In a recent pipeline update, Celldex Therapeutics (NASDAQ:CLDX) quietly reported that it had discontinued a pilot clinical study of CDX-1135, a drug in development for dense deposit disease (DDD), an ultra-rare orphan indication. A grand total of one patient had been enrolled since last July, and that patient did not experience sustained improvement in terms of stopping or reversing the kidney deterioration caused by the disease. Celldex also mentioned that its experience with compassionate use of the compound had not provided support for continuation of the program.

CDX-1135 has been considered a hidden treasure of Celldex's pipeline for quite some time, with the expectation it could provide upside by becoming a surprise Soliris-like product with a Soliris-like $400,000 per year price tag. Soliris is approved for atypical hemolytic uremic syndrome (aHUS) and paroxysmal nocturnal hemoglobinuria (PNH), and that single drug has built its manufacturer Alexion Pharmaceuticals (NASDAQ:ALXN) into a pharmaceutical powerhouse with a $35 billion market capitalization.

Celldex's CDX-1135 modulates the complement pathway, binding to two pathway components, C5 and C3. Soliris is also a complement modulator, with binding activity for C5 alone. So the perceived potential equivalence of the two compounds makes a lot of sense.

Unfortunately for the investment world, there's a world of difference between activity in vitro and in human patients, and biology doesn't always cooperate with good clinical results. By terminating its trials of CDX-1135, Celldex has made a pretty strong statement that it no longer believes in the product. And although some hopeful investors may rationalize that more of the problem lies with Celldex's difficulty finding suitable patients to enroll, they would be well advised to put that hope to rest, and back slowly away from Celldex's erstwhile "hidden treasure."

The real winner in this piece of news is, once again, Alexion, with its not-so-hidden treasure, Soliris. That drug, also, has been tested in a single patient with dense deposit disease, and with good result according to a correspondence published in the New England Journal of Medicine in 2012.

CDX-1135 was also considered a potential challenger to Soliris in its primary indications of aHUS and paroxysmal nocturna hemoglobinuria, as well as other potential investigational indications, because of the similarity of complement C5 inhibition mechanism. Discontinuation of CDX-1135 takes a significant challenger away from Soliris, returning clear and sole dominance in the field to Alexion.

With CDX-1135 out of the picture, Celldex becomes an immuno-oncology company with a solid pipeline of clinical assets in its quiver. Among development goals for 2014, it lists completion of accrual in a Phase III study of rindopepimut for glioblastoma multiforme, continued accrual of patients for an accelerated approval study of glembatumumab vedotin, completion of a Phase I study of varlilumab in solid tumors, support of a NCI-sponsored Phase II study of CDX-1401 and CDX-301 in metastatic melanoma, and a pilot study of CDX-301 with Mozobil in hematopoietic stem cell transplantation.

Celldex has dropped from about $31 per share to just under $25 per share in the past month, and at this point future changes will depend on progress with those oncology assets. Although the oncology space can be crowded, and lacks the perceived slam-dunk, find-one-problem-and-fix-it ease of approval of the rare disease field, it does have the advantage of having a relatively favorable regulatory climate in terms of an agency willing to give a chance to drugs that would be considered too risky and not effective enough in less lethal indications.

Alexion's stock enjoyed a boost of around $1 per share at the time Celldex released its news, but is currently surging due to upwardly revised revenue and earnings guidance, from $2 to $2.02 billion to $2.15 to $2.17 billion for revenues and from $3.70-$3.80 per share to $4.37-$4.47 for earnings. Those increased expectations are based on strong sales in PNH and sales surpassing expectations in aHUS.

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