Celldex Therapeutics, Inc. (CLDX) Q3 2017 Earnings Report, Transcript and Summary

Good day ladies and gentlemen and welcome to the Celldex Therapeutics, Year End 2017 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, you may begin.

Thank you. Good afternoon and thank you for joining us. Today on the call I have Anthony Marucci, Co-Founder, President and CEO of Celldex Therapeutics; Dr. Tibor Keler, Co-Founder, Executive Vice President and Chief Scientific Officer; and Sam Martin, Senior Vice President and Chief Financial Officer. Before we begin our discussion, I'd 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 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 reports on Form 8-K, as well as those described in Celldex's other filings with the SEC 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 Anthony.

Thank you, Sarah. Good afternoon everyone and thank you for joining us. On today’s call we will update you on our clinical programs, outline key milestones for the remainder of the year and then Sam Martin will review financial results. As always, we look forward to answering your questions at the close of the call. We will start first with glembatumumab vedotin, our lead ADC currently in the company sponsored studies in both triple negative breast cancer and metastatic melanoma. As previously disclosed, enrolment in METRIC study in triple negative breast cancer was completed in August 2017 with 327 patients on study. Given the inherent challenges in recruiting an enriched patient population, especially within an orphan indication, achieving this milestone was a significant accomplishment. We are also very grateful to physician and patients who participated in the METRIC study and are hopeful that glemba will be able to offer patients, families and care givers a potentially new option and indication where there are so few therapies and none that target gpNMB, which is associated with a more aggressive form of the disease. In total, we enrolled patients across 120 sites in the U.S., EU, Canada and Australia. We were pleased to see that our screening outcomes were consistent with our prior experience. Approximately 50% of the patients we screened for the METRIC study met the 25% or greater gpNMB threshold. The primary end point of the studies progression free survival or PFS, which is defined as the time from randomizations to the earlier of disease progression or death due to any cause. The primary end point analysis is based on reaching 203 events and will be assessed by an independent central read of patient scans. You may recall in the Phase 2 immerse study which was conducted in our later stage patient population, glemba PFS in subset of patients with high gpNMB expressing triple negative breast cancer was 3.5 months. The comparative on in the METRIC study is Xeloda, also known by the generic name capecitabine, which has a reported PFS of 1.7 months to 2.5 months for patient populations similar to METRIC. We believe glemba is well positioned for success, particularly in these studies that do no select the gpNMB expression, which has been shown to correlate with reduced PFS and survival of breast cancer. From a statistical perspective the METRIC study is powered at 85% to detect a hazard ratio of less than or equal to 0.64 for the primary PFS endpoint. The totality of the data including secondary end points of response rate, overall survival, duration of response and safety will be important in assessing clinical benefit. The 203rd progression event required for a valuation of the prior end point that has been reached and filing data cleaning is ongoing and preparation for data lock and analysis. As we reaffirmed in our filings this afternoon, we remain on track to report top line primary end point data from the METRIC study in the second quarter of 2018. The successful METRIC is a study with potential registration in both the U.S. and EU. Importantly, we plan to seek input from the health authorities on our submission plans as their feedback will be important and prioritizing and to finding next steps and the associated timelines. These submissions will be supported by a companion diagnostic and a fully validated commercial manufacturing process. As we have previous discussed, commercial manufacturing for an ADC is considerably more involved and more expensive of that of a typical antibody and we made the decision to stage the most costly work in these areas, estimated at an incremental spend of approximately $35 million to begin after we have data in hand. While this stuff will extend the timeline to complete our regulatory submissions, we believe this is the most prudent use of our funds as we seek to advance our pipeline overall. Assuming positive data, we plan to work with the FDA on a regulatory strategy that will support submitting a Biological License Application or BLA in the second half of 2019. As we have stated in the past, we remain open to the possibility of bringing on a partner for glemba who could help maximize the opportunity across multiple indications and geographies and we believe the staged approach we’ve outlined on the manufacturing and diagnostics supports us. We have completed a number of important steps to support this work. We have established a commercial manufacturing supply chain, a monoclonal antibody intermediate, the antibody drug substance and the antibody drug product at commercial scale. Each of these steps will require Process Performance Qualification or PPQ to support the manufacturing portion of the BLA. We had manufacturing slots identified with our commercial manufactures and with positive top line data we will quickly move forward with PPQ planning and execution. We continue to work closely with our preferred diagnostic partner on the commercial diagnostic test and plant to meet with the FDA to discuss transition from a current lab based test and additional activates needed to support a PMA submission by a diagnostic partner in line with the BLA submission for glemba. We continue to believe based on key opinion leader, a Physician Advisory Board feedback that glemba’s mechanism of action, its unique gpNMB target and the clinical evidence to-date will support a differentiated product and a robust market for glemba. Again, we look forward to update in the next question and our hopeful that glemba will offer patients, families and care givers a potential new option in the state of disease. Behind the METRIC study, glemba is also about being evaluated at Celldex in multi-cohort Phase 2 study in patient with check point refractory metastatic melanoma. We presented mature data from the single-agent arm at ASCO in 2017, where we saw a compelling activity including an overall response rate of 11% and a PFS of 4.4 months in heavily-pretreated patients with unresectable stage III or stage IV melanoma who previous failed checkpoint immunotherapy and BRAF or MEK targeted therapies. Importantly, what stood out to us in this study was the waterfall plot where more than 50% of the patients experienced tumor shrinkage with a number of these patients coming very close to the resist responses. Our goal in the combination cohorts we are conducting is to see if we can tip these patients into formal responses, increasing the overall robustness of the data. To this end, we have added a number of combination arms including our CD27 agonist, Varlilumab, which reported data assets in 2017 with checkpoint inhibitors which very recently completed enrolment and with CDX-301, our dendritic cells gross factor which is currently enrolling patients. As data emerges, we will be a position to determine next steps and look forward to sharing this with you. Moving to varli, in January as planned we completed enrolment across all cohorts in the Phase 2 study of varli in combination with Opdivo that we are conducting in collaboration with BMS. In total, the Phase 2 portion of this study enrolled 139 patients across five cohorts in colorectal cancer, ovarian cancer, head and neck squamous cell carcinoma, renal cell carcinoma and glioblastoma. The primary objective of the Phase 2 cohorts’ objective response rate, except for glioblastoma, where the primary objective is the rate of 12 month overall survival. Secondary objectives include a new profiling of patients and their tumors and evaluating alternative dose and schedules of varli. Working with BMS we plan to report data from each cohort at various medical meetings in 2018 beginning this summer. Moving on CDX-014, our ADC that targets TIM-1, enrollment is continuing in our Phase 1 does escalation study. This trail initially enrolled patients with clear cell and papillary renal cell carcinomas. In January we expanded enrolments also to include patients with ovarian clear cell carcinomas, a malignancy where the TIM-1 expression is also up-regulated. The study includes a dose escalation portion across three separate dosing cohorts to determine the maximum tolerated dose, followed by cohorts of up to 15 patients, each to assess the preliminary anti-tumor activity as measuring by overall response. Finally, as we close out 2017 we advance two of our pipeline candidates into new studies. First, we opened enrolment in a Phase 2 study of CDX-3379 in combination with Erbitux in head and neck squamous cell carcinoma. CDX-3379 is a human monoclonal antibody designed to block the activity of ErbB3, which is believed to an important receptor in regulating cancer cell growth and survival, as well as resistance to targeted therapies. It is expressed that many cancers including head and neck, thyroid, breast, lung and gastric cancers, as well as melanoma. We believe the proposed mechanism of action of CDX-3379 sets it apart from other drugs and development in its class due to the ability to block both ligand-independent and ligand-dependent ErbB3 signaling binding to a unique epitope. This Phase 2 study is an open label trail in combination with Erbitux and approximately 30 patients with HPV negative Erbitux resistance, advanced head and neck squamous cell carcinoma. Patients must have been treated previous with an anti-PD-L1 checkpoint inhibitor, a population with limited options and a particularly poor prognosis. This study employs a two stage Simon design and the primary objective of the study is objective response rate. To advance to the second stage we much observe one objective response in the first 13 patients. We also initiated the Phase 1 study of CDX-1140. The 1140 is a fully human antibody targeted to CD40, a key activator of immune response which is found on dendritic cells, macrophages and B cells and is also expressed on many cancer cells. Potent CD agonist antibodies have shown encouraging results in early clinical studies; however, systemic toxicity associated with broad CD40 activation has limited their dosing. We believe that CDX-1140 has unique properties relative to other CD40 agonist antibodies. This agonist activity does not require cross linking through FC receptor interaction, allowing more consistent and controlled immune cell activation. Also we observed strong synergy with CD40 ligand that may potentiate the agonist activity near activated T cells in lymph nodes and tumors. Finally, CDX-1140 has a remarkably good safety profile while demonstrated potent immune activation in our preclinical studies. This Phase 1 study which is expected to enroll up to approximately 105 patients with recurrent locally advanced or metastatic cancers, the desire to determine the maximum tolerated dose during a dose escalation phase and to recommend doses for further study in a subsequent expansion phase. During the dose escalation phase, patients will receive CDX-1140 at dose levels ranging from 0.01 mg/kg to 3.0 mg/kg, once every four weeks until disease progression or intolerance. The expansion phase is designed to further evaluate the tolerability and biological effects of selected doses of CDX-1140 in specific tumor types. This program has evolved nicely and we think we are in good position to initiate combination cohorts later this year. Behind these programs we continue to advance our anti KIT program. We anticipate manufacturing and IND enabling efforts for CDX-0159 will be completed this year and will enter the clinic in 2019. We also continue to advance the TAM program comprised of targets Tyro3, AXL and MerTK, which has potentially broad applications in oncology, inflammation and infectious diseases and are growing by a specific antibody program. With that, I will ask Sam to report on the financials and then we will outline the minestrones for 2018 and open up the call for questions. Sam.

Thank you, Anthony. For the fourth quarter of 2017, net loss was $3.8 million or $0.03 per share compared to a net loss of $32.3 million or $0.30 per share for the fourth quarter of 2016. Net loss for the year ended December 31, 2017 was $93 million or $0.72 per share compared to $128.5 million or $1.27 per share for the comparable period in 2016. As a result of the tax reform passed in 2017, we recorded a non-cash income tax benefit of $19.1 million during the fourth quarter of 2017. Research and development expenses were $96.2 million for the year ended December 31, 2017, compared to $102.7 million for the comparable period in 2016. General and administrative expenses were $25 million to the year ended December 31, 2017 compared to $36 million for the comparable period in 2016. As of December 31, 2017, we reported cash, cash equivalents and marketable securities of $139.4 million. We expect that our cash, cash equivalents and marketable securities at December 31, 2017, combined with a $6.1 million in net proceeds from the sales of common stock under our cancer agreement from January 1, 2018 through February 28, 2018, and the anticipated proceeds from future sales of common stock under our cancer agreement are sufficient to meet estimated working capital requires and fund planned operations through 2019. This could be impacted by our clinical data results from the METRIC study and their impact on the pace of commercial manufacturing and the rate of expansion of our commercial operations. At December 31, 2017 we had $138.5 million shares outstanding. I will now turn the call over to Anthony to close.

Thank you, Sam. As you can see 2017 was a significant year for Celldex, with advancement across our entire pipeline. Before we move on to Q&A let’s review the milestones for 2018. First with glemba, we look forward to reporting top-line primary end point data from the METRIC study in triple negative breast cancer in the second quarter. In the ongoing melanoma program, we completed enrolment and the checkpoint combination cohort in January and recently initiated a combination cohort CDX-301, which we hope to complete enrolment by the end of the third quarter of 2018. For varli, we anticipate reporting data at various medical meetings over the remainder of the year. If all goes as planned, we would expect to report the ovarian colorectal and renal cell cohorts in the summer and the head and neck GBM cohorts in the fall. For CDX-3379 we plan to complete enrolment in the first stage of the study by the end of the third quarter. For CDX-014 and CDX-1140 we will continue to execute across both of these Phase 1 studies over the remainder of the year and hope to be able to report data over the next steps later on this year. With that review, I thank you for your time, and operator we are now ready to open the call for questions.

[Operator Instructions]. Our first question is from Mara Goldstein from Cantor Fitzgerald. Your line is now open.

Thank you for taking the question. Hi Anthony.

How are you doing?

I’m well, thank you. On the screen rate that you just discussed for glemba, is that rate consistent with what you are seeing in melanoma and the rate between what you saw for METRIC and triple negative versus what you are seeing in the glemba studies in melanoma at that 25% threshold or above and to the extent that it is, do you think that really represents sort of the resonate sort of effects with the prevalence of gpNMB in which population would be for METRIC?

Well for the melanoma if you remember Mara the expression rate is so high we are not even using the diagnostic in those studies, because the melanoma is in the 85%. In the emerge study we reported that expression level of 25% or greater was around 40% and in this study it was actually or approximately 50, so it’s a little bit higher. I guess as we go through the data we’ll look at higher expression levels as well, but we think 25% was a good level to form this side.

Okay and if I could just also ask, some of the activities that are underway, just around manufacture and companion diagnostic understanding obviously that diagnostic is not necessarily an issue for CDX-014. But the work that you are doing towards that, is there anything that was really leveragability towards CDX-014 given that that’s also an ADC.

No I think it’s the same thing. I mean each one of these antibodies have their own steps to go through. We are going through the validation steps now which are the most expensive. But I think all the work that we’ve done for glemba has already been applicable to the early work we have done for 014. Q - Mara Goldstein Okay and if I could just also ask, you gave them an outline of when you expected date to emerge or be presented rather on varli. But in terms of go-forward decisions, will that be announced after you have all the different cohorts or will you do it on a more real time basis or a partner will do it on a more real time basis.

We’ll try to do it on a real time basis, but I think we need to really take a big look at all the data. But as the cohorts have read out, we can certainly make decisions based on that.

Alright, thanks so much. I’m going to stop there and let some other folks get in.

Thank you, Mara.

Thank you. Our next question is from Boris Peaker from Cowen. Your line is now open.

Great, thanks for taking my questions. My first one is on glemba. I’m just curious, since you have wait until the second half of ’19 to file due to manufacturing companion diagnostic development. Just curious, will you have overall survival by them or how close would you think you’ll be to having overall survival by them?

We should have a lot of the overall survival, but to know that we have all of it at that point, it’s hard to tell at this point in time. We’ll know more during our mid-year call Boris.

Got you and also another question on glemba, I am just – as investors do their work ahead of the metrics study readout, I’m curious what can we extrapolate from the single agent data in melanoma to the breast cancer, were it similarity of between tumor types, gpNMB expression or anything else between these two different tumor types.

I think it’s very different Boris, because in melanoma the express level of gpNMB is so high, that pretty much all the patients have some really high levels of gpNMB. I just think it’s different and I wouldn’t try to correlate the two.

This is Tibor. I was just going to add sensitivity to the MMAE component is also quite different between these different indications.

Got you. And lastly on the timing, and you mentioned that the metrics that you’ll read out in 2Q. I’m just curious, you think it’s more likely to be in the earlier or later part of the quarter?

Q2 is the best we can do at this point Boris.

Got you. Okay, well thank you very much for taking my questions.

Thank you.

Our next question is from Seamus Fernandez from Leerink Partners. Your line is now open.

Hi, this is Rich Doss [ph] calling in for Seamus. Thanks for taking my question. Just with regards to the top line results for the metric trial, how much detail should we expect in the press release and then do you expect the OS curves to be mature enough to report any data on this end point in the initial presentation?

No, we don’t expect the OS curves to be mature enough at this point. What we’ll do is give the top line data on PFS, any response rate, safety results and what have you.

Okay, great. And then with regard to the Phase 2 trial for varli plus Opdivo, can you give us a sense as to the efficacy thresholds that you’re looking to either lead or surpass in order to move forward in each of the tumor types that you’re looking at.

Hi, this is Tibor again. So the protocols have defined some thresholds based on the expectation with single agent nivo in the various cohorts and so obviously where there is various different indications, they are at different levels of response. Those are protocol defined based on the information that was available at that time. They are not necessarily the criteria that would be used exactly with regards to the next steps. Does that answer your question?

Sure. And then just lastly, you mentioned the possibility of bringing a partner onboard to commercialize glemba. How important is it that you file in on prior approval and you know would you be able to then launch on your own if necessary.

Yes, we’ll be able to launch on our own. What we know is as far as a partner goes we’ll be looking more outside in the U.S. for a partner. I think that’s where that would be most beneficial to us, but yes we will launch for that one.

Okay great, thank you.

Alright, thank you.

Thank you. Our next question is from Joe Pantginis from HC Wainwright. Your line is now open.

Hey guys, good afternoon. I got two questions. Hey, first on glemba besides the PPQ things that you discussed, what other background activities surrounding say commercial work up are you doing in the background?

You’re referring specifically to manufacturing or…

No, more for the commercialization standpoint.

So we’ve done the commercial work up on markets and what have you Joe. We’ve done all the launching, pre-clinical access, I mean the access work and what we need to do and the pricing, so that still needs to be worked on. But mostly you know the stuff that we need to be able to lease preliminary due to launching we’ve already done with. And then on the manufacturing side it’s more of the validation runs.

Got it, got it and maybe this is a question for Tibor. Not sure if you can answer just yet until the data releases, but with regard to varli, do you have anything to share regarding the alternative dosing strategies, the types of dosing you’re looking at and some of the rationale behind it?

Sure Joe. So we said in three different regements that we’re based on a dosing strategy that did not provide continuous exposure to Varli. That’s really based on the theoretical perspective that’s hitting the co-stimulatory molecules and are on off-site settings, maybe better than continuous exposure and essentially the two different alternative regements either provide a high dose with a longer duration between doses or a low dose with therefore a shorter duration between doses.

Got it, and my last logistical question if you don’t mind, with regard to the cash guidance, I know you mentioned the incremental spend that you’re waiting for with regard to manufacturing for the ADC. How much is it part of or not part of your cash guidance or you know is it basically sort of partially included in your budgeting?

It’s included Joe.

Great. Thanks a lot guys.

Alright, thank you Joe.

Thank you. Our next question is from Tony Butler from Guggenheim Securities, your line is now open.

Yes, thanks very much Antony. I got only three questions. The first is, and forgive me I may have just missed this. In Q2 in metric will you give top line or as much information as you can. I’m trying to understand the robustness or will you holdback – let’s assume the trial is positive for PFS for the moment. Will you holdback for and provide data, more importantly at a medical meeting that may occur in the second half of the year?

Yeah Tony, I think we’ll give as much data as we possibly can, knowing fully well that more data will come up at the medical meetings, but we’ll give as much top line as we can on the call and then obviously there’ll be more information to share at a medical meeting.

Thank you for that. The second question is around the open label study for glemba plus 301 and the fail checkpoint cohorts. What I’m asking here is often times in fail checkpoint cohorts you’ll find where tumor may progress or where there may be no more therapy benefit with say Keytruda or Opdivo and then the question maybe, sometimes therapy stops, you could then retreat. You actually get regression again, sort of a headshake or pseudoprogression if you will. So the question is how actually are you valuating those patients who have failed checkpoint therapy just to make sure that the addition of the combination is really having an effect.

Well, for what we’ve seen and the protocol is that they wouldn’t have failed just one checkpoint. In a lot of cases they’ve failed both Opdivo and the combination with yervoy they would have failed tembro [ph]. So we think that they’ve already failed the checkpoints on multiple occasions before they get onto our study.

Perfect, thank you. And then finally on the Phase 2 varli/Opdivo collaborative trial, the key here is, is there some decision on appropriate biomarkers in that study that you’re looking at to sub-divide those particular cohorts be it a mutation burden, PD-L1, etcetera.

So the study is designed with really expensive biomarker analysis and certainly that’s something we’re paying a tremendous amount to attention to and is being used to at least understand potentially the differences between patients who benefit versus those who don’t. We’re certainly putting a lot of effort into that to address those questions specifically.

Thank you very much.

Thank you, Tony.

At this time I am showing no further question. I would like to turn the call back over to Anthony Marucci, CEO for closing remarks.

Thank you operator and thank you everybody for joining us today. We appreciate your time and support and we look forward to keeping you updated throughout 2018, and as always we welcome your questions at anytime. Please get home safe with all the snowstorms. So thank you everybody.

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