Over the past year, clinical-stage biotech Celldex Therapeutics (NASDAQ:CLDX) has lost over 86% of its value. A phase 3 failure during a generally bearish period for your industry can do that to a company that spends over $100 million a year on R&D without a product to sell.
If you think the market went way too far in punishing the stock after Rintega failed to beat the standard-of-care in brain cancer this March, you're not alone.
Wall Street seems to have overlooked a couple important points about this promising biotech. First, its runner up drug candidate to Rintega, Glembatumumab Vedotin (formerly CDX-011, and affectionately dubbed Glembat for the rest of this article) is in several clinical trials, any one of which could support a new drug application. What you'll find even more shocking is that the company finished last year with cash and marketable securities of nearly $290 million. With a market cap of around $400 million, that puts an awfully small price on the company's existing pipeline.
In fact, I'll argue that Glembat alone makes this company a buy. Let's have a closer look.
Delivering death to cancer cells
Glembat is a harmless protein attached to a chemotherapy drug so potent, it can't be used as chemotherapy. Glembat binds specifically to gpNMB, another protein found all over the surface of several different tumor cell types. It's like a tiny Trojan horse: once Glembat binds to gpNMB, it's invited inside -- and then it releases its super-chemo drug.
Turns out gpNMB is overexpressed on the surface of lots of different tumor cells. Celldex is taking the financially responsible route, and focusing on larger indications first such as breast, skin, and (most recently) lung cancer.
The National Cancer Institute is so thrilled with Glembat's potential that it's sponsoring two early stage trials with patients suffering from extremely rare forms of eye and bone cancer.
A positive for triple-negative
While Celldex has gained some recent attention for beginning an early stage trial in lung cancer patients, it's an ongoing study with Glembat in triple-negative breast cancer that overexpress gpNMB that investors should stay focused on. The trial, named Metric, began in 2013 and is limited to the U.S., Canada, and Australia.
In late 2014, members of the European Medicines Agency (the EU's FDA) suggested some changes that would expand patient criteria. Those amendments boosted the number of patients to 300, and its success could support an application in the U.S. and EU.
In a previous trial with 122 heavily pretreated breast cancer patients with lots of gpNMB on their tumors, Glembat slowed progression of the disease and lengthened overall survival, but not enough to be considered statistically significant. When investigators sifted out patients with triple-negative breast cancer, progression free and overall survival results were significant.
Triple-negative breast cancer gets its name because the tumor cells don't express three common targets for existing therapies, leaving these women with a poor prognosis and limited options. It accounts for just 10% to 15% of all breast cancers, or about 170,000 cases annually worldwide.
Just how many of these women's tumors overexpress gpNMB is hard to pin down. So far it seems like a high percentage, and gpNMB is frequently seen in metastatic tumor cells -- the extra-dangerous type that break free from their first location and set up shop elsewhere.
A buy? Oh yeah.
Given the lack of options available to triple-negative breast cancer patients, I think an approval in this indication alone would give the drug billion-dollar blockbuster potential. With four additional indications in exploratory trials, it could go much further.
The only upsetting part so far about Glembat is that enrollment of these patients in the trial that could lead to its approval isn't expected to complete until the second half of the year. I wouldn't expect results until well into 2017.
At least the wait won't be dull. Glembat is just one of several clinical-stage candidates at Celldex. It's immuno-oncology candidate, varlilumab, inspires the immune system to attack tumor cells and is in combination studies with Bristol-Myers Squibb's Opdivo and Roche's atezolizumab.
While I think just one highly specific breast cancer indication for Glembat makes Celldex a buy, it's only the tip of this stock's iceberg.