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Expert Financial Analysis and Reporting

Celldex: Update Based on 2Q, 2016 Conference Call (CLDX, Neutral, $4.45)

Investment View

Celldex has a broad array of clinical trials underway or in planning that involve five drugs. However, most of these trials are in an early exploratory stage and are designed to provide signals of activity for designing subsequent trials that could lead to approval. As such they are not likely to have much of an effect on investor thinking. I do not anticipate any data that will have a meaningful effect on the stock price until late 2017 or 2018. The Company has a strong cash position of $254 million that management believes will fund operations through 2018. I am not involved with the stock at this point nor am I likely to be for the next year or so. I remain impressed with the technology base of the Company and that is why I continue to follow it.

Glembatumumab is the Lead Product

The Company’s lead product is glembatumumab which is being studied in a phase 2b trial in triple negative breast cancer, which management says could be the basis for approval if the trial is successful. During the second quarter conference call, management said that enrollment was going slower than expected and that because of this it was adding sites in Europe. The reason for the delay is that there are over 330 clinical trials now ongoing in triple negative breast cancer and the patient population is small. Hence the competition for patients to treat is fierce. Management did not give any guidance on when enrollment might be completed, but did say that topline results could be available six months after completing enrollment. Management had previously been expecting enrollment to complete in late 2016. I would guess that enrollment might now complete in 2Q, 2017 or later so this suggests topline data in 2H, 2017.

In December 2014, Celldex initiated a single arm, open label phase 2 study of glembatumumab in patients with unrespectable stage 3 or 4 melanoma who had failed therapy with checkpoint inhibitors (Yervoy, Opdivo and Keytruda). This study completed enrollment of 62 patients in April. The primary endpoint of the study required a minimum of six responses in the first 52 patients to be deemed successful. This endpoint has been exceeded and some patients are still potentially progressing to response. Celldex plans to present data from this study at the European Society for Medical Oncology (ESMO) meeting in October. If the Company goes forward in this indication, it will likely be in combination with checkpoint inhibitors.

Varlilumab is next in Line

The next product farthest along in development is the checkpoint modulator varlilumab. There are now five combination studies of varlilumab that will be enrolling patients across seven indications. Phase 2 combination studies with BMY’s Opdivo began in April and topline data could be available in late 2017 or 2018. Phase 2 studies with Roche’s Tecentric (atezolizumab) in renal cell carcinoma and other solid tumors should start enrolling soon as should a phase 2 study with Pfizer’s Sutent in renal cell carcinoma. There is unlikely to be data that could have a meaningful effect on the stock price from varlilumab until late 2017 or early 2018.

Cash Position

Celldex ended 2Q, 2016 with cash of $254 million. The operating cash burn in 2Q, 2016 was $34 million so that at this rate of burn, the Company has 7.5 quarters of cash which would last the Company until mid-2018. The Company’s guidance is that it believes it has a cash runway though 2018. . It has an at the market agreement in place that should allow it to bring in some additional cash.

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