Down 47%: Why the Market is Wrong About Celldex Stock

Celldex Therapeutics's epic decline begun once the company shut down CDX-1135, but are the losses warranted, or is the company now presenting great value?

Jul 22, 2014 at 8:31AM

Celldex Therapeutics Inc (NASDAQ:CLDX) stock is down about 47% so far year-to-date. This decline was jump-started after the company's decision to close its early stage study on CDX-1135 back in March, a potential competitor to Alexion Pharmaceuticals (NASDAQ:ALXN). While this was a big blow, was it really worth what Celldex has lost?

What's the story on CDX-1135?
In early 2014, Celldex announced that it was stopping the investigation of a small pilot study on CDX-1135 in treating dense deposit disease, or DDD. The company had aimed to test 15 patients, but had only enrolled one in a disease that effects just 300 to 500 people in the U.S.

Treating DDD was unlikely to be a huge fundamental catalyst, but the drug's structure was exciting to investors. CDX-1135 was a complement modulator that worked by binding to certain components linked to rare diseases. Alexion Pharmaceuticals's Soliris is the same kind of drug, binding to C5; the only difference is that CDX-1135 also binds to C3.

With Soliris being the priciest drug in the U.S., having multiple uses, and being expected to generate sales over $2 billion this year, investors were excited about CDX-1135's developmental possibilities. Theoretically, if CDX-1135 was successful, many believed it could one day challenge Alexion in treating many of the same diseases. This would consequently potentially effect Soliris' pricing and Alexion's $30 billion market capitalization. It was a big blow for Celldex to close the program, but it was possibly a big win for Alexion.

A deep value-driving pipeline
The fortunate fact surrounding Celldex is that it's not just a one-candidate company, but instead has a deep pipeline of promising drugs. In fact, CDX-1135 was deep in its pipeline, and much of the company's stock price run from $2.6 in 2012 to nearly $40 in 2013 was in connection to data from its breast cancer drug Glembatumumab vedotin and its brain cancer drug Rindopepimut.

In a difficult-to-treat breast cancer population who have failed three prior treatments, more than 30% of patients responded to Glembatumumab vedotin. As for Rindopepimut, it's being studied in a Phase 3 trial as well. Moreover, Celldex doubled the size of the trial last year after identifying strong anti-tumor activity.

Going deeper in the pipeline
The company also has several promising early stage products like Varlilumab, a monoclonal antibody immunotherapy.

Essentially, Varlilumab binds to cancer cells while activating certain cancer-killing proteins; it also prevents the growth of cancer-causing cells. While a maximum dose is yet to be found, Celldex found that eight of 15 patients saw their cancer stabilize with three seeing significant tumor shrinkage partway through an early-stage trial -- although it's important to note that this drug is very early in its development.

Why dwell on CDX-1135?
With all things considered, Celldex has a solid pipeline around it, meaning that the market's reaction to its stock may be overdone. Specifically, its breast cancer drug Glembatumumab is being tested against Xeloda, and if the data is good could see uptake upon approval. Seeing as how Xeloda had global sales of $1.7 billion in 2013, Glembatumumab could very well be a blockbuster product. Rindopepimut has the potential to earn $500 million or more in peak sales.

Foolish thoughts
Last year, Celldex was considered one of the most promising companies in immuno-oncology development. Looking at the company now, I think optimism is still warranted. Sure, it flunked on the development of CDX-1135. In retrospect, though, it was a very small indication, and even Alexion had avoided developing Soliris to treat DDD. Now, while there was more potential upside in the drug given the potential to take on Alexion in other indications, I think there's still plenty of opportunity with the stock.

While biotech is an inherently risky space and investors should be particularly careful when looking at clinical-stage biotechs like Celldex, I still think that is more than enough upside in treating cancer, and Celldex's pipeline and late-stage candidates make it a company with many potential opportunities.

Leaked: This coming blockbuster will make every biotech jealous
The best biotech investors consistently reap gigantic profits by recognizing true potential earlier and more accurately than anyone else. Let me cut right to the chase. There is a product in development that will revolutionize not just how we treat a common chronic illness, but potentially the entire health industry. Analysts are already licking their chops at the sales potential. In order to outsmart Wall Street and realize multi-bagger returns you will need The Motley Fool's new free report on the dream-team responsible for this game-changing blockbuster. CLICK HERE NOW.

 

Brian Nichols owns shares of Celldex Therapeutics. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.


Compare Brokers