Celldex Therapeutics, Inc. (CLDX) Q2 2015 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen. And welcome to the Celldex Therapeutics Second Quarter Financial Results Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to introduce your host for today’s conference, Sarah Cavanaugh. Please go ahead, Ms. Cavanaugh.

Thank you. And thank you all for joining us. Before we begin our discussion, I’d like to mention that today’s speakers will be making forward-looking statements. Such statements reflect on current views with respect to future events that 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 Operations 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 Securities and Exchange Commission 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’d now like to turn the call over to Mr. Anthony Marucci, Co-Founder, President and CEO of Celldex. Anthony?

Thank you, Sarah. Good afternoon, everyone, and thank you for joining us. Joining me are Dr. Tom Davis, Executive Vice President and Chief Medical Officer; and Dr. Tibor Keler, Co-Founder, Executive Vice President, Chief Scientific Officer; Mr. Chip Catlin, Senior Vice President and Chief Financial Officer; and Dr. Richard Wright, Senior Vice President and Chief Commercial Officer. On our call this afternoon, we will walk you through our recent accomplishments, provide you with an update of our clinical programs, review financial results from the second quarter and then outline key objectives for the reminder of year. And as always at the close of our prepared remarks, we look forward to answering your questions. First, as one would imagine, we have a marked increase in interest in the RINTEGA program from patients, their families and their physicians, since presenting data of the Phase 2 ReACT study in recurrent glioblastoma last fall at SNO, and again, this May at ASCO. These data had demonstrated in even one of the most challenging disease setting, recurrent brain cancer, that RINTEGA can generate remarkable, [ph] frequent, and robust immune responses against EGFRvIII, and that this response strongly correlates with meaningful clinical activity across multiple endpoints. Importantly, we saw no side effects in these studies. The primary endpoint of the study was met progression-free survival at six months. But most importantly, we observed a statistically significant overall survival advantage with a hazard ratio of 0.53 and a P-value of 0.02 in the pro-protocol [ph] population. Even at ASCO in June, excuse me, this is beginning to translate into long-term survival for a number of patients, something that’s seen in highly aggressive EGFRvIII-positive glioblastoma with twice as many patients on the RINTEGA arm alive at 18 months compared to the control arm. The emergence of this tale in the survival curve is consistent with immunotherapy treatment effect. The advantage of RINTEGA therapy extended across multiple other endpoints, including longer progression-free survival, high objective response rate, and reduced thyroid requirements. Glioblastoma patients normally experience swelling in a brain that can cause neurological problems, which often requires high-level of steroids further impacting patient’s quality of life. In the ReACT study, 44% of those patients on the RINTEGA arm were able to stop steroids within two months, compared to 21% on the control arm. In fact, 33% of the patients on the RINTEG arm were able to stop steroids in more than six months and half of those patients were able to stop it for more than a year versus 0% on a control arm for either point of times. Based on these data, we believe RINTEG has the potential to provide meaningful benefits to patients. A patients echoed by a number of leading physicians would treat patients with this disease. We continue to follow patients for survival, and look forward to presenting mature overall and long-term survival data at the Society of Neuro-Oncology Annual Meeting this November. The ReACT results mirrored what we have seen in earlier RINTEGA studies conducted in newly diagnosed patients, supporting our belief that RINTEGA will be an important treatment option for all patients with EGFRvIII-positive glioblastoma. To that end, Phase 3 ACT IV study in patients with newly diagnosed EGFRvIII-positive glioblastoma move steadily closer to the finished line in Q2. In June, we reported at the Independent Safety and Monitoring Committee recommended continuation of the ACT IV study. This analysis includes an assessment of utility, safety, and efficacy, and was pre-specified as 50% of events, which are deaths. According to our model, the second interim, which will be conducted at the 75% of events should occur late this year, or early next year. We at Celldex are acutely aware of the significant unmet need in glioblastoma, which is even more pronounced in patients who are EGFRvIII-positive, and our meeting, as many of these requests as we can through our compassionate use program. At the urging of a number of our investigators and key opinion leaders in the field, we have entered into discussions with the regulatory authorities on the significance of the ReACT data that we presented at ASCO. As we have said a number of times, the ReACT study was not a typical approval package for the FDA, and hence we were cautious about our expectations given the exploratory nature of the study and a small study size. That said, we thought we had an obligation to patients to pursue all potential avenues given at this patient population, which historically have done poorly were seen an extremely rare survival benefit. RINTEGA’s breakthrough designation was enabled a robust back and forth with its dialogue with CBER on the ReACT study and RINTEGA program overall. Based on the discussions to-date, we believe the most likely scenario for filing for approval for RINTEGA in the U.S. and Europe will be upon receiving data from the ACT IV study. With that data in hand, we would then provide the ReACT data as supportive in nature in the filing and apply for approval across all lines of therapy. While we have consistently received positive feedback from CBER on the ReACT data set, when we applied for breakthrough designation and in our follow-up discussions to-date, CBER has guided us that the small sample size would be a potential concern for them, if we were to file. While this was a surprise to us, we certainly disappointed particularly for patients. That said, our discussions with the FDA had been fruitful. We are actively working with them to ensure all parts of our license application meet the expectations and hopefully reduce the time for review. These interactions are especially focused on the manufacturing activities and the companion diagnostic. With the progress made in these areas, we are confident that all the requirement activities associated with the ability to apply for licensure will be completed in line with receiving ACT IV data. We are also in a step-fashion, planning for a potential launch under the leadership of Dr. Rick Wright, who was promoted to Senior Vice President and Chief Commercial Officer in August. He [ph] brings significant global experience commercializing novel therapeutics for both orphan diseases and more prevalent indications, which will be important to Celldex, given the breadth and depth of our pipeline. He is responsible for developing global business strategy and building the infrastructure required, support commercialization of our cancer immunotherapy pipeline as a whole, but certainly the focus is now on RINTEGA. This focus is echoed as an appropriate throughout the organization as a whole, who are actively executing on all necessary steps to prepare for the filing, so that the process can be completed and expeditious as possible when the ACT IV data become available. At the same time, we continue to make significant progress advancing each of our candidates in our pipeline. For glembatumumab vedotin program, we have approximately 100 sites open in the METRIC study, a registration trial in triple negative breast cancer. The study currently spans the U.S., Australia and Canada. Trial expansion into EU is underway and we anticipate that we will open enrollment in up to 50 sites in the EU, beginning in early 2016. Based on our current projections, we believe enrollment will be completed in the second-half of 2016. Enrollment is also active in a Phase 2 study of Glembatumumab vedotin in metastatic melanoma, and plans for additional studies with collaborators in squamous cell lung, uveal melanoma and pediatric sarcoma are well underway. The varlilumab program has grown considerably with four combination studies now actively recruiting patients, including two that were initiated this past quarter, one with combination with sunitinib in metastatic clear cell renal cell carcinoma, and one with ipilimumab metastatic melanoma. Early in Q2, Tibor and his team presented preclinical data supporting Varli’s combo with PD-1 inhibitors at AACR, demonstrating that a varli anti-PDL1 combination induce the potent immune-mediated effect that resulted in changes in the tumor microenvironment. Importantly, this combination increased the ratio of effector T cells to regulatory cells, which is considered an important indicator, the beneficial response of immunotherapy. This work directly supports our clinical trial collaboration with both Bristol-Myers Squibb and Roche. The varlilumab-nivolumab study is progressing well. And the Roche study is on track to begin by year-end, as we have previously guided. Finally, Oncothyreon lead study of a varlilumab on Oncothyreon’s MUC1 vaccine ONT-10 in breast and ovarian cancer is fully enrolled. Additional varli combination studies are in the queue and we will update you as these initiatives – as they begin. Overall, we feel very confident that we have built a significant development program for varli that should support robust product profile across multiple indications and in combination with a variety of different mechanisms. We think 2016 should be an exciting year for varli with multiple data readouts. Finally, to wrap up, pipeline CDX-1401 is been included with the varli-ipi combination study and will be administered to patients who are NY-ESO-1 positive. It’s also being studied in a number of external collaborations, including an NCI sponsored Phase 2 study, the CDX-301 in metastatic melanoma, which is enrolling patients currently. Like varlilumab and CDX-1401, CDX-301 also has the potential to be developed as a combination product candidate with other immuno-oncology agents in multiple settings. We are also conducting a pilot study of CDX-301 for the mobilization of transplantation of allogeneic hematopoietic stem cells, deep cells, in patients with hematological malignancies, undergoing hematopoietic stem cell transportation. The study is exploring the utility of CDX-301 alone and in combination with Mozobil, and is enrolling up to 18 recipient donor pairs. We’re anticipating we have additional data for this study early in 2016. Finally, we remain on track to file an IND CDX-014 by year end, and look forward to initiating clinical trials next year in renal cell carcinoma and potentially other TIM-1 expressing tumors during 2016. As you may recall, CDX-014 is a fully human monoclonal antibody drug conjugate that targets T-Cell immunoglobulin and mucin domain-1 or TIM-1, a molecule that is upregulated several cancers, including renal cell and ovarian carcinomas. It was associated with kidney injury and the shedding of the endo-domain is a predictive biomarker for tumor progression. That said, it has very restricted expression in healthy tissues, making it a promising target for antibody mediated therapy. Additionally, as with many of our pipeline assets, there are also many opportunities for CDX-014 in combination therapies. In summary, we believe we are assembling an innovative and valuable immunotherapy pipeline that demonstrates our commitments to bring a novel benefit to patients for treating of devastating diseases. With that, I will turn the call over to Chip to review our numbers. Chip?

Thank you, Anthony. Net loss was $32.4 million, or $0.33 per share for the second quarter of 2015, compared to a net loss of $28.3 million, or $0.32 per share for the second quarter of 2014. Net loss for the six months ending June 30, 2015 was $62.5 million, or $0.65 per share, compared to $58.2 million, or $0.65 per share for the comparable periods in 2014. Research and development expenses were $26.5 million in the second quarter of 2015, compared to $24.1 million for the second quarter of 2014. R&D expenses were $51.6 million for the six months ending June 30, 2015, compared to $51.2 million for the comparable periods in 2014. As of June 30, 2015, we reported cash, cash equivalents and marketable securities of $34 million, compared to $359.8 million as of March 31, 2015. The decrease in cash, cash equivalents and marketable securities was primarily driven by our second quarter net cash burn of $25.8 million. We expect that our cash, cash equivalents and marketable securities will be sufficient to fund operating expenses and capital expenditure requirements through 2017. However, this could be impacted by our clinical data results from the RINTEGA program and their potential impact on our pace of commercial manufacturing and the rate of expansion of our commercial operations. As of June 30, 2015, Celldex had 98.5 million shares outstanding. I will now turn the call over to Anthony to close.

Thank you, Chip. First-half of 2015 was a very busy time for Celldex with multiple major milestones accomplished from RINTEGA and a considerable expansion across every single program in our pipeline. We are continuing this momentum in the second-half of the year and look forward to keeping you up-to-date, as we go forward on our progress. With that review, operator, we are now ready to the take calls and questions.

Thank you. [Operator Instructions] Our first question comes from the line of Christopher Marai with Oppenheimer. Your line is now open. Please go ahead.

All right. Good afternoon. Thanks for taking the question. As far as the – just let’s – let’s maybe touch-base the rindo update. With respect to that, are you looking to undertake it anyway or rolling with NDA submission, I guess, following that top line data read out from ACT IV?

Well, we certainly are in active discussions with the FDA around the requirements for approval into next steps. Certainly, based on the ReACT data upon which we achieved breakthrough designation, we have been able to initiate very active conversations around multiple components of the ultimate package. We wouldn’t be starting a formal rolling BLA until we had a full dataset in order to submit, but clearly we’ll be in a very good position when that time comes to have a complete package, and we believe that could lead to a fairly rapid approval in this particular setting.

Great. And then, with respect to CMC, any biomarker analysis or a diagnostic, how far are you along in those, could you remind us?

Sorry, Chris, this is Tibor. We’ve made great progress on both of those fronts. So CMC we’re already manufacturing at commercial scale and working through all of the validation efforts required for the license applications. Similarly, for the diagnostic, we have very good relationships with our diagnostic partners and feel that we’re in great shape for filing separately for the PMA that is required for the diagnostic.

Okay, great. And if I may, just one more on varli, when might we see some of that data from the Phase 1/2s whether in compensation with sunitinib or ipi? Thanks.

So Chris, as we previously predicted, we should have data by the end of next year. We’re very pleased with how things are going with nivo combination. But, again, we are very dependent on Bristol regarding what we can say there. However, the sunitinib’s data should likely be available the end of next year.

Okay. Thank you.

Thanks, Chris.

Thank you. Our next question comes from the line of Boris Peaker with Cowen. Your line is now open. Please go ahead.

Okay. Thanks for taking my questions. I guess, on RINTEGA, just anything specific that the FDA pointed out as a reason to not to file on the ReACT data. I’m just wondering, was it the imbalance between the arms? Was it only the size of the study? I’m just curious given the medical need in this indication.

Sure, Thomas Davis again. The trial was designed as an explorative study and the sizing clearly from the outset had fairly limited power. Ultimately, that is the concern that the results of the study could be induced by chance. And hence, they have always been resistant to approval based on small randomized trials with overall survival as one of the endpoints. That really is the primary concern and they would have liked to see a larger dataset to confirm these results. We’re still in discussions with them around possibilities moving forward. We do believe that these data are significant. As we’ve mentioned before, key investigators agree with that. And as a supplemental indication, potentially after filing the ACT IV data, we still think that the recurrent population is a possibility.

But at this point, you said that, even though you’re in discussion with them, is there any path forward to even consider filing on ReACT, or is it clear and conclusive that we have to wait for ACT IV to read out before an official filing will take place?

There is a fairly significant back and forth with the FDA around this issue. We’ve not had any definitive answer at this point. But again, I think they are looking for more than just what we have in the ReACT right now. We’ll continue to talk with them.

Okay. And then, in terms of just thinking forward upon ACT IV results, if ACT IV, let’s say, unfortunately fails, I mean, would you then be in a position to file anything or would you have to run essentially if you wanted to move to second line – to move for filing in second line, would you have to essentially run another study in that setting?

Of course, we don’t expect that to happen. But if it should, we likely would need another confirmatory study. There are several possibilities that we could pursue in that setting, but certainly a positive outcome from ACT IV would be most reassuring for this particular program.

Great. And my last question, on the CDX-1127, could you just – I know you have multiple collaborations ongoing, any particular timeline when we’ll see some initial results?

More than likely, Boris, it will be around ASCO, but again, we’d have to talk to the collaborators.

Okay, great. Well, thank you very much for taking my questions.

Okay.

Thank you. Our next question comes from the line of Joe Pantginis with Roth Capital Partners. Your line is now open. Please go ahead.

Hey guys, good afternoon. Thanks for taking the question. Maybe with RINTEGA, can you maybe describe a little more with regard to your current compassionate use program and how a patient could go about getting on that?

Well, certainly based on the data, there’s been a great deal of interest, Joe, around both recurrent patients and upfront patients receiving RINTEGA. Obviously, our resources are not unlimited and we have a program for investigators who have participated in previous studies to refer patients in. And where possible, we can provide support, but there are still limitations. More importantly though, we are planning some additional studies looking at new combinations with RINTEGA and different scientific questions, and we hope to be able to put patients on trials rather than providing compassionate use before too long.

That’s helpful. Thank you. And, I guess, Tom, maybe with regard to ACT IV, I guess, question is, patients – all the patients in the study, what is the average time on studying? Can you provide or go back and remind us what the enrollment rates looks like, where most of the enrollment towards the end of the study or what is the slope of the curve look like?

Well, certainly, accrual accelerated over time and the highest accrual rate was in the second-half of the trial. So, yes, most of the patients were accrued in the second-half of the study and ultimately the average follow-up is not that different from the close to the end of the trial. So I can’t give you specific number around that.

Okay.

Because we are tracking events at this point, which I think the question you’re getting at, when would we expect to actually achieve the second interim analysis and final analysis, and still be very consistent with what we’ve described before, where we would have the second interim into this year, or early next year, and the final analysis could extend out to be end of next year.

Got it, got it. And then maybe one last quick question on varli, other types of combos that are exciting to you that you might be considering?

Certainly a lot of possibilities out there, a lot of interesting programs. We’re particularly interested, of course, in combining it within our own pipeline and we have an established collaboration with National Cancer Institute, and we’re exploring some possibilities, including varli along with 301 and 1,401 in different settings.

Thanks a lot, guys.

Thank, Joe.

You’re welcome.

Thank you. Our next question comes from the line of Seamus Fernandez with Leerink. Your line is now open. Please go ahead.

Thanks very much, and thanks for the question. So just a couple of quick ones. Can you just remind us what the statistical cutoffs are for in terms of the trial design, so at the 50% versus a 75% and then what the cutoffs would be at the final analysis? And if you could provide hazard ratios along with that, that would be very helpful? And then the second question, as we sort of look forward to the pace, should ACT IV succeed either at the second interim analysis for the final analysis, how should we think about timing to commercialization from that point? It sounds like it will be relatively rapid, but just wanted to know what kind of support you are getting from the agency, as you seek to work towards commercialization? Thanks a lot.

So, Tom here, I’ll answer your statistical questions, then hand it over to – hope that Wright wants me to answer the development question as well. The statistics around the study are based essentially on P-values for their interim analysis. So the first interim analysis, which was based on 50% of events would require the data to have a P-value of 0.003 or better, in order to be kicked out for efficacy. Now, that translates to a range in hazard values, but essentially hazard value of 0.5 to 0.55 would have had a high likelihood of achieving that P-value. So the second interim analysis, the required P-value would be 0.018, which relates again to a range in hazard ratios with something approximately 0.65, would be adequate. For the final analysis, essentially a P-value of 0.044, or hazard ratio of up to 0.79 would be adequate for positive outcome variance. When it comes to commercialization path, obviously, the time to be able to file a BLA and achieve licensure is variable. As we said earlier, we do believe that we’re well on the path to assuring success of a BLA based on ongoing discussions with the FDA. But after we do have a definitive data package, we probably would be able to file approximately 3 to 6 months thereafter, and of course, there is 6 to 8 month review time required for approval. But I can assure you that our commercial team are dedicated to a launch as soon as possible once we have a license.

Great. And just, if I can a quick follow up. As we think about commercial – not commercialization, but ongoing R&D spend typically, what would be the – are there areas beyond GBM, where we could envision rindo getting utilized. My understanding is rindo would be fairly isolated to just the GBM patient population. So I’m more asking, what ongoing spend might be necessary. And if ACT IV succeeds, do you envision getting a label that would be supportive of the overall patient population or would a study be necessary in the recurrent setting to establish a broad label? Thanks.

Well, certainly a good question. It’s very clear in our hands that v3 is reliably expressing glioblastoma, our assay seems to be quite reproducible that about a third of patients will test positive both in the upfront and recurrent setting. The data in other tumor types is more variable that we’ve not been able to reliably reproduce the other data that are out there. So we don’t completely rule out the possibility of extending into other diseases, but currently we’re not planning along those lines until we can be confident of expression patterns.

And just, I guess, the other question was on – with the ACT IV study if successful, could react or would react, make it as part of a potential label or would the label, at least, if ACT IV were successful be broad and include recurrent GBM as well as the frontline setting?

So we do believe that if were to file, we’d be able to file for all v3 positive glioblastoma patients regardless of the disease setting. The ReACT data should be supportive of a supplemental BLA in that setting, so we would simultaneously get the entire population. Of course, that’s our goal and we believe that’s very reasonable. And that would be our approach to the regulators that we are again in discussions. When we have final ACT IV data, we will be able to ask that question definitively.

Perfect. Thanks so much.

Thanks.

Thank you. [Operator Instructions] Our next question comes from the line of Biren Amin with Jefferies. Your line is now open. Please go ahead.

Yes, hi, this is Biren Amin with Jefferies. Maybe just a question on FDA discussions with RINTEGA, with regard just to the timeline, can you think of a situation where a Phase 2 trial showing positive data on OS, and the company and the sponsor are running a robust Phase 3 trial design and FDA doesn’t allow a sponsor to submit a BLA, because we – when you look back, I guess, at some examples like Onyx which was able to submit on Phase 2 response rate data and other situations, it seems that FDA has been more lenient in other examples.

Yes, Brien Amin, we do think that this is a unique situation. In that, it was a small randomized trial with a PFS6 endpoint. So, essentially for randomized comparison, on a time-to-event endpoint, it was underpowered. That’s essentially the only way you can design a Phase 2 randomized trial of this sort. If it were a response rate endpoint or another surrogate endpoint, the data might have been adequate to file for accelerated approval. But based on the current structure with that PFS and a secondary OS endpoint, again, the FDA are just concerned that the result could be by chance and would like to see a confirmatory dataset. So we certainly feel that the ACT IV data could be confirmatory. And if ACT IV is positive, we certainly would be filing for the entire indication.

Okay. And then, with regards to varli, when would – I may have missed this, because I joined the call late, but when would we see data on the combination trial with nivo?

So the trial is going very well at this time, but again, we are subject to an agreement with Bristol as to when we could release data. That we are discussing, when data might be available. The earliest would be the middle of next year, but it more likely will be longer than that unless Bristol agrees.

Got it. Thank you.

Thanks, Biren.

Thank you. Our next question comes from the line of David Nierengarten with Wedbush Securities. Your line is now open. Please go ahead.

Hey, thanks for taking my question. Most of them have been asked, but I did have one question. If the – or has the FDA taken a look at the interim ACT IV data? Did they have access to the unblinded dataset there? Thanks.

No, they have not, David.

Okay. Okay, great. Thank you.

Thank you.

Thank you. Our next question comes from the line of Stephen Brozak with WBB Securities. Your line is now open. Please go ahead.

Yes, hello this is Amat Amat [ph] for Steve Brozak today WBB.

Hello, Amat.

Hey, how is it going?

Fine.

Thank you for taking the question. But I have a question around Avastin. RINTEGA at this point has shown significantly more benefit for patients than Avastin ever has. And you’ve guys probably know better than I do is approved on much less data with much less survival benefit. So how do you guys compare and contrast the Avastin approval in GBM versus what’s going on with you at the FDA and RINTEGA? And how this is playing into your overall strategy with FDA, if at all with regard to what you’re doing and what you’re saying?

Well, certainly a good question. And the clinicians who have used both drugs certainly agree that the data from ReACT are very compelling considering the dismal nature of the disease. However, the requirements for approval, particularly, accelerated approval are for surrogate endpoints, like response rate and Avastin, of course, was approved based on a fairly significant response rate in disease where our responses are rarely seen. We could talk for sometime whether or not they are true responses or not, but they did appear to provide patient benefits. And that really was the basis for the FDA approval, accelerated approval based on a surrogate response rate. There has not been a study showing whether there is a survival benefit with Avastin, and many people point out that’s a limitation to that approval.

And, of course, in 2009 when Avastin was granted approval, it almost seems like a different era for the FDA back then. But I had to ask, because it seems as if the data here is just overwhelmingly in favor for the use of this in treatment. So – but thank you very much for the response.

Sure. No, it’s a good question. Let me just add that the Avastin approval in glioblastoma was a supplemental approval. So that’s what I’m referring to here where ReACT could serve for supplemental approval, but not primary approval for a drug that’s certainly with how much Avastin was approved in another indications. And when it showed activity with response rates in glioblastoma, the data would then justify approval.

Excellent. Thank you so much.

Thank you, Amat.

Thank you. I’m showing no further questions. I would now like to turn the call back to Anthony Marucci, President and CEO of Celldex for closing remarks.

Thank you, operator, and thanks, everyone, today for joining us at this late hour. We appreciate your time, enjoy the last weeks of your summer, and we look forward to catching up with you during the rest of the year. Thank you.