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Celldex Therapeutics Inc (NASDAQ:CLDX)
Q2 2019 Earnings Call
Aug 7, 2019, 4:30 p.m. ET


  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Hello, and welcome to Celldex Therapeutics Midyear 2019 Conference Call. [Operator Instructions]

I would now like to introduce your host for today's call, Sarah Cavanaugh. You may begin.

Sarah Cavanaugh -- Senior Vice President, Corporate Affairs and Administration

Thank you. Good afternoon. With me on the call today are Anthony Marucci, Co-founder, President and CEO of Celldex Therapeutics; Dr. Tibor Keler, Co-founder, Executive Vice President and Chief Scientific Officer; Dr. Margo Heath-Chiozzi, Senior Vice President of Regulatory Affairs; Sam Martin, Senior Vice President and Chief Financial Officer; and new to our team, Dr. Diane Young, Senior Vice President and Chief Medical Officer.

Before we begin our discussion, I would like to mention that today's speakers will be making forward-looking statements. Such statements reflect on current views with respect to future events and are based on assumptions and subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such forward-looking statements.

Certain of the factors that might cause Celldex's actual results to differ materially from those in the forward-looking statements, include those set forth under the headings Risk Factors and Management's Discussion and Analysis of Financial Condition and Results of Operation in Celldex's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and its current reports on Form 8-K as well as those described in Celldex's other filings with the SEC and its press releases.

All forward-looking statements are expressly qualified in their entirety by this cautionary notice. You should carefully review all of these factors and be aware that there may be other factors that could cause these differences.

These forward-looking statements are based on information, plans and estimates as of this call, and Celldex does not promise to update any forward-looking statements to reflect changes in underlying assumptions or factors, new information, future events or other changes. Please be advised that the question-and-answer period will be held at the close of the call.

I would now like to turn the call over to Anthony.

Anthony S. Marucci -- Founder, President and Chief Executive Officer

Thank you, Sarah. Good afternoon, and thank you for joining us.

We made excellent progress in the first half of the year and look forward to providing you a thorough update on our programs this afternoon. As you look at the business overall, our pipeline remains strong and well diversified. We have two programs advancing nicely in the clinic, a third poised to answer clinical development before the year-end and a fourth lined up for 2020. We also made an important hire this summer that we believe will further strengthen our clinical development efforts and support the continued progress of our product pipeline.

Dr. Diane Young has joined the Celldex team as a Senior Vice President and Chief Medical Officer. Diane is a medical oncologist and has led clinical and cross-functional research and development teams, responsible for the global development of numerous novel therapies from Phase 1 through successful product registrations.

Most recently, Diane served as Chief Medical Officer of GTx, Inc., a public biopharmaceutical company focused on the development drugs that target nuclear hormone receptors. Previously, Diane spent 13 years at Novartis Oncology in senior leadership roles in global clinical development and medical affairs.

As the Head of Oncology Clinical Development, she directed the clinical programs, leading to successful regulatory approvals for more than a dozen -- half dozen important oncology drugs. Prior to Novartis, Diane held senior leadership positions in clinical development at the R.W. Johnson Pharmaceutical Research Institute of J&J, as well as Hoffman-La Roche and Sandoz. We are very pleased to have Diane on our team. She will join us at both medical and investor conferences this fall, and I'm sure our shareholders will enjoy meeting her at these venues.

We continue to strengthen our balance sheet to extend and direct our financial resources to the advancement of the programs we believe can bring the most value to both patients and shareholders. And the right support of this, in June, we decided to consolidate our Massachusetts laboratory and manufacturing facilities. The lease for the Needham, Massachusetts facility will not be renewed and most functions and employees will be integrated into the company's Fall River manufacturing facilities.

We estimate that this consolidation, along with the reduction in the square footage of our Hampton, New Jersey facility executed earlier this year, will decrease our facility footprint by over 35% and will save us over $3.5 million annually, starting in the second half of 2020.

With that, I'd like to turn to a review of our pipeline. I'm going to start with an update of the CDX-1140, CDX-0159 and our preclinical programs. Then I'm going to ask Dr. Margo Heath-Chiozzi, our Senior VP of Regulatory Affairs, to provide an update on CDX-3379. Margo has served as the Medical Lead for this program to date. Sam Martin, our CFO, will then review the financials before we open the call to your questions.

CDX-1140 is a fully human antibody targeted to CD40, a key activator of immune response, which is found on dendritic cells, macrophages, B cells and several cancer types. Potent CD40 agonist antibodies have shown encouraging results in early clinical studies. However, systemic toxicity associated with broad CD40 activation has limited their dosing.

We selected CDX-1140 based on its unique properties relative to other CD40 agonist antibodies. It binds to the CD40 receptor in a manner that results in a linear, non -- dose-dependent agonist activity, which may allow for higher systemic dosing and better tumor penetration at the optimal agonist levels.

CDX-1140 does not require cross-linking through Fc receptor interactions for its agonist activity, allowing more consistent and controlled immune cell activation. Also, CDX-1140 does not interfere with the natural activation of CD40 by its ligand, which may further potentiate local immune responses.

Finally, CDX-1140 had a strong safety profile, while demonstrating potent immune activation in our preclinical studies. The ongoing Phase 1 trial is a multi-dose dose-escalation study of CDX-1140 in patients with locally advanced, recurrent or metastatic solid tumors and B cell lymphomas.

The study also includes a separate dose-escalation arm of CDX-1140 in combination with CDX-301. CDX-301 is a potent dendritic cell growth factor that increases the number of these important cells, which are a key target for CDX-1140. An important goal of this study is to achieve dosing levels of CDX-1140 that will provide good systemic exposure without dose-limiting toxicity.

To this end, we have made excellent progress completing all eight cohorts in the monotherapy dose-escalation arm. Importantly, based on biomarker data, CDX-1140 is demonstrating strong biological activity associated with CD40 activation.

Currently, we are adding additional patients at the three highest dose levels to provide additional data in the selection of our recommended Phase 2 dose, as we await completion of the dose escalation and the combination arm of the study.

With CDX-1140 and 301 combination, we are nearing the close of the VLT window for the fourth of six potential cohorts at the 0.72 milligrams per kilogram, and assuming successful clearance, the 1.5 milligram per kilogram combination cohort should open shortly.

Overall, we are pleased with the data to date, which have shown that CDX-1140 can be safely administered at doses that Celldex believes will support good tissue and tumor penetration and a dose is significantly higher than most other protagonists targeting CD40.

Our next step is to add an additional arm to the study that will include the combination of a PD-1 inhibitor with CDX-1140. This cohort is important as we'll be both enhancing the immune system with CDX-1140 and releasing the brake on the immune system with the introduction of the checkpoint inhibitor.

We are also exploring future combination opportunities with chemotherapy, radiation therapy and Celldex's potent CD27 agonist monoclonal antibody, varlilumab. We are excited about 1140 program and its clinical potential. We presented data from this study at AACR in early April and hopeful -- and hope to present an update at the SITC meeting in November.

Before year-end, we will also initiate a Phase 1 study of CDX-0159, our KIT antagonist antibody program in healthy subjects. CDX-0159 is a reengineered variant of CDX-0158. KIT is a key regulator of mast cells in preclinical and clinical data, with CDX-0158 demonstrated robust inhibition of mast cell activity and decrease mast cell numbers, supporting the concept that targeting KIT with an antagonist antibody and modulate mast cell activity and potentially provide clinical benefit in mast cell-related diseases.

CDX-0159 was redesigned to ablate Fc receptor interactions and effector functions and approve its safety profile while preserving full KIT inhibitory activity. In addition, CDX-0159 was modified to provide extended half-life following administration. This Phase 1a study is designed to evaluate the safety profile, pharmacokinetics and pharmacodynamics of single ascending doses of CDX-0159 in healthy subjects.

Following completion of this study, we plan to further study CDX-0159 in chronic idiopathic urticaria or CIU. CIU 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. The prevalence of CIU is estimated to be 0.5% to 1% of the total population or up to 2 -- 3.2 million cases in the United States.

About 50% of patients with CIU achieved symptomatic control with antihistamines and leukotriene receptor agonist such as Zoloft. An IgE inhibitor provides relief for roughly half of the remaining antihistamine, leukotriene refractory patients. Consequently, there is need for more effective later line therapies.

We believe targeting KIT with CDX-0159 represents a unique strategy in diseases involving mast cells such as CIU. We hope to present the scientific rationale and supportive data of our development strategy in CIU in a medical meeting this fall, and we'll continue to keep you updated on this program.

Before I hand the call over to Margo to discuss CDX-3379, I want to touch on our preclinical pipeline, which had a strong showing at AACR in the second quarter. CDX-527, our first bispecific antibody program, combines CD27 mediated cell activation with PD-1 blockade. We have developed CDX-527 from our proprietary, highly active anti-PD-L1 and CD27 human antibodies and demonstrated the bispecific to be more potent than the combination of the individual antibodies in preclinical models.

CDX-527 provides Celldex for its own PD-1 pathway inhibitor with potentially broader activity and sets us up for unique combinations within our own pipeline. We are currently initiating manufacturing activities for CDX-527 to support an IND targeted for 2020.

We have also been making significant progress on developing lead candidates, targeting the receptor tyrosine kinases, Tyro3, AXL and MerTK, collectively known as the TAMs. These receptors have been gaining importance in the immunotherapy field due to their role as checkpoint molecules on macrophages, dendritic cells and other immune cells, where they can negatively regulate the antitumor immunity.

We recently presented our progress on lead antibody characterizations for all three receptors at AACR. The antibodies targeting to Tyro3, AXL and MerTK, all promote activation of human macrophages and dendritic cells. And we look forward to moving these candidates toward development activities.

With that overview, I will ask Margo to discuss the progress we've made with CDX-3379. Margo??

Margo Heath-Chiozzi -- Senior Vice President, Regulatory Affairs

Thank you, Anthony.

CDX-3379 is a monoclonal antibody that targets ErbB3, which is also called HER3. ErbB3 is found on tumor cells in a variety of cancers, including head and neck, thyroid, breast, lung, gastric cancers as well as melanoma. It is implicated in cancer cell growth and survival, as well as resistance to targeted therapy.

Uniquely among ErbB3 target antibodies, CDX-3379 blocks ErbB3 into an inactive state, blocking its interactions with its ligand and interactions with other Erb family members that are necessary for ErbB3 signaling. In addition, CDX-3379 is engineered to have an extended half-life, further enhancing its product profile.

We are conducting a Phase 2 study of CDX-3379 in combination with Erbitux, generic name cetuximab, in patients with cetuximab-resistant advanced HPV negative head and neck squamous cell carcinoma, who have previously been treated with the PD-1 checkpoint inhibitor. These patients have extremely limited treatment options and a particularly poor prognosis.

In addition to the ongoing Phase 2 study, CDX-3379 has been studied in two other clinical trials that included patients with head and neck cancer. We've been served in treating clinical activity in a number of patients with head and neck cancer across these three studies. Emerging

data from exploratory biomarker analysis across the CDX-3379 clinical development program suggest that this antitumor activity may be associated with somatic mutations in specific genes. Dr. Julie Bauman of the University of Arizona Cancer Center, an investigator in the Phase 2 study, presented interim results from the CDX-3379 clinical program and the biomarker analysis for the ASCO Annual Meeting in Chicago.

First, let me give you a quick overview of the Phase 2 interim study results, and then we will dive into the biomarker analysis. In this study, cetuximab is dosed weekly, and CDX-3379 is administered once every three weeks. Treatment continues into disease progression and intolerance and the assessments occur every six weeks.

Using a Simon's two-stage design, the first stage of the study was designed to enroll 13 patients. And if at least one patient achieved a partial or complete response, enrollment will progress to the second stage. This objective was met. 15 patients were enrolled in stage one of the studies. The patients had a median of three prior cancer therapies with a range of two to six. All patients had received prior checkpoint treatment and 14 of the 15 were cetuximab refractory.

Notable clinical activity was observed in this refractory treatment population, where treatment options are very limited, including a durable complete response that continues at over a year, this patient continues to receive treatment and an unconfirmed partial response in the patient who had not received cetuximab.

47% of the patients experienced stable disease as their overall best response, including the unconfirmed partial responder and a clinical benefit rate of 29% was observed. The combination of CDX-3379 with cetuximab was generally associated with the expected on-target mediated adverse event of diarrhea and rash.

The clinical activity was notable in this difficult-to-treat patient population and was similar to the experience observed in head and neck patients from our previous studies. Understanding that a biomarker enrichment strategy could change the standard of care for these patients, we performed next-generation sequencing on tumor samples from 18 patients with head and neck cancer treated with CDX-3379 across the three clinical studies.

In total, this data set included four patients with clinical responses, including two durable complete responses, the patient with over a year and a patient with 8.3 months in the cetuximab refractory patient treated with the combination of CDX-3379 and cetuximab. The unconfirmed partial response in the cetuximab naive patient and an exceptional partial response with greater than 92% tumor shrinkage in the previously untreated patient who received two doses of CDX-3379 monotherapy.

This also included eight patients with stable disease and/or tumor shrinkage and six patients with progressive disease. We found that across the CDX-3379 program, there were mutations in specific genes, including FAT1 and NOTCH1, NOTCH2 and NOTCH3, that were associated with clinical activity. In head and neck cancer, these genes may function as tumor suppressors, genes that normally prevent uncontrolled cell growth.

Inactivating mutations in FAT1 and NOTCH genes occur in a sizable subset of HPV negative head and neck tumors, with 32% containing FAT1 and 26% containing FAT2 mutations. Specifically, in the exploratory analysis presented at ASCO, seven patients were identified as having FAT1 mutated tumors and four of these patients demonstrated a clinical response, three of which were confirmed.

Four -- three of the four clinical responses occurred in patients who had NOTCH1, NOTCH2 or NOTCH3 mutations. And of note, all patients who experienced clinical benefit, seven of the total 18, had FAT1 and/or FAT1, 2 -- and/or NOTCH1, NOTCH2 or NOTCH3 mutations. Finally, we also observed that all four clinical responses occurred in patients with the primary tumor site of oral cavity.

We discuss these interim results with our clinical investigators, and there was significant enthusiasm for exploring these findings in a larger setting. As a result, we have expanded our current Phase 2 study and we'll enroll up to 45 patients, including at least 15 with FAT1 mutations to evaluate the clinical utilities of these biomarkers for future patient selections. Enrollment is ongoing. We are also conducting preclinical studies investigating the association of CDX-3379 sensitivity and inactivating mutations of FAT1 and NOTCH genes.

As Dr. Bauman said at ASCO in the presentation, these data, while early, are provocative and suggest the potential for a biomarker enrichment strategy that could change the standard of care for these patients. We look forward to obtaining additional data in this ongoing study to more fully elucidate the potential here.

With that, I will turn the call over to Sam to review the financials. Sam?

Sam Martin -- Senior Vice President and Chief Financial Officer

Thank you, Margo. All of the following share and per share amounts reflect the 1:15 reverse stock split, which became effective February 8, 2019. For the second quarter of 2019, net loss was $11.8 million or $0.84 per share compared to a net loss of $16.4 million, or $1.67 per share for the second quarter of 2018.

Net loss for the six months ended June 30, 2019, was $29 million, or $2.21 per share, compared to $134.5 million or $14.01 per share for the comparable period in 2018.

During the first quarter of 2018, we recorded $109.7 million in one-time goodwill and intangible asset non-cash impairment expenses. Research and development expenses were $21.2 million for the six months ended June 30, 2019, compared to $43.3 million for the comparable period in 2018. General and administrative expenses were $8.8 million for the six months ended June 30, 2019, compared to $11.2 million for the comparable period in 2018.

As of June 30, 2019, we reported cash, cash equivalents and marketable securities of $81.3 million. We expect that our cash, cash equivalents and marketable securities at June 30, 2019, compared -- combined with the anticipated proceeds from future sales of common stock under our Cantor agreement are sufficient to meet estimated working capital requirements and fund planned operations through 2020. At June 30, 2019, we had 14.8 million shares outstanding.

I will now turn the call over to Anthony to close.

Anthony S. Marucci -- Founder, President and Chief Executive Officer

Thank you, Sam. Thank you, Margo.

I'm very pleased with our progress on both the CDX-1140 and the CDX-3379 programs. Importantly, we have advanced these programs to the point that we should be able to answer key questions over the next six to 12 months on their clinical potential.

Expansion in additional combination cohorts with other key mechanism of actions will be important for CDX-1140, and those are well under way. The CDX-1140, CDX-301 combination cohort is nearing completion of dose escalation, put us in a good position to select the appropriate dose for additional combinations, including the PD-1 inhibitor combination that is planned next.

We have amended the CDX-3379 study to allow us to validate the potential for a biomarker strategy in head and neck cancer, which will be a significant development for the field overall and are actively enrolling new patients with significant investigator support.

We also remain on track to initiate the Phase 1 study of CDX-0159 before year-end and to advance bispecific programs to the clinic next year. We are pleased with the expanding breadth and depth of our pipeline and believe it will support significant news flow and meaningful inflection points in the coming months and 2020.

With that review, we will open the floor to questions. Operator?

Questions and Answers:


[Operator Instructions] Our first question comes from the line of Joe Pantginis with H.C. Wainwright. Your line is open.

Joseph Pantginis -- H.C. Wainwright & Co. -- Analyst

Hey, guys. Good afternoon. Thanks for taking the question. First, I just wanted to focus on 1140, if you don't mind, specifically the safety profile. I don't know if my question is really apples to oranges, but do you feel that as part of your dose escalation for 1140, you've maybe surpassed levels where you might have expected to see a safety signal that might be related to others in the competitive landscape?

Anthony S. Marucci -- Founder, President and Chief Executive Officer

Sure. Tibor, can you answer that question?

Tibor Keler -- Founder, Executive Vice President and Chief Scientific Officer

Sure. Hi, Joe. I don't know exactly what you mean by surpass the levels. We are certainly seeing the kinds of biological activity that are associated with CD40 activation that have been reported in clinical trials by some of the other agonist antibodies.

This has generally increased somewhat with our higher doses, but we have not reached the level where any of these have become limiting from a safety or dose point of view. So, that's been very nice, while we see clear signals in terms of cytokine and chemokine responses, immune activation that we expect to see that has looked very good at the high-dose levels

Joseph Pantginis -- H.C. Wainwright & Co. -- Analyst

Right. So, yeah, just basically, where others have shown safety signals at their levels -- at their own personal levels?

Tibor Keler -- Founder, Executive Vice President and Chief Scientific Officer


Joseph Pantginis -- H.C. Wainwright & Co. -- Analyst

Okay. Got it. And then moving to the 3379 program. Obviously, you're pursuing a very nice personalized medicine approach. So, wanted to get a sense of looking ahead a bit here. With regard to the FAT1 and NOTCH mutations, what kind of population sizes are you looking at? Or maybe stated differently, the overall frequency of these mutations in a general population, maybe just starting with head and neck or if you have any additional data? And then with that, are you using more lab diagnostics at this point? I know you said next-generation sequencing, but are these something that can be translated commercially if there were to be approved from a diagnostic standpoint? Thanks.

Margo Heath-Chiozzi -- Senior Vice President, Regulatory Affairs

Joe, this is Margo. As I mentioned earlier, when you look at head and neck tumor epidemiology, it appears that the FAT1 is seen in about a third of tumors and the NOTCH maybe a 0.25. The current genotyping of head and neck tumors is sort of evolving because there haven't been as many targeted therapies that the currently available genetic tests as good drugs to guide the patients too, but we are going to do next-generation sequencing on the current study to confirm, enlarge the sample for the early observations.

And then if we do confirm that FAT1 is a good predictive biomarker, we're clearly going to collaborate with clinical diagnostic companies to help change the field where you would be more inclined to test head and neck tumors because there's actual clinical information to be going from that testing. So, it's a two-stage process really, and we're actively pursuing -- enlarging our understanding of the stage one.

Joseph Pantginis -- H.C. Wainwright & Co. -- Analyst

Got it. No, that's very helpful. I think I was combining some of the comments you made with regard to what patients on the study had the particular mutation. So, thanks for clarifying that. All right. Thanks, guys. Appreciate it.

Anthony S. Marucci -- Founder, President and Chief Executive Officer

Thanks, Joe.


Thank you. I'm showing no further questions at this time. I would now like to turn the call back over to Anthony Marucci for closing remarks.

Anthony S. Marucci -- Founder, President and Chief Executive Officer

Thank you, operator, and thanks to everyone for joining us today. We appreciate your time and support. As always, we welcome your questions at any time. Have a great day. Enjoy the rest of the summer.


[Operator Closing Remarks]

Duration: 30 minutes

Call participants:

Sarah Cavanaugh -- Senior Vice President, Corporate Affairs and Administration

Anthony S. Marucci -- Founder, President and Chief Executive Officer

Margo Heath-Chiozzi -- Senior Vice President, Regulatory Affairs

Sam Martin -- Senior Vice President and Chief Financial Officer

Tibor Keler -- Founder, Executive Vice President and Chief Scientific Officer

Joseph Pantginis -- H.C. Wainwright & Co. -- Analyst

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