Celldex Therapeutics Inc (CLDX) 2008 Q4 法說會逐字稿

Good morning and welcome to the fourth quarter and year end 2008 Celldex Therapeutics Incorporated earnings conference call.

My name is Shanelle and I will be your operator on today's call.

Before we begin our discussion, I would like to caution listeners that today's speaker 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 factors that may cause Celldex's actual results to differ materially from those in the forward-looking statements include those set forth under the headings Business Risk Factors, Management Discussion and Analysis of Financial Conditions and Results of Operations in each of Celldex's annual reports on form 10K as well as those described in Celldex's press release and other filings with the Securities and Exchange Commission.

You should carefully review all of these factors and you should 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 and 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 would now like to turn the call over to Mr.

Anthony Marucci, president and CEO of Celldex Therapeutics.

You may proceed.

Good morning and thank you for joining us.

I'm Anthony Marucci, president and CEO of Celldex.

Joining me on the call today is Chip Catlin, our Senior Vice President and Chief Financial Officer and Tom Davis, our Senior Vice President and Chief Medical Officer.

Celldex closed fiscal year 2008 strongly with a promising later stage program and a deep internal pipeline fueled by proprietary technology and cash on hand through 2010 to support future growth.

As we look at our progress over the last year, I'm both proud of what we accomplished in a short time frame and excited about the prospects for 2009 and beyond.

Since finalizing the merger in March of 2008, we have fully integrated the two organizations and built what we believe is a leading publicly traded biotechnology company that leverages our unique expertise and proprietary technology and targeted immunotherapy.

On today's call I'd like to take a few moments to highlight the major milestones from the year and provide detail for recent events.

2008 was a very productive year for Celldex.

We reported positive data from our ACTIVATE and ACT II studies for CDX-110 in glioblastoma multiforme and announced one of the most substantial partnership deals to date in the cancer immunotherapy space for this compound with Pfizer.

CDX-110 is currently in multicenter, single arm phase 2 study with 60 patients and 35 sites in the United States.

In addition, Pfizer and Celldex are working on the design of a randomized study to compare CDX-110 plus standard of care versus standard of care alone.

In addition to CDX-110, we are also making substantial progress in advancing other key candidates from our pipeline, most notably CDX-1307.

CDX-1307 is an exciting first candidate generated from our precision targeted immunotherapy platform.

The candidate has demonstrated encouraging data to date and based on the positive safety and immunogenicity observed in the phase I dose escalation studies, we will initiate a phase 2 trial for CDX-1307 in combination with selective TLR agonists during the second half of 2009.

Importantly we believe the CDX-1307 data provides further support for the tolerability and immunogenicity of the precision targeted immunotherapy platform overall and its potential to generate a broad immunotherapy portfolio across a range of disease indications.

In direct support of our ongoing efforts to enhance our precision targeted immunotherapy platform technology, we completed multiple strategic licensing arrangements to access synergistic technologies including a license agreement with the University of Southampton to develop therapeutic human antibodies to our CD-27, a potentially important immunotherapy target for various cancers.

In addition, we executed a collaboration with 3M to access their proprietary immune response modifier Resiquimod and additional agonists.

We also monetized the divestiture of noncore programs allowing us to concentrate on our resources and dedicate our full bandwidth to support the novel clinical and preclinical programs emerging from our platform.

To this end, in January of this year we granted an exclusive license to Vaccine Technologies Incorporated to develop and commercialize our CholeraGarde and ETEC vaccine programs and executed the sale of our poultry vaccines business to Lohmann Animal Health International.

These arrangements further support an already strong cash position which we believe will allow us to continue to strategically focus and grow our business despite the current macroeconomic environment.

With this I will now ask Chip to review the financial results for the fourth quarter and the year end 2008 and look forward to answering your questions at the close of the call.

Chip?

Thank you Anthony.

We announced in our press release today financial results for Celldex fourth quarter and year end 2008.

The press release is available on Celldex's website on the Investor Information page.

It is important to note that the 2007 financial results reflect the activities of pre-merger Celldex when the company was privately held.

I will now review summary financial results for the three months and year ended December 31, 2008.

In the fourth quarter of 2008 we reported a net loss of $7.5 million or $0.47 per share compared with a net loss of $4.2 million or $0.51 per share for the comparable three months ended December 31, 2007.

For year ended December 31, 2008 Celldex reported a net loss of $47.5 million or $3.34 per share compared to a net loss of $15.1 million or $1.81 per share for the year ended December 31, 2007.

The change in net loss between the three month periods was primarily due to increased operating expenses as a result of the merger of AVANT and Celldex, offset by increased revenues, investment and other income.

The increase in net loss between the fiscal years reflects increased operating expenses for the combined companies and non-cash charges of $19.6 million or $1.38 per share related to $14.8 million of purchased in-process research and development and $4.8 million of stock-based compensation expense.

The increase in operating expenses also resulted from higher general and administrative expenses, which is primarily due to increases in personnel related expenses and professional service costs of the combined companies.

The increase in net loss is offset in part by an increase in investment and other income.

Revenues for 2008 increased by $6 million compared with revenues for 2007.

The increase in product development and licensing revenue in 2008 primarily reflects recognition of $2.9 million in Pfizer deferred revenue related to CDX-110 in 2008.

The decrease in contracts and grants revenue in 2008 compared to 2007 primarily reflects reduced levels of vaccine development work billable to Rockefeller University between the periods.

In 2008 Celldex also recognized $3 million in product royalty revenue related to offsetting royalty expense payable to Cincinnati Children's Hospital.

There was no product royalty revenue in 2007.

At December 31, 2008 our cash balance was $44.3 million.

This figure includes a $10 million milestone payment from Paul Capital Healthcare upon GlaxoSmithKline's US launch of Rotarix which we received on October 1, 2008.

As Anthony mentioned earlier in this call, we believe that our current cash position and expected sources of revenue will meet estimated working capital requirements and will fund operations through 2010.

I will now turn the call back over to Anthony.

Thanks, Chip.

Celldex came into its own in 2008 carving out a unique identity in the immunotherapy arena through the refinement of our comprehensive immunotherapy platform.

We have a number of events and milestones anticipated over the next 12 months to build on last year's progress as well.

We plan on presenting CDX-110 data to final results from the ACT II trial and preliminary phase 1 data of CDX-1307 at ASCO in June.

In the clinic we anticipate initiating two clinical trials in our cancer programs, a phase 2 study in CDX-1307 and a phase 1/2 study for CDX-1401.

Our infectious and inflammatory disease programs are also moving forward with a planned phase 1 trial with healthy volunteers for CDX-2401 which is in development for prevention of HIV, and a phase 1/2 trial for CDX-1135 in renal disease.

We continue to work toward a licensing agreement for our immunomodulator program and hope to announce news during the year as well, and we will update you on a randomized study to compare CDX-110 plus standard of care versus standard of care at the appropriate time with our partner Pfizer.

Celldex's pipeline encapsulates the broad therapeutic promise of our precision targeted immunotherapy platform and our development model signals the future of the Company as a leader in generating novel and promising immunotherapies for difficult to treat diseases.

In these challenging economic times, Celldex is fortunate to have an experienced team and a strong cash position to enable continued progress in 2009 as we work towards bringing these novel immunotherapies to patients with serious medical needs.

That concludes our prepared remarks at this time and I'd like to open the call to questions and answer session.

(OPERATOR INSTRUCTIONS) Your first question comes from the line of Joe Pantginis of Merriman Curhan Ford.

Hi guys, good morning and congratulations on the progress.

Two quick questions if you don't mind.

First, you mentioned about the phase 2 study that will be starting in this year for 1307.

I was just wondering if you could add a little more color on that with regard to the design and the role of TLRs in that combination.

And the second question is obviously you have a lot going on but you still have a lot of potential access to Medarex's technology to develop antibodies so I was just curious what kind of progress we might see on that front.

Thanks a lot.

Thanks, Joe.

Thanks Joe.

Great questions.

As you know we're finalizing our phase 1 program with CDX-1307 which is our vaccine that targets beta HCG in assorted different tumors.

A key component of that phase 1 program has been to not just escalate the dose, which is standard in phase 1s but also to add additional agents that will amplify the immune effect, so statistically the TLR agonists you're referring to.

And we're at the stage now where we're going into a final cohort where we will be combining them all together.

As far as I know I think this is really the first time that it's been done to bring multiple TLR agonists together.

I'm sure you're aware that quite a few companies have single ones that they've developed as single agents or used in combination.

But we're one of the first people to be using them together to see if we can get even more impact.

Those data will be relatively critical.

If we do see that the combination works that much better, we'd be heading off into a development strategy that was focusing on response rates and looking to see if we can shrink tumors that express beta HCG.

Although as it stands right now even without the total combination we have seen patients experience significant stable disease and have seen some patients have some tumor shrinkage.

We've also been able to eliminate circulating beta HCG in patient's serum.

Even with that data it would seem appropriate for us to head into a phase 2 program in a tumor that expresses beta HCG.

We're focusing specifically on bladder cancer at this point.

And so a randomized phase 2 study that would determine whether the vaccine can really delay the time to progression or progression free survival and of course as a secondary endpoint in the phase 2 we would be looking for overall survival as well.

So we don't have final plans for exactly what the phase 2 will look like.

It depends on what we see in this next cohort but we certainly will be talking more about that as the year goes through.

We're expecting to present the data at ASCO from the combination.

The second part of your question, the antibodies, as you know we've brought in several different targets and are moving towards INDs.

The time lines on those is more in the 2010 time frame but we do have the target CD-27 that we licensed in from Southampton.

That appears to be a critical target in the activation of the immune system.

A la CTLA4 and CD40 are some targets that other companies are pursuing.

So the potential for that product would be to similarly activate the immune system and potentially have single agent activity in many different settings.

But it will also nicely complement our immunotherapy programs and we're looking forward to testing it alone first but then rapidly bringing it into combination to see if we can further potentiate the vaccine effects.

And we also have CD89 as a target.

The preclinical data suggests that an antibody to CD89 can actually shut down assorted different autoimmune diseases so in a different approach there would be looking to turn off a lot of IgA driven autoimmune diseases and certainly preclinical data suggests we can do that.

So as we move forward generating more preclinical data in the final toxicology packages to manufacturing, we're looking to take those in to the clinic in a little over a year's time, so we'll be talking more about that throughout the next 12 months.

Thanks a lot guys.

Thanks Joe.

Your next question comes from the line of Jonathan Aschoff of Brean Murray.

Hi guys, good morning.

Good morning, Jonathan.

I was wondering, could you help me on the two year cash projection perhaps at least by explaining '09 SG&A and R&D trends?

Jonathan, good to hear from you.

We really aren't going to go into details on the specific financial projections today but we do believe that we have cash burn between $20 million and $22 million over the next two years so we're very comfortable on our current cash position getting us through 2010.

Okay, so that would kind of assume I guess at most a flattening of those expenses, perhaps a drop from the fourth quarter of '08.

That's correct.

And I guess, are you guys sort of anywhere on maybe the thinking with the next 110 trial be a similar design, in a different country or a placebo controlled design in the United States for a pivotal 110 trial or is that just something that's way too early in discussion?

You know we're talking closely to Pfizer about the specific plan.

I think the expectation is that we need to complete a randomized study for FDA approval but that is going to depend a great deal on what we see from the current ACT III study.

Now a single arm trial of it, if we can replicate the ACTIVATE and ACT II data from Duke and MD Anderson, we may well be able to get away with a much smaller study when we do start the randomized trial.

Overall though I think it's reasonable to expect that we'll need to do a placebo control and we'll need to do a randomized study on an international scale and that's generally where we're headed but of course we need to finalize those plans with the FDA and with Pfizer before we can be talking about them publicly.

Okay, thank you very much.

Thank you Jonathan.

Your next question comes from the line of Mark Monane of Needham.

Good morning everybody.

Thanks for the review.

Thank you, Mark.

Could you please comment on the use of the different adjuvants.

I see you're using GM-CSF in one trial and then I know you have a number of other toll-like receptors and some products from 3M which are also available.

There was a recent study in "Blood" that said that perhaps there were GM-CSF receptors on the Treg cells.

Can you help us understand how you're optimizing the adjuvant to the given vaccine?

GM-CSF has been around for a long time and quite a few different vaccines have used it.

I think if you look through the literature you'll find that it has many different impacts as you suggested.

It might be on Tregs.

It's certainly on various different components of the immune system.

One thing that it does specifically do however is upregulate or increase the number of [nanos] receptors on dendritic cells.

So when you look at our 1307 program you'll see that we combine it with GM-CSF.

The intention there is specifically to increase the 1307 targets in order to make sure we're getting as much of the vaccine into the dendritic cells as we can.

Our next program, 1401, which targets DEC-205, we won't need GM-CSF to serve that purpose and you'll see in the general design we're not planning to add GM-CSF in that setting.

The toll-like receptors on the other hand do have very specific roles in activating both dendritic and T cells as they mature and activate those cells in order to potentiate the effect.

And in a lot of data you can take a specific TLR agonist, a TLR3 or 4, TLR9, get fairly robust immune effect, so though they haven't been adequate by themselves to really change the potency of the immune system in fighting cancers at least.

So we have two in hand, the Hiltonol or poly-ICLC is available to us.

That's a TLR3 and Resiquimod, which we licensed in from 3M, is an agonist for both TLR7 and 8 and in the laboratory, when you combine them together, you get much stronger effects than with either one alone.

So our expectation is that using the two along with the vaccine will give us an even more effective but specific immune response against tumors and again as I mentioned earlier, that's the point we're at with 1307.

We'll be bringing everything together within the next few months and we'll let you know what happens.

And with 1401 we're planning to start with Resiquimod that may well be combining them all together at the end of the day if we seem to think that's the most effective.

However there are other ways that we can manipulate the immune system and we continue to have an open mind about additional things we can do to make sure that we're getting a maximal response in patients.

That was helpful.

And in 1307, I think there was a trial designed that allowed for both a systemic delivery as well as intradermal delivery of the vaccine.

Are you going to pursue both strategies in a proposed phase 2 or do you have a clear winner at this point?

We're still finishing up both of those phase 1 studies.

They are separate trials that we're intending to compare the two to see if they have dramatically different outcomes.

We have presented the preliminary data at previous meetings where the intravenous approach certainly appeared to work well but it wasn't clearly superior so while we're waiting for the final data, I think ultimately we may be driven by the easiest routes to develop in the intradermal or intracutaneous injection along with topical Resiquimod and local Hiltonol would appear to be the most practical path forward.

Again, we're waiting for the final data on that and it's going to depend on the next patients that we enter into the study.

That's very -- and then Chip, how many people are now at Celldex Therapeutics and what's the optimal number please going forward?

That's a very good question.

We currently have about 79 or 80 people in the three locations here in Needham, Massachusetts, Fall River, Massachusetts, and Phillipsburg, New Jersey.

We expect to add a small number of people, between 6 and 8 in 2009 primarily in support of manufacturing, quality control, QA and regulatory, so that's really the focus of where we'll be adding a few people in 2009.

Thank you very much everyone for the added information.

Congratulations on your progress.

There are no further questions in the Q&A.

I would now like to turn the call back over to Mr.

Anthony Marucci.

Thank you operator and thank you everyone for joining us today.

We'll look forward to seeing many of you at the upcoming events and reporting to you throughout the year as we continue to move our programs forward.

Have a good weekend.

Ladies and gentlemen, that concludes the presentation.

Thank you for your participation.

You may now disconnect.

Have an excellent weekend.