Item 2. Management’s Discussion and Analysis of Financial
Condition and Results of Operations
Safe
Harbor Statement under the Private Securities Litigation Reform Act of 1995: This report on Form 10-Q contains forward-looking
statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 under Section 27A
of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements
include statements with respect to our beliefs, plans, objectives, goals, expectations, anticipations, assumptions, estimates, intentions
and future performance, and involve known and unknown risks, uncertainties and other factors, which may be beyond our control, and which
may cause our actual results, performance or achievements to be materially different from future results, performance or achievements
expressed or implied by such forward-looking statements. All statements other than statements of historical fact are statements that could
be forward-looking statements. You can identify these forward-looking statements through our use of words such as “may,” “will,”
“can,” “anticipate,” “assume,” “should,” “indicate,” “would,”
“believe,” “contemplate,” “expect,” “seek,” “estimate,” “continue,”
“plan,” “point to,” “project,” “predict,” “could,” “intend,” “target,”
“potential” and other similar words and expressions of the future.
There are a number of important factors that could
cause the actual results to differ materially from those expressed in any forward-looking statement made by us. These factors include,
but are not limited to:
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our dependence on product candidates, which are still in an early development stage;
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our ability to successfully complete research and further development, including preclinical and clinical studies, and, if we obtain
regulatory approval, commercialization of our drug candidates and the growth of the markets for those drug candidates;
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our anticipated timing for preclinical development, regulatory submissions, commencement and completion of clinical trials and product
approvals;
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the impact of the COVID-19 pandemic on our business or on the economy generally;
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whether the COVID-19 pandemic will affect the timing of the completion of our planned and/or currently ongoing preclinical/clinical
trials;
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our ability to negotiate strategic partnerships, where appropriate, for our drug candidates;
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our ability to manage multiple clinical trials for a variety of drug candidates at different stages of development;
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the cost, timing, scope and results of ongoing preclinical and clinical testing;
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our expectations of the attributes of our product and development candidates, including pharmaceutical properties, efficacy, safety
and dosing regimens;
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the cost, timing and uncertainty of obtaining regulatory approvals for our drug candidates;
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the availability, cost, delivery and quality of clinical management services provided by our clinical research organization partners;
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the availability, cost, delivery and quality of clinical and commercial-grade materials produced by our own manufacturing facility
or supplied by contract manufacturers, suppliers and partners;
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our ability to develop and commercialize products before competitors that are superior to the alternatives developed by such competitors;
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our ability to develop technological capabilities, including identification of novel and clinically important targets, exploiting
our existing technology platforms to develop new drug candidates and expand our focus to broader markets for our existing targeted therapeutics;
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the cost of paying development, regulatory approval and sales-based milestones under the merger agreement by which we acquired Kolltan
Pharmaceuticals, Inc. (“Kolltan”), and the cost, timing, and outcome of our declaratory judgment action against the Kolltan
stockholder representative with respect to certain of those milestones;
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our ability to realize the anticipated benefits from the acquisition of Kolltan;
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our ability to raise sufficient capital to fund our preclinical and clinical studies and to meet our long-term liquidity needs, on
terms acceptable to us, or at all. If we are unable to raise the funds necessary to meet our long-term liquidity needs, we may have to
delay or discontinue the development of one or more programs, discontinue or delay ongoing or anticipated clinical trials, license out
programs earlier than expected, raise funds at significant discount or on other unfavorable terms, if at all, or sell all or part of our
business;
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our ability to protect our intellectual property rights and our ability to avoid intellectual property litigation, which can be costly
and divert management time and attention;
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our ability to develop and commercialize products without infringing the intellectual property rights of third parties; and
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the risk factors set forth elsewhere in this quarterly report on Form 10-Q and the factors listed under the headings “Business,”
“Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”
in the Company’s annual report on Form 10-K for the year ended December 31, 2020 and other reports that we file with the
Securities and Exchange Commission.
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All forward-looking statements are expressly qualified in their entirety
by this cautionary notice. You are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the
date of this report or the date of the document incorporated by reference into this report. We have no obligation, and expressly disclaim
any obligation, to update, revise or correct any of the forward-looking statements, whether as a result of new information, future events
or otherwise. We have expressed our expectations, beliefs and projections in good faith, and we believe they have a reasonable basis.
However, we cannot assure you that our expectations, beliefs or projections will result or be achieved or accomplished.
OVERVIEW
We are a biopharmaceutical company dedicated to
developing therapeutic monoclonal and bispecific antibodies that address diseases for which available treatments are inadequate. Our drug
candidates include antibody-based therapeutics which have the ability to engage the human immune system and/or directly affect critical
pathways to improve the lives of patients with inflammatory diseases and many forms of cancer.
We are focusing our efforts and resources on the
continued research and development of:
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CDX-0159, a monoclonal antibody that specifically binds the KIT receptor
and potently inhibits its activity, which completed a Phase 1a study in healthy subjects in summer 2020. We are studying CDX-0159 in mast
cell driven diseases, including, initially, in urticarias and plan to initiate a study in prurigo nodularis in the fourth quarter of 2021.
In October and December 2020 respectively, we announced that enrollment had opened and the first patients had been dosed in
Phase 1b studies in chronic spontaneous urticaria (CSU) and chronic inducible urticaria (CIndU). Positive interim data to date from the
Phase 1b study in CIndU were reported in late Q1 2021 in patients with cold contact urticaria and symptomatic dermographism and, based
on these results, we announced that we are expanding this study to also include patients with cholinergic urticaria;
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CDX-1140, an agonist monoclonal antibody targeted to CD40, a key activator
of immune response, currently being studied in a Phase1 study. Dose escalation was completed in a Phase 1 study in solid tumors and lymphoma
and the recommended dose for further study was determined to be 1.5 mg/kg for both CDX-1140 monotherapy and in combination with CDX-301,
our dendritic cell growth factor. We have initiated multiple expansion cohorts within the study, including a combination cohort with KEYTRUDA®
(pembrolizumab) in patients refractory to PD1/PDL1 treatment and a combination cohort with standard of care chemotherapy in patients with
untreated metastatic pancreatic cancer. We are exploring additional combination cohorts with mechanisms that we believe could be complementary
or synergistic with CDX-1140; and
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CDX-527, a bispecific antibody that uses our proprietary highly active anti-PD-L1 and CD27 human antibodies to couple CD27 co-stimulation with blockade of the PD-L1/PD-1 pathway, for which we initiated a Phase 1 study in advanced solid tumors in August 2020.
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We routinely
work with external parties to collaboratively advance our drug candidates. In addition to Celldex-led studies, we also have an
Investigator Initiated Research (IIR) program with multiple studies ongoing with our drug candidates.
Our goal is to build a fully integrated, commercial-stage
biopharmaceutical company that develops important therapies for patients with unmet medical needs. We believe our program assets provide
us with the strategic options to either retain full economic rights to our innovative therapies or seek favorable economic terms through
advantageous commercial partnerships. This approach allows us to maximize the overall value of our technology and product portfolio while
best ensuring the expeditious development of each individual product. Currently, all programs are fully owned by Celldex.
The expenditures that will be necessary to execute
our business plan are subject to numerous uncertainties. Completion of clinical trials may take several years or more, and the length
of time generally varies substantially according to the type, complexity, novelty and intended use of a drug candidate. It is not unusual
for the clinical development of these types of drug candidates to each take five years or more, and for total development costs to exceed
$100 million for each drug candidate. We estimate that clinical trials of the type we generally conduct are typically completed over the
following timelines:
Clinical Phase
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Estimated
Completion
Period
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Phase 1
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1 - 2 Years
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Phase 2
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1 - 5 Years
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Phase 3
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1 - 5 Years
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The duration and the cost of clinical trials may
vary significantly over the life of a project as a result of differences arising during the clinical trial protocol, including, among
others, the following:
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the number of patients that ultimately participate in the trial;
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the duration of patient follow-up that seems appropriate in view of results;
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the number of clinical sites included in the trials;
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the length of time required to enroll suitable patient subjects; and
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the efficacy and safety profile of the drug candidate.
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We test potential drug candidates in numerous preclinical
studies for safety, toxicology and immunogenicity. We may then conduct multiple clinical trials for each drug candidate. As we obtain
results from trials, we may elect to discontinue or delay clinical trials for certain drug candidates in order to focus our resources
on more promising drug candidates.
An element of our business strategy is to pursue
the discovery, research and development of a broad portfolio of drug candidates. This is intended to allow us to diversify the risks associated
with our research and development expenditures. To the extent we are unable to maintain a broad range of drug candidates, our dependence
on the success of one or a few drug candidates increases.
Regulatory approval is required before we can market
our drug candidates as therapeutic products. In order to proceed to subsequent clinical trial stages and to ultimately achieve regulatory
approval, the regulatory agency must conclude that our clinical data demonstrate that our product candidates are safe and effective. Historically,
the results from preclinical testing and early clinical trials (through Phase 2) have often not been predictive of results obtained in
later clinical trials. A number of new drugs and biologics have shown promising results in early clinical trials but subsequently failed
to establish sufficient safety and efficacy data to obtain necessary regulatory approvals.
Furthermore, our business strategy includes the
option of entering into collaborative arrangements with third parties to complete the development and commercialization of our drug candidates.
In the event that third parties take over the clinical trial process for one of our drug candidates, the estimated completion date would
largely be under control of that third party rather than us. We cannot forecast with any degree of certainty which proprietary products,
if any, will be subject to future collaborative arrangements, in whole or in part, and how such arrangements would affect our development
plan or capital requirements. Our programs may also benefit from subsidies, grants, contracts or government or agency-sponsored studies
that could reduce our development costs.
As a result of the uncertainties discussed above,
among others, it is difficult to accurately estimate the duration and completion costs of our research and development projects or when,
if ever, and to what extent we will receive cash inflows from the commercialization and sale of a product. Our inability to complete our
research and development projects in a timely manner or our failure to enter into collaborative agreements, when appropriate, could significantly
increase our capital requirements and could adversely impact our liquidity. These uncertainties could force us to seek additional, external
sources of financing from time to time in order to continue with our business strategy. Our inability to raise additional capital, or
to do so on terms reasonably acceptable to us, would jeopardize the future success of our business.
During the past five years through December 31,
2020, we incurred an aggregate of $350.6 million in research and development expenses. The following table indicates the amount incurred
for each of our significant research programs and for other identified research and development activities during the three months ended
March 31, 2021 and 2020. The amounts disclosed in the following table reflect direct research and development costs, license fees
associated with the underlying technology and an allocation of indirect research and development costs to each program.
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Three Months
Ended
March 31, 2021
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Three Months
Ended
March 31, 2020
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(In thousands)
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CDX-0159/Anti-KIT Program
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$
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6,016
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$
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1,246
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CDX-1140 and CDX-301
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1,470
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3,371
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CDX-527
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1,390
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2,924
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Other Programs
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3,844
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4,154
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Total R&D Expense
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$
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12,720
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$
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11,695
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Clinical Development Programs
While our clinical development
programs have not been significantly, negatively impacted by COVID-19 to date, we continue to carefully monitor the evolving situation
closely across all our development programs and work to minimize potential impact/disruptions.
CDX-0159
CDX-0159 is a humanized monoclonal
antibody that specifically binds the receptor tyrosine kinase KIT and potently inhibits its activity. KIT is expressed in a variety of
cells, including mast cells, and its activation by its ligand SCF regulates mast cell growth, differentiation, survival, chemotaxis and
degranulation. In certain inflammatory diseases, such as chronic spontaneous urticaria (CSU), also known as chronic idiopathic urticaria
(CIU) and chronic inducible urticaria (CIndU), mast cell degranulation plays a central role in the onset and progression of the disease.
CDX-0159 is designed to block KIT
activation by disrupting both SCF binding and KIT dimerization. Celldex believes that by targeting KIT, CDX-0159 may be able to inhibit
mast cell activity and decrease mast cell numbers to provide potential clinical benefit in mast cell related diseases.
In June 2020, we completed
a randomized, double-blind, placebo-controlled, single ascending dose escalation Phase 1a study of CDX-0159 in healthy subjects (n=32;
8 subjects per cohort, 6 CDX-0159; 2 placebo). Subjects received a single intravenous infusion of CDX-0159 at 0.3, 1.0, 3.0, or 9.0 mg/kg
or placebo. The objectives of the study included safety and tolerability, pharmacokinetics (PK) and pharmacodynamics (tryptase and stem
cell factor) and immunogenicity. Tryptase is an enzyme synthesized and secreted almost exclusively by mast cells and decreases in plasma
tryptase levels are believed to reflect a systemic reduction in mast cell burden in both healthy volunteers and in disease. Data from
the study were featured in a late breaking presentation at the European Academy of Allergy and Clinical Immunology (EAACI) Annual Congress
2020 in June. CDX-0159 demonstrated a favorable safety profile as well as profound and durable reductions of plasma tryptase, consistent
with systemic mast cell suppression.
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Most common adverse events were mild infusion-related reactions, all of which spontaneously resolved without intervention. Mild and
asymptomatic decreases in neutrophil and white blood cell count were observed in laboratory testing.
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A single dose of CDX-0159 suppressed plasma tryptase levels in a dose-dependent manner, indicative of systemic mast cell suppression.
Tryptase suppression below the level of detection was observed after a single 1.0 mg/kg dose and was maintained for more than 2 months
at single doses of both 3.0 and 9.0 mg/kg of CDX-0159. A subset of subjects from the 3mg/kg and 9 mg/kg cohorts agreed to continued follow
up for tryptase suppression which remained below the level of detection for over 3 months (14 weeks) in 50% of subjects and over 4 months
(18 weeks) in all subjects, respectively.
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Dose dependent increases in plasma stem cell factor mirror decreases in tryptase, consistent with allosteric blockade of stem cell
factor to KIT and demonstrate complete target engagement in vivo.
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Long serum half-life and non-immunogenic profile support a convenient dosing schedule.
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Enhanced PK profile and durable tryptase suppression at low doses support re-formulation for sub-cutaneous administration.
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These data supported expansion
of the CDX-0159 program into mast cell driven diseases, including initially in chronic spontaneous urticaria (CSU) and chronic inducible
urticaria (CIndU), diseases where mast cell degranulation plays a central role in the onset and progression of the disease. The prevalence
of CSU and CIndU is approximately 0.5-1% of the total population or up to 1 to 3 million patients in the United States alone (Weller et
al. 2010. Hautarzt. 61(8), Bartlett et al. 2018. DermNet. Org). CSU presents as itchy hives, angioedema or both for at least six weeks
without a specific trigger; multiple episodes can play out over years or even decades. About 50% of patients with CSU achieve symptomatic
control with antihistamines or leukotriene receptor antagonists. Omalizumab, an IgE inhibitor, provides relief for roughly half of the
remaining antihistamine/leukotriene refractory patients. Consequently, there is a need for additional therapies. CIndUs are forms of urticaria
that have an attributable cause or trigger associated with them, typically resulting in hives or wheals. Celldex is exploring cold-induced
and dermographism (scratch-induced) urticarias.
In October 2020, we announced
that enrollment had opened and the first patient had been dosed in a Phase 1b multi-center study of CDX-0159 in CSU. This study is a randomized,
double-blind, placebo-controlled clinical trial designed to assess the safety of multiple ascending doses of CDX-0159 in up to 40 patients
with CSU who remain symptomatic despite treatment with antihistamines. Secondary and exploratory objectives include pharmacokinetic and
pharmacodynamic assessments, including measurement of tryptase and stem cell factor levels and clinical activity outcomes (impact on urticaria
symptoms, disease control, clinical response) as well as quality of life assessments. CDX-0159 is administered intravenously (0.5, 1.5,
3 and 4.5 mg/kg at varying dosing schedules) as add on treatment to H1-antihistamines, either alone or in combination with H2-antihistamines
and/or leukotriene receptor agonists.
In December 2020, we announced
that enrollment had opened and the first patient had been dosed in a second Phase 1b study in CIndU being conducted in Germany. This study
is an open label clinical trial designed to evaluate the safety of a single dose of CDX-0159 in up to 20 patients with cold contact urticaria
(n=10) or symptomatic dermographism (n=10) who are refractory to antihistamines. Patient’s symptoms are induced via provocation
testing that resembles real life triggering situations. Secondary and exploratory objectives include pharmacokinetic and pharmacodynamic
assessments, including changes from baseline provocation thresholds, measurement of tryptase and stem cell factor levels, clinical activity
outcomes (impact on urticaria symptoms, disease control, clinical response), quality of life assessments and measurement of tissue mast
cells through skin biopsies. CDX-0159 is administered intravenously (3.0 mg/kg) on Day 1 as add on treatment to H1-antihistamines.
In March of 2021, we reported
positive interim data from the Phase 1b study in CIndU in patients with cold contact urticaria and symptomatic dermographism. Fifteen
out of 20 planned patients with antihistamine refractory CIndU had received a single intravenous infusion of CDX-0159 at 3 mg/kg, including
nine patients with cold contact urticaria (ColdU) and six patients with symptomatic dermographism (SD). Safety results were reported for
all 15 patients; activity results were reported for all patients assessed for at least 15 days/2 weeks after treatment (n=10; 7 ColdU
and 3 SD). Patients had high disease activity as assessed by provocation threshold testing. In ColdU and SD pts, baseline critical temperature
thresholds were 18.7 +/-2.7°C (range: 5-27°C) and FricTest® thresholds were 3.7 +/- 0.3 (range: 3-4) of 4.
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Eight of 10 patients (7 ColdU; 1 SD) experienced a complete response (CR) as assessed by provocation threshold testing. The remaining
two patients (both with SD), had been recently treated and were followed for two weeks. One patient experienced a partial response (PR)
thus far and one patient reported symptomatic improvement (decreased itching). All patients will continue to be assessed for response
through week 12.
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Patient global assessment (Pat-GA) and physician global assessment (Phy-GA) results were consistent with provocation testing results.
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Measurements of serum tryptase levels are available for only the first six patients evaluated for activity, all with ColdU. The mean
baseline was 3.3 +/- 0.2 ng/ml and levels on day 15 after treatment were at or below the limit of detection. These patients all experienced
complete responses.
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CDX-0159 was generally well tolerated. Six of 15 patients had mild infusion reactions, generally areas of localized redness and itching,
which resolved rapidly. A single severe infusion reaction was observed (brief loss of consciousness, followed by shaking and sweating).
The patient was treated with antihistamines and steroids; no epinephrine was administered. The patient rapidly recovered and was hospitalized
for observation with no further manifestations of this event. Importantly, there was no evidence of mast cell activation as measured by
decreases in serum tryptase levels shortly after the infusion and further at a later time point.
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Through day 15, three patients had transient, mild decreases in hemoglobin, and no patients had meaningful declines in white blood
cells.
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Enrollment is currently being completed in the ColdU and SD cohorts (10 per cohort; 20 total). Based on these compelling results,
the study has been expanded to also include 10 patients with cholinergic urticaria.
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We continue to assess potential
opportunities for CDX-0159 in other diseases where mast cells play an important role, such as dermatologic, respiratory, allergic, gastrointestinal
and ophthalmic conditions. In February of 2021, we announced that we plan to expand clinical development of CDX-0159 into prurigo
nodularis (PN), a chronic skin disease characterized by the development of hard, intensely itchy (pruritic) nodules on the skin. Mast
cells through their interactions with sensory neurons and other immune cells are believed to play an important role in amplifying chronic
itch and neuroinflammation, both of which are a hallmark of PN. There are currently no FDA approved therapies for PN, representing an
area of significant unmet need. Celldex anticipates initiating the study in PN in the fourth quarter of 2021.
Manufacturing activities are also
progressing as planned to support the introduction of the CDX-0159 subcutaneous formulation into the clinical program in the third quarter
of 2021.
CDX-1140
CDX-1140 is a fully human agonist
monoclonal antibody targeted to CD40, a key activator of immune response, which is found on dendritic cells, macrophages and B cells and
is also expressed on many cancer cells. Potent CD40 agonist antibodies have shown encouraging results in early clinical studies; however,
systemic toxicity associated with broad CD40 activation has limited their dosing. CDX-1140 has unique properties relative to other CD40
agonist antibodies: potent agonist activity is independent of Fc receptor interaction, contributing to more consistent, controlled immune
activation; CD40L binding is not blocked, leading to potential synergistic effects of agonist activity near activated T cells in lymph
nodes and tumors; and the antibody does not promote cytokine production in whole blood assays. CDX-1140 has shown direct anti-tumor activity
in preclinical models of lymphoma. Preclinical studies of CDX-1140 clearly demonstrate strong immune activation effects and low systemic
toxicity and support the design of the Phase 1 study to identify the dose for characterizing single-agent and combination activity.
We initiated a Phase 1 study of
CDX-1140 in November 2017. This study is expected to enroll up to approximately 260 patients with recurrent, locally advanced or
metastatic solid tumors and B cell lymphomas. The study is designed to determine the maximum tolerated dose, or MTD, during a dose-escalation
phase (0.01 to 3.0 mg/kg once every four weeks until confirmed progression or intolerance) and to recommend a dose level for further study
in a subsequent expansion phase. The expansion is designed to further evaluate the tolerability and biologic effects of selected dose(s) of
CDX-1140 in specific tumor types. Secondary objectives include assessments of safety and tolerability, pharmacodynamics, pharmacokinetics,
immunogenicity and additional measures of anti-tumor activity, including clinical benefit rate. We believe that the potential for CDX-1140
will be best defined in combination studies with other immunotherapies or conventional cancer treatments.
In support of this, the Phase 1
study protocol also allows for the exploration of CDX-1140 in combination with CDX-301 at a fixed dose of CDX-301 and escalating doses
of CDX-1140. Dendritic cells, which express CD40, are often rare or missing from the tumor microenvironment and are critical for initiating
anti-tumor immunity. CDX-301, a recombinant FMS-like tyrosine kinase 3 ligand, or Flt3L, is a hematopoietic cytokine that uniquely expands
dendritic cells and hematopoietic stem cells, and in combination with other agents may potentiate anti-tumor responses. CDX-301 is being
utilized as a priming agent in this study to increase the number of dendritic cells in blood and tissue available for CDX-1140 activation.
CDX-1140 should, in turn, activate and mature the dendritic cells, an important step for enhancing anti-tumor immune responses.
Prior data presented at Society
for Immunotherapy of Cancer’s (SITC) 34th Annual Meeting in November 2019 established the maximum tolerated dose (MTD) and
recommended dose for continued study at 1.5 mg/kg — one of the highest systemic dose levels in the CD40 agonist class. Clinical
activity both as a monotherapy and in combination with CDX-301 were also reported for CDX-1140 at varying doses, including an unconfirmed
partial response (uPR) and tumor cavitation. At SITC 2020, analysis was focused on patients treated at the MTD and recommended dose of
1.5 mg/kg. 41 patients (n=25 monotherapy; n=16 in combination with CDX-301) had been treated at the 1.5 mg/kg dose at the time of data
cutoff; 29 patients had post-treatment scans performed and five patients had not reached their first post-treatment response assessment.
In addition, preliminary safety data from the combination cohort with pembrolizumab (n=9; 4 at 0.72 mg/kg and 5 at 1.5 mg/kg CDX-1140)
were also presented. CDX-1140 monotherapy and in combination with CDX-301 or pembrolizumab was generally well tolerated with mostly grade
1 or grade 2 drug related adverse events. Activity at 1.5mg/kg dose of CDX-1140 to date included:
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An ongoing (6+ months) complete response (CR) in a patient with follicular lymphoma treated with CDX-1140 in combination with CDX-301;
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Notable tumor shrinkage and/or necrosis in 6 patients with squamous cell head and neck cancer (SCCHN), including extensive tumor cavitation/necrosis
of a large baseline protruding neck mass associated with decreased tumor pain in a patient; and,
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Stable disease (n=10) for 11 to 32 weeks.
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CDX-1140 at the recommended dose
of 1.5 mg/kg provided good systemic exposure that enhanced the distribution into tissues and tumor and resulted in marked changes in the
tumor microenvironment (TME) consistent with a more inflammatory and less immunosuppressive state as demonstrated by gene expression analysis.
Interferon signaling and cytotoxicity pathways were most highly upregulated, while immunosuppression via TGFb signaling and metastatic
pathways were downregulated, marking the first clear demonstration in patients of biological activity within the TME for a systemically
administered agonist anti-CD40 mAb. Pre-treatment of patients with CDX-301 greatly increased the number of circulating dendritic cells
prior to CDX-1140 administration and peripheral blood mononuclear cells (PBMCs) isolated from CDX-301 pretreated patients were more responsive
to CDX-1140 than PBMCs from non-pretreated patients.
Two combination cohorts are ongoing.
A combination of CDX-1140 with pembrolizumab has completed the safety run-in and expansion cohorts in patients with checkpoint-refractory
squamous cell head and neck cancer and non-small cell lung cancer is enrolling patients. A combination of CDX-1140 with gemcitabine/nab-paclitaxel
in patients with previously untreated metastatic pancreatic adenocarcinoma is also enrolling patients. We are also exploring additional
combination cohorts with mechanisms that we believe could be complementary or synergistic with CDX-1140.
CDX-527
CDX-527 is the first candidate
from Celldex’s bispecific antibody platform. Bispecifics provide opportunities to engage two independent pathways involved in controlling
immune responses to tumors. CDX-527 uses Celldex’s proprietary highly active anti-PD-L1 and CD27 human antibodies to couple CD27
co-stimulation with blockade of the PD-L1/PD-1 pathway to help prime and activate anti-tumor T cell responses through CD27 costimulation,
while preventing PD-1 inhibitory signals that subvert the immune response.
Celldex’s prior clinical
experience with combining CD27 activation and PD-1 blockade provide the rationale for linking these two pathways into one molecule. Preclinical
data presented at the SITC 34th Annual Meeting in November 2019 demonstrated that CDX-527 is more potent at T cell activation and
anti-tumor immunity than the combination of parental monoclonal antibodies.
In
August 2020, we announced the initiation of a Phase 1 dose-escalation study. The study includes up to approximately 40 patients with
advanced or metastatic solid tumors that have progressed during or after standard of care therapy to be followed by tumor-specific expansion
cohorts. The study is designed to determine the maximum tolerated dose, or MTD, during a dose-escalation phase and to recommend a dose
level for further study in the subsequent expansion phase. The expansion is designed to further evaluate the tolerability, and
biologic and anti-tumor effects of selected dose level(s) of CDX-527 in specific tumor types. Enrollment is ongoing.
CRITICAL ACCOUNTING POLICIES
See Note 2 to the unaudited condensed consolidated
financial statements included elsewhere in this Quarterly Report on Form 10-Q for information regarding newly adopted and recent
accounting pronouncements. See also Note 2 to our financial statements included in our Annual Report on Form 10-K for the year ended
December 31, 2020 for a discussion of our critical accounting policies. There have been no material changes to such critical accounting
policies. We believe our most critical accounting policies include accounting for contingent consideration, revenue recognition, intangible
and long-lived assets, research and development expenses and stock-based compensation expense.
RESULTS OF OPERATIONS
Three Months Ended March 31, 2021 Compared with Three Months
Ended March 31, 2020
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Three Months Ended
March 31,
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Increase/
(Decrease)
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Increase/
(Decrease)
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2021
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2020
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$
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%
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
Product development and licensing agreements
|
|
$
|
3
|
|
|
$
|
2,286
|
|
|
$
|
(2,283
|
)
|
|
|
(100
|
)%
|
Contracts and grants
|
|
|
682
|
|
|
|
442
|
|
|
|
240
|
|
|
|
54
|
%
|
Total revenues
|
|
$
|
685
|
|
|
$
|
2,728
|
|
|
$
|
(2,043
|
)
|
|
|
(75
|
)%
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
12,720
|
|
|
|
11,695
|
|
|
|
1,025
|
|
|
|
9
|
%
|
General and administrative
|
|
|
4,121
|
|
|
|
3,666
|
|
|
|
455
|
|
|
|
12
|
%
|
Loss on fair value remeasurement of contingent consideration
|
|
|
483
|
|
|
|
234
|
|
|
|
249
|
|
|
|
106
|
%
|
Total operating expense
|
|
|
17,324
|
|
|
|
15,595
|
|
|
|
1,729
|
|
|
|
11
|
%
|
Operating loss
|
|
|
(16,639
|
)
|
|
|
(12,867
|
)
|
|
|
3,772
|
|
|
|
29
|
%
|
Investment and other income, net
|
|
|
101
|
|
|
|
242
|
|
|
|
(141
|
)
|
|
|
(58
|
)%
|
Net loss
|
|
$
|
(16,538
|
)
|
|
$
|
(12,625
|
)
|
|
$
|
3,913
|
|
|
|
31
|
%
|
Net Loss
The $3.9 million increase in net loss for the three
months ended March 31, 2021, as compared to the three months ended March 31, 2020, was primarily the result of a decrease in
revenue from product development and licensing agreements and an increase in research and development expenses.
Revenue
The Company’s agreement with Rockefeller
University, as amended, (the “Rockefeller Agreement”) provides for the Company to perform manufacturing and development services
for Rockefeller University for their portfolio of antibodies against HIV. This portfolio was licensed to Gilead Sciences in January 2020
from Rockefeller University (“Rockefeller Transaction”). The $2.3 million decrease in product development and licensing agreements
revenue for the three months ended March 31, 2021, as compared to the three months ended March 31, 2020, was primarily due to
the $1.8 million received from the Rockefeller Transaction in the first quarter of 2020. The $0.2 million increase in contracts and grants
revenue for the three months ended March 31, 2021, as compared to the three months ended March 31, 2020, was primarily due to
an increase in services performed under our contract manufacturing and research and development agreements with Rockefeller University
and Gilead Sciences. We expect revenue to increase over the next twelve months as a result of an increase in services expected to be performed
under our contract manufacturing and research and development agreements with Rockefeller University and Gilead Sciences.
Research and Development Expense
Research and development expenses consist primarily
of (i) personnel expenses, (ii) laboratory supply expenses relating to the development of our technology, (iii) facility
expenses and (iv) product development expenses associated with our drug candidates as follows:
|
|
Three Months Ended
March 31,
|
|
|
Increase/
(Decrease)
|
|
|
|
2021
|
|
|
2020
|
|
|
$
|
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Personnel
|
|
$
|
6,038
|
|
|
$
|
5,616
|
|
|
$
|
422
|
|
|
|
8
|
%
|
Laboratory supplies
|
|
|
1,760
|
|
|
|
1,460
|
|
|
|
300
|
|
|
|
21
|
%
|
Facility
|
|
|
1,255
|
|
|
|
1,730
|
|
|
|
(475
|
)
|
|
|
(27
|
)%
|
Product development
|
|
|
2,762
|
|
|
|
1,806
|
|
|
|
956
|
|
|
|
53
|
%
|
Personnel expenses primarily include salary, benefits,
stock-based compensation and payroll taxes. The $0.4 million increase in personnel expenses for the three months ended March 31,
2021, as compared to the three months ended March 31, 2020, was primarily due to higher stock-based compensation expense. We expect
personnel expenses to remain relatively consistent over the next twelve months, although there may be fluctuations on a quarterly basis.
Laboratory supplies expenses include laboratory
materials and supplies, services, and other related expenses incurred in the development of our technology. The $0.3 million increase
in laboratory supply expenses for the three months ended March 31, 2021, as compared to the three months ended March 31, 2020,
was primarily due to higher laboratory materials and supplies purchases. We expect laboratory supplies expenses to remain relatively consistent
over the next twelve months, although there may be fluctuations on a quarterly basis.
Facility expenses include depreciation, amortization,
utilities, rent, maintenance and other related expenses incurred at our facilities. The $0.5 million decrease in facility expenses for
the three months ended March 31, 2021, as compared to the three months ended March 31, 2020, was primarily due to lower rent
and depreciation expenses. We expect facility expenses to remain relatively consistent over the next twelve months, although there may
be fluctuations on a quarterly basis.
Product development expenses include clinical investigator
site fees, external trial monitoring costs, data accumulation costs, contracted research and outside clinical drug product manufacturing.
The $1.0 million increase in product development expenses for the three months ended March 31, 2021, as compared to the three months
ended March 31, 2020, was primarily due to an increase in contract research and clinical trial expenses. We expect product development
expenses to increase over the next twelve months, although there may be fluctuations on a quarterly basis.
General and Administrative Expense
The $0.5 million increase in general and administrative
expenses for the three months ended March 31, 2021, as compared to the three months ended March 31, 2020, was primarily due
to higher stock-based compensation expense. We expect general and administrative expenses to remain relatively consistent over the next
twelve months, although there may be fluctuations on a quarterly basis.
Loss on Fair Value Remeasurement of Contingent Consideration
The $0.5 million loss on fair value remeasurement
of contingent consideration for the three months ended March 31, 2021 was primarily due to changes in discount rates and the passage
of time. The $0.2 million loss on fair value remeasurement of contingent consideration for the three months ended March 31, 2020
was primarily due to the passage of time.
Investment and Other Income, Net
The $0.1 million decrease in investment and other
income, net for the three months ended March 31, 2021, as compared to the three months ended March 31, 2020, was primarily due
to lower interest rates on fixed income investments. We expect investment and other income to remain relatively consistent over the next
twelve months, although there may be fluctuations on a quarterly basis.
LIQUIDITY AND CAPITAL RESOURCES
Our cash equivalents are highly liquid investments
with a maturity of three months or less at the date of purchase and consist primarily of investments in money market mutual funds with
commercial banks and financial institutions. We maintain cash balances with financial institutions in excess of insured limits. We do
not anticipate any losses with respect to such cash balances. We invest our excess cash balances in marketable securities, including municipal
bond securities, U.S. government agency securities and high-grade corporate bonds that meet high credit quality standards, as specified
in our investment policy. Our investment policy seeks to manage these assets to achieve our goals of preserving principal and maintaining
adequate liquidity.
The use of our cash flows for operations has primarily
consisted of salaries and wages for our employees; facility and facility-related costs for our offices, laboratories and manufacturing
facility; fees paid in connection with preclinical studies, clinical studies, contract manufacturing, laboratory supplies and services;
and consulting, legal and other professional fees. To date, the primary sources of cash flows from operations have been payments received
from our collaborative partners and from government entities and payments received for contract manufacturing and research and development
services provided by us. The timing of any new contract manufacturing and research and development agreements, collaboration agreements,
government contracts or grants and any payments under these agreements, contracts or grants cannot be easily predicted and may vary significantly
from quarter to quarter.
At March 31, 2021, our principal sources of
liquidity consisted of cash, cash equivalents and marketable securities of $176.1 million. We have had recurring losses and incurred a
loss of $16.5 million for the three months ended March 31, 2021. Net cash used in operations for the three months ended March 31,
2021 was $18.1 million. We believe that the cash, cash equivalents and marketable securities at March 31, 2021 are sufficient to
meet estimated working capital requirements and fund planned operations through 2023. This could be impacted if we elect to pay Kolltan
contingent milestones, if any, in cash.
During the next twelve months, we may take further
steps to raise additional capital to meet our long-term liquidity needs including, but not limited to, one or more of the following: the
licensing of drug candidates with existing or new collaborative partners, possible business combinations, issuance of debt, or the issuance
of common stock or other securities via private placements or public offerings. Although we have been successful in raising capital in
the past, there can be no assurance that additional financing will be available on acceptable terms, if at all, and our negotiating position
in capital raising efforts may worsen as existing resources are used. There is also no assurance that we will be able to enter into further
collaborative relationships. Additional equity financings may be dilutive to our stockholders; debt financing, if available, may involve
significant cash payment obligations and covenants that restrict our ability to operate as a business; and licensing or strategic collaborations
may result in royalties or other terms which reduce our economic potential from products under development. Our ability to continue funding
our planned operations into and beyond twelve months from the issuance date is also dependent on the timing and manner of payment of future
contingent milestones from the Kolltan acquisition, in the event that we achieve the drug candidate milestones related to those payments.
We may decide to pay those milestone payments in cash, shares of our common stock or a combination thereof. If we are unable to raise
the funds necessary to meet our long-term liquidity needs, we may have to delay or discontinue the development of one or more programs,
discontinue or delay ongoing or anticipated clinical trials, license out programs earlier than expected, raise funds at a significant
discount or on other unfavorable terms, if at all, or sell all or a part of our business.
Operating Activities
Net cash used in operating activities was $18.1
million for the three months ended March 31, 2021 as compared to $12.1 million for the three months ended March 31, 2020. The
increase in net cash used in operating activities was primarily due to a decrease in cash received related to product development and
licensing agreements and an increase in research and development and general and administrative expenses. We expect that cash used in
operating activities will remain relatively consistent over the next twelve months, although there may be fluctuations on a quarterly
basis.
We have incurred and will continue to incur significant
costs in the area of research and development, including preclinical and clinical trials and clinical drug product manufacturing as our
drug candidates are developed. We plan to spend significant amounts to progress our current drug candidates through the clinical trial
process as well as to develop additional drug candidates. As our drug candidates progress through the clinical trial process, we may be
obligated to make significant milestone payments.
Investing Activities
Net cash provided by investing activities was $43.5
million for the three months ended March 31, 2021 as compared to $22.0 million for the three months ended March 31, 2020. The
increase in net cash provided by investing activities was primarily due to net sales and maturities of marketable securities of $44.0
million for the three months ended March 31, 2021 as compared to $22.2 million for the three months ended March 31, 2020.
Financing Activities
Net cash provided by financing activities was $0.1
million for the three months ended March 31, 2021 as compared to $1.6 million for the three months ended March 31, 2020. The
decrease in net cash provided by financing activities was primarily due to a decrease in net proceeds from stock issuances.
Aggregate Contractual Obligations
The disclosures relating to our contractual obligations
reported in our Annual Report on Form 10-K for the year ended December 31, 2020 which was filed with the SEC on March 29,
2021 have not materially changed since we filed that report.
OFF-BALANCE SHEET ARRANGEMENTS
We did not have during the periods presented, and
we do not currently have, any off-balance sheet arrangements, as defined under SEC rules.