Expert Financial Analysis and Reporting

ACT-IV Trial is Halted

The independent Data Safety and Monitoring Board (DSMB) just completed its second interim review of the phase 3 ACT IV study of Rintega (rindopepimut) in patients with newly diagnosed EGFRvIII-positive glioblastoma. The analysis concluded that the trial will not achieve statistical significance for its primary endpoint of overall survival. Celldex received this information on Friday and has decided to terminate the ACT IV clinical trial. This news caused the stock to decline from $8.18 on Friday’s close to $4.01 in early trading on Monday.

In the ACT IV study, Rintega performed as expected and survival was consistent with results seen in earlier phase 2 studies. The failure of the study was due to the standard of care (SOC) arm performing significantly better than expected. The interim analysis showed median overall survival of 20.4 months for Rintega and 21.1 months for SOC with a hazard ratio of 0.99. Rintega showed no improvement over SOC.

Rintega was targeted at a sub-set of the glioblastoma population that has the EGFRvIII mutation which occurs in about one-third of patients. In broad based studies of glioblastoma (most notably the phase 3 studies of Avastin) which include this EGFRvIII subset, the median overall survival for SOC has been about 15 to 16 months. Celldex had expected that the EGFRvIII patients might do worse than this. The 21 month survival in the control arm came as a complete shock as standard of care has not changed; it is still radiation plus the chemotherapy drug temozolomide. There is no immediate explanation as to why SOC patients did so much better in this trial than in recent trials.

Looking at Celldex without Rintega

There are two other key drugs in clinical development. Glembatumumab is in the METRIC phase 3 trial in triple negative breast cancer with results expected in 2017. There are also expected to be results from glembatumumab in a trial in malignant melanoma in late 2016. This is a small open label study in very advanced patients, some of whom have likely failed on the checkpoint inhibitors, Opdivo and Keytruda. These two drugs were approved on the basis of showing a 10% to 12% response rate. Celldex saw this type of response with glembatumumab in earlier trials and thinks that a conformation of such results would warrant conducting a phase 2 trial in malignant melanoma that could possibly lead to accelerated approval.

Varilumab is also an important drug for Celldex. The varilumab clinical trial program is based on combinations with established cancer drugs and studies are actively recruiting patients. Two were just initiated in 2Q, 2015: a combination trial with sunitinib in metastatic clear cell renal cell carcinoma, and a combination with ipilimumab in metastatic melanoma. There is also a trial underway that combines varilumab with the Bristol-Myers checkpoint inhibitor Opdivo. BMY and Celldex recently moved this combination forward into phase 2 trials. Celldex says that BMY does not want to release the data that led to this decision. Results from this new phase 2 trial of Opdivo and varilumab are probably a year away

Celldex ended 2015 with $290 million of cash. It has been burning cash at a rate of $25 million per quarter so that at this rate, it has enough cash to last into late 2018.This likely means that there will be no need to finance in 2016 and probably not before METRIC results are reported in 2017. This strong cash position is a significant positive.

Investment Thesis

I downgraded Celldex from Buy to Hold in my report of April 13, 2015 at a price of $29. See Celldex Pipeline Update and Investment Thesis (CLDX, Moving from Buy to Hold, $28.56).  Since then, I have not been involved in Celldex because so much was riding on Rintega and key clinical results of glembatumumab and varilumab were likely 2017 events. I have always been uneasy about Rintega, because it targets a single cancer antigen and I beleive that therapies for GBM need to address several antigens.

The stock has declined from $8.18 to $4.01 on this news and now has a market capitalization of $400 million. I am not inclined to rush in at this point. The stock seems fairly valued or possibly undervalued, but oftentimes after traumatic events like this, biotechnology stocks go much lower than we expect. Also, the only near term catalyst is results for glembatumumab in malignant melanoma later this year. There is limited news flow until late 2016 and 2017.  However, I think that glembatumab and/or varilumab are interesting drugs with significant potential if successfully developed. I will continue to follow and comment on Celldex.