Tiny Celldex Therapeutics (NASDAQ:CLDX) is punching above its weight, as it develops one of the industry's more impressive clinical-stage oncology pipelines. With five candidates in 13 clinical trials at the moment, it should offer a deluge of data in the quarters ahead.
That data will probably result in violent price swings. The company's first candidate to enter a registrational phase 3 trial, Rintega, put up results consistent with earlier studies but failed to beat the standard of care once evaluated head-to-head. Market jitters about the rest of the company's pipeline are to be expected.
I'm extremely bullish on Celldex, as are several billionaires, but expecting every trial to produce positive results is unrealistic. Here's a coldhearted look at the pitfalls that may lie ahead.
The cancer treatment industry is tough
Drug development is a risky endeavor, and oncology is the most perilous disease area of all. Over the decade ended last year, just 5.1% of new drug candidates with a phase 1 trial success under their belt went on to earn FDA approval.
Luckily, there are reasons to expect that Celldex's most important candidate, Glemba, has a far better-than-average chance at earning approval for treatment of breast cancer patients with triple-negative tumors that overexpress Glemba's target gene, gpNMB. In a previous trial with 124 heavily pretreated, advanced breast cancer patients, a subset of 16 participants' tumors were both triple-negative and overexpressed gpNMB. Median progression-free survival among the 10 patients treated with Glemba was 3.5 months -- significantly higher than 1.5 months among the six people in the control group who were treated with an investigator's choice of available therapies.
The company is currently enrolling 300 breast cancer patients with triple-negative, gpNMB overexpressing tumors into a trial designed to support applications in the U.S. and EU, and progression-free survival is the main goal. Instead of using an investigator's choice of treatments in the control arm, patients will receive Roche's Xeloda, which should improve Glemba's chances of exhibiting a significant survival benefit in the larger trial.
While we wait
Glemba's pivotal trial should be a slam dunk, but enrolling triple-negative breast cancer patients is proving problematic. Although Celldex originally expected to complete enrollment by the end of the year, that timeline has been pushed back, as more than 330 ongoing studies are currently enrolling triple-negative breast cancer patients.
In the meantime, Celldex is conducting clinical trials with Glemba in lung cancer and advanced melanoma, both solo and in combination with one of its own candidates. Investigators independent of Celldex are sponsoring trials with the antibody-drug conjugate in rare eye and bone cancers.
The company expects to present data from a study with Glemba as a monotherapy in melanoma patients at a scientific conference in October, and I wouldn't be surprised if more early-stage data with Glemba is released before its pivotal trial is complete. If the results are less than terrific, then the market might punish Celldex stock on fears that gpNMB isn't a valid target before the pivotal Glemba data becomes available.
Paying the bills
Celldex isn't limiting its shots on goal to Glemba. Varlilumab, or varli, is a protein that should stimulate longer immune-system attacks against tumors. Celldex is enrolling 90 advanced melanoma patients in a phase 2 study to measure response rates to varli plus Glemba against Glemba alone.
Back in 2014, Bristol-Myers Squibb cut Celldex a check for $5 million up front to test its wildly successful immunotherapy, Opdivo, in concert with varli. Celldex burned through the up-front cash long ago, and Bristol isn't paying for much at present. Celldex is responsible for conducting a phase 1/2 study across several tumor types that began last January. The phase 2 portion began this April, with 179 patients across five different tumor types.
Celldex and Roche are engaged in a similar, multi-tumor phase 1/2 trial with Varli in combination with the Swiss pharma's recently approved immunotherapy, Tecentriq. The phase 1 stage enrolled 55 patients across several tumor types, but the phase 2 portion, expected to begin during the present quarter, will be limited to kidney cancer patients. Unlike the partnership with Bristol, Roche didn't offer any cash up front -- just its drug.
This is by no means a comprehensive list of Celldex's R&D outlays, but it highlights the biotech's ambition and cash burn. It finished June with about $220 million in short-term assets, compared with about $254 million three months earlier. Management considers its operations funded through 2018 but is relying in part on an at-the-market offering of its shares of up to $60 million in total.
The company finished June with just 99.4 million shares outstanding. If some positive data from the slew of studies expected to read out data next year raises the stock much higher than its recent price of around $4.70, then selling shares on the open market won't lead to a great deal of dilution. If the stock craters again, however, then selling $60 million worth at the market price could significantly shrink investors' slice of future profits while we wait for Glemba's pivotal trial results.
Its extensive pipeline makes Celldex the safest clinical-stage, oncology-focused biotech I can think of, but it's hardly risk-free. That big pipeline could lead to a liquidity crunch in the coming quarters if market sentiment takes a turn for the worse.