Celldex Therapeutics, Inc. (CLDX) Q2 2016 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen. And welcome to the Celldex Therapeutics Second Quarter 2016 Financial Results. 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, Vice President of Investor Relations. Ma’am you may begin.

Thank you. Good afternoon and welcome to Celldex Therapeutics media update call. Before we begin our discussion, I would like to mention that today's speakers will be making forward-looking statements. Such statements reflect our 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 Operations in Celldex’s Annual Report on Form 10-K, quarterly report on Form 10-Q, and its current report 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 Therapeutics. Anthony?

Thank you, Sarah. Good afternoon and thank you for joining us. With me are Dr. Tom Davis, Executive Vice President and Chief Medical Officer; and Mr. Chip Catlin, Senior Vice President and Chief Financial Officer. Dr. Tibor Keler, Co-Founder, Executive Vice President, and Chief Scientific Officer is travelling today and is unable to join us on the call. This afternoon we will update you on our clinical programs, outline key objectives for the remainder of the year and review financial results and as always we look forward to answering your questions. Before I turn the call over to Tom, I'd like to take a few moments to outline our progress since we last talked in March, when the decision was made to discontinue the ACT IV study based on the recommendation of the Data Safety and Monitoring Board. Study closure activities are substantially complete. The database for all 745 patients was locked and the data have been cleaned. Our team is in the process of analyzing the data and we have involved a number of KOLs in the GBM space to participate in this exercise with us. I can say that we are confident the study was well-run and there were no imbalances in the treatment arms that would account for the outcome. We've had a placeholder abstract excepted for Society for Neuro-Oncology Annual Meeting in November and we'll present the final data at this meeting. At this time, we continue to anticipate that we will not incur substantial additional costs related to RINTEGA. In steps with our comments in March, all patients who were on the RINTEGA arm on the ACT IV prior Phase 2 studies and the existing compassionate use patients have been offered ongoing access to RINTEGA on a compassionate use basis and there are currently over 100 patients on drug. The RINTEGA team has been largely transitioned to support our five other clinical programs including a new introduction, CDX-014 which entered the clinic last month and has enrolled its first patients. The METRIC study, our pivotal study of glembatumumab vedotin in triple negative breast cancer continues to enroll patients. Investigator feedback continues to be very positive. They're excited about the study and screening patients. That said, enrollment has been slower than we had hoped in part because of the triple negative space is a very popular space for clinical trials right now with more than 330 studies ongoing worldwide. This is great for patients, but it also means that it has taken many of us in this space more time to enroll studies. To address this as you know, we've made some trial modifications to patient entry criteria and notably in May we announced that we were going to open sites in the EU. We have opened about 25 sites to date and are actively working on opening additional sites in the next few months. Given that clinical trial enrollment often slows in the summer, especially in Europe and since we are still opening sites we think we'll have a better indication of what the adjusted timeline will look like after we have come more expensive European experience. However, we will make certain to keep you up-to-date as we gain more clarity here in the coming months. Overall, we are extremely positive based upon the activity we have seen in previous studies. We think gpNMB is an exciting target and the evolving literature supports this. We've built a broad program with five studies ongoing across breast cancer, osteosarcoma, squamous cell lung cancer, metastatic melanoma and uveal melanoma. We look forward to presenting data from this single agent melanoma study in October at ESMO and we have also recently opened enrollment in the glemba-varli combi in metastatic melanoma which will give us varli's first clinical experience in combination with an antibody drug conjugate. There are now five combination studies of varli across seven indications enrolling patients. The Phase 2 Nivo combination study opens for enrollment in April and we expect the Phase 2 atezo combo study to open later this quarter. The breadth and depth of the glemba and varli programs should provide us with a data rich 2017 and clearly define the potential of these product candidates. Within our organization we are now actively enrolling seven clinical trials. In addition, there are six investigative sponsored or collaborative studies are actively enrolling patients. We anticipate new studies will be added potentially later this year including a study of CDX-1401 and NY-ESO-1 positive patients. Tom will also discuss in more detail data from a combined study of 1401 and CDX-301 which established further proof-of-concept for both of these programs and prioritize CDX-301 in a broader I/O [ph] field as a highly applicable, effective dendritic cell growth factor. Lastly, Tibor and his team are finishing up preclinical work on our CD40 agonist candidate and you will likely see data from what appears to be a very interesting program later this year. As always, we are mindful of our cash position. We did put an ATM in place back in May, a vehicle we have used the past when markets have not been very favorable. We believe with our current cash position and anticipated proceeds from future sales of our ATM we will be able to meet our estimated working capital requirements through 2018. With that overview, I will ask Tom to cover our clinical programs in more detail. Tom?

Thank you, Anthony and good afternoon. Anthony outlined the current status of RINTEGA program. We are working hard to understand the details within this data set and we'll be fully transparent in sharing our findings at a presentation at SNO in November. We think the SNO meeting is the most appropriate setting for this discussion and our analysis will be completed in time for the meeting. Looking to the future, the glembatumumab vedotin program continues to grow. As a quick reminder, the METRIC study is a randomized controlled Phase 2b study of glembatumumab vedotin in patients with triple negative breast cancers that overexpressed gpNMB. With positive data it should serve as a registration study in both the U.S. and the EU. The primary endpoint of the study is progression free survival. The study is designed to enroll 300 patients randomized 2:1. In addition to the sites in the U.S., Canada and Australia we began to open sites in the EU adding approximately 25 centers in the second quarter in the United Kingdom, Spain, Italy and Germany. We will continue to add additional sites in new countries in the coming months to support enrollment. As Anthony said, given the competition in this rare disease space, we need a few more months of enrollment in Europe under our belt to accurately predict enrollment completion. Once enrollment is complete, we would likely know the primary outcome of progression free survival roughly six months later. In December 2014 we initiated a single arm open label Phase 2 study of glemba in patients with unresectable stage three or four melanoma after progression with the checkpoint inhibitor. This study includes 13 sites in the United States. We completed enrollment of 62 patients in April. The primary endpoint of the study which required a minimum of six responses in the first 52 patients to be deemed successful has been met and exceeded with some patients still potentially progressing to response. We plan to present data from this study at the European Society for Medical Oncology, ESMO meeting in October. As previously announced, we did amend the protocol to add a second cohort of patients to a glemba plus varli combination arm to assess the potential clinical benefit of the combination and to explore varli's potential biologic and immunologic effect when combined with an ADC. Our own data and recently published studies have highlighted the benefits of combining immunotherapy with ADCs, which not only provide tumor antigen release by targeted killing of tumor cells, it also changed the tumor microenvironment to be more favorable for immune mediated antitumor activity. This combination cohort has since opened to enrollment. The primary objective is also overall response rate. We previously announced that we had entered into a CRADA with the National Cancer Institute or NCI under which NCI is sponsoring two studies of glemba, one in uveal melanoma and one in osteosarcoma, both studies are enrolling patients. The Phase 2 study of glemba in squamous cell lung cancer an indication where the majority of patients express gpNMB also recently opened to enrollment in late April and good progress has been made there. The study is being conducted under collaborative relationship with PrECOG. The study is a Phase ½ open label, single arm in unresectable stage III or IV gpNMB expressing squamous cell lung cancer after failure of a platinum-based chemotherapy regimen. Phase 1 is a limited dose escalation study to determine whether a higher dose of glemba might be appropriate in this setting. It will be followed by a Phase 2 expansion study to assess objective response rate. The varlilumab program has also made considerable progress. Data from the 36 patients phase 1 portion of the varli-nivo study conducted by Celldex under a clinical trial collaboration with BMS were presented at AACR in April. Our primary concern with varli, given its role as an immune activator, has always been safety. We were very pleased to see that the combination showed favorable tolerability and safety across all dose levels without any evidence of increased autoimmunity or inappropriate immune activation. Importantly, combination therapy also led to marked changes in the tumor microenvironment including increased infiltrating CD8 T cells and increased PD-L1 expression, which have been shown to correlate with greater magnitude of treatment effect from checkpoint inhibitors in other clinical studies. Additional favorable immune biomarkers, such as increase in inflammatory cytokines and decrease in T regulatory cells were also noted. While it is difficult to compare across studies, intratumoral effects we have seen appear to be more prominent than those presented for other immune agonists. In a subset of 17 patients on study who had both pre-and post tumor biopsies available, preliminary evidence also suggested a correlation between biomarker data and stable disease or better in seven of these patients, including four patients with ovarian cancer, two with colorectal cancer and one with squamous cell carcinoma of the head and neck. Enrollment of the Phase 2 portion of the study opened in April using a saturating 3 mg per kg varli dose that we know to be active based on our cumulative clinical experience. We have seen interesting tumor responses that based on the biological principles of immune activation and our preclinical data, we are also interested in gaining experience using varli in alternative dosing schedules that may allow the immune system to reset in between doses. We recently finalized a protocol amendment to include additional arms evaluating alternate dosing schedules in both renal cell carcinoma and squamous cell head and neck cancer. The additional arms include one where we dose varli at lower dose, but more frequently, and the second, where we dose at a higher level and allow more time for clearance before retreatment. The study now includes the following cohorts: 18 patients in colorectal cancer, 18 patients in ovarian cancer, 54 patients in head and neck squamous cell carcinoma, 75 patients in renal cell carcinoma and 20 patients with glioblastoma. We removed the lung cohort which had not enrolled patients yet to allow for the increased patient numbers and other indications and will pursue the lung indication separately. The primary objective of the Phase 2 cohorts is overall response rate accepting glioblastoma where it is 12 months overall survival. Enrollment has been completed in the Phase 1 portion of the varli-atezolizumab study. Atezolizumab, trade name Tecentriq, is Roche's investigational anti-PD-L1 cancer immunotherapy. We entered into a clinical trial collaboration with Roche in May of 2015 under which Celldex is conducting this study. The Phase 1 is being conducted in multiple tumor types and the primary outcomes is safety and tolerability. We anticipate that the Phase 2 portion of this study which will be conducted in renal cell carcinoma will initiate in the third quarter of this year. The primary outcome will be overall response rates. We've also made excellent progress in our Phase 1/2 study examining the combination of varli and sunitinib, trade name Sutent in patients with metastatic clear cell renal cell carcinoma. We believe the Phase 1 portion of the study will complete enrollment in the next few months and that the Phase 2 portion of the study will initiate by year end. In addition, as I mentioned earlier, we also recently opened enrollment in the varli-glemba Phase 2 combination study in metastatic melanoma. And finally for varli, we continue to enroll patients to the Phase 1/2 combination study of varli and ipilimumab, trade name Yervoy in patients with stage III or IV metastatic melanoma. The Phase 1 portion of this study is assessing safety and intolerability of varli doses when administered with ipilimumab to identify a recommended dose for the Phase 2 portion of the study. The Phase 2 study will include two cohorts, one comprised of patients who are NY-ESO positive and once comprised of patients who are NY-ESO negative. Patients who are NY-ESO positive will also receive CDX-1401 in addition to varli and ipilimumab. The primary objective for both cohorts is objective response rate up to 24 weeks. There was some interesting data at ASCO on CDX-1401 and CDX-301 presented by the Cancer Immunotherapy Trials Network or CITN. The CITN is conducting a study of CDX-1401 and CDX-301 under a CRADA between Celldex and the Cancer Therapy Evaluation Program of the National Cancer Institute. CDX-1401 is an NY-ESO-1 antibody fusion protein for immunotherapy, CDX-301, which is recombinant human Flt3 ligand acts as a potent hematopoietic growth factor that uniquely expands dendritic cells and hematopoietic stem cells. This particular study was designed to assess whether the immune response to NY-ESO-1 elicited by CDX-1401 could be substantially increased by pretreatment with CDX-301 to expand the number of dendritic cells which are the key cells in initiating immune responses. As this study was intended primarily for safety and immune endpoints, patients were not selected for NY-ESO-1 expression. 60 patients with resected stage IIB through IV melanoma were randomized into two cohorts, 30 patients each. Both cohorts received four monthly cycles of CDX-1401and the adjuvant Hiltonol. Cohort one received pretreatment with CDX-301 for the first two cycles whereas cohort two did not receive CDX-301. Both regimens were well tolerated and no drug related adverse events required discontinuation from treatment. NY-ESO-1 specific T cell responses were significantly greater and more frequent and developed earlier in the CDX-301pretreated cohort. All 30 patients in this cohort achieved a specific NY-ESO-1 specific T cell response compared to 22 out of 30 patients in the non-pretreated cohort. Substantial increases in innate immune cells including dendritic cells, natural killer cells and monocytes and greater increases in antibody titer were observed in the CDX-301 pretreated cohort. This study was important for two reasons; first, the study confirms that CDX-1401 is effective at driving NY-ESO-1 immunity. Second, it validated that increasing the number of dendritic cells with Flt3 ligand or CDX-301 is highly effective at enhancing cancer antigen specific T cells when combined with CDX-1401. With these results we are planning to initiate a study in patients with NY-ESO-1 positive disease to determine if these enhanced immune responses can translate to improved clinical outcomes. This study should also stimulate significant interest in CDX-301 as a highly applicable immunologic approach that can be broadly studied in combination with other immunotherapy regimens. So CDX-1401 and CDX-301 are also being studied in additional investigator sponsored studies. Finally, in July we announced the expansion of our clinical pipeline with the initiation of the Phase 1/2 study of CDX-1401 in advanced renal cell carcinoma. CDX-1401 is a fully human ADC that targets T cell immunoglobulin and the mucin-1 or TIM-1 a molecule that is upregulated in several cancers including renal cell and ovarian carcinomas. It is associated with the injury and high blood levels are predictive of a more malignant phenotype and tumor progression in renal cell carcinoma. That said, it has very restricted expression in healthy tissues making it a promising target for antibody mediated therapy. The Phase 1 portion of the trial is a dose escalation study to determine the maximum tolerated dose of CDX-1401 and a recommended dose for Phase 2 study. The Phase 2 portion of the study will enroll approximately 25 patients to assess the antitumor activity of CDX-1401 at the recommended dose in advanced renal cell carcinoma as measured by objective response rate. The study is being conducted in the United States and should include about 10 sites. Patients can present with either advanced metastatic clear cell or papillary renal cell carcinoma, which is nice because there aren’t as many options for patients with papillary renal cell carcinoma. Patients must experienced progressive disease after at least two prior lines of therapy, including at least one VEGF-targeted therapy or the otherwise inappropriate candidates were all approved to therapies. They will likely be checkpoint failures. Data analysis will be conducted separately in clear cell rehearsal carcinoma and papillary renal cell carcinoma as well as in the total population. So this concludes our clinical program updates. I will now turn the call over to Chip to review the financials for the second quarter of 2016.

Thank you, Tom. For the second quarter of 2016 net loss was $32 million or $0.32 per share compared to a net loss of $32.4 million or $0.33 per share for the second quarter of 2015. Net loss for the six months ending June 30, 2016 was $66.6 million or $0.67 per share compared to $62.5 million or $0.65 per share for the comparable period in 2015. Research and development expenses were $25.7 million in the second quarter of 2016 compared to $26.5 million for the second quarter of 2015 R&D expenses were $53.2 million for the six months ended June 30, 2016 compared to $51.6 million for the comparable period in 2015. General and administrative expenses were $7.8 million in the second quarter of 2016 compared $8.2 million for the second quarter of 2015. G&A expenses were $17.1 million for the six months ending June 30, 2016 compared to $14.3 million for the comparable period in 2015. Cash, cash equivalents and marketable securities as of June 30, 2016 were $220.1 million compared to $254 million as of March 31, 2016. The decrease was primarily driven by our second quarter cash used in operating activities of $33.8 million, $5.9 million of which were RINTEGA related payments. As Anthony said earlier, we are comparable with a cash run way through 2018. As of June 30, 2016 Celldex had 99.4 million shares outstanding. I will now turn the call over to Anthony to close.

Thank you, Chip and Tom. While there is no denying that the first half of 2016 was marked by a significant setback with the discontinuation of our RINTEGA program, we also saw considerable progress across our pipeline which remains one of the most robust pipelines in immuno-oncology with five product candidates in the clinic including glemba and a registration study and varli advancing in Phase 2 in multiple indications. Celldex is now actively conducting seven clinical trials and we anticipate the initiation of an eighth study, the CDX-1401 study in NY-ESO-1 positive patients potentially as soon as the end of the year. In addition, given the scope of the combination approaches we want to explore, we have worked very closely with the scientific community and are supporting six ongoing investigator sponsored studies with additional studies nearing initiation. Lastly, as I said earlier, Tibor and his team are finishing up the preclinical work on a CD40 agonist candidate and have submitted data for potential presentations and upcoming medical meetings later this year. The second half of 2016 will continue to be about execution across the pipeline. We look forward to presenting data on glemba at ESMO and additional programs likely at [indiscernible] and ASH. With that review, operator we are now ready to open the call for questions.

Thank you. [Operator Instructions] And our first question comes from Boris Peaker from Cowen. Your line is open.

Great, thanks for taking my questions. Maybe I'll start with RINTEGA. Are there still discussions ongoing with the FDA, I just want to kind of know or is this program completely closed off at this point?

Of course we are treating patients on the compassionate use. The INDs are open and we are still discussing with the FDA. So our regulatory responsibilities continue. It is an active program at this point, but as I alluded to we are still looking at the data to fully understand the meaning of the results and have not made any decisions about moving forward.

Got you. Now, switching to glemba in melanoma, you said based on your criteria you met six responses in the first 52 patients. I am just curious, do you plan to develop this agent as monotherapy at all in the syndication or you are awaiting checkpoint combo to really as the next move forward?

Well, let me just repeat our specific words. We met the criteria that were defined in the call of six patients out of 52 and we exceeded that criteria. We will present the exact data at the ESMO meeting coming up in a few months. We would emphasize that these patients are checkpoint failures, so we are working in a population who have a very real unmet need. When we can talk about the specific response rate after we have followed all the patients out to an appropriate timeframe when we are confident of their responses, then we can make that decision.

Okay, got you. And in terms of glemba in breast cancer, as you bring on European sites, I'm just curious what you anticipate roughly to be the target of patients from these new European sites versus the prior target geographies at the end of enrollment and also if there is any may be variability in treatment or any other kind of differences that you would expect between Europe and most of the U.S., Australia and Canada that you are unrolling now?

I am not sure I understand your question when you're asking about target geographic factors you mean differences in treatments, difference in patient characteristics?

Yes, I am asking, maybe in two parts, one is how big do you anticipate the European group to be out of the total enrollment at the end and also are there any kind of treatment differences be in the breast cancer population within European patients versus other patients in the study.

Oh we do believe that the Europeans will contribute significantly to the study, but they will certainly be less than half of the total population of patients. There are some variations in treatment, but for triple-negative patients, where very few treatments are particularly effective, that variation is relatively minor. We certainly have no concern that there will be differences between the U.S. and European patients that could undermine the data set. The entry criteria are the same in both areas and as such we think we'll have a fairly clean data set at the end of the day.

Great, thank you for taking my questions.

Thanks Boris.

And our next question comes from Tony Butler from Guggenheim. Your line is open.

Yes, this is actually Jake Skivington for Tony. We just had a quick question about the varli-Opdivo combo. We know the estimated time of completion for that is around December 2017. So I'm just wondering if there is going to be any data points along the way? Thanks.

Well, we've generally described the safety and immunologic endpoints from the Phase 1 portion and we are hoping to be able to describe in greater detail the results of that Phase I portion. And we would expect to have data from some of the Phase 2 cohorts by the end of next year. As always, however, our ability to present those data are dependent on our partner, and we can't promise anything. But there will be data available and of course, we would like to be able to talk about it.

Great, thank you.

And our next question comes from Seamus Fernandez from Leerink Partners. Your line is open.

Hi this is [indiscernible] on behalf of Seamus. Thanks for the questions. Some of my questions have already been answered previously. I just want to ask about sort of a general business strategy questions. Can you comment on the thinking on partnering any of your pipeline programs. I understand at least at this point if not most, if not all a few assets remained wholly-owned by the company. Would you like to comment on some of your business strategy questions? Thank you.

Sure, this is Anthony. Yes, we do own all of our assets, and we are collaborating with various entities with those assets. And at the appropriate time, we'll make the decision on whether or not we would like to partner them or continue operating them as fully owned assets within the company.

Good, thanks.

[Operator Instructions] And our next question comes from Stephen Brozak from WBB. Your line is open.

Hey, good afternoon gents. Just one quick question on CDX-014. I know it's a Phase 1, but could you give any kind of information on how well I should say – how you're selecting your target and how well you believe the target works and how you're specifically looking at enrollment?

Well, of course, the ultimate goal, Steve, in selecting targets is to find one that is not expressed on normal tissues, which would allow you both to better control your pharmacokinetics for the drug as well as avoid collateral damage to normal tissues. That is highly expressed in your target tumors. TIM-1, we think, it's an excellent target that internalizes very effectively, which is important for this particular technology, and it is highly expressed in clear cell renal carcinomas as well as clear cell ovarian carcinomas. So, we think it's a very clean target for this type of therapy. It had very good activity in preclinical models and as such, we are excited to see what it can do in the clinic. It's particularly interesting that with other ADCs of this technology coming from the Seattle Genetics MMAE era, there have been –has been a fairly consistent maximum tolerated dose that held up in preclinical models in the toxicology studies. What was interesting about 014 is that in the animals, we saw really quite limited toxicity less than we expected, and that will allow us to dose escalate above what we've seen with these other ADCs. So we're hoping that we can have a much better toxicity to efficacy ratio with this particular setting. So I think the Phase 1 will be very interesting from that perspective is this one going to be uniquely different because of its chemical construct. It's a fairly traditional Phase 1 on the other hand. We will see what the safety profile is like, like the Phase 2 dose and then expanded Phase 2 cohort, get a sense for that the activity will be. This is in refractory patients as our most Phase 1 studies, we expect that in this population approval will go quite quickly, simply because patients who have been through all the standard therapies for renal cell carcinoma, they still have a very real unmet need.

And actually that leads into the next question, since monotherapies are no longer even being considered, given the number of programs that you've got and given the ability to understand how multiple therapies can be used into the future, how does this position Celldex? Because, obviously, you guys have greater experience than any other company your size or even larger and I'll jump back in the queue on that. Thanks.

Sure. Thanks again Steve. Great question. We alluded to some of the data and hypotheses driving the idea that combining an antibody drug conjugate with a checkpoint inhibitor will be quite effective. And the concept really is based on the observations that ADC killing likely generates a very immunogenic Celldex, which of course, could be very important in the combination with checkpoint inhibitors. There really are no clinical data as yet showing that, that is true, but the initial studies combining ADCs with checkpoint inhibitors will be coming out over the next year or two. And as you heard, we are combining with Varlilumab and glemba in an effort to further augment the immunogenic Celldex that could be achieved. And we'll, of course take that program forward into a combination with the checkpoint inhibitors as well. As those data become available, we'll really be able to see what additional effects we could get once we have the 014 data to determine whether or not we can get even higher activity from a combination. But ultimately, it's clear from several products in the clinic and in development that an ADC by itself can provide significant clinical benefit to patients and we're certainly hoping that we see the same thing with 014 in the Phase 1, 2.

Great, looking forward to the data then. Thank you again.

Thanks Steve.

Thank you, Steve.

At this time, I'm showing no further questions. I would like to turn the call back to Anthony Marucci for any closing remarks.

Thank you, operator, and thank you all for joining us today. As always, we welcome your questions at any time, and have a great day and enjoy the last few weeks of the summer. Thank you.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program. You may now disconnect. Everyone, have a great day.