korea and certain other countries) relating to the technology used in CDX-1401 which, if and where issued and maintained to full term in
due course, would have estimated patent expiry dates in 2028.
-
-
The U.S. patent for the technology used in CDX-301 has an estimated expiration date in 2020.
-
-
Our patent portfolio for CDX-014 includes rights under issued U.S., European and Canadian patents and pending patent applications in Australia
and Japan. If and where issued and maintained to full term in due course, these filings would have estimated patent expiry dates in at least 2024 (not including increases of term due to Patent Term
Adjustment in the U.S.). In addition, patent rights relating to toxin and conjugation technology have been licensed from Seattle Genetics. The patent rights from Seattle Genetics include issued
patents and pending patent applications in Australia, Canada, Europe, the U.S. and Japan which include composition of matter claims relating to the toxin and conjugation technology. If maintained to
full term in due course, the main Seattle Genetics patent rights would have estimated patent expiry dates ranging from 2023 in Europe to 2026 in the U.S.
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We have exclusively licensed a portfolio of patent applications relating to particular ErbB3 inhibitors from MedImmune. These patent
applications include claims directed to particular anti-ErbB3 antibody compositions of matter, including CDX-3379 compositions of matter, and methods of using such antibodies. A U.S. Patent has been
issued which has an estimated patent expiry date in 2032. Patent applications in this portfolio are pending in Europe, Japan, Australia, Canada, China, India, Republic of Korea and certain other
countries, and any patents that may issue from these applications would also have estimated patent expiry dates in 2032. These are the estimated expirations if we continue to pay the maintenance fees
and annuities when due, and do not include any possible additional terms for Patent Term Adjustments, Patent Term Extensions or SPCs if these may be secured in due course.
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We own a family of patents and patent applications directed to anti-KIT receptor antibody compositions of matter, including CDX-0158
compositions of matter, and methods of using such antibodies. U.S. patents have been issued and foreign counterparts to patent applications in this family are pending in Europe, Japan, Australia,
Canada, China, India, Republic of Korea and certain other countries. If and where issued the foregoing would have estimated patent expiry dates ranging from at least 2032 to 2033. We also have pending
U.S. and European patent applications directed to use of anti-KIT receptor antibodies, including CDX-0158 antibodies, for treatment of particular eosinophil or mast cell related disorders, including
neurofibromatosis. Any patents that issue based on these patent applications would have estimated patent expiry dates in 2035. These are the estimated expirations if we continue to pay the maintenance
fees and annuities when due, and do not include any possible additional terms for Patent Term Adjustments, Patent Term Extensions or SPCs if these may be secured in due course.
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We acquired rights to a portfolio of patents and patent applications related to the "TAM family" of RTKs (comprised of Tyro3, AXL and MerTK)
receptors which are in-licensed from, or co-owned with, the Salk Institute for Biological Studies. For example, we have an exclusive license to two issued U.S. patents directed to TAM receptor
inhibition to treat infections, and to a U.S. patent application directed to methods for the modulation of the immune response via targeting TAM receptors. Foreign counterparts to these patents and
this patent application are pending in Europe and Canada. If and where issued the foregoing would have estimated patent expiry dates in 2028. These are the estimated expirations if we continue to pay
the maintenance fees and annuities when due, and do not include any possible additional terms for Patent Term Adjustments, Patent Term Extensions or SPCs if these may be secured in due course.
There
can be no assurance that patent applications owned by or licensed to us will result in granted patents or that, if granted, the resultant patents will afford protection against
competitors with similar technology. It is also possible that third parties may obtain patents or other proprietary rights that may be necessary or useful to us. In cases where third parties are first
to invent a particular product or technology, it is possible that those parties will obtain patents that will be sufficiently broad to prevent us from using important technology or from further
developing or commercializing important drug candidates and immunotherapeutic systems. If licenses from third parties are necessary but cannot be obtained, commercialization of the covered products
might be delayed or prevented. Even if these licenses can be obtained, they would probably require us to pay ongoing royalties and other costs, which could be substantial.
Although
a patent has a statutory presumption of validity in the United States, the issuance of a patent is not conclusive as to validity or as to the enforceable scope of the patent
claims. The validity or
enforceability of a patent after its issuance by the Patent and Trademark Office can be challenged in litigation. As a business that uses a substantial amount of intellectual property, we face a
heightened risk of intellectual property litigation. If the outcome of the litigation is adverse to the owner of the patent, third parties may then be able to use the invention covered by the patent
without authorization or payment. There can be no assurance that our issued patents or any patents subsequently issued to or licensed by us will not be successfully challenged in the future. In
addition, there can be no assurance that our patents will not be infringed or that the coverage of our patents will not be successfully avoided by competitors through design innovation.
We
are aware that others, including universities and companies, have filed patent applications and have been granted patents in the United States and other countries which claim subject
matter potentially useful or necessary to the commercialization of our products. The ultimate scope and validity of existing or future patents which have been or may be granted to third parties, and
the availability and cost of acquiring rights in those patents necessary to the manufacture, use or sale of our products presently cannot be determined by us.
Third
parties may have or may obtain valid and enforceable patents or proprietary rights that could block us from developing products using our technology,
including:
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certain patents and applications in the United States and foreign countries covering particular antigens and antigenic fragments targeted by
our current drug candidates, including CDX-1401;
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certain patents and pending applications related to particular receptors and other molecules on dendritic cells and macrophages that may be
useful for generating monoclonal antibodies and can be employed in our APC Targeting Technology;
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a United States patent owned by Genentech, Inc., relating to the production of recombinant antibodies in host cells;
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certain patents held by third parties relating to antibody expression in particular types of host cells; and
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a United States patent and certain pending applications assigned to Aduro Biotech Holdings relating to anti-CD27 antibodies.
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We are also aware of a third party European patent that relates to use of ErbB3 antibodies for treatment of hyperproliferative disorders,
including cancer. Counterparts of this patent have also issued in Australia and Japan. As a result of an opposition proceeding, the European patent was revoked in its entirety. The owner of the
European patent has appealed the decision in the opposition proceeding. We do not know if the appeal will succeed, or, if successful, whether the scope of claims, post-appeal, would be relevant to our
activities. Should the appeal be successful and a license be necessary for our program that targets ErbB3, we cannot predict whether we would be able to obtain such a license, or, if a license were
available, whether it would be available on commercially reasonable terms. If the appeal results in patents having a valid claim relevant to our use of ErbB3 antibodies and a license under the patents
is unavailable on commercially relevant terms, or at all, our ability to commercialize CDX-3379 in Europe may be impaired or delayed. We would vigorously defend ourselves, but we cannot predict
whether the patents would be found valid, enforceable or infringed. We also continue to monitor counterparts in other jurisdictions which may entail comparable risks to us in these other
jurisdictions.
In
addition to the patents referred to in the previous paragraphs, there may be other patent applications and issued patents belonging to competitors that may require us to alter our
drug candidates and immunotherapeutic delivery systems, pay licensing fees or cease some of our activities. If our drug candidates conflict with patents that have been or may be granted to
competitors, universities or others, the patent owners could bring legal action against us claiming damages and seeking to enjoin manufacturing and marketing of the patented products. If any of these
actions is successful, in addition to any potential liability for damages, we could be required to obtain a license in order to continue to manufacture or market the affected products. There can be no
assurance that we would prevail in any such action or that any license required under any such third party patent would be made available on acceptable terms or at all. We believe that there may be
significant litigation in the biotechnology industry regarding patent and other intellectual property rights. If we become involved in that litigation, we could consume substantial resources.
Licenses
We have entered into several significant license agreements relating to technologies that are being developed by us. In general, these
institutions have granted us an exclusive worldwide license (with right to sublicense) to make, use and sell products embodying the licensed technology, subject to the reservation by the licensor of a
non-exclusive right to use the technologies for non-commercial research purposes. Generally, the term of each license is through the expiration of the last of the patents issued with respect to the
technologies covered by the license. We have generally agreed to use reasonable efforts to develop and commercialize licensed products and to achieve specified milestones and pay license fees,
milestone payments and royalties based on the net sales of the licensed products or to pay a percentage of sublicense income. If we breach our obligations, the licensor has the right to terminate the
license, and, in some cases, convert the license to a non-exclusive license. Generally, we control and are responsible for the cost of defending the patent rights of the technologies that we license.
Proprietary Rights
We also rely on unpatented technology, trade secrets and confidential information, and no assurance can be given that others will not
independently develop substantially equivalent information and techniques or otherwise gain access to our know-how and information, or that we can meaningfully protect our rights in such unpatented
technology, trade secrets and information. We require each of our employees, consultants and advisors to execute a confidentiality agreement at the commencement
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of
an employment or consulting relationship with us. The agreements generally provide that all inventions conceived by the individual in the course of employment or in providing services to us and all
confidential information developed by, or made known to, the individual during the term of the relationship shall be the exclusive property of us and shall be kept confidential and not disclosed to
third parties except in limited specified circumstances. There can be no assurance, however, that these agreements will provide meaningful protection for our information in the event of unauthorized
use or disclosure of such confidential information.
Government Regulation
Our activities and products are significantly regulated by a number of governmental entities, including the FDA in the United States and by
comparable authorities in other countries. These entities regulate, among other things, the manufacture, testing, safety, effectiveness, labeling, documentation, advertising and sale of our products.
We must obtain regulatory approval from FDA and comparable authorities in other countries, as applicable, for our drug candidates before we can commercialize such drugs in the U.S. and foreign
jurisdictions. Product development within this regulatory framework takes a number of years and involves the expenditure of substantial resources. Many drug candidates that initially appear promising
ultimately do not reach the market because they are found to be unsafe or ineffective when tested. Our inability to commercialize a product would impair our ability to earn future revenues.
FDA Approval Process
In the United States, the FDA regulates drugs and biological products under the Federal Food, Drug, and Cosmetic Act, or FDCA, the Public Health
Service Act, or PHSA, and implementing regulations. The process of obtaining regulatory approvals and the subsequent compliance with appropriate federal, state, local and foreign statutes and
regulations requires the expenditure of substantial time and financial resources. Failure to comply with the applicable United States requirements at any time during the product development process,
approval process or after approval may subject an applicant to a variety of administrative or judicial sanctions, such as the FDA's refusal to approve pending applications, withdrawal of an approval,
imposition of a clinical hold, issuance of untitled or warning letters, product recalls, product seizures, total or partial suspension of production or distribution injunctions, fines, refusals of
government contracts, restitution, disgorgement of profits, civil penalties and criminal prosecution.
The
process required by the FDA before a drug or biological product may be marketed in the United States generally involves the following:
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completion of preclinical laboratory tests, animal studies and formulation studies in compliance with the FDA's good laboratory practice, or
GLP, regulations;
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submission to the FDA of an investigational new drug, or IND, application which must become effective before human clinical trials may begin;
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approval by an independent institutional review board, or IRB, at each clinical site before each trial may be initiated;
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performance of adequate and well-controlled human clinical trials in accordance with good clinical practices, or GCP, to establish the safety
and efficacy of the proposed drug or biological product for each indication;
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submission to the FDA of a new drug application, or NDA, or a biologics license application, or BLA, as applicable;
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satisfactory completion of an FDA advisory committee review, if applicable;
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satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the product is produced to assess compliance
with cGMP requirements and to assure that the facilities, methods and controls are adequate to preserve the drug's identity, strength, quality and purity; and
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FDA review and approval of the NDA or BLA.
We
expect that all of our clinical drug candidates will be subject to review as biological products under BLA standards.
Data
obtained at any stage of testing is susceptible to varying interpretations, which could delay, limit or prevent regulatory approval. Moreover, during the regulatory process, new or
changed drug approval policies may cause unanticipated delays or rejection of our product. We may not obtain necessary regulatory approvals within a reasonable period of time, if at all, or avoid
delays or other problems in testing our products. Moreover, even if we received regulatory approval for a product, the approval may require limitations on use, which could restrict the size of the
potential market for the product.
Clinical Trials
The FDA provides that human clinical trials may begin 30 days after receipt and review of an IND application, unless the FDA requests
additional information or changes to the study protocol within that period. An IND must be sponsored and filed for each of our proposed drug candidates. Authorization to conduct a clinical trial in no
way assures that the FDA will ultimately approve the product. Clinical trials are generally conducted in three sequential phases. In a Phase 1 trial, the product is given to a small number of
patients to test for safety (adverse effects), determine a recommended Phase 2 dose(s) and evaluate any signals of efficacy. Phase 2 trials are conducted on a limited group of the target
patient population; safety, optimal dosage and efficacy are studied. A Phase 3 trial is performed in a large patient population, generally over a wide geographic area to provide evidence for
the safety and efficacy of the product.
A
product's safety and effectiveness in one clinical trial is not necessarily indicative of its safety and effectiveness in another clinical trial. Moreover, we may not discover all
potential problems with a product even after completing clinical trials on it. Some of our products and technologies have undergone only preclinical testing. As a result, we do not know whether they
are safe or effective for humans. Also, regulatory authorities may decide, contrary to our findings, that a product is unsafe or not as effective in actual use as its clinical trial results indicated.
This could prevent the product's widespread use, require its withdrawal from the market or expose us to liability. The FDA or the sponsor may suspend or terminate a clinical trial at any time on
various grounds, including a finding that the patients are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution if
the clinical trial is not being conducted in accordance with the IRB's requirements or if the drug has been associated with unexpected serious harm to patients. Any such action could materially harm
us. Clinical trials are critical to the success of our products but are subject to unforeseen and uncontrollable delay, including delay in enrollment of patients. Any delay in clinical trials could
delay our commercialization of a product.
Marketing Approval
Assuming successful completion of the required clinical testing, the results of the preclinical and clinical studies, together with detailed
information relating to the product's pharmacology, chemistry, manufacture, controls and proposed labeling, among other things, are submitted to the FDA as part of an NDA or BLA requesting approval to
market the product for one or more indications. FDA approval of the NDA or BLA is required before marketing of the product may begin in the United States. Under federal law, the submission of most
NDAs and BLAs is additionally subject to a substantial
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application
user fee and the sponsor of an approved NDA or BLA is also subject to annual product and establishment user fees.
The
FDA conducts a preliminary review of all NDAs and BLAs within the first 60 days after receipt before accepting them for filing based on the agency's threshold determination
that they are sufficiently complete to permit substantive review. The FDA may request additional information rather than accept an NDA or BLA for filing. In this event, the application must be
resubmitted with the additional information. The resubmitted application is also subject to review before the FDA accepts it for filing. Once the submission is accepted for filing, the FDA begins an
in-depth substantive review. The FDA has agreed to specified performance goals in the review of NDAs and BLAs. Most such applications for non-priority products are reviewed within ten to twelve months
after filing, and most applications for priority review products, that is, drugs and biologics that the FDA determines represent a significant improvement over existing therapy, are reviewed in six to
eight months after filing. The review process may be extended by the FDA for three additional months to consider certain late-submitted information or clarification regarding information already
provided in the submission. The FDA may also refer applications for novel drugs or biological products or products that present difficult questions of safety or efficacy to an advisory committee,
typically a panel that includes clinicians and other experts, for review, evaluation and a recommendation as to whether the application should be approved. The FDA is not bound by the recommendations
of an advisory committee, but it considers such recommendations carefully when making decisions.
Before
approving an NDA or BLA, the FDA typically will inspect the facility or facilities where the product is manufactured. The FDA will not approve an application unless it determines
that the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistent production of the product within required specifications. In addition, before
approving
an NDA or BLA, the FDA will typically inspect one or more clinical sites to assure compliance with GCP and integrity of the clinical data submitted.
The
testing and approval process requires substantial time, effort and financial resources, and each may take many years to complete. Data obtained from clinical activities are not
always conclusive and may be susceptible to varying interpretations, which could delay, limit or prevent regulatory approval. The FDA may not grant approval on a timely basis, or at all. We may
encounter difficulties or unanticipated costs in our efforts to develop our drug candidates and secure necessary governmental approvals, which could delay or preclude us from marketing our products.
After
the FDA's evaluation of the NDA or BLA and inspection of the manufacturing facilities, the FDA may issue an approval letter or a complete response letter. An approval letter
authorizes commercial marketing of the drug or biological product with specific prescribing information for specific indications. A complete response letter generally outlines the deficiencies in the
submission and may require substantial additional testing or information in order for the FDA to reconsider the application. If and when those deficiencies have been addressed to the FDA's
satisfaction in a resubmission of the NDA, the FDA will issue an approval letter. The FDA has committed to reviewing such resubmissions in two or six months depending on the type of information
included. Even with submission of this additional information, the FDA ultimately may decide that the application does not satisfy the regulatory criteria for approval.
Even
if the FDA approves a product, it may limit the approved indications for use for the product, require that contraindications, warnings or precautions be included in the product
labeling, require that post-approval studies, including Phase 4 clinical trials, be conducted to further assess a drug's safety after approval, require testing and surveillance programs to
monitor the product after commercialization, or impose other conditions, including distribution restrictions or other risk management mechanisms, which can materially affect the potential market and
profitability of the product. The FDA may prevent or limit further marketing of a product based on the results of
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post-market
studies or surveillance programs. After approval, some types of changes to the approved product, such as changes in indications, manufacturing changes and labeling, are subject to further
testing requirements and FDA review and approval.
Special Regulatory Procedures
Fast track designation
The FDA is required to facilitate the development and expedite the review of drugs and biologics that are intended for the
treatment of a serious or life-threatening disease or condition and which demonstrate the potential to address unmet medical needs for the condition. Under the fast track program, the sponsor of a new
drug or biologic candidate may request the FDA to designate the product for a specific indication as a fast track product concurrent with or after the filing of the IND for the drug candidate. A drug
that receives Fast Track designation is eligible for some or all of the following: (i) more frequent meetings with FDA to discuss the drug's development plan and ensure collection of
appropriate data needed to support drug approval; (ii) more frequent written communication from FDA about such things as the design of the proposed clinical trials and use of biomarkers;
(iii) eligibility for Accelerated Approval and Priority Review, if relevant criteria are met; and (iv) Rolling Review, which means that a drug company can submit completed sections of
its BLA or NDA for review by FDA, rather than waiting until every section of the NDA or BLA is completed before the entire application can be reviewed. This rolling review is available if the
applicant provides and the FDA approves a schedule for the submission of the remaining information and the applicant pays applicable user fees. However, the FDA's time period goal for reviewing a fast
track application does not begin until the last section of the NDA or BLA is submitted. In addition, the fast track designation may be withdrawn by the FDA if the FDA believes that the designation is
no longer supported by data emerging in the clinical trial process.
Priority review
Under FDA policies, a drug candidate may be eligible for priority review, or review within a six to eight month time frame from the
time a complete application is accepted for filing. Products regulated by the FDA's Center for Drug Evaluation and Research, or CDER, are eligible for priority review if they provide a significant
improvement compared to marketed products in the treatment, diagnosis or prevention of a disease. Products regulated by the FDA's Center for Biologics Evaluation and Research, or CBER, are eligible
for priority review if they provide a significant improvement in the safety or effectiveness of the treatment, diagnosis or prevention of a serious or life-threatening disease. A fast track designated
drug candidate could be eligible for priority review if supported by clinical data at the time of the BLA or NDA submission.
Accelerated approval
Under the FDA's accelerated approval regulations, the FDA may approve a drug or biologic for a serious or life-threatening
illness that provides meaningful therapeutic benefit to patients over existing treatments based on a surrogate endpoint that is reasonably likely to predict clinical benefit. Surrogate endpoints can
often be measured more easily or more rapidly than clinical endpoints. A drug candidate approved on this basis is subject to rigorous post-marketing
compliance requirements, including the completion of Phase 4 or post-approval clinical trials to confirm the effect on the clinical endpoint. Failure to conduct required post-approval studies,
or confirm a clinical benefit during post-marketing studies, would allow the FDA to withdraw the drug from the market on an expedited basis. All promotional materials for drug candidates approved
under accelerated regulations are subject to prior review by the FDA.
Breakthrough therapy designation
The FDA is also required to expedite the development and review of the application for approval of drugs that are
intended to treat a serious or life-threatening disease or condition where preliminary clinical evidence indicates that the drug candidate may demonstrate substantial improvement over existing
therapies on one or more clinically significant endpoints. Under the breakthrough therapy program, the sponsor of a new drug candidate may request
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that
the FDA designate the drug candidate for a specific indication as a breakthrough therapy concurrent with, or after, the filing of the IND for the drug candidate.
Orphan drug designation
Under the Orphan Drug Act, the FDA may grant orphan drug designation to drugs or biologics intended to treat a rare disease or
condition, which is generally defined as a disease or condition that affects fewer than 200,000 individuals in the United States. Orphan drug designation does not convey any advantage in, or shorten
the duration of, the regulatory review and approval process. The first NDA or BLA applicant to receive FDA approval for a particular active ingredient to treat a particular disease with FDA orphan
drug designation is entitled to a seven-year exclusive marketing period in the United States for that product, for that indication. During the seven-year exclusivity period, the FDA may not approve
any other applications to market the same drug or biologic for the same orphan indication, except in limited circumstances. Among the other benefits of orphan drug designation are tax credits for
certain research and a waiver of the NDA or BLA application user fee.
Pediatric information
Under the Pediatric Research Equity Act of 2003, an NDA, BLA or supplement to an NDA or BLA must contain data that are adequate to assess the
safety and effectiveness of the drug or biological product for the claimed indications in all relevant pediatric subpopulations, and to support dosing and administration for each pediatric
subpopulation for which the product is safe and effective. The FDA may, on its own initiative or at the request of the applicant, grant deferrals for submission of some or all pediatric data until
after approval of the product for use in adults, or full or partial waivers from the pediatric data requirements. Under the Food and Drug Administration Safety and Innovation Act, or FDASIA, the FDA
has additional authority to take action against manufacturers not adhering to pediatric study requirements. Unless otherwise required by regulation, the pediatric data requirements do not apply to
products with orphan drug designation.
Post Approval
Any drug or biological products manufactured or distributed by us pursuant to FDA approvals are subject to pervasive and continuing regulation
by the FDA, including, among other things, requirements relating to recordkeeping, periodic reporting, product sampling and distribution, advertising and promotion and reporting of adverse experiences
with the product. After approval, most changes to the approved product, such as adding new indications or other labeling claims are subject to prior FDA review and approval.
The
FDA may impose a number of post-approval requirements as a condition of approval of an NDA or BLA. For example, the FDA may require post-marketing testing, including Phase 4
clinical trials, and surveillance to further assess and monitor the product's safety and effectiveness after commercialization. Regulatory approval of oncology products often requires that patients in
clinical trials be followed for long periods to determine the overall survival benefit of the drug or biologic.
In
addition, drug and biologic manufacturers and other entities involved in the manufacture and distribution of approved drugs and biological products are required to register their
establishments with the FDA and state agencies and are subject to periodic unannounced inspections by the FDA and these state agencies for compliance with cGMP requirements. The FDA was also granted
new inspection authorities under FDASIA. Changes to the manufacturing process are strictly regulated and often require prior FDA approval before being implemented. FDA regulations also require
investigation and correction of any deviations from cGMP and impose reporting and documentation requirements upon us and any third-party manufacturers that we may decide to use. Accordingly,
manufacturers must continue to expend time, money and effort in the areas of production and quality control to maintain cGMP compliance.
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Once
an approval is granted, the FDA may withdraw the approval if compliance with regulatory requirements and standards is not maintained or if problems occur after the product reaches
the market. Later discovery of previously unknown problems with a product, including adverse events of unanticipated severity or frequency, or with manufacturing processes, or failure to comply with
regulatory requirements, may result in revisions to the approved labeling to add new safety information, imposition of post-market studies or clinical trials to assess new safety risks or imposition
of distribution or other restrictions under a Risk Evaluation and Mitigation Strategy program. Other potential consequences include, among other things:
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restrictions on the marketing or manufacturing of the product, complete withdrawal of the product from the market or product recalls;
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fines, untitled and warning letters or holds on post-approval clinical trials;
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refusal of the FDA to approve pending applications or supplements to approved applications, or suspension or revocation of product license
approvals;
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product seizure or detention, or refusal to permit the import or export of products; or
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consent decrees, injunctions or the imposition of civil or criminal prosecution.
The
FDA strictly regulates marketing, labeling, advertising and promotion of products that are placed on the market. Drugs and biologics may be promoted only for the approved indications
and in accordance with the provisions of the approved label. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off label uses, and a company that is
found to have improperly promoted off label uses may be subject to significant liability.
Biosimilars Law
The Biologics Price Competition and Innovation Act of 2009, or BPCIA, amended the PHSA to provide for an abbreviated approval pathway for
biological products that demonstrate biosimilarity to a previously-approved biological product. The BPCI Act establishes criteria for determining that a product is biosimilar to an already-licensed
biologic, or reference product, and establishes a process by which an abbreviated BLA for a biosimilar product is submitted, reviewed and approved. The BPCI Act provides periods of exclusivity that
protect a reference product from biosimilars competition. Under the BPCI Act, the FDA may not accept a biosimilar application for review until four years after the date of first licensure of the
reference product, and the biosimilar may not be licensed until 12 years after the reference product's approval. Additionally, the BPCI Act establishes procedures by which the biosimilar
applicant must provide information about its application and product to the reference product sponsor, and by which information about potentially relevant patents is shared and litigation over patents
may proceed in advance of approval. The BPCI Act also provides a period of exclusivity for the first biosimilar to be determined by the FDA to be interchangeable with the reference product. The BPCIA
may be applied to our drug candidates in the future and could be applied to allow approval of biosimilars to our products.
The
FDA has not yet issued proposed regulations setting forth its interpretation of the BPCIA's provisions but has issued guidance documents related to BPCIA implementation. Because the
BPCI Act is a relatively new law, we anticipate that its contours will be defined as the statute is implemented over a period of years. This likely will be accomplished by a variety of means,
including FDA issuance of guidance documents, proposed regulations and decisions in the course of considering specific applications. Such evolution may significantly affect the impact of the BPCI Act
on both reference product and biosimilar sponsors.
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21st Century Cures Act
On December 13, 2016, Congress passed the 21st Century Cures Act, or the Cures Act. The Cures Act is designed to modernize and
personalize healthcare, spur innovation and research, and streamline the discovery and development of new therapies through increased federal funding of particular programs. It authorizes increased
funding for FDA to spend on innovation projects, including for certain oncology-directed research. The new law also amends the Public Health Service Act to reauthorize and expand funding for the
National Institutes of Health.
Because
the Cures Act has only recently been enacted, its potential effect on our business remains unclear with the exception of a provision requiring that we post our policies on the
availability of expanded access programs for individuals. In addition, the Cures Act includes provisions that may be beneficial to us in the future, including a requirement that the FDA assess and
publish guidance on the use of novel clinical trial designs, the use of real world evidence in applications, the availability of summary level review for supplemental applications for certain
indications, and the qualification of drug development tools. Because these provisions allow FDA several years to develop these policies, their effects on us, if any, could be delayed.
The
Cures Act also authorizes funding for the "Cancer Moonshot" initiative. The Cancer Moonshot initiative's strategic goals encourage inter-agency cooperation and fund research and
innovation to catalyze new scientific breakthroughs, bring new therapies to patients, and strengthen prevention and diagnosis. This initiative aims to stimulate drug development through the creation
of a public-private partnership with 20 to 30 pharmaceutical and biotechnology companies to expedite cancer researchers' access to investigational agents and approved drugs. This partnership is
designed to permit researchers to obtain drugs and other technologies from a preapproved "formulary" list without having to negotiate with each company for individual research projects. We will
continue to monitor these developments to assess their potential impacts on our business.
Companion Diagnostic Review and Approval
We expect that some of our drug candidates, including glembatumumab vedotin, will rely on the use of a companion diagnostic. Companion
diagnostics are subject to regulation by the FDA and comparable foreign regulatory authorities as medical devices and require separate clearance or approval prior to their commercialization. Based on
recent FDA guidance documents and the FDA's past treatment of companion diagnostics, we believe that the FDA will likely require one or more of our
in
vitro
companion diagnostics to obtain Premarket Approval Application, or PMA, in conjunction with approval of the related drug candidate. The receipt and timing of PMA approval
may have a
significant effect on the receipt and timing of commercial approval for such drug candidates. Currently we rely on third party collaborators to develop companion diagnostics for our drug candidates.
The
PMA process is costly, lengthy and uncertain. PMA applications must be supported by valid scientific evidence, which typically requires extensive data, including technical,
preclinical, clinical and manufacturing data, to demonstrate to the FDA's satisfaction the safety and effectiveness of the device. For diagnostic tests, a PMA application typically includes data
regarding analytical and clinical validation studies. As part of its review of the PMA, the FDA will conduct a pre-approval inspection of the manufacturing facility or facilities to ensure compliance
with the Quality System Regulation, or QSR, which requires manufacturers to follow design, testing, control, documentation and other quality assurance procedures. If the FDA evaluations of both the
PMA application and the manufacturing facilities are favorable, the FDA will either issue an approval letter or an approvable letter, which usually contains a number of conditions that must be met in
order to secure the final approval of the PMA. If the FDA's evaluation of the PMA or manufacturing facilities is not favorable, the FDA will deny approval of the PMA or issue a not approvable letter.
A not approvable letter will outline the deficiencies in the application and, where practical, will identify what is necessary to make the PMA
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approvable.
The FDA may also determine that additional clinical trials are necessary, in which case the PMA approval may be delayed while the trials are conducted and then the data submitted in an
amendment to the PMA.
Furthermore,
even after PMA approval is obtained, numerous regulatory requirements apply to the manufacturer of the companion diagnostic. The FDA enforces these requirements by
inspection and market surveillance. These requirements include: the QSR, labeling regulations, the FDA's general prohibition against promoting products for unapproved or "off label" uses, the medical
device reporting regulation, and the reports of corrections and removals regulation. If the FDA finds a violation, it can institute a wide variety of enforcement actions, ranging from a public warning
letter to more severe sanctions such as: fines, injunctions and civil penalties; recall or seizure of products; operating restrictions, partial suspension or total shutdown of production; refusing
requests for PMA of new products; and withdrawing PMAs already granted.
Federal and State Fraud and Abuse, Data Privacy and Security and Transparency Laws
In addition to FDA restrictions on marketing and promotion of pharmaceutical products, several other types of federal and state laws have been
applied to restrict certain marketing
business practices in the biopharmaceutical and medical device industries in recent years. These laws include, without limitation, state and federal anti-kickback statutes and false claims statutes
and false claims laws, data privacy and security laws, as well as transparency laws regarding payments or other items of value provided to healthcare providers. Applicable state law may be broader in
scope than federal law and may apply regardless of payor, in addition to items and services reimbursed under Medicaid and other state programs. If our operations are found to be in violation of any of
the health regulatory laws described above or any other laws that apply to us, we may be subject to penalties, including potentially significant criminal and civil and/or administrative penalties,
damages, fines, disgorgement, imprisonment, exclusion from participation in government healthcare programs, contractual damages, reputational harm, administrative burdens, diminished profits and
future earnings, and the curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business and our results of operations. To the extent that any
of our products are sold in a foreign country, we may be subject to similar foreign laws, which may include, for instance, applicable post-marketing requirements, including safety surveillance,
anti-fraud and abuse laws and implementation of corporate compliance programs and reporting of payments or transfers of value to healthcare professionals.
In
addition, the United States Foreign Corrupt Practices Act, or FCPA, prohibits corporations and individuals from engaging in certain activities to obtain or retain business or to
influence a person working in an official capacity. It is illegal to pay, offer to pay or authorize the payment of anything of value to any official of another country, government staff member,
political party or political candidate in an attempt to obtain or retain business or to otherwise influence a person working in that capacity. In many countries, the healthcare professionals we may
interact with may meet the FCPA's definition of a foreign government official.
Foreign Regulation
In order to market any therapeutic or diagnostic product outside of the United States, we need to comply with numerous and varying regulatory
requirements of other countries regarding safety and efficacy and governing, among other things, clinical trials, marketing authorization, commercial sales and distribution of our products. Whether or
not we obtain FDA approval for a product, we need to obtain the necessary approvals by the comparable regulatory authorities of foreign countries before we can commence clinical trials or marketing of
the product in those countries. The approval process varies from country to country and can involve additional product testing and additional administrative review periods. The time required to obtain
approval in other countries might differ from and be
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longer
than that required to obtain FDA approval. Regulatory approval in one country does not ensure regulatory approval in another, but a failure or delay in obtaining regulatory approval in one
country may negatively impact the regulatory process in others.
Under
the EU regulatory system, we will submit most of our marketing authorization applications under the centralized procedure. The centralized procedure is compulsory for medicines
produced by biotechnology, or are for the treatment of cancer, or officially designated as 'orphan medicines'. The centralized procedure provides for the grant of a single marketing authorization that
is valid for all EU member states. As in the United States, we may apply for designation of our products as orphan drug for the treatment of a specific indication in the EU before the application for
marketing authorization is made. The EMA grants orphan medicinal product designation to promote the development of products that may offer therapeutic benefits for life-threatening or chronically
debilitating conditions affecting not more than five in 10,000 people in the EU. Orphan drugs in Europe enjoy economic and marketing benefits, including a 10-year market exclusivity period for the
approved indication, but not for the same product, unless another applicant can show that its product is safer, more effective or otherwise clinically superior to the orphan-designated product.
Other Regulatory Processes
From time to time, legislation is drafted, introduced and passed in Congress that could significantly change the statutory provisions governing
the testing, approval, manufacturing and marketing of products regulated by the FDA.
In
addition to new legislation, FDA regulations and policies are often revised or interpreted by the agency in ways that may significantly affect our business and our products. It is
impossible to predict whether further legislative changes will be enacted or whether FDA regulations, guidance, policies or interpretations will change or what the effect of such changes, if any, may
be.
Third-Party Payor Coverage and Reimbursement
Significant uncertainty exists as to the coverage and reimbursement status of any drug products for which we obtain regulatory approval. Sales
of any of our drug candidates, if approved, will depend, in part, on the extent to which the costs of the drugs will be covered by third-party payors, including government health programs such as
Medicare and Medicaid, as well as commercial health insurers, such as managed care organizations. The process for determining reimbursement rates is separate from the payor coverage decision.
Therefore, despite obtaining coverage, reimbursement rates may be lower than expected, which can result in larger out-of-pocket payments for the patient.
In
order to secure coverage and reimbursement for any drug that might be approved for sale, we need to conduct analyses and pharmaco-economic studies in order to demonstrate the
incremental medical benefit over and above the generally-accepted standard of care and cost-effectiveness of the drug. Our drug candidates may not be considered medically necessary, provide
insufficient incremental medical benefit, or may not be deemed cost-effective. A payor's decision to provide coverage for a drug product does not imply that an adequate reimbursement rate will be
approved.
The
containment of healthcare costs has become a priority of federal, state and foreign governments, and the prices of drugs have been a focus in this effort. Third-party payors are
increasingly challenging the prices charged for medical products and services and examining the medical necessity and cost-effectiveness of medical products and services, in addition to their safety
and efficacy. If these third-party payors do not consider our drugs to be cost-effective compared to other available therapies, they may not cover our drugs after approval as a benefit under their
plans or, if they do, the level of reimbursement and/or restrictions in formulary placement may be such that they would significantly limit projected sales volumes. In addition to third party payors,
we will also need to negotiate formulary placement with hospitals, health systems and certain independent delivery
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networks.
Such negotiations may be more protracted than anticipated and may be compromised because of similar considerations, relating to insufficient incremental medical benefit and/or
cost-effectiveness.
Pricing
and reimbursement schemes vary widely from country to country. For example, certain EU member states may approve a specific price and volume for a drug product after which
incremental revenues or profits need to be paid back by way of rebates. They may also institutionalize utilization
restrictions, curb physicians' drug budgets, provide conditional reimbursement schemes that require additional evidence to be generated post-marketing authorization, etc. The downward pressure on
healthcare costs in general, particularly prescription drugs, has been particularly evident in EU markets, for some time, with evidence pointing to increasing pressures on the horizon. As a result,
increasingly high barriers are being erected to the pricing and reimbursement of new drugs, despite regulatory efforts to bring drugs to market sooner. In addition, cross-border trade has existed for
some time in the EU, allowing pharmacies in one country to import, at a lower price, drug from another country, further exerting pricing pressures across the EU. There can be no assurance that any
country that has price controls or reimbursement limitations for drug products will allow favorable reimbursement and pricing arrangements for any of our drugs.
The
marketability of any drugs for which we receive regulatory approval for commercial sale may suffer if third-party payors and/or hospital administrators fail to provide adequate
coverage, reimbursement or formulary placement. Coverage policies, third-party reimbursement rates and drug pricing regulations may change in the future. In particular, uncertainty within, and over
the long-term, of the Patient Protection and Affordable Care Act, or PPACA, in the U.S., may mean that coverage, reimbursement and pricing structures available today may be different in the future. In
addition, the States may continue to consider legislation of their own which could further restrict the ability to freely price drugs and/or curb utilization in the U.S. Even if favorable coverage and
reimbursement status is attained for one or more drugs for which we receive regulatory approval, less favorable coverage policies and reimbursement rates may be implemented in the future.
Employees
As of December 31, 2016, we employed 210 employees (205 full-time, 2 part-time and 3 interns), 40 of whom have Ph.D. and/or M.D. degrees.
Of these employees, 177 were engaged in or directly support research and development activities. We believe that our employee relations are good. We believe that our future success will depend in
large part on our ability to attract and retain experienced and skilled employees.
Research and Development
We have dedicated a significant portion of our resources to our efforts to develop our drug candidates. We incurred research and development
expenses of $102.7 million, $100.2 million and $104.4 million during the years ended December 31, 2016, 2015 and 2014, respectively. We anticipate that a significant
portion of our operating expenses will continue to be related to research and development in 2017 as we continue to advance our drug candidates through clinical development.
Corporate and Available Information
We are incorporated in Delaware. In February 2016, we formed a wholly-owned subsidiary, Celldex Therapeutics Europe GmbH, in Zug,
Switzerland. We are in the process of liquidating Celldex Therapeutics Europe GmbH. In July 2016, we formed a wholly-owned subsidiary, Celldex Australia Pty Ltd in Brisbane, Australia.
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Our website is located at
http://www.celldex.com.
On our website, investors can obtain, free of charge, a copy of
our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, other reports and any amendments thereto filed or furnished pursuant to
Section 13(a) or 15(d) of the Exchange Act of 1934, as amended, as soon as reasonably practicable after we file such material electronically with, or furnish it to, the Securities and Exchange
Commission, or SEC. None of the information posted on our website is incorporated by reference into this Annual Report.
Item 1A. RISK FACTORS
You should consider carefully these risk factors together with all of the information included or incorporated by reference in this Annual
Report in addition to our financial statements and the notes to our financial statements. This section includes forward-looking statements.
The
following is a discussion of the risk factors that we believe are material to us at this time. These risks and uncertainties are not the only ones facing us and there may be
additional matters that we are unaware of or that we currently consider immaterial. All of these could adversely affect our business, results of operations, financial condition and cash flows.
Risks Related to our Financial Condition and Capital Requirements
We currently have no product revenue and will need to raise capital to operate our business.
To date, we have generated no product revenue and cannot predict when and if we will generate product revenue. We had an accumulated deficit of
$719.5 million as of December 31, 2016. Until, and unless, we complete clinical trials and further development, and receive approval from the FDA and other regulatory authorities, for
our drug candidates, we cannot sell our drugs and will not have product revenue. We expect to spend substantial funds to continue the research, development and testing of our products that are in the
preclinical and clinical testing stages of development and to prepare to commercialize products in anticipation of FDA approval. Therefore, for the foreseeable future, we will have to fund all of our
operations and development expenditures from cash on hand, equity or debt financings, licensing fees and grants. Additional financing will be required to meet our liquidity needs. If we do not succeed
in raising additional funds on acceptable terms, we might not be able to complete planned preclinical and clinical trials or obtain approval of any drug candidates from the FDA and other regulatory
authorities. In addition, we could be forced to discontinue product development, reduce or forego sales and marketing efforts, forego attractive business opportunities or curtail operations. Any
additional sources of financing could involve the issuance of our equity securities, which would have a dilutive effect on our stockholders. No assurance can be given that additional financing will be
available to us when needed on acceptable terms, or at all.
We
cannot be certain that we will achieve or sustain profitability in the future. Failure to achieve profitability could diminish our ability to sustain operations, pay dividends on our
common stock, obtain additional required funds and make required payments on our present or future indebtedness.
We expect to incur future losses and we may never become profitable.
We have incurred operating losses of $132.9 million, $129.5 million and $122.4 million during 2016, 2015 and 2014,
respectively, and expect to incur an operating loss in 2017 and beyond. We believe that operating losses will continue in 2017 and beyond because we are planning to incur significant costs associated
with the clinical development of our drug candidates and manufacturing of commercial supply to prepare for the potential commercial launch of glembatumumab vedotin if regulatory approval is obtained.
During the years ended December 31, 2016, 2015 and 2014, we incurred $24.9 million, $36.3 million, and $45.6 million in clinical trial expense and $18.3 million,
$14.8 million, and $21.2 million in contract manufacturing expense. We anticipate clinical trial expense to remain
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relatively
consistent over the next twelve months as decreases in Rintega costs are offset by increases in the CDX-0158 and CDX-3379 programs, although there may be fluctuations on a quarterly basis.
We anticipate contract manufacturing expense to decrease over the next twelve months as decreases in Rintega costs are only partially offset by increases in the CDX-0158 and CDX-3379 programs. Our net
losses have had and will continue to have an adverse effect on, among other things, our stockholders' equity, total assets and working capital. We expect that losses will fluctuate from quarter to
quarter and year to year, and that such fluctuations may be substantial. We cannot predict when we will become profitable, if at all.
We will need additional capital to fund our operations, including the development, manufacture and potential
commercialization of our drug candidates. If we do not have or cannot raise additional capital when needed, we may be unable to develop and ultimately commercialize our drug candidates successfully.
We expect to incur significant costs as we develop our drug candidates. In particular, the continuing development and commercialization of
glembatumumab vedotin, varlilumab, CDX-0158, CDX-3379 and our other drug candidates requires additional capital beyond our current resources. As of December 31, 2016, we had cash, cash
equivalents and marketable securities of $189.8 million. During the next twelve months and beyond, we will take further steps to raise additional capital to fund our liquidity needs. Our
capital raising activities may include, but may not be limited to, one or more of the following:
-
-
licensing of drug candidates with existing or new collaborative partners;
-
-
possible business combinations;
-
-
issuance of debt; or
-
-
issuance of common stock or other securities via private placements or public offerings.
While
we may seek capital through a number of means, there can be no assurance that additional financing will be available on acceptable terms, if at all, and our negotiating position in
capital-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 financing 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. 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 the build-out of our commercial infrastructure and our commercial planning and
preparation activities, 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.
We may pay future milestone consideration to the former Kolltan stockholders. If we are unsuccessful in
obtaining stockholder approval for the issuance of common stock, we would pay the milestone consideration to former Kolltan stockholders in cash, in which case we may need to raise additional capital.
The merger agreement between us and Kolltan provides that 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, we will be required to pay
Kolltan's former stockholders milestone payments of up to $172.5 million, which milestone payments may be made, at our sole
election, in cash, in shares of our common stock or a combination of both (except with respect to non-accredited former shareholders of Kolltan to whom we will pay cash). Pursuant to applicable NASDAQ
listing rules, we are required to
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obtain
stockholder approval of such issuances of our common stock to the extent that such issuances exceed 19.9% of our common stock outstanding prior to the merger. We plan to seek stockholder
approval of such common stock issuances at our 2017 annual meeting. If we do not obtain stockholder approval of such common stock issuances, we may elect to pay the milestone consideration in cash to
maintain compliance with applicable NASDAQ listing standards. We may still decide to pay cash even if we obtain stockholder approval although it is required to maintain a certain percentage of the
overall consideration paid in Celldex common stock to satisfy certain tax requirements under the Merger Agreement. We may require additional capital to fund any milestone payments in cash, depending
on the facts and circumstances at the time such payments become due.
Risks Related to Development and Regulatory Approval of Drug Candidates
Our long term success depends heavily on our ability to fund and complete the research and development
activities and obtain regulatory approval for our program assets, including our lead drug candidate, glembatumumab vedotin.
We are particularly dependent on the future success of glembatumumab vedotin because it is our most advanced drug candidate. Only a small
minority of all research and development programs ultimately result in commercially successful drugs. Clinical failure can occur at any stage of clinical development. For example, in March 2016, we
decided to discontinue ACT IV, a randomized Phase 3 clinical study of Rintega in patients with newly diagnosed EGFRvIII-positive glioblastoma, based on the determination by the independent Data
Safety and Monitoring Board that continuation of the ACT IV study would not reach statistical significance for overall survival in patients with minimal residual disease, the primary endpoint of the
study, because both the Rintega arm and the control arm were performing on par with each other. Clinical trials may produce negative or inconclusive results, and we may decide, or regulators may
require us, to conduct additional clinical or preclinical trials. In addition, data obtained from trials are susceptible to varying interpretations, and regulators may not interpret our data as
favorably as we do, which may delay, limit or prevent regulatory approval. Success
in preclinical testing and early clinical trials does not ensure that later clinical trials will generate the same results or otherwise provide adequate data to demonstrate the efficacy and safety of
a drug candidate.
We
will need substantial additional financing to complete the development of glembatumumab vedotin, varlilumab, CDX-0158, CDX-3379 and our other drug candidates. Further, even if we
complete the development of glembatumumab vedotin or any of our other drug candidates and gain marketing approvals from the FDA and comparable foreign regulatory authorities in a timely manner, we
cannot be sure that such drug candidate will be commercially successful in the pharmaceutical market. If the results of clinical trials, the anticipated or actual timing of marketing approvals, or the
market acceptance of glembatumumab vedotin or any other drug candidate, if approved, do not meet the expectations of investors or public market analysts, the market price of our common stock would
likely decline.
We may enter into collaboration agreements for the licensing, development and ultimate commercialization of
some of our drug candidates including, where appropriate, for our lead drug candidates. In such cases, we will depend greatly on our third-party collaborators to license, develop and commercialize
such drug candidates, and they may not meet our expectations.
We may enter into co-development and commercialization partnerships for our drug candidates where appropriate, including glembatumumab vedotin.
The process of identifying collaborators and negotiating collaboration agreements for the licensing, development and ultimate commercialization of some of our drug candidates may cause delays and
increased costs. We may not be able to enter into collaboration agreements on terms favorable to us or at all. Furthermore some of those agreements may give substantial responsibility over our drug
candidates to the collaborator. Some collaborators may be unable or unwilling to devote sufficient resources to develop our drug candidates as their
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agreements
require. They often face business risks similar to ours, and this could interfere with their efforts. Also, collaborators may choose to devote their resources to products that compete with
ours. If a collaborator does not successfully develop any one of our products, we will need to find another collaborator to do so. The success of our search for a new collaborator will depend on our
legal right to do so at the time and whether the product remains commercially viable.
If
we enter into collaboration agreements for one or more of our lead drug candidates, the success of such drug candidates will depend in great part upon our and our collaborators'
success in promoting
them as superior to other treatment alternatives. We believe that our drug candidates can be proven to offer disease prevention and treatment with notable advantages over drugs in terms of patient
compliance and effectiveness. However, there can be no assurance that we will be able to prove these advantages or that the advantages will be sufficient to support the successful commercialization of
our drug candidates.
Our drug candidates are subject to extensive regulatory scrutiny.
All of our drug candidates are at various stages of development and our activities and drug candidates are significantly regulated by a number
of governmental entities, including the FDA in the United States and by comparable authorities in other countries. These entities regulate, among other things, the manufacture, testing, safety,
effectiveness, labeling, documentation, advertising and sale of drugs and drug candidates. We or our partners must obtain regulatory approval for a drug candidate in all of these areas before we can
commercialize any of our drug candidates. Product development within this regulatory framework takes a number of years and involves the expenditure of substantial resources. This process typically
requires extensive preclinical and clinical testing, which may take longer or cost more than we anticipate, and may prove unsuccessful due to numerous factors. Many drug candidates that initially
appear promising ultimately do not reach the market because they are found to be unsafe or ineffective when tested. Companies in the pharmaceutical, biotechnology and immunotherapeutic drug industries
have suffered significant setbacks in advanced clinical trials, even after obtaining promising results in earlier trials. Our inability to commercialize a drug candidate would impair our ability to
earn future revenues.
If our drug candidates do not pass required tests for safety and effectiveness, we will not be able to obtain
regulatory approval and derive commercial revenue from them.
In order to succeed, we will need to obtain regulatory approval for our drug candidates. The FDA has not approved any of our drug candidates for
sale to date. Our drug candidates are in various stages of preclinical and clinical testing. Preclinical tests are performed at an early stage of a product's development and provide information about
a product's safety and effectiveness on laboratory animals. Preclinical tests can last years. If a product passes its preclinical tests satisfactorily, and we determine that further development is
warranted, we would file an IND application for the product with the FDA, and if the FDA gives its approval we would begin Phase 1 clinical tests. Phase 1 testing generally lasts between
6 and 24 months. If Phase 1 test results are satisfactory and the FDA gives its approval, we can begin Phase 2 clinical tests. Phase 2 testing generally lasts between 6 and
36 months. If Phase 2 test results are satisfactory and the FDA gives its approval, we can begin Phase 3 pivotal studies. Phase 3 studies generally last between 12 and
48 months. Once clinical testing is completed and a BLA or NDA is filed with the FDA, it may take more than a year to receive FDA approval.
In
all cases we must show that a drug candidate is both safe and effective before the FDA, or drug approval agencies of other countries where we intend to sell the product, will approve
it for sale. Our research and testing programs must comply with drug approval requirements both in the United States and in other countries, since we are developing our lead products with the
intention to, or could later decide to, commercialize them both in the U.S. and abroad. A product may fail for safety or effectiveness at any stage of the testing process. A major risk we face is the
possibility that none of our
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products
under development will come through the testing process to final approval for sale, with the result that we cannot derive any commercial revenue from them after investing significant amounts
of capital in multiple stages of preclinical and clinical testing.
We may be unable to manage multiple late stage clinical trials for a variety of drug candidates
simultaneously.
As our current clinical trials progress, we may need to manage multiple late stage clinical trials simultaneously in order to continue
developing all of our current products. The management of late stage clinical trials is more complex and time consuming than early stage trials. Typically, early stage trials involve several hundred
patients in no more than 10 to 30 clinical sites. Late stage (Phase 3) trials may involve up to several thousand patients in up to several hundred clinical sites and may require facilities in
several countries. Therefore, the project management required to supervise and control such an extensive program is substantially larger than early stage programs. As the need for these resources is
not known until some months before the trials begin, it is necessary to recruit large numbers of experienced and talented individuals very quickly. If the labor market does not allow this team to be
recruited quickly, the sponsor is faced with a decision to delay the program or to initiate it with inadequate management resources. This may result in recruitment of inappropriate patients,
inadequate monitoring of clinical investigators and inappropriate handling of data or data analysis. Consequently it is possible that conclusions of efficacy or safety may not be acceptable to permit
filing of a BLA or NDA for any one of the above reasons or a combination of several.
Product testing is critical to the success of our products but subject to delay or cancellation if we have
difficulty enrolling patients.
As our portfolio of drug candidates moves from preclinical testing to clinical testing, and then through progressively larger and more complex
clinical trials, we will need to enroll an increasing number of patients with the appropriate characteristics. At times we have experienced
difficulty enrolling patients and we may experience more difficulty as the scale of our clinical testing program increases. The factors that affect our ability to enroll patients are largely
uncontrollable and include principally the following:
-
-
the nature of the clinical test;
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-
the size of the patient population;
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-
patients' willingness to receive a placebo or less effective treatment on the control arm of a clinical study;
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-
the distance between patients and clinical test sites; and
-
-
the eligibility criteria for the trial.
If
we cannot enroll patients as needed, our costs may increase or we may be forced to delay or terminate testing for a product.
We may have delays in completing our clinical trials and we may not complete them at all.
We have not completed the clinical trials necessary to obtain FDA approval to market glembatumumab vedotin or any of our other drug candidates
in development. Clinical trials for
glembatumumab vedotin or any of our other products in development may be delayed or terminated as a result of many factors, including the following:
-
-
difficulty in enrolling patients in our clinical trials;
-
-
patients failing to complete clinical trials due to dissatisfaction with the treatment, side effects or other reasons;
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-
-
failure by regulators to authorize us to commence a clinical trial;
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-
suspension or termination by regulators of clinical research for many reasons, including concerns about patient safety or failure of our
contract manufacturers to comply with cGMP requirements;
-
-
delays or failure to obtain clinical supply for our products necessary to conduct clinical trials from contract manufacturers, including
commercial grade clinical supply for our Phase 3 clinical trials;
-
-
treatment candidates demonstrating a lack of efficacy during clinical trials;
-
-
inability to continue to fund clinical trials or to find a partner to fund the clinical trials;
-
-
competition with ongoing clinical trials and scheduling conflicts with participating clinicians; and
-
-
delays in completing data collection and analysis for clinical trials.
Any
delay or failure to complete clinical trials and obtain FDA approval for our drug candidates could have a material adverse effect on our cost to develop and commercialize, and our
ability to generate revenue from, a particular drug candidate.
If serious adverse or unacceptable side effects are identified during the development of our drug candidates,
we may need to abandon or limit our development of some of our drug candidates.
If our drug candidates are associated with serious adverse events or undesirable side effects in clinical trials or have characteristics that
are unexpected, we may need to abandon their development or limit development to more narrow uses or subpopulations in which the serious adverse events, undesirable side effects or other
characteristics are less prevalent, less severe or more acceptable from a risk-benefit perspective. In pharmaceutical development, many drugs that initially show promise in early stage testing for
treating cancer are later found to cause side effects that prevent further development of the drug. Currently marketed therapies for the treatment of cancer are generally limited to some extent by
their toxicity. In addition some of our drug candidates would be chronic therapies or be used in pediatric populations, for which safety concerns may be particularly important. Use of our drug
candidates as monotherapies may also result in adverse events consistent in nature with other marketed therapies. In addition, when used in combination with other marketed therapies, our drug
candidates may exacerbate adverse events associated with the marketed therapy.
Failure to successfully validate, develop and obtain regulatory approval for companion diagnostics for
certain of our drug candidates, including our lead drug candidate glembatumumab vedotin, could harm our drug development strategy and operational results.
As an element of our clinical development approach, we may seek to screen and identify subsets of patients that express a certain biomarker or
that have a certain genetic alteration who may derive meaningful benefit from our development drug candidates. To achieve this, one or more of our drug development programs may be dependent on the
development and commercialization of a companion diagnostic by us or by third party collaborators. For example, we have engaged third party collaborators to develop a commercially suitable companion
diagnostic test to identify patients that over express gpNMB for use in certain indications with glembatumumab vedotin and such companion diagnostic may encounter technical hurdles to development and
would require separate approval by the FDA, for which we must rely on our third party collaborator to obtain. Companion diagnostics are developed in conjunction with clinical programs for the
associated drug candidate. Companion diagnostics are subject to regulation as medical devices and must themselves be approved for marketing by the FDA or certain other foreign regulatory agencies
before the related drug candidate may be commercialized. The approval of a companion diagnostic as part of the product label will limit the use of the drug candidate
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to
only those patients who express the specific biomarker it was developed to detect. We or our third party collaborators may also experience delays in developing a sustainable, reproducible and
scalable manufacturing process or transferring that process to commercial partners or negotiating insurance reimbursement for such companion diagnostic, all of which may prevent us from completing our
clinical trials or commercializing our drugs on a timely or profitable basis, if at all.
To
date, the FDA has required premarket approval of all companion diagnostics for cancer therapies. We and our third-party collaborators may encounter difficulties in developing and
obtaining approval for these companion diagnostics. Any delay or failure by us or third-party collaborators to develop or obtain regulatory approval of a companion diagnostic could delay or prevent
approval of our related drug candidates or, if regulatory approval is obtained, delay or limit our ability to commercialize our related drug candidates.
Any delay in obtaining regulatory approval would have an adverse impact on our ability to earn future
revenues.
It is possible that none of the drug candidates that we develop will obtain the regulatory approvals necessary for us to begin commercializing
them. The time required to obtain FDA and other approvals is unpredictable but often can take years following the commencement of clinical trials, depending upon the nature of the drug candidate. Any
analysis we perform of data from clinical activities is subject to confirmation and interpretation by regulatory authorities, which could delay, limit or prevent regulatory approval. Glembatumumab
vedotin has been granted Fast Track designation by the FDA. Fast Track designation does not change the standards for approval, guarantee a faster review time as compared to other drugs or ensure that
the drug will ultimately obtain marketing approval. In addition, the FDA may withdraw these designations at any time. Any delay or failure in obtaining required approvals could have a material adverse
effect on our ability to generate revenues from the particular drug candidate including, but not limited to, loss of patent term during the approval period. Furthermore, if we, or our partners, do not
reach the market with our products before our competitors offer products for the same or similar uses, or if we, or our partners, are not effective in marketing our products, our revenues from product
sales, if any, will be reduced.
We
face intense competition in our development activities. We face competition from many companies in the United States and abroad, including a number of large pharmaceutical companies,
firms specialized in the development and production of vaccines, adjuvants and vaccine and immunotherapeutic delivery systems and major universities and research institutions. Competitors that we are
aware of that have initiated a pivotal study or have obtained marketing approval for a potential competitive drug/device for glembatumumab vedotin in the treatment of breast cancer include AbbVie,
Astellas, AstraZeneca, Bristol-Myers Squibb, Immunomedics, Merck, Nektar, Novartis, Pfizer, Roche, and Tesaro.
Most
of our competitors have substantially greater resources, more extensive experience in conducting preclinical studies and clinical testing and obtaining regulatory approvals for
their products, greater operating experience, greater research and development and marketing capabilities and greater production capabilities than those of ours. These companies might succeed in
obtaining regulatory approval for competitive products more rapidly than we can for our products, especially if we experience any delay in obtaining required regulatory approvals.
A fast track designation or grant of priority review status by the FDA may not actually lead to a faster
development or regulatory review or approval process.
In the United States, glembatumumab vedotin has received fast track designation and may be eligible for priority review status. If a drug is
intended for the treatment of a serious or life-threatening disease or condition and the drug demonstrates the potential to address unmet medical needs for this
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disease
or condition, the drug sponsor may apply for FDA fast track designation. If a drug offers major advances in treatment, the drug sponsor may apply for FDA priority review status. The FDA has
broad discretion whether or not to grant fast track designation or priority review status, so even if we believe a particular drug candidate is eligible for such designation or status, the FDA could
decide not to grant it. Even though glembatumumab vedotin has received fast track designation and may be eligible for priority review status, we may not experience a faster development process, review
or approval compared to conventional FDA procedures. Furthermore, the FDA may withdraw fast track designation if it believes that the designation is no longer supported by data from our clinical
development program.
We have many competitors in our field and they may develop technologies that make ours obsolete.
Biotechnology, pharmaceuticals and therapeutics are rapidly evolving fields in which scientific and technological developments are expected to
continue at a rapid pace. We have many competitors in the U.S. and abroad. Competitors that we are aware of that have initiated a pivotal study or have obtained marketing approval for a potential
competitive drug/device for glembatumumab vedotin in the treatment of breast cancer include AbbVie, Astellas, AstraZeneca, Bristol-Myers Squibb, Immunomedics, Merck, Nektar, Novartis, Pfizer, Roche,
and Tesaro. Our success depends upon our ability to develop and maintain a competitive position in the product categories and technologies on which we focus. Many of our competitors have greater
capabilities, experience and financial resources than we do. Competition is intense and is expected to increase as new products enter the market and new technologies become available. Our competitors
may:
-
-
develop technologies and products that are more effective than ours, making ours obsolete or otherwise noncompetitive;
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-
obtain regulatory approval for products more rapidly or effectively than us; and
-
-
obtain patent protection or other intellectual property rights that would block our ability to develop competitive products.
Risks Related to Commercialization of Our Drug Candidates
We may face delays, difficulties or unanticipated costs in establishing sales, marketing and distribution
capabilities or seeking a partnership for the commercialization of our drug candidates, even if regulatory approval is obtained.
We may choose to build a commercial organization which we believe could provide us with the strategic options to either retain full economic
rights to our drug candidates or seek favorable economic terms through advantageous commercial partnerships. As a result, we may have full responsibility for commercialization of one or more of our
drug candidates if and when they are approved for sale. We currently lack sufficient marketing, sales and distribution capabilities to carry out this strategy. If any of our drug candidates are
approved by the FDA, we will need a drug sales force with technical expertise prior to the commercialization of any of our drug candidates. We may not succeed in developing such sales and distribution
capabilities, the cost of establishing such sales and distribution capabilities may exceed any product revenue, or our direct marketing and sales efforts may be unsuccessful. We may find it necessary
to enter into strategic partnerships, co-promotion or other licensing arrangements and to the extent we enter into such strategic partnerships, co-promotion or other licensing arrangements, our
product revenues are likely to be lower than if we directly marketed and sold such drugs, and some or all of the revenues we receive will depend upon the efforts of third parties, which may not be
successful and may not be within our control. If we are unable to enter into such strategic partnerships, co-promotion or other licensing arrangements on acceptable terms or at all, we may not be able
to successfully commercialize our existing and future drug candidates. If we are not successful in commercializing any drug candidates, for which we obtain regulatory approval, either on
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our
own or through collaborations with one or more third parties, our future product revenue will suffer and we may never achieve profitability or become unable to continue the operation of our
business.
If our drug candidates for which we obtain regulatory approval do not achieve broad acceptance from
physicians, patients and third-party payors, we may be unable to generate significant revenues, if any.
Even if we obtain regulatory approval for our drug candidates, our approved drugs may not gain market acceptance among physicians and patients.
We believe that effectively marketing our drug candidates, if any of them are approved, will require substantial efforts, both prior to commercial launch and after approval. Physicians may elect not
to prescribe our drugs, and patients may elect not to request or take them, for a variety of reasons including:
-
-
limitations or warnings contained in a drug's FDA-approved labeling;
-
-
changes in the standard of care or the availability of alternative drugs for the targeted indications for any of our drug candidates;
-
-
limitations in the approved indications for our drug candidates;
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-
the approval, availability, market acceptance and reimbursement for the companion diagnostic, where applicable;
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-
demonstrated clinical safety and efficacy compared to other drugs;
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-
significant adverse side effects;
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-
effectiveness of education, sales, marketing and distribution support;
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-
timing of market introduction and perceived effectiveness of competitive drugs;
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-
cost-effectiveness;
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-
adverse publicity about our drug candidates or favorable publicity about competitive drugs;
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-
convenience and ease of administration of our drug candidates; and
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-
willingness of third-party payors to reimburse for the cost of our drug candidates.
If
our future drugs fail to achieve market acceptance, we will not be able to generate significant revenues and may never achieve profitability.
Even if any of our drug candidates receive FDA approval, the terms of the approval may limit such drug's
commercial potential. Additionally, even after receipt of FDA approval, such drug would be subject to substantial, ongoing regulatory requirements.
The FDA has complete discretion over the approval of our drug candidates. If the FDA grants approval, the scope of the approval may limit our
ability to commercialize such drug, and in turn, limit our ability to generate substantial product revenue. For example, the FDA may grant approval contingent on the performance of costly
post-approval clinical trials or subject to warnings or contraindications. Additionally, even after granting approval, the manufacturing processes, labeling, packaging, distribution, adverse event
reporting, storage, advertising, promotion and recordkeeping for such drug will be subject to extensive and ongoing regulatory requirements. In addition, manufacturers of our drug candidates are
required to comply with cGMP regulations, which include requirements related to quality control and quality assurance as well as the corresponding maintenance of records and documentation. Further,
regulatory authorities must inspect and approve these manufacturing facilities before they can be used to manufacture our drug candidates, and these facilities are subject to continual review and
periodic inspections by the FDA and other regulatory authorities for compliance
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with
cGMP regulations. If we or a third party discover previously unknown problems with a drug, such as adverse events of unanticipated severity or frequency, or problems with the facility where the
drug is manufactured, a regulatory authority may impose restrictions on that product, the manufacturer or us, including requiring withdrawal of the drug from the market or suspension of manufacturing.
If we, our drug candidates or the manufacturing facilities for our drug candidates fail to comply with regulatory requirements of the FDA and/or other non-U.S. regulatory authorities, we could be
subject to administrative or judicially imposed sanctions, including the following:
-
-
warning letters;
-
-
civil or criminal penalties and fines;
-
-
injunctions;
-
-
consent decrees;
-
-
suspension or withdrawal of regulatory approval;
-
-
suspension of any ongoing clinical studies;
-
-
voluntary or mandatory product recalls and publicity requirements;
-
-
refusal to accept or approve applications for marketing approval of new drugs;
-
-
restrictions on operations, including costly new manufacturing requirements; or
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-
seizure or detention of drugs or import bans.
The
regulatory requirements and policies may change and additional government regulations may be enacted for which we may also be required to comply. We cannot predict the likelihood,
nature or extent of government regulation that may arise from future legislation or administrative action, either in the United States or in other countries. If we are not able to maintain regulatory
compliance, we may not be permitted to market our future products and our business may suffer.
Reimbursement decisions by third-party payors may have an adverse effect on pricing and market acceptance of
any of our drug candidates. If there is not sufficient reimbursement for our future drugs, it is less likely that such drugs will be widely used.
Market acceptance and sales of any of our drug candidates for which we obtain regulatory approval will depend on reimbursement policies and may
be affected by future healthcare reform measures in both the United States and foreign jurisdictions. Government authorities and third-party payors, such as private health insurers and health
maintenance organizations, decide which drugs they will cover and establish payment levels. In addition, government authorities and these third-party payors are increasingly attempting to contain
health care costs by demanding price discounts or rebates and limiting both the types and variety of drugs that they will cover and the amounts that they will pay for these drugs. In addition, we
might need to conduct post-marketing studies in order to demonstrate the cost-effectiveness of any future drugs to such payors' satisfaction. Such studies might require us to commit a significant
amount of management time and financial and other resources.
Reimbursement
rates may vary according to the use of the drug and the clinical setting in which it is used, may be based on payments allowed for lower-cost products that are already
reimbursed, may be incorporated into existing payments for other products or services, and may reflect budgetary constraints and/or imperfections in Medicare or Medicaid data used to calculate these
rates. Net prices for drugs may be reduced by mandatory discounts or rebates required by government health care programs. Such legislation, or similar regulatory changes or relaxation of laws that
restrict imports of drugs from other countries, could reduce the net price we receive for any future marketed drugs. As a result, our future drugs might not ultimately be considered cost-effective.
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We
cannot be certain that reimbursement will be available for any drug candidates that we develop. Also, we cannot be certain that reimbursement policies will not reduce the demand for,
or the price paid for, any future drugs. If reimbursement is not available or is available on a limited basis, we may not be able to successfully commercialize any drug candidates that we develop.
Other factors could affect the demand for and sales and profitability of any drug candidates that we may
commercialize in the future.
In general, other factors that could affect the demand for and sales and profitability of our future drugs include, but are not limited
to:
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-
the timing of regulatory approval, if any, of competitive drugs;
-
-
our or any other of our partners' pricing decisions, as applicable, including a decision to increase or decrease the price of a drug, and the
pricing decisions of our competitors;
-
-
government and third-party payor reimbursement and coverage decisions that affect the utilization of our future drugs and competing drugs;
-
-
negative safety or efficacy data from new clinical studies conducted either in the U.S. or internationally by any party could cause the sales
of our future drugs to decrease or a future drug to be recalled;
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-
the degree of patent protection afforded our future drugs by patents granted to or licensed by us and by the outcome of litigation involving
our or any of our licensor's patents;
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-
the outcome of litigation involving patents of other companies concerning our future drugs or processes related to production and formulation
of those drugs or uses of those drugs;
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-
the increasing use and development of alternate therapies;
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-
the rate of market penetration by competing drugs; and
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-
the termination of, or change in, existing arrangements with our partners.
Any
of these factors could have a material adverse effect on the sales of any drug candidates that we may commercialize in the future.
Failure to obtain regulatory approvals in foreign jurisdictions will prevent us from marketing our products
internationally.
We plan to seek approval for glembatumumab vedotin in Europe and may seek approval of our other drug candidates outside the United States and
may market future products in international markets. In order to market our future products in the European Economic Area, or EEA, and many other foreign jurisdictions, we must obtain separate
regulatory approvals. Specifically, in the EEA, medicinal products can only be commercialized after obtaining a Marketing Authorization, or MA.
Before
granting the MA, the European Medicines Agency or the competent authorities of the member states of the EEA make an assessment of the risk-benefit balance of the product on the
basis of scientific criteria concerning its quality, safety and efficacy.
The
approval procedures vary among countries and can involve additional clinical testing, and the time required to obtain approval may differ from that required to obtain FDA approval.
Clinical studies conducted in one country may not be accepted by regulatory authorities in other countries. Approval by the FDA does not ensure approval by regulatory authorities in other countries,
and approval by one or more foreign regulatory authorities does not ensure approval by regulatory authorities in other foreign countries or by the FDA. However, a failure or delay in obtaining
regulatory approval in one country may have a negative effect on the regulatory process in others. The
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foreign
regulatory approval process may include all of the risks associated with obtaining FDA approval. We may not obtain foreign regulatory approvals on a timely basis, if at all. We may not be able
to file for regulatory approvals and even if we file we may not receive necessary approvals to commercialize our products in any market.
If we obtain approval to commercialize any approved products outside of the United States, a variety of risks
associated with international operations could materially adversely affect our business.
If our drug candidates are approved for commercialization outside of the United States, we expect that we will be subject to additional risks
related to international operations and entering into international business relationships, including:
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different regulatory requirements for drug approvals;
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-
reduced protection for intellectual property rights, including trade secret and patent rights;
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-
unexpected changes in tariffs, trade barriers and regulatory requirements;
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-
economic weakness, including inflation, or political instability in particular foreign economies and markets;
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-
compliance with tax, employment, immigration and labor laws for employees living or traveling abroad;
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-
foreign taxes, including withholding of payroll taxes;
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-
foreign currency fluctuations, which could result in increased operating expenses and reduced revenues, and other obligations incident to doing
business in another country;
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-
workforce uncertainty in countries where employment regulations are different than, and labor unrest is more common than, in the United States;
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production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad;
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-
business interruptions resulting from geopolitical actions, including war and terrorism, or natural disasters including earthquakes,
hurricanes, floods and fires; and
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-
difficulty in importing and exporting clinical trial materials and study samples.
Risks Related to Reliance on Third Parties
We rely on third parties to plan, conduct and monitor our clinical tests, and their failure to perform as
required would interfere with our product development.
We rely on third parties to conduct a significant portion of our clinical development activities. These activities include clinical patient
recruitment and observation, clinical trial monitoring, clinical data management and analysis, safety monitoring and project management. We conduct project management and medical and safety monitoring
in-house for some of our programs and rely on third parties for the remainder of our clinical development activities.
The
significant third parties who we currently rely on for clinical development activities include PPD Development, LLC for clinical studies including our METRIC study. If any of
these third parties, including PPD Development, is unable to perform in a quality and timely manner, and at a feasible cost, our clinical studies will face delays. Further, if any of these third
parties fails to perform as we expect or if their work fails to meet regulatory standards, our testing could be delayed, cancelled or rendered ineffective.
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We rely on contract manufacturers over whom we have limited control. Should the cost, delivery and quality of
clinical and commercial grade materials manufactured by us in our Fall River facility or supplied by contract manufacturers vary to our disadvantage, our business operations could suffer significant
harm.
We have limited experience in commercial manufacturing. We rely on CMOs, to manufacture drug substance and drug product for our late-stage
clinical studies of glembatumumab vedotin as well as for future commercial supplies. Our ability to conduct late-stage clinical trials, manufacture and commercialize our drug candidates, if regulatory
approval is obtained, depends on the ability of such third parties to manufacture our drug candidates on a large scale at a competitive cost and in accordance with cGMP and foreign regulatory
requirements, if applicable. We also rely on CMOs for filling, packaging, storage and shipping of drug product. In order for us to establish our own commercial manufacturing facility, we would require
substantial additional funds and would need to hire and retain significant additional personnel and comply with extensive cGMP regulations applicable to such a facility. The commercial manufacturing
facility would also need to be licensed for the production of our drug candidates by the FDA.
For
our most advanced programs, we are working with CMOs under established manufacturing arrangements that comply with the FDA's requirements and other regulatory standards, although
there is no assurance that the manufacturing will be successful. Prior to approval of any drug candidate, the FDA must review and approve validation studies for drug product. The manufacturing
processes for our drug candidates and immunotherapeutic delivery systems utilize known technologies. We believe that the products we currently have under development can be scaled up to permit
manufacture in commercial quantities. However, there can be no assurance that we will not encounter difficulties in scaling up the manufacturing processes. Significant scale-up of manufacturing may
result in unanticipated technical challenges and may require additional validation studies that the FDA must review and approve. CMOs may encounter difficulties in scaling up production, including
problems involving raw material suppliers, production yields, technical difficulties, scaled-up product characteristics, quality control and assurance, shortage of qualified personnel, capacity
constraints, changing priorities within the CMOs, compliance with FDA and foreign regulations, environmental compliance, production costs and development of advanced manufacturing techniques and
process controls. Any of these difficulties, if they occur, and are not overcome to the satisfaction of the FDA or other regulatory agency, could lead to significant delays and possibly the
termination of the development program for such drug candidate. These risks become more acute as we scale up for commercial quantities, where a reliable source of drug product becomes critical to
commercial success. The commercial viability of any of our drug candidates, if approved, will depend on the ability of our contract manufacturers to produce drug product on a large scale. Failure to
achieve this level of supply can jeopardize and prevent the successful commercialization of the drug.
To
date, we have utilized CMOs for the manufacture of clinical trial supplies of glembatumumab vedotin. In the second half of 2016, we established a relationship with Patheon Biologics
in Brisbane to manufacture the glembatumumab vedotin mAb intermediate due to being informed by Lonza Biologics, our previous CMO, that the bioreactors used to manufacture glembatumumab vedotin will be
decommissioned and would not be available for commercialization. We also have a relationship with Piramal Healthcare UK Ltd. to manufacture the antibody drug conjugate with the vcMMAE
linker-toxin. The drug substance is then filled and packaged at Piramal Lexington or BSP Pharma. We rely on MilliporeSigma for supplying suitable quantities of vcMMAE. Any manufacturing failures or
delays by our glembatumumab vedotin contract manufacturers or suppliers of materials could cause delays in our glembatumumab vedotin clinical studies including the METRIC study and/or a BLA filing
and, if regulatory approval is obtained, commercial launch of glembatumumab vedotin.
We
also utilize CMOs for the manufacture of varlilumab for global clinical trials and potential commercialization. We have established relationships with Patheon Biologics in
St. Louis for the manufacture of varlilumab drug substance and Vetter Pharma for the manufacture of varlilumab drug
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product.
Any manufacturing failures or delays by our varlilumab CMOs could cause delays in our varlilumab clinical studies.
We
operate our own cGMP manufacturing facility in Fall River, Massachusetts, to produce drug substance for our current and planned early-stage clinical trials. Our Fall River
manufacturing facility has 250L and 1000L bioreactor capacity and is able to manufacture in compliance with FDA regulations, allowing us to distribute potential products to clinical sites in the U.S.
for early clinical trials. We currently manufacture CDX-1401, CDX-301, and CDX-1140 drug substance and CDX-014 mAb intermediate in our Fall River facility for our current and planned Phase 1
and Phase 2 clinical trials. CDX-014, an antibody-drug conjugate, is then manufactured by Lonza (Visp). We expect our existing clinical supplies of CDX-3379 and CDX-0158 will be sufficient to
carry out our current planned clinical development. Additional manufacturing is under review and may involve utilization of the Fall River facility and/or a CMO. All products are then filled and
packaged at contract manufacturers. Any manufacturing failures or compliance issues at contract manufacturers could cause delays in our Phase 1 and Phase 2 clinical studies for these
drug candidates.
Our
leading drug candidates require specialized manufacturing capabilities and processes. We may face difficulty in securing commitments from U.S. and foreign contract manufacturers as
these manufacturers could be unwilling or unable to accommodate our needs. Relying on foreign manufacturers involves peculiar and increased risks, including the risk relating to the difficulty foreign
manufacturers may face in complying with cGMP requirements as a result of language barriers, lack of familiarity with cGMP or the FDA regulatory process or other causes, economic or political
instability in or affecting the home countries of our foreign manufacturers, shipping delays, potential changes in foreign regulatory laws governing the sales of our product supplies, fluctuations in
foreign currency exchange rates and the imposition or application of trade restrictions.
There
can be no assurances that contract manufacturers will be able to meet our timetable and requirements. Further, contract manufacturers must operate in compliance with cGMP and
failure to do so could result in, among other things, the disruption of product supplies. As noted above, non-U.S. contract manufacturers may face special challenges in complying with cGMP
requirements, and
although we are not currently dependent on non-U.S. collaborators or contract manufacturers, we may choose or be required to rely on non-U.S. sources in the future as we seek to develop stable
supplies of increasing quantities of materials for ongoing clinical trials of larger scale. Our dependence upon third parties for the manufacture of our products may adversely affect our profit
margins and our ability to develop, manufacture, sell and deliver products on a timely and competitive basis.
We currently rely on sole suppliers for key components of our drug candidates. Any production problems with
our suppliers or other disruptions in the supply of such components could adversely affect us
We currently rely on sole suppliers for key components of our drug candidates, including vcMMAE for glembatumumab vedotin and Hiltonol for
CDX-1401. While we work with the suppliers of these key components to ensure continuity of supply, no assurance can be given that these efforts will be successful. In addition, due to regulatory
requirements relating to the qualification of suppliers, we may not be able to establish additional or replacement sources on a timely basis or without excessive cost. If our suppliers were to
terminate our arrangements or fail to meet our supply needs we might be forced to delay our development programs or we could face disruptions in the distribution and sale of any drugs for which we
obtain regulatory approval.
We currently rely on third party collaborators to develop and commercialize companion diagnostic tests for
certain of our drug candidates, including our lead drug candidate glembatumumab vedotin.
We do not have experience or capabilities in developing, administering, obtaining regulatory approval for, or commercializing companion
diagnostic tests and will need to rely in large part on third
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party
collaborators to perform these functions. Companion diagnostic tests are subject to regulation by the FDA and similar regulatory authorities outside of the United States as medical devices and
require separate regulatory approval prior to commercialization. We are dependent on such third party collaborators to obtain regulatory approval and commercialize such companion diagnostic tests.
Such third party collaborators:
-
-
may not perform its obligations as expected or as required under our collaboration agreement;
-
-
may encounter production difficulties that could constrain the supply of the companion diagnostic test;
-
-
may have difficulties gaining acceptance of the use of the companion diagnostic test in the clinical community;
-
-
may not pursue commercialization of the companion diagnostic test even if they receive any required regulatory approvals;
-
-
may elect not to continue the development or commercialization of the companion diagnostic test based on changes in the third parties'
strategic focus or available funding, or external factors such as an acquisition, that divert resources or create competing priorities;
-
-
may not commit sufficient resources to the marketing and distribution of the companion diagnostic test; and
-
-
may terminate their relationship with us.
If
such third party collaborators fail to develop, obtain regulatory approval or commercialize the companion diagnostic test, we may not be able to enter into arrangements with another
diagnostic company to obtain supplies of an alternative diagnostic test for use in connection with the development and commercialization of our product candidates or do so on commercially reasonable
terms, which could adversely affect and/or delay the development or commercialization of our drug candidates.
Our reliance on third parties requires us to share our trade secrets, which increases the possibility that a
competitor will discover them.
Because we rely on third parties to develop our products, we must share trade secrets with them. We seek to protect our proprietary technology
in part by entering into confidentiality agreements and, if applicable, material transfer agreements, collaborative research agreements, consulting agreements or other similar agreements with our
collaborators, advisors, employees and consultants prior to beginning research or disclosing proprietary information. These agreements typically restrict the ability of our collaborators, advisors,
employees and consultants to publish data potentially relating to our trade secrets. Our academic collaborators typically have rights to publish data, provided that we are notified in advance and may
delay publication for a specified time in order to secure our intellectual property rights arising from the collaboration. In other cases, publication rights are controlled exclusively by us, although
in some cases we may share these rights with other parties. We also conduct joint research and development programs which may require us to share trade secrets under the terms of research and
development partnership or similar agreements. Despite our efforts to protect our trade secrets, our competitors may discover our trade secrets, either through breach of these agreements, independent
development or publication of information including our trade secrets in cases where we do not have proprietary or otherwise protected rights at the time of publication. A competitor's discovery of
our trade secrets would impair our competitive position.
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Risks Related to Business Operations
We depend greatly on the intellectual capabilities and experience of our key executives, commercial personnel
and scientists and the loss of any of them could affect our ability to develop our products.
The loss of Anthony S. Marucci, our President and Chief Executive Officer, or other executive officers or key members of our staff, including
Avery W. Catlin, our Chief Financial Officer, Dr. Thomas Davis, our Chief Medical Officer, Dr. Tibor Keler, our Chief Scientific Officer, Dr. Ronald Pepin, our Chief Business
Officer, Dr. Richard Wright, our Chief Commercial Officer,
Elizabeth Crowley, our Chief Product Development Officer and Theresa LaVallee, our Senior Vice President, Regulatory and Precision Medicine, could harm us. We entered into employment agreements with
Mr. Marucci and each of our executive officers although an employment agreement as a practical matter does not guarantee retention of an employee. We also depend on our scientific and clinical
collaborators and advisors, all of whom have outside commitments that may limit their availability to us. In addition, we believe that our future success will depend in large part upon our ability to
attract and retain highly skilled scientific, managerial and marketing personnel, particularly as we expand our activities in clinical trials, the regulatory approval process and sales and
manufacturing. We routinely enter into consulting agreements with our scientific and clinical collaborators and advisors, key opinion leaders and heads of academic departments in the ordinary course
of our business. We also enter into contractual agreements with physicians and institutions who recruit patients into our clinical trials on our behalf in the ordinary course of our business.
Notwithstanding these arrangements, we face significant competition for this type of personnel from other companies, research and academic institutions, government entities and other organizations. We
cannot predict our success in hiring or retaining the personnel we require for continued growth.
We may expand our clinical development, regulatory and sales and marketing capabilities, and as a result, we
may encounter difficulties in managing our growth, which could disrupt our operations.
We expect that if our drug candidates continue to progress in development, we may require significant additional investment in personnel,
management systems and resources, particularly in the build out of our commercial capabilities. To date we have hired a core commercial team to plan for potential commercial launches if any of our
drug candidates are approved. Over the next several years, we may experience significant growth in the number of our employees and the scope of our operations, particularly in the areas of drug
development, regulatory affairs and sales and marketing. To manage this potential future growth, we may continue to implement and improve our managerial, operational and financial systems, expand our
facilities and continue to recruit and train additional qualified personnel. Due to our limited financial resources and the limited experience of our management team in managing a company with such
anticipated growth, we may not be able to effectively manage the expansion of our operations or recruit and train additional qualified personnel. The physical expansion of our operations may lead to
significant costs and may divert our management and business development resources. Any inability to manage growth could delay the execution of our business plans or disrupt our operations.
Integrating Kolltan's organization is expected to be costly and may divert management's attention away from
our operations.
We are in the process of integrating Kolltan's organization and while we plan such integration to be cash neutral, we expect to incur
significant costs integrating Kolltan's operations, facility, products and personnel. Furthermore, successful integration of Kolltan's preclinical and clinical programs, operations, and personnel may
place a significant burden on our management and internal resources. The costs of integrating Kolltan's operations with ours and the diversion of management's
attention and any difficulties encountered in the transition and integration process could result in delays in the
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preclinical
and clinical trial programs of Kolltan and/or Celldex and could otherwise harm our business, financial condition and operating results.
If we are unable to successfully integrate Kolltan's organization, we may not operate efficiently or realize
the anticipated benefits of our acquisition of Kolltan.
The success of the merger will depend on, among other things, the combined company's ability to operate efficiently and to achieve its business
objectives, including the successful development of its drug candidates. Achieving the benefits of the merger will depend in part on the successful integration of Kolltan's preclinical and clinical
programs, operations and personnel in a timely and efficient manner. If we cannot successfully integrate Kolltan's preclinical and clinical programs, operations and personnel, we may not realize the
expected benefits of the merger. The integration process may result in the disruption of each company's ongoing business, an adverse impact on the value of our assets, or inconsistencies in standards,
controls, procedures or policies that could adversely affect our ability to comply with reporting obligations as a public company, to satisfy our obligations to third parties or to achieve the
anticipated benefits of the merger.
Any
delays in the integration process or inability to operate efficiently or to realize the full extent of the anticipated benefits of the merger could have an adverse effect on our
business prospects and results of operations.
Our employees may engage in misconduct or other improper activities, including noncompliance with regulatory
standards and requirements, which could have a material adverse effect on our business.
We are exposed to the risk of employee fraud or other misconduct. Misconduct by employees could include intentional failures to comply with FDA
regulations, provide accurate information to the FDA, comply with applicable privacy laws, comply with manufacturing standards we have established, comply with federal and state health-care fraud and
abuse laws and regulations, report financial information or data accurately or disclose unauthorized activities to us. In particular,
sales, marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, kickbacks, self-dealing and other abusive practices.
These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements.
Employee misconduct could also involve the improper use of information obtained in the course of clinical trials, which could result in regulatory sanctions and serious harm to our reputation. We have
adopted a Code of Business Conduct and Ethics and launched a Health Care Compliance program, but it is not always possible to identify and deter employee misconduct. The precautions we take to detect
and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a
failure to be in compliance with such laws or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could
have a significant effect on our business and results of operations, including the imposition of significant fines or other sanctions.
We may engage in strategic transactions that could impact our liquidity, increase our expenses and present
significant distractions to our management.
From time to time we may consider strategic transactions, including acquisitions of companies, such as our acquisition of Kolltan in the fourth
quarter of 2016, asset purchases and out-licensing or in-licensing of products, drug candidates or technologies. Additional potential transactions that we may consider include a variety of different
business arrangements, including spin-offs, strategic partnerships, joint ventures, restructurings, divestitures, business combinations and investments. Any such transaction may require us to incur
non-recurring or other charges, may increase our near and long-term expenditures and may pose significant integration challenges or disrupt our management or business,
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which
could adversely affect our operations and financial results. For example, these transactions may entail numerous operational and financial risks,
including:
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exposure to unknown liabilities;
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disruption of our business and diversion of our management's time and attention in order to develop acquired products, drug candidates or
technologies;
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incurrence of substantial debt or dilutive issuances of equity securities to pay for acquisitions;
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higher than expected acquisition and integration costs;
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write-downs of assets or goodwill or impairment charges;
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increased amortization expenses;
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difficulty and cost in combining the operations and personnel of any acquired businesses with our operations and personnel;
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impairment of relationships with key suppliers or customers of any acquired businesses due to changes in management and ownership; and
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inability to retain key employees of any acquired businesses.
Accordingly,
although there can be no assurance that we will undertake or successfully complete any transactions of the nature described above, any transactions that we do complete could
have a material adverse effect on our business, results of operations, financial condition and prospects.
We may not be able to successfully integrate our existing technology or to modify our technologies to create
new immunotherapeutic drugs.
If we are able to integrate our acquired assets, such as Kolltan's drug development programs and TAM technology, and licensed assets with our
immunotherapy technologies, we believe these assets will give our immunotherapeutic drugs a competitive advantage. However, if we are unable to successfully integrate licensed assets, or other
technologies which we have acquired or may acquire in the future, with our existing technologies and potential products currently under development, we may be unable to realize any benefit from our
acquisition of these assets, or other technologies which we have acquired or may acquire in the future and may face the loss of our investment of financial resources and time in the integration
process.
We
believe that our immunotherapy technology portfolio may offer opportunities to develop immunotherapeutic drugs that treat a variety of oncology, inflammatory and infectious diseases
by stimulating a patient's immune system against those disease organisms. If our immunotherapy technology portfolio cannot be used to create effective immunotherapeutic drugs against a variety of
disease organisms, we may lose all or portions of our investment in development efforts for new drug candidates.
Our internal computer systems, or those of our CROs, CMOs, or other contractors or consultants, may fail or
suffer security breaches, which could result in a material disruption of our drug development programs.
Despite the implementation of security measures, our internal computer systems and those of our CROs, CMOs and other contractors and consultants
are vulnerable to damage from cyberattacks, malicious intrusion, computer viruses, unauthorized access, loss of data privacy, natural disasters, terrorism, war and telecommunication, electrical
failures or other significant disruption. If such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our drug development programs and
commercialization efforts. For example, the loss of clinical study data from completed or ongoing clinical studies for any of our drug candidates could result in
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delays
in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. To the extent that any disruption or security breach were to result in a loss of or
damage to our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability and the further development or commercialization of our drug
candidates could be delayed.
Our business requires us to use hazardous materials, which increases our exposure to dangerous and costly
accidents.
Our research and development activities involve the use of hazardous chemicals, biological materials and radioactive compounds. Although we
believe that our safety procedures for handling and disposing of hazardous materials comply with the standards prescribed by applicable laws and regulations, we cannot completely eliminate the risk of
accidental contamination or injury from these materials. In the event of an accident, an injured party will likely sue us for any resulting damages with potentially significant liability. The ongoing
cost of complying with environmental laws and regulations is significant and may increase in the future.
We face the risk of product liability claims, which could exceed our insurance coverage, and produce recalls,
each of which could deplete our cash resources.
As a participant in the pharmaceutical, biotechnology and immunotherapeutic drug industries, we are exposed to the risk of product liability
claims alleging that use of our drug candidates caused an injury or harm. These claims can arise at any point in the development, testing, manufacture, marketing or sale of our drug candidates and may
be made directly by patients involved in clinical trials of our products, by consumers or healthcare providers or by individuals, organizations or companies selling our products. Product liability
claims can be expensive to defend, even if the drug or drug candidate did not actually cause the alleged injury or harm.
Insurance
covering product liability claims becomes increasingly expensive as a drug candidate moves through the development pipeline to commercialization. Under our license agreements,
we are required to maintain clinical trial liability insurance coverage up to $15 million. However, there can be no assurance that such insurance coverage is or will continue to be adequate or
available to us at a cost acceptable to us or at all. We may choose or find it necessary under our collaborative agreements to increase our insurance coverage in the future. We may not be able to
secure greater or broader product liability insurance coverage on acceptable terms or at reasonable costs when needed. Any
liability for damages resulting from a product liability claim could exceed the amount of our coverage, require us to pay a substantial monetary award from our own cash resources and have a material
adverse effect on our business, financial condition and results of operations. Moreover, a product recall, if required, could generate substantial negative publicity about our products and business
and inhibit or prevent development of our drug candidates and, if approval is obtained, commercialization of our future drugs.
Risks Related to Intellectual Property
We license technology from other companies to develop products, and those companies could influence research
and development or restrict our use of it. In addition, if we fail to comply with our obligations in our intellectual property licenses with third parties, we could lose license rights that are
important to our business.
Companies that license technologies to us that we use in our research and development programs may require us to achieve milestones or devote
minimum amounts of resources to develop products using those technologies. They may also require us to make significant royalty and milestone payments, including a percentage of any sublicensing
income, as well as payments to reimburse them for patent costs. The number and variety of our research and development programs require us to establish
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priorities
and to allocate available resources among competing programs. From time to time we may choose to slow down or cease our efforts on particular products. If in doing so we fail to fully
perform our obligations under a license, the licensor can terminate the licenses or permit our competitors to use the technology. Termination of these licenses or reduction or elimination of our
licensed rights may result in our having to negotiate new or reinstated licenses with less favorable terms. Moreover, we may lose our right to market and sell any products based on the licensed
technology. The occurrence of such events could materially harm our business.
Our ability to successfully develop and, if regulatory approval is obtained, commercialize our drug
candidates may be materially adversely affected if we are unable to obtain and maintain effective intellectual property rights for our drug candidates and technologies.
Our success depends in part on our ability to obtain and maintain patent protection and other intellectual property protection for our drug
candidates and proprietary technology. We have sought to protect our proprietary position by filing patent applications in the United States and abroad related to our drug candidates and technology
that are important to our business. This process is expensive and time-consuming, and we may not be able to file and prosecute all necessary or desirable patent applications at a reasonable cost or in
a timely manner. It is also possible that we will fail to identify patentable aspects of our research and development output before it is too late to obtain patent protection. Our existing patents and
any future patents we obtain may not be sufficiently broad to prevent others from using our technologies or from developing competing drugs and technologies.
Biotechnology
patents involve complex legal, scientific and factual questions and are highly uncertain. To date, there is no consistent policy regarding the breadth of claims allowed in
biotechnology patents, particularly in regard to patents for technologies for human uses like those we use in our business. We cannot predict whether the patents we or our licensors seek will issue.
If such patents are issued, a competitor may challenge them and limit their scope. Moreover, our patents may not afford effective protection against competitors with similar technology. A successful
challenge to any one of our patents could result in a third party's ability to use the technology covered by the patent. We also face the risk that others will infringe, avoid or circumvent our
patents. Technology that we license from others is subject to similar risks and this could harm our ability to use that technology. If we, or a company that licenses technology to us, were not the
first creator of an invention that we use, our use of the underlying product or technology will face restrictions, including elimination. For example, in September 2014, two European patent
oppositions were filed against the University of Southampton European patent and at a hearing on November 23, 2016 the European Patent Office (EPO) revoked the European patent on the ground of
lack of inventive step. We intend to appeal this decision and to defend the European patent vigorously in cooperation with the University of Southampton. This EPO decision does not affect the later
filed Celldex patents and applications for varlilumab. We also have an issued U.S. patent which covers varlilumab as a composition of matter.
If
we must defend against suits brought against us or prosecute suits against others involving intellectual property rights, we will incur substantial costs. In addition to any potential
liability for significant monetary damages, a decision against us may require us to obtain licenses to patents or other intellectual property rights of others on potentially unfavorable terms. If
those licenses from third parties are necessary but we cannot acquire them, we would attempt to design around the relevant technology, which would cause higher development costs and delays, and may
ultimately prove impracticable.
We may need to license intellectual property from third parties, and such licenses may not be available or
may not be available on commercially reasonable terms.
A third party may hold intellectual property, including patent rights, that are important or necessary to the development of our drug
candidates. It may be necessary for us to use the patented or
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proprietary
technology of a third party to commercialize our own technology or drug candidates, in which case we would be required to obtain a license from such third party. A license to such
intellectual property may not be available or may not be available on commercially reasonable terms, which could have a material adverse effect on our business and financial condition.
We
are aware of a third party European patent that relates to use of ErbB3 antibodies for treatment of hyperproliferative disorders, including cancer. A counterpart of this patent has
also issued in Japan and Australia. As a result of an opposition proceeding, the European patent was revoked in its entirety. The owner of the European patent has appealed the decision in the
opposition proceeding. We do not know if the appeal will succeed, or, if successful, whether the scope of claims, post-appeal, would be relevant to our activities. Should the appeal be successful and
a license be necessary for our program that targets ErbB3, we cannot predict whether we would be able to obtain such a license, or, if a license were available, whether it would be available on
commercially reasonable terms. If the appeal results in such third party's patents having a valid claim relevant to our use of ErbB3 antibodies and a license under the patents is unavailable on
commercially relevant terms, or at all, our ability to commercialize CDX-3379 in Europe may be impaired or delayed. We would vigorously defend ourselves, but we cannot predict whether the patents
would be found valid, enforceable or infringed. We continue to monitor counterpart patent applications pending in other jurisdictions, including the United States. While we cannot predict whether
claims will issue in these other jurisdictions or whether the scope of such claims would be relevant to our activities, these applications entail comparable risks to us in these other jurisdictions.
We may be unable to protect the confidentiality of our trade secrets, thus harming our business and
competitive position.
We rely upon trade secrets, including unpatented know-how, technology and other proprietary information to develop and maintain our competitive
position, which we seek to protect, in
part, by confidentiality agreements with our employees and our collaborators and consultants. We also have agreements with our employees that obligate them to assign their inventions to us. However,
it is possible that technology relevant to our business will be independently developed by a person that is not a party to such an agreement. Furthermore, if the employees, consultants or
collaborators that are parties to these agreements breach or violate the terms of these agreements, we may not have adequate remedies for any such breach or violation, and we could lose our trade
secrets through such breaches or violations. Further, our trade secrets could be disclosed, misappropriated or otherwise become known or be independently discovered by our competitors. In addition,
intellectual property laws in foreign countries may not protect our intellectual property to the same extent as the laws of the United States. If our trade secrets are disclosed or misappropriated, it
would harm our ability to protect our rights and have a material adverse effect on our business.
We may become involved in lawsuits to protect or enforce our patents, which could be expensive,
time-consuming and unsuccessful.
Competitors may infringe our patents. To counter infringement or unauthorized use, we may be required to file infringement claims, which can be
expensive and time-consuming. In addition, in an infringement proceeding, a court may decide that a patent of ours is invalid or unenforceable, or may refuse to stop the other party from using the
technology at issue on the grounds that our patents do not cover the technology in question. An adverse result in any litigation proceeding could put one or more of our patents at risk of being
invalidated or interpreted narrowly. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our
confidential information could be compromised by disclosure during this type of litigation.
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Third parties may initiate legal proceedings alleging that we are infringing their intellectual property
rights, the outcome of which would be uncertain and could have a material adverse effect on the success of our business.
Our commercial success depends upon our ability and the ability of our collaborators to develop, manufacture, market and sell our drug
candidates and use our proprietary technologies without infringing, misappropriating or otherwise violating the proprietary rights or intellectual property of third parties. We may become party to, or
be threatened with, future adversarial proceedings or litigation regarding intellectual property rights with respect to our drug candidates and technology. Third parties may assert infringement claims
against us based on existing patents or patents that may be granted in the future. If we are found to infringe a third-party's intellectual property rights,
we could be required to obtain a license from such third-party to continue developing our drug candidates and technology. However, we may not be able to obtain any required license on commercially
reasonable terms or at all. Even if we were able to obtain a license, it could be non-exclusive, thereby giving our competitors access to the same technologies licensed to us. We could be forced,
including by court order, to cease developing the infringing technology or product. In addition, we could be found liable for monetary damages. Claims that we have misappropriated the confidential
information or trade secrets of third parties can have a similar negative impact on our business.
Third parties may assert that our employees or consultants have wrongfully used or disclosed confidential
information or misappropriated trade secrets.
We employ individuals who were previously employed at universities or other diagnostic or biopharmaceutical companies, including our competitors
or potential competitors. Although we try to ensure that our employees and consultants do not use the proprietary information or know-how of others in their work for us, we may be subject to claims
that we or our employees, consultants or independent contractors have inadvertently or otherwise used or disclosed intellectual property, including trade secrets or other proprietary information, of a
former employer or other third parties. Litigation may be necessary to defend against these claims. If we fail in defending any such claims, in addition to paying monetary damages, we may lose
valuable intellectual property rights or personnel. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and
other employees.
Regulatory Risks
If our processes and systems are not compliant with regulatory requirements, we could be subject to delays in
submitting BLAs, NDAs or restrictions on marketing of drugs after they have been approved.
We currently are developing drug candidates for regulatory approval and are in the process of implementing regulated processes and systems
required to obtain and maintain regulatory approval for our drug candidates. Certain of these processes and systems for conducting clinical trials and manufacturing material must be compliant with
regulatory requirements before we can apply for regulatory approval for our drug candidates. These processes and systems will be subject to continual review and periodic inspection by the FDA and
other regulatory bodies. If we are unable
to achieve compliance in a timely fashion, or if compliance issues are identified at any point in the development and approval process, we may experience delays in filing for regulatory approval for
our drug candidates, or delays in obtaining regulatory approval after filing. In addition, any later discovery of previously unknown problems or safety issues with approved drugs or manufacturing
processes, or failure to comply with regulatory requirements, may result in restrictions on such drugs or manufacturing processes, withdrawal of drugs from the market, the imposition of civil or
criminal penalties or a refusal by the FDA and/or other regulatory bodies to approve pending applications for marketing approval of new drugs or supplements to approved applications, any of which
could have a material adverse effect on our business. In addition, we are a party to agreements that transfer
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responsibility
for complying with specified regulatory requirements, such as filing and maintenance of marketing authorizations and safety reporting or compliance with manufacturing requirements, to
our collaborators and third-party manufacturers. If our collaborators or third-party manufacturers do not fulfill these regulatory obligations, any drugs for which we or they obtain approval may be
subject to later restrictions on manufacturing or sale, or may even risk withdrawal, which could have a material adverse effect on our business.
Even if we receive regulatory approval for a drug candidate, we will be subject to ongoing regulatory
obligations and continued regulatory review, which may result in significant additional expense and subject us to penalties if we fail to comply with applicable regulatory requirements.
Once regulatory approval has been granted, the approved product and its manufacturer are subject to continual review by the FDA and/or non-U.S.
regulatory authorities. Any regulatory approval that we or our collaboration partners receive for our drug candidates may be subject to limitations on the indicated uses for which the product may be
marketed or contain requirements for potentially costly post-marketing follow-up studies to monitor the safety and efficacy of the product. In addition, if the FDA and/or non-U.S. regulatory
authorities approve any of our drug candidates, we will be subject to extensive and ongoing regulatory requirements by the FDA and other regulatory authorities with regard to the labeling, packaging,
adverse event reporting, storage, advertising, promotion and recordkeeping for our products. In addition, manufacturers of our drug products are required to comply with cGMP regulations, which include
requirements related to quality control and quality assurance as well as the corresponding maintenance of records and documentation. Further, regulatory authorities must inspect and approve these
manufacturing facilities before they can be used to manufacture our drug products, and these facilities are subject to continual review and periodic inspections by the FDA and other regulatory
authorities for compliance with cGMP regulations. If we or a third party discover previously unknown problems with a product, such as adverse events of unanticipated severity or frequency, or problems
with the facility where the product is manufactured, a regulatory authority may impose restrictions on that product, the manufacturer or us, including requiring withdrawal of the product from the
market or suspension of manufacturing. If we, our drug candidates or the manufacturing facilities for our drug candidates fail to comply with
regulatory requirements of the FDA and/or other non-U.S. regulatory authorities, we could be subject to administrative or judicially imposed sanctions, including the
following:
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warning letters;
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civil or criminal penalties and fines;
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injunctions;
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consent decrees;
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suspension or withdrawal of regulatory approval;
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suspension of any ongoing clinical studies;
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voluntary or mandatory product recalls and publicity requirements;
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refusal to accept or approve applications for marketing approval of new drugs;
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restrictions on operations, including costly new manufacturing requirements; or
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seizure or detention of drugs or import bans.
The
regulatory requirements and policies may change and additional government regulations may be enacted for which we may also be required to comply. We cannot predict the likelihood,
nature or extent of government regulation that may arise from future legislation or administrative action, either
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in
the United States or in other countries. If we are not able to maintain regulatory compliance, we may not be permitted to market our future products and our business may suffer.
We may be subject, directly or indirectly, to federal and state healthcare fraud and abuse laws, false claims
laws and health information privacy and security laws. If we are unable to comply, or have not fully complied, with such laws, we could face substantial penalties.
If we obtain FDA approval for any of our drug candidates and begin commercializing those products in the United States, our operations may be
directly, or indirectly through our customers, subject to various federal and state fraud and abuse laws, including, without limitation, the federal Anti-Kickback Statute and the federal False Claims
Act. These laws may affect, among other things, our proposed sales, marketing and education programs. In addition, we may be subject to patient privacy regulation by both the federal government and
the states in which we conduct our business. The laws that may affect our ability to operate include:
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the federal Anti-Kickback Statute, which prohibits, among other things, persons from knowingly and willfully soliciting, receiving, offering or
paying remuneration, directly or indirectly, to induce, or in return for, the purchase or recommendation of an item or service reimbursable under a federal healthcare program, such as the Medicare and
Medicaid programs;
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federal civil and criminal false claims laws and civil monetary penalty laws, which prohibit, among other things, individuals or entities from
knowingly presenting, or causing to be presented, claims for payment from Medicare, Medicaid, or other third-party payors that are false or fraudulent;
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the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which created new federal criminal statutes that prohibit
executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters;
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HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, or HITECH, and its implementing
regulations, which imposes certain requirements relating to the privacy, security and transmission of individually identifiable health information;
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the federal transparency requirements under the Patient Protection and Affordable Care Act of 2010 requires manufacturers of drugs, devices,
biologics and medical supplies to report to the Department of Health and Human Services information related to physician payments and other transfers of value and physician ownership and investment
interests; and
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state law and foreign law equivalents of each of the above federal laws, such as anti-kickback and false claims laws which may apply to items
or services reimbursed by any third-party payor, including commercial insurers, and state laws governing the privacy and security of health information in certain circumstances, many of which differ
from each other in significant ways and may not have the same effect, thus complicating compliance efforts.
Although
compliance programs can mitigate the risk of investigation and prosecution for violations of these laws, the risks cannot be entirely eliminated. If our operations are found to
be in violation of any of the laws described above or any other governmental regulations that apply to us, we may be subject to penalties, including civil and criminal penalties, damages, fines and
the curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business and our results of operations. Moreover, achieving and sustaining compliance
with applicable federal and state privacy, security and fraud laws may prove costly.
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Compliance with laws and regulations pertaining to the privacy and security of health information may be time
consuming, difficult and costly, particularly in light of increased focus on privacy issues in countries around the world, including the U.S. and the EU.
We are subject to various domestic and international privacy and security regulations. The confidentiality, collection, use and disclosure of
personal data, including clinical trial patient-specific information, are subject to governmental regulation generally in the country that the personal data were collected or used. In the United
States were are subject to various state and federal privacy and data security regulations, including but not limited to HIPAA, and as amended in 2014 by the HITECH Act. HIPAA mandates, among other
things, the adoption of uniform standards for the electronic exchange of information in common healthcare transactions, as well as standards relating to the privacy and security of individually
identifiable health information, which require the adoption of administrative, physical and technical safeguards to protect such information. In the EU personal data includes any information that
relates to an identified or identifiable natural person with health information carrying additional obligations, including obtaining the explicit consent from the individual for collection, use or
disclosure of the information. In addition, we are subject to EU rules with respect to cross-border transfers of such data out of the EU. Furthermore, the legislative and regulatory landscape for
privacy and data protection continues to evolve, and there has been an increasing amount of focus on privacy and data protection issues. The United States and the EU and its member states continue to
issue new privacy and data protection rules and regulations that relate to personal data and health information.
Compliance
with these laws may be time consuming, difficult and costly. If we fail to comply with applicable laws, regulations or duties relating to the use, privacy or security of
personal data we could be subject to the imposition of significant civil and criminal penalties, be forced to alter our business practices and suffer reputational harm.
Changes in healthcare law and implementing regulations, including government restrictions on pricing and
reimbursement, as well as healthcare policy and other healthcare payor cost-containment initiatives, may have a material adverse effect on us.
In March 2010, the Patient Protection and Affordable Care Act of 2010, as amended by the Health Care and Education Reconciliation Act of 2010,
or collectively PPACA, became law in the United States. PPACA substantially changed the way healthcare is financed by both governmental and private insurers and significantly affects the
pharmaceutical industry. PPACA aims to, among other things, expand coverage for the uninsured while at the same time containing overall healthcare costs. Many provisions of PPACA may impact the
biopharmaceutical industry, including that in order for a biopharmaceutical product to receive federal reimbursement under the Medicare Part B and Medicaid programs or to be sold directly to
U.S. government agencies, the manufacturer must extend discounts to entities eligible to participate in the drug pricing program under the Public Health Services Act, or PHS. The required PHS discount
on a given product is calculated based on the Average Manufacturers Price, or AMP, and Medicaid rebate amounts reported by the manufacturer. PPACA expanded the types of entities eligible to receive
discounted PHS pricing, although, under the current state of the law, with the exception of children's hospitals, these newly eligible entities will not be eligible to receive discounted PHS pricing
on orphan drugs when used for the orphan indication. In addition, as PHS drug pricing is determined based on AMP and Medicaid rebate data, revisions, including the recently published AMP rule, to the
Medicaid rebate formula and AMP definition described above could cause the required PHS discount to increase.
Since
its enactment, there have been judicial and Congressional challenges to certain aspects of PPACA. In January 2017, Congress voted to adopt a budget resolution for fiscal year 2017,
or the Budget Resolution, that authorizes the implementation of legislation that would repeal portions of PPACA. The Budget Resolution is not a law; however, it is widely viewed as the first step
toward the
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passage
of legislation that would repeal certain aspects of PPACA. Further, on January 20, 2017, President Trump signed an Executive Order directing federal agencies with authorities and
responsibilities under PPACA to waive, defer, grant exemptions from, or delay the implementation of any provision of PPACA that would impose a fiscal or regulatory burden on states, individuals,
healthcare providers, health insurers, or manufacturers of pharmaceuticals or medical devices. Congress also could consider subsequent legislation to replace elements of PPACA that are repealed.
Because of the continued uncertainty about the implementation of PPACA, including the potential for further legal challenges or repeal of PPACA, we cannot quantify or predict with any certainty the
likely impact of the PPACA or its repeal on our business, prospects, financial condition or results of operations.
In
addition, other legislative changes have also been proposed and adopted since PPACA was enacted. The Budget Control Act of 2011, among other things, created the Joint Select Committee
on Deficit Reduction to recommend to Congress proposals in spending reductions. The Joint Select Committee did not achieve a targeted deficit reduction of at least $1.2 trillion for the years 2013
through 2021, triggering the legislation's automatic reduction to several government programs. This includes a 2% reduction in Medicare provider payments paid under Medicare Part B to
physicians for physician-administered drugs, which went into effect in April 2013 and, following passage of the Bipartisan Budget Act of 2015, will remain in effect through 2025 unless additional
congressional action is taken. The American Taxpayer Relief Act of 2012, among other things, reduced Medicare payments to several providers and increased the statute of limitations period for the
government to recover overpayments to providers from three to five years. In addition, legislation has been proposed to shorten the period of biologic data and market exclusivity granted by the FDA.
We
also expect ongoing initiatives to increase pressure on drug pricing. For example, President Trump has indicated support for possible new measures related to drug pricing. We cannot
assure you as to the ultimate content, timing, or effect of changes, nor is it possible at this time to estimate the impact of any such potential legislation; however, such changes or the ultimate
impact of changes could negatively affect our revenue or sales of any drug candidates for which we obtain approval in the future.
We
cannot be sure whether additional legislative changes will be enacted, or whether FDA regulations, guidance or interpretations will be changed, or what the impact of such changes (or
in some instances current regulations, guidance or interpretations) on the marketing approvals of our product candidates, if any, may be.
Risks Related to Our Capital Stock
Our history of losses and uncertainty of future profitability make our common stock a highly speculative
investment.
We have had no commercial revenue to date from sales of our drug candidates. We had an accumulated deficit of $719.5 million as of
December 31, 2016. We expect to spend substantial funds to continue the research and development testing of our drug candidates.
In
anticipation of FDA approval of these products, we will need to make substantial investments to establish sales, marketing, quality control, regulatory compliance capabilities and
commercial manufacturing alliances. These investments will increase if and when any of these drug candidates receive FDA approval. We cannot predict how quickly our lead drug candidates will progress
through the regulatory approval process. As a result, we may continue to lose money for several years.
We
cannot be certain that we will achieve or sustain profitability in the future. Failure to achieve profitability could diminish our ability to sustain operations, pay dividends on our
common stock, obtain additional required funds and make required payments on our present or future indebtedness.
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Our share price has been and could remain volatile.
The market price of our common stock has historically experienced and may continue to experience significant volatility. From January 2016
through December 2016, the market price of our common stock has fluctuated from a high of $15.61 per share in the first quarter of 2016, to a low of $2.85 per share in the fourth quarter of 2016. Our
progress in developing and commercializing our products, the impact of government regulations on our products and industry, the potential sale of a large volume of our common stock by stockholders,
our quarterly operating results, changes in general conditions in the economy or the financial markets and other developments affecting us or our competitors could cause the market price of our common
stock to fluctuate substantially with significant market losses. If our stockholders sell a substantial number of shares of common stock, especially if those sales are made during a short period of
time, those sales could adversely affect the market price of our common stock and could impair our ability to raise capital. In addition, in recent years, the stock market has experienced significant
price and volume fluctuations. This volatility has affected the market prices of securities issued by many companies for reasons unrelated to their operating performance and may adversely affect the
price of our common stock. Adverse changes to the price of our common stock could result in an impairment to the amount recorded to goodwill on our balance sheet. In addition, we could be subject to a
securities class action litigation as a result of volatility in the price of our stock, which could result in substantial costs and diversion of management's attention and resources and could harm our
stock price, business, prospects, results of operations and financial condition.
If certain preclinical and clinical milestones are achieved, our stockholders may experience significant
dilution as a result of milestone payments to former Kolltan stockholders.
The merger agreement pursuant to which we acquired Kolltan provides that, 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, we will be
required to pay Kolltan's stockholders milestone payments of up to $172.5 million, which milestone payments may be made, at our sole election, in cash, in shares of our common stock or a
combination of both, subject to NASDAQ listing requirements and provisions of the merger Agreement. The number of shares of our common stock issuable in connection with a milestone payment, if any,
will be determined based on the average closing price per share of our common stock for the five trading day period ending three calendar days prior to the achievement of such milestone. Pursuant to
applicable NASDAQ listing rules, we are required to obtain stockholder approval of such issuances of our common stock to the extent that such issuances exceed 19.9% of its common stock outstanding
prior to the merger. If we elect to issue additional shares of our common stock, in lieu of paying cash, for such milestone payments, our stockholders may experience significant dilution.
Our ability to use our net operating loss carryforwards will be subject to limitation and, under certain
circumstances, may be eliminated.
Utilization of our net operating loss and research and development credit carryforwards may be subject to substantial annual limitation due to
ownership change limitations that have occurred previously or that could occur in the future provided by Section 382 of the Internal Revenue Code of 1986, or Section 382, as well as
similar state provisions. In general, an ownership change, as defined by Section 382, results from transactions increasing the ownership of certain shareholders or public groups in the stock of
a corporation by more than 50 percentage points over a three-year period.
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In October 2007, June 2009, December 2009 and December 2013, we experienced a change in ownership as defined by Section 382 of the Internal Revenue Code.
Historically, we have raised capital through the issuance of capital stock on several occasions which, combined with shareholders' subsequent disposition of those shares, has resulted in three changes
of control, as defined by Section 382. As a result of these ownership changes, utilization of our Federal net operating loss carryforwards is subject to an annual limitation. Any unused annual
limitation may be carried over to later years, and the amount of the limitation may, under certain circumstances, be subject to adjustment if the fair value of the our net assets are determined to be
below or in excess of the tax basis of such assets at the time of the ownership change, and such unrealized loss or gain is recognized during the five-year period after the ownership change.
Subsequent ownership changes, as defined in Section 382, could further limit the amount of net operating loss carryforwards and research and development credits that can be utilized annually to
offset future taxable income.
We
have not undertaken a study to assess whether an ownership change or multiple ownership changes has occurred for (i) AVANT, CuraGen or Kolltan prior to our acquisitions,
(ii) the Company on the state level, (iii) the Company since March 2015, or (iv) research and development credits. If, based on such a study, we were to determine that there has
been an ownership change at any time since its formation, utilization of net operating loss or tax credit carryforwards would be subject to an annual limitation under Section 382.
Refer
to Note 15, "Income Taxes," in the accompanying notes to the financial statements for additional discussion on income taxes.