CELLDEX THERAPEUTICS, INC. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Form 10-Q)
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995: This report on Form 10-Q contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 under Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements include statements with respect to our beliefs, plans, objectives, goals, expectations, anticipations, assumptions, estimates, intentions and future performance, and involve known and unknown risks, uncertainties and other factors, which may be beyond our control, and which may cause our actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. All statements other than statements of historical fact are statements that could be forward-looking statements. You can identify these forward-looking statements through our use of words such as "may," "will," "can," "anticipate," "assume," "should," "indicate," "would," "believe," "contemplate," "expect," "seek," "estimate," "continue," "plan," "point to," "project," "predict," "could," "intend," "target," "potential" and other similar words and expressions of the future. There are a number of important factors that could cause the actual results to differ materially from those expressed in any forward-looking statement made by us. These factors include, but are not limited to:
? our dependence on product candidates, which are still in an early stage of development
our ability to carry out research and further development,
? including preclinical and clinical studies, and, if we obtain
the approval, commercialization of our drug candidates and the growth of the
the markets for these drug candidates;
? our anticipated timeline for preclinical development, regulatory submissions,
initiation and completion of clinical trials and product approvals;
? the impact of the COVID-19 pandemic on our business or the economy
? whether the COVID-19 pandemic will affect the timeline for the completion of our
preclinical/clinical trials planned and/or in progress;
? our ability to negotiate strategic partnerships, if any, for our
? our ability to manage multiple clinical trials for a variety of drug candidates
at different stages of development;
? the cost, schedule, scope and results of ongoing preclinical and clinical studies
? our expectations on the attributes of our products and development candidates,
including pharmaceutical properties, efficacy, safety and dosage schedules;
? the cost, timing and uncertainty of obtaining regulatory approvals for our drug
? the availability, cost, delivery and quality of clinical management services
provided by our clinical research organization partners;
the availability, cost, delivery and quality of clinical and commercial grade products
? materials produced by our own manufacturing plant or supplied by contract
manufacturers, suppliers and partners;
? our ability to develop and market products ahead of competitors who
superior to the alternatives developed by such competitors; 15 Table of Contents
our ability to develop technological capabilities, including the identification of
? new and clinically important targets, leveraging our existing technology
platforms to develop new drug candidates and expand our focus to broader markets for our existing targeted therapeutics;
the cost of payment for development, regulatory approval and sales milestones
? as part of the merger agreement whereby we acquired
and the outcome of our declaratory judgment action against the
representative with respect to some of these milestones;
our ability to raise sufficient capital to fund our preclinical and clinical activities
studies and to meet our long-term liquidity needs, on terms acceptable to us,
or not at all. If we are unable to raise the necessary funds to meet our long-term needs
? liquidity needs, we may have to delay or interrupt the development of one or
more programs, interrupting or delaying ongoing or planned clinical trials,
license programs earlier than expected, raise funds with a deep discount
or other adverse terms, if any, or sell all or part of our business;
our ability to protect our intellectual property rights and our ability to
? avoid intellectual property disputes, which can be costly and misleading
management’s time and attention;
? our ability to develop and market products without violating the
the intellectual property rights of third parties; and
the risk factors set forth elsewhere in this Quarterly Report on Form 10-Q and
the factors listed under the headings “Activity”, “Risk Factors” and
? “Management’s commentary and analysis of the financial position and results of
Operations” in the company’s annual report on Form 10-K for the fiscal year ended
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.
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 focus our efforts and resources on the continuous research and development of:
Barzolvolimab (also called CDX-0159), a monoclonal antibody that
specifically binds the KIT receptor and potently inhibits its activity,
currently being investigated in mast cell-mediated diseases. In October and December
2020 respectively, we announced the opening of registrations and the first
? the patients had been dosed in the phase 1b studies in CSU and CIndU. Positive interim
data from the Phase 1b study in CIndU was reported in July and
in patients with cold urticaria and symptomatic dermographism. The study has
also been expanded to include patients with cholinergic urticaria and in
CDX-1140, an agonist monoclonal antibody targeted against CD40, a key activator of
immune response, currently being studied in a phase 1 study. Dose escalation
was supplemented in solid tumors and lymphomas and the recommended dose for
? the study was determined at 1.5 mg/kg for CDX-1140 monotherapy and
combination. We have launched several expansion cohorts within the study,
including a cohort combined with KEYTRUDA® (pembrolizumab) in patients
refractory to PD-1/PD-L1 treatment, which closed to enrollment in
16 Table of Contents
CDX-527, a bispecific antibody that uses our patented highly active technology
? human anti-PD-L1 and CD27 antibodies to couple CD27 costimulation with
blocking of the PD-L1/PD-1 pathway, for which we have initiated a Phase 1 study in
advanced solid tumors in
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 millionfor each drug candidate. We estimate that clinical trials of the type we generally conduct are typically completed over the following timelines: Estimated Completion Clinical Phase Period Phase 1 1 - 2 Years Phase 2 1 - 5 Years Phase 3 1 - 5 Years The duration and the cost of clinical trials may vary significantly over the life of a project as a result of differences arising during the clinical trial protocol, including, among others, the following:
? the number of patients who eventually participate in the trial;
? the length of patient follow-up that seems appropriate given the results;
? the number of clinical sites included in the trials;
? the length of time required to recruit suitable patient subjects; and
? the efficacy and safety profile of the drug candidate.
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. 17 Table of Contents
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 agencies 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, 2021, we incurred an aggregate of $301.1 millionin 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, 2022and 2021. 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. Three Months Three Months Ended Ended March 31, 2022 March 31, 2021 (In thousands) Barzolvolimab/Anti-KIT Program $ 9,668 $ 6,016 CDX1140 and CDX-301 759 1,470 CDX527 605 1,390 Other Programs 6,024 3,844 Total R&D Expense $ 17,056 $ 12,720
Clinical development programs
The COVID-19 pandemic continues to have a major impact in the US and around the world. The availability of vaccines holds promise for the future, though new variants of the virus and potential waning immunity from vaccines may result in continued impact from this pandemic in the future, which could adversely impact our operations. To date, the Company has managed delays and disruptions without significant impact in planned and ongoing preclinical and clinical trials, manufacturing or shipping. Potential impacts to our business include delays in planned and ongoing preclinical and clinical trials including enrollment of patients, disruptions in time and resources provided by independent clinical investigators, contract research organizations, and other third-party service providers, temporary closures of our facilities, disruptions or restrictions on our employees' ability to travel, and delays in manufacturing and/or shipments to and from third-party suppliers and contract manufacturers for APIs and drug product. 18 Table of Contents
Barzolvolimab (also called CDX-0159)
Barzolvolimab 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. Barzolvolimab is designed to block KIT activation by disrupting both SCF binding and KIT dimerization. Celldex believes that by targeting KIT, barzolvolimab may be able to inhibit mast cell activity and decrease mast cell numbers to provide potential clinical benefit in mast cell related diseases. 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. In
June 2020, we completed a randomized, double-blind, placebo-controlled, single ascending dose escalation Phase 1a study of barzolvolimab in healthy subjects (n=32; 8 subjects per cohort, 6 barzolvolimab; 2 placebo). Subjects received a single intravenous infusion of barzolvolimab 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 Allergyand Clinical Immunology (EAACI) Annual Congress 2020 in June. Barzolvolimab demonstrated a favorable safety profile as well as profound and durable reductions of plasma tryptase, consistent with systemic mast cell suppression. These data supported expansion of the barzolvolimab program into mast cell driven diseases, including initially in CSU and 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 Statesalone (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, dermographism (scratch-induced) and cholinergic (exercise-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 barzolvolimab in CSU. This study is a randomized, double-blind, placebo-controlled clinical trial designed to assess the safety of multiple ascending doses of barzolvolimab 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. Barzolvolimab 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 Germanyin patients who are refractory to antihistamines. This study is an open label clinical trial designed to evaluate the safety of a single dose (3 mg/kg) of barzolvolimab in patients with cold urticaria (n=10) or symptomatic dermographism (n=10). In March and June 2021, respectively, we added a third cohort (single dose, 3 mg/kg) in patients with cholinergic urticaria (n=10) and a fourth cohort at a lower dose (single dose, 1.5 mg/kg) in cold urticaria. 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. Barzolvolimab is administered intravenously on Day 1 as add on treatment to H1-antihistamines. 19
July 2021, we reported positive interim data from the cold urticaria and symptomatic dermographism cohorts. As of the data cut-off on June 11, 2021, 20 patients had received a single intravenous infusion of barzolvolimab at 3 mg/kg, including 11 patients with cold urticaria and 9 patients with symptomatic dermographism. Patients had high disease activity as assessed by provocation threshold testing. In patients with cold urticaria and symptomatic dermographism baseline critical temperature thresholds were 18.9°C/66°F (range: 5-27°C/41-80.6°F) and FricTest® thresholds were 3.8 (range: 3-4) of 4 pins. Safety results were reported for all 20 patients; activity results were reported for the 19 patients who received a full dose of barzolvolimab. 14 of 19 patients completed the 12-week study observation period and five were ongoing (range of 2-8 weeks) as of June 11, 2021.
All 19/19 (100)% of patients achieved clinical response, as assessed by
challenge threshold testing; 18/19 (95)% got a complete response and
1/19 (5)% had a partial response. 10/10 (100)% of patients with colds
? hives had a complete response. 8/9 (89) % of patients with symptoms
dermographism had a complete response and 1/9 (11)% had a
partial response. Competitive responses were observed in all 3 patients (1 cold
urticaria; 2 symptomatic dermographism) with prior Xolair® (omalizumab) experience, including two who were Xolair refractory.
A rapid onset of responses after administration and sustained durability were observed.
Most patients with cold urticaria and symptomatic dermographism experienced
? complete response at week 1 and week 4, respectively. The median duration of
response for patients was 77+ days for cold urticaria and 57+ days for symptomatic dermographism.
Improvements in disease activity as reported by physician and patient
? global assessment of disease severity matched comprehensive assessment
responses measured by challenge tests.
A single 3 mg/kg dose of barzolvolimab produced a rapid, marked and long-lasting
suppression of serum tryptase and depletion of cutaneous mast cells (87% depletion)
as measured by biopsy. The kinetics of serum tryptase and cutaneous mast cells
? exhaustion reflected clinical activity. This confirmed that the serum tryptase level
is a robust pharmacodynamic biomarker for assessing mast cell burden and
clinical activity in inducible urticaria and potentially in other diseases
mast cell-induced involvement.
Barzolvolimab was generally well tolerated. The most common adverse events were
hair color changes, mild infusion reactions, and transient taste changes
Perception. Hair color changes (usually small areas of lightening of hair color)
and taste disturbances (usually partial changes in the ability to taste salt) are
consistent with inhibition of KIT signaling in other cell types and should
? be fully reversible. As stated previously in
infusion reaction of brief loss of consciousness was observed in one patient
a fainting story. The patient quickly recovered. Above all, no evidence
mast cell activation as measured by serum tryptase monitoring was observed.
There was no evidence of clinically significant decreases in hematology parameters-an important finding for a KIT inhibitor.
A patient with symptomatic dermographism included in the study also had a
? diagnosis of prurigo nodularis (“PN”). After a single dose of barzolvolimab,
this patient experienced both a complete response of symptomatic dermographism
and noticeable improvement in PN.
Celldex has expanded clinical development of barzolvolimab into prurigo nodularis ("PN"). PN is 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. Industry sources estimate there are approximately 154,000 patients in
the United Stateswith PN who have undergone treatment within the last 12 months and, of these, approximately 75,000 would be biologic-eligible. In December 2021, the first patient was dosed in a Phase 1b multi-center, randomized, double-blind, placebo-controlled study designed to assess the safety and treatment effects across multiple dosing cohorts of barzolvolimab in up to 30 patients with PN. 20
Manufacturing activities to support the introduction of the barzolvolimab subcutaneous formulation into the clinical program have been completed and, in
September 2021, we initiated dosing in a randomized, double-blind, placebo-controlled, Phase 1 study designed to evaluate the safety of single ascending doses of the subcutaneous formulation of barzolvolimab in healthy volunteers. In February 2022, we reported that subcutaneous administration of barzolvolimab was well tolerated and that multiple dose levels have been identified that possess promising pharmacokinetic and pharmacodynamic properties. Importantly, subcutaneous delivery of barzolvolimab resulted in dose-dependent, rapid and sustained decreases in serum tryptase compared with placebo and achieved sufficient exposure to produce tryptase suppression levels comparable with the levels that generated impressive clinical activity observed in the Phase 1 CIndU intravenous study. Celldex anticipates the upcoming Phase 2 multi-dose studies in urticaria will evaluate 75mg and 150mg administered every 4 weeks and 300mg administered every 8 weeks. The planned doses support a 0.5 to 2 ml injection volume, allowing for a single injection as barzolvolimab advances towards potential commercialization. In 2022, we plan to initiate a transfer of our current barzolvolimab manufacturing process to a contract manufacturing organization to support late-stage trials and to prepare for potential commercialization. In February 2022, we also reported interim data after completing the in-life dosing portion of our six month chronic toxicology study in non-human primates; a subset of the animals will continue to be followed beyond clearance of the barzolvolimab antibody to study completion. As expected and consistent with other KIT-targeting agents, impact on spermatogenesis was observed which is anticipated to be fully reversible upon clearance of the antibody. There were no other clinically adverse findings reported in the study. We believe these data strongly support our planned Phase 2 studies in urticaria later this year and in future indications. In February 2022, we announced that we will be expanding clinical development of barzolvolimab into eosinophilic esophagitis ("EoE"), the most common type of eosinophilic gastrointestinal disease. EoE is a chronic inflammatory disease of the esophagus characterized by the infiltration of eosinophils. This chronic inflammation can result in trouble swallowing, chest pain, vomiting and impaction of food in the esophagus, a medical emergency. Several studies have suggested that mast cells may be an important driver in the disease, demonstrating that the number and activation state of mast cells are greatly increased in EoE biopsies and that mast cell signatures correlate with markers of inflammation, fibrosis, pain and disease severity. Currently, there are limited treatment options for EoE. Individuals often participate in an elimination diet to identify potential food allergens that may contribute to EoE, avoid difficult to swallow foods and undergo esophageal dilation. While not approved for EoE, proton pump inhibitors and the swallowing of topical corticosteroids are also used to address the disease. Industry sources estimate there are approximately 160,000 patients in the United Stateswith EoE who have undergone treatment within the last 12 months and, of these, approximately 48,000 would be biologic-eligible. Given the lack of effective therapies for EoE and barzolvolimab's potential as a mast cell depleting agent, we believe EoE is an important indication for future study.
We continue to evaluate the potential opportunities of barzolvolimab in other diseases where mast cells play an important role, such as dermatological, respiratory, allergic, gastrointestinal and ophthalmic conditions.
21 Table of Contents 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 concentrations to levels that may not be optimal for engaging CD40 expressing cells in the tumor microenvironment. 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. In
November 2017, we initiated a Phase 1 study of CDX-1140 in up to 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. 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. A combination cohort with CDX-301, a hematopoietic cytokine that uniquely expands dendritic cells and hematopoietic stem cells and a safety run-in combination cohort with gemcitabine/nab-paclitaxel in patients with previously untreated metastatic pancreatic adenocarcinoma have been completed. A combination of CDX-1140 with pembrolizumab has completed the safety run-in phase. Expansion cohorts in patients with checkpoint-refractory/resistant squamous cell head and neck cancer and non-small cell lung cancer are enrolling patients. In November 2020, we reported interim Phase 1 data from patients treated at the maximum tolerated dose (MTD) and recommended dose of 1.5 mg/kg-one of the highest systemic dose levels in the CD40 agonist class. Interim data from the study were presented at the Society for Immunotherapy of Cancer's(SITC) 35th Annual Meeting 2020 (n=41; 25 mono, 16 with CDX-301 and 29 with post-treatment scans). 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 pembrolizumab was generally well tolerated with mostly grade 1 or 2 drug related adverse events. Activity at 1.5mg/kg dose of CDX-1140 included an ongoing complete response (CR; 18 months as of Oct 2021) in a patient with follicular lymphoma treated with CDX-1140 monotherapy. There was notable tumor shrinkage and/or necrosis in 6 patients with squamous cell head and neck cancer (SCCHN) treated with CDX-1140 alone or in combination with CDX-301 and stable disease (n=10) for 11 to 32 weeks. CDX-1140 provided good systemic exposure and resulted in marked changes in the tumor microenvironment. In November 2021, we provided an update on the ongoing Phase 1 study. Emerging data from the safety run-in cohort of CDX-1140 with gemcitabine/nab-paclitaxel in patients with previously untreated metastatic pancreatic adenocarcinoma and external CD40 agonist data recently reported using the same regimen, suggest that simultaneous treatment with chemotherapy and CD40 activation may not be optimal. Alternative strategies for investigating CDX-1140 in pancreatic cancer in other regimens are being explored, including through investigator sponsored studies. The combination of CDX-1140 with pembrolizumab has completed the safety run-in phase. Expansion cohorts in patients with checkpoint-refractory/resistant squamous cell head and neck cancer and non-small cell lung cancer were also initiated. In November 2021, we reported that of the six patients with squamous cell head and neck cancer treated with CDX-1140 at 1.5 mg/kg in combination with pembrolizumab, encouraging preliminary results were observed including a confirmed partial response and durable stable disease. Of the six evaluable patients with non-small cell lung cancer, four had stable disease as their best response. Adverse events, such as arthralgia, myalgia and fatigue, occurred more frequently in combination with pembrolizumab relative to CDX-1140 monotherapy and the protocol was amended to allow CDX-1140 dose reduction, if necessary, to help manage these toxicities. In late March 2022, Celldex closed enrollment to the study; patients continue to be dosed and followed for safety and potential treatment effect. 22 Table of Contents 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 2019demonstrated 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 to the dose escalation portion of the study has been completed and an expansion cohort in ovarian cancer is enrolling patients. Interim data were presented at the American Society of Clinical Oncology(ASCO) 2021 Annual Meeting in June that demonstrated a good safety profile along with promising pharmacodynamic and pharmacokinetic activity, which are important key hurdles for the development of bispecific antibodies. As of the data cut-off ( April 16, 2021), 11 patients were enrolled in the first 5 dose escalation cohorts, 0.03 mg/kg through 3 mg/kg.CDX-527 was well tolerated, with no dose-limiting toxicities or treatment related serious adverse events observed. Pharmacokinetics and receptor occupancy demonstrate good exposure starting at the 1 mg/kg dose and no evidence of significant anti-drug antibodies impact. Pharmacodynamic parameters demonstrate biological activity consistent with immune activation including: transient increase in pro inflammatory cytokines/chemokines, upregulation of activation marker on T cells and particularly NK cells and a decrease in regulatory T cells.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
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, 2021for a discussion of our critical accounting policies and estimates. There have been no material changes to such critical accounting policies or estimates. 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. 23 Table of Contents RESULTS OF OPERATIONS Three Months Ended March 31, 2022Compared with Three Months Ended March 31, 2021Three Months Ended Increase/ Increase/ March 31, (Decrease) (Decrease) 2022 2021 $ % (In thousands) Revenues: Product development and licensing agreements $ 30 $ 3 $ 27900 % Contracts and grants 144 682 (538) (79) % Total revenues $ 174 $ 685 $ (511)(75) % Operating expenses: Research and development 17,056 12,720 4,336 34 % General and administrative 6,911 4,121 2,790 68 % (Gain) loss on fair value remeasurement of contingent consideration (536) 483 (1,019) (211) % Total operating expense 23,431 17,324 6,107 35 % Operating loss (23,257) (16,639) 6,618 40 %
Investment and other income, net 207 101
106 105 % Net loss
$ (23,050) $ (16,538) $ 6,51239 % Net Loss
$6.5 millionincrease in net loss for the three months ended March 31, 2022, as compared to the three months ended March 31, 2021, was primarily the result of increases in research and development and general and administrative expenses, partially offset by an increase in the gain on fair value remeasurement of contingent consideration.
Revenue from product development and licensing agreements for the three months ended
March 31, 2022was relatively consistent with the three months ended March 31, 2021. The $0.5 milliondecrease in contracts and grants revenue for the three months ended March 31, 2022, as compared to the three months ended March 31, 2021, was primarily due to a decrease in services performed under our manufacturing and research and development agreements with Rockefeller Universityand Gilead Sciences. We expect revenue to remain relatively consistent over the next twelve months, although there may be fluctuations on a quarterly basis.
Research and development costs
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 Increase/ March 31, (Decrease) 2022 2021 $ % (In thousands) Personnel
$ 7,527 $ 6,038 $ 1,48925 % Laboratory supplies 1,637 1,760 (123) (7) % Facility 1,306 1,255 51 4 % Product development 5,158 2,762 2,396 87 % Personnel expenses primarily include salary, benefits, stock-based compensation and payroll taxes. The $1.5 millionincrease in personnel expenses for the three months ended March 31, 2022, as compared to the three months ended March 31, 2021, was primarily due to higher stock-based compensation expense and an increase in employee headcount. We expect personnel expenses to increase over the next twelve months as a result of additional headcount to support the expanded development of barzolvolimab. 24
Laboratory supplies expenses include laboratory materials and supplies, services, and other related expenses incurred in the development of our technology. The
$0.1 milliondecrease in laboratory supply expenses for the three months ended March 31, 2022, as compared to the three months ended March 31, 2021, was primarily due to lower 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. Facility expenses for the three months ended March 31, 2022was relatively consistent with the three months ended March 31, 2021. 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 $2.4 millionincrease in product development expenses for the three months ended March 31, 2022, as compared to the three months ended March 31, 2021, was primarily due to an increase in clinical trial expenses. We expect product development expenses to increase over the next twelve months as a result of further increases in barzolvolimab clinical trial, contract manufacturing and contract research expenses.
General and administrative costs
$2.8 millionincrease in general and administrative expenses for the three months ended March 31, 2022, as compared to the three months ended March 31, 2021, was primarily due to higher personnel, legal and commercial planning expenses. We expect general and administrative expenses to increase over the next twelve months primarily due to increased commercial planning efforts for barzolvolimab.
(Gain) Loss on fair value Remeasurement of contingent consideration
$0.5 milliongain on fair value remeasurement of contingent consideration for the three months ended March 31, 2022was primarily due to changes in discount rates. The $0.5 millionloss on fair value remeasurement of contingent consideration for the three months ended March 31, 2021was primarily due to changes in discount rates and the passage of time.
Investment and other income, net
$0.1 millionincrease in investment and other income, net for the three months ended March 31, 2022, as compared to the three months ended March 31, 2021, was primarily due to higher levels of cash and investment balances. We expect investment and other income to increase over the next twelve months due to higher interest rates on fixed income investments and higher other income related to our sale of New Jerseytax benefits.
CASH 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. We anticipate that our cash flows from operations will continue to be focused in these areas as we progress our current drug candidates through the clinical trial process and develop additional drug candidates. 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. 25
March 31, 2022, our principal sources of liquidity consisted of cash, cash equivalents and marketable securities of $380.5 million. We have had recurring losses and incurred a loss of $23.1 millionfor the three months ended March 31, 2022. Net cash used in operations for the three months ended March 31, 2022was $24.5 million. We believe that the cash, cash equivalents and marketable securities at March 31, 2022are sufficient to meet estimated working capital requirements and fund planned operations through 2025. This could be impacted if we elect to pay Kolltancontingent 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 Kolltanacquisition, 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.
Net cash used in operating activities was
$24.5 millionfor the three months ended March 31, 2022as compared to $18.1 millionfor the three months ended March 31, 2021. The increase in net cash used in operating activities was primarily due to an increase in research and development and general and administrative expenses. We expect that cash used in operating activities will increase over the next twelve months as a result of the expanded development of barzolvolimab. 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, pursuant to our existing arrangements and arrangements we may enter in the future.
Net cash provided by investing activities was
$10.4 millionfor the three months ended March 31, 2022as compared to $43.5 millionfor the three months ended March 31, 2021. The decrease in net cash provided by investing activities was primarily due to net sales and maturities of marketable securities of $11.0 millionfor the three months ended March 31, 2022as compared to $44.0 millionfor the three months ended March 31, 2021.
Net cash provided by financing activities was
$0.3 millionfor the three months ended March 31, 2022as compared to $0.1 millionfor the three months ended March 31, 2021. The increase in net cash provided by financing activities was primarily due to an increase in proceeds from issuance of stock from employee benefit plans. 26 Table of Contents
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