Celldex Therapeutics (CLDX) is a development-stage pharmaceutical company. It was once a high-flyer, before its lead candidate failed a Phase 3 trial in 2015. More recently, before the CDX-0159 news was announced in June, it was selling at about $3.00 per share. On September 30, 2020, Celldex closed at $14.83 per share, giving it a market capitalization of about $594 million.

This article will explore why investors have become so excited about Celldex in 2020. However, I cannot emphasize too much that while the stock still appears to be undervalued, true success will require a long process, ultimately getting FDA and EU approvals, then successful commercialization of at least one therapy.

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CDX-527

In late August, Celldex announced it had initiated a CDX-527 Phase 1 trial. CDX-527 is a bispecific antibody that targets both PD-1 and CD27. In preclinical models, it was more potent than PD-1 antibodies alone at T cell activation and resulting anti-tumor activity. It was also better than combining single-agent PD-1 and CD27 antibodies. The Phase 1 study will be open-label, of patients with advanced or metastatic solid tumors who have failed standard of care therapies. The plan is to enroll 90 patients. It will begin with a dose escalation phase. If that is successful at establishing a recommended dose, there will be expansion cohorts in specific tumor types, looking for safety and signs of efficacy. Other than the designation of solid tumors, the specific types of tumors to be studied have not been revealed. If CDX-527 does turn out to be more effective than current PD-1 agents, it could be a major revenue generator once it passes its trials and gets regulatory approval. Initial data from the Phase 1 study is anticipated in the first half of 2021.

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CDX-0159

On June 6, at the European Academy of Allergy and Clinical Immunology Annual Congress, Celldex announced that CDX-0159 Phase 1 results were positive. The Phase 1 trial was in healthy adults, and the measure of success was not an outcome in a particular disease. CDX-0159 is a KIT inhibitor. In short, KIT, a tyrosine kinase, is an important component of the immune system. Inhibiting KIT was hypothesized to reduce the level of tryptase enzyme, which, in turn, should correlate with reduced mast cell burden. Mast cells play an important role in a healthy immune system, but also can contribute to both immune diseases and cancer. Most notably, mast cells play a role in anaphylaxis.

The early results showed CDX-0159 is good at lowering tryptase, and so, is likely good at controlling mast cells. This fall Celldex plans to initiate Phase 1b studies of CDX-0159 in subtypes of hives, or urticaria: chronic spontaneous urticaria and chronic inducible urticaria (CIndU). Celldex is also exploring cold-induced and scratch-induced urticarias and additional mast cell-driven diseases for potential future development, including mast cell activation syndromes, asthma, allergic conditions, and mast cell-driven gastrointestinal disorders. While acute cases of hives are typically treated with antihistamines, cortisone, or other medications, chronic hives often are a result of autoimmune reactions to mast cells and are difficult to treat effectively.

CDX-3379

Furthest along in the Celldex pipeline is CDX-3379, so arguably, that is the real source of its current value. CDX-3379 is a human immunoglobulin G1 lambda antibody that selectively binds and inhibits ErbB3 activity. Top line Phase 2 data is expected before the end of this year. This trial is in HNSCC, or head and neck squamous cell carcinoma, in combination with Erbitux, in second-line patients. Preliminary data was announced in June 2019, showing that biomarkers for a set of mutations (FAT1 and NOTCH1, NOTCH2, or NOTCH3) were associated with clinical activity. I believe that positive Phase 2 results later this year would significantly increase the value of Celldex.

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CDX-1140 and CDX-301

CDX-1140 is in a Phase 1 study which includes patients with advanced or refractory cancers. Top line full Phase 1 data is expected before the end of 2020. CDX-1140 is an antibody to CD40, which is expressed on antigen-presenting cells. Celldex claims its CD40 antibody is engineered to balance good systemic exposure and safety with potent therapeutic activity. Both the monotherapy and combination with CDX-301 dose escalation portions of the Phase 1 dose escalation portion of the trial are complete, with an identified maximum tolerated dose and recommended Phase 2 dose of 1.5 mg/kg. Expansion cohorts are now actively recruiting, including two arms: CDX-1140 with Keytruda (pembrolizumab) in patients who have progressed on a checkpoint therapy and CDX-1140 in combination with CDX-301 in patients with head and neck squamous cell carcinoma. A combination of CDX-1140 with standard of care chemotherapy in first-line metastatic pancreatic cancer is expected to initiate later in 2020.

Cash and run rate

Phase 1 trials are relatively inexpensive. Phase 3 trials are the most expensive. As the above-described candidates progress through the trial phases, Celldex’s operating expenses will increase. As I predicted was likely in my prior article, the company raised cash with a stock offering in Q2. The gross proceeds were about $150 million. Celldex also raised another $24 million from a separate equity offering. At the end of Q2 2020, it had a cash and equivalents balance of $207 million. Celldex stated that would be sufficient to fund operations through 2023, but it does not preclude further stock offerings. The net loss in Q2 was near $11.0 million, most of which, $9.7 million, was for research & development.

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Conclusion

At the close of market on September 30, Celldex had a market capitalization of $594 million. That is not much if you think one or more of its potential therapies will be commercialized and generate significant income. But it will take larger-scale trials to get any therapy all the way to where an application can be submitted to the FDA. All in all, I think the stock price is still reasonable even after the 2020 price surge, but future progress depends on continued good data being released. Cancer trial results are binary, allowing investors to make a lot or lose a lot when released. This is not a stock for risk-averse investors.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.



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