Celldex Therapeutics Inc (CLDX) 2010 Q4 法說會逐字稿

Good morning and welcome to Celldex Therapeutics 2010 year-end and 2011 kickoff webcast and conference.

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

Before we begin our discussion, I have been asked to caution listeners that today's speakers will be making forward-looking statements.

Such statements reflect on 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 of the factors that might cause Celldex's actual results to differ materially from those in the forward-looking statements, including those set forth under the headings Business 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 reports on Form 10-Q and its current reports on Form 8-K as well as those described in Celldex's press release and filings with the Securities and Exchange Commission.

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 would now like to turn the call over to Mr.

Anthony Marucci, President and CEO of Celldex Therapeutics.

You may proceed.

Thank you, operator.

Good morning everyone and thank you for joining us.

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

Joining me on the call this morning are Chip Catlin, our Senior Vice President and Chief Financial Officer, and Dr.

Tom Davis, our Senior Vice President and Chief Medical Officer.

Celldex enters 2011 focused on two promising late-stage oncology compounds, rindopepimut and CDX-011, which are supported by our solid financial position, and a deep pipeline of other clinical and pre-clinical opportunities.

Our emphasis during today's discussion is on the advancement of rindopepimut into a pivotal Phase III development in GBM as well as the completion of our randomized Phase IIb study of CDX-011, our antibody drug conjugate, for advanced breast cancer.

We continue to see exciting data emerging from our pipeline, and I will discuss these data later in the call.

In addition, we'll be happy to take your questions at the end of the call.

Before we do that, I'll ask Chip to give you a brief overview of our 2010 year-end financial results.

Chip?

Thank you, Anthony.

Celldex reported net income of $22.7 million, or $0.71 per basic earnings per share and $0.70 per fully-diluted earnings per share, for the fourth quarter of 2010, compared to a net loss of $12.7 million or $0.41 per basic and diluted share for the fourth quarter of 2009.

Net income for the fourth quarter of 2010 includes one-time items totaling $30.5 million for rindopepimut-related revenue recorded as a result of the termination of the Pfizer license agreement and a charge to royalty expense related to costs originally capitalized in connection with the Pfizer license agreement.

Excluding these one-time items, on a non-GAAP basis, net loss per share for the fourth quarter of 2010 was $7.8 million or $0.24 per basic share.

For the 12 months ending December 31, 2010, Celldex reported a net loss of $2.5 million, or $0.08 per share, compared to a net loss of $36.5 million, or $1.84 per share, for the 12 months ended December 31, 2009.

Net loss for 2010 included the one-time items described above.

Excluding these items, the non-GAAP net loss per share for 2010 was $33.0 million, or $1.04 per basic share.

Celldex reported $61.1 million in cash, cash equivalents and marketable securities as of December 31, 2010.

So while we have had some one-time events with significant impact on our financial results in 2010, Celldex enters 2011 in a solid financial position, with projected cash flow and financial resources expected to sufficiently fund planned program development into 2012,including initiation of a Phase III pivotal study for rindopepimut.

I'll now turn the call back over to Anthony to go into more detail regarding our clinical programs and business operations.

Anthony?

Thank you, Chip.

I'd like to now go over in some depth our two late-stage candidates and spend a few minutes on several of our programs that support and strengthen our pipeline, and then wrap up and take a few questions later on.

As I mentioned, a substantial amount of our efforts are on advancing rindopepimut and CDX-011.

These two programs will drive a number of potential value-enhancing key events over the course of 2011 and into 2012.

As you may know, rindopepimut is an immunotherapy that targets the tumor-specific molecule called EGFRvIII, a functional variant of the epidermal growth factor receptor.

vIII is a common mutated form of natural EGFR and is present in multiple cancer types.

We have a robust data package for rindopepimut including positive Phase II trials in GBM that we reported at the SNO conference in November 2010.

The multi-center trial showed 66% of the patients were progression-free at 8.5 months from diagnosis, a statistically significant increase over a predetermined progression-free rate estimate of 53%.

These data are consistent with previous studies with rindopepimut in GBM.

The consistency of the data from these three separate studies is impressive and clearly supports the plan to conduct controlled pivotal study in front-line GBM.

To that end, we met with the FDA last month and are consulting with the EMEA in Europe to design an innovative trial with what we hope has a high probability of success, leveraging what we have learned from our previous positive trials.

We are confident, based on these interactions and the plans we have undertaken, that we can have an agreement on a single registration trial for this exciting and promising compound.

The design and review process for this Phase III trial of rindopepimut has been extensive and while it would be inappropriate for us to go into great detail as we continue to finalize the trial design with regulatory agencies, I can say that we are committed to taking the necessary steps to design a Phase III trial that will support an efficient regulatory review process, when that time comes.

We expect the studies to include a similar patient population to the previous studies and to also include a placebo blind for the control arm and a asymmetrical randomization weighted towards the vaccinated patients.

We look forward to sharing more details with you on this study as we get closer to initiating the trial in the second half of 2011.

In addition to initiating our pivotal study in front-line GBM, we are also working to expand the therapeutic opportunities for rindopepimut.

These opportunities include a recurring GBM study in combination with Avastin; Head and Neck cancer, where we are confirming the expression of vIII in this setting; as well as Squamous cell lung cancer, where again we are confirming the expression of vIII in this setting before determining the clinical path forward on both of these indications; and lastly, Celldex is making rindo available to investigators at Stanford University to conduct a pilot study in pediatric pontine glioma, a devastating disease in children.

Next, I'd like to talk about CDX-011, an antibody drug conjugate that targets glycoprotein NMB, or GPNMB, which is highly expressed in breast cancer, melanoma, lymphoma and leukemias.

In May 2010, we were granted FDA fast track designation for CDX-011, for the treatment of advanced refractory or resistant GPNMB-expressing breast cancer and in September of 2010, we initiated a 120-patient randomized Phase II study for GPNMB patients in refractory breast cancer, which also included triple-negative disease.

This trial continues to accrue on target and should be fully enrolled by the end of 2011 with interim data possible by December and final results expected in the first half of 2012.

The [Phase IIb] (corrected by company after the call) data trial will provide important randomized data for physicians on sizing and conducting a pivotal Phase III study, which we believe could be initiated by late 2012.

We expect that this would be a larger trial, following a similar protocol in which patients are randomized to receive either CDX-011 or single agent "Investigator Choice" chemotherapy.

We would specifically target a patient population with unmet medical need.

Additionally, we continue to explore other indications for CDX-011 and seek to evaluate broader collaboration opportunities.

In 2011, we'll be focusing our financial and human resources heavily on these two late stage programs, but beyond these two advanced programs, we have a number of earlier-stage programs, highlighting the productivity of our platform and the diversity and depth of Celldex's research and development capabilities.

CDX-1307 and CDX-1401 are currently in Phase II and Phase I/II studies respectively.

We are looking to complete the CDX-1401 study by year-end and the CDX-1307 study in 2012.

Further, we expect to have two new Phase I trials launched in 2011.

The first is CDX-1127.

This compound was part of a project to develop human antibodies to CD27, which is a potentially important target for immunotherapy of various cancers.

Our antibody to CD27 can target tumors by two mechanisms, first by activating anti-cancer immunity similar to ipilimumab, and second, by direct anti-tumor effect on lymphomas in a mechanism similar to rituximab.

We will be launching the Phase I trial to start exploring potential indications on this exciting program by the end of 2011.

The second program is CDX-301 and we have filed an IND with the NCI for a Healthy Volunteer study, Phase I study, before the NCI initiates a Phase I/II study for cancer patients requiring hematopoietic stem cell transplantation.

At Celldex, we believe we have built a truly unique company and this should become even more apparent as the year progresses.

Celldex has a very maturing oncology portfolio with late-stage candidates for targeted populations.

Our pipeline is also diversified in terms of risks and with a robust portfolio of earlier stage programs that are the output of our unique technology platform, productive business development efforts, and our experienced scientific and development teams.

These programs should drive a number of potential value-enhancing key events over the course of the year and, at this time, I'd like to recap those events.

We expect to initiate Phase I clinical studies of both CDX-301 and CDX-1127 during 2011; complete the Phase I combination study of CDX-1401; complete the enrollment of 120-patient randomized Phase IIb controlled study of CDX-011 for the treatment of patients of GPNMB-expressing advanced refractory breast cancer patients, which also includes triple negative disease; and finally, initiate an international double blinded placebo-controlled randomized Phase III pivotal study of rindopepimut in the second half of 2011 in approximately 300 patients with GBM that express the vIII variant.

Thank you for your time this morning, and we look forward to updating you on our continued progress and our overall strategic initiatives.

At this time, we'll open the call for questions.

Operator?

Thank you.

(Operator Instructions).

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

Please proceed.

Hi.

Thanks.

Good morning.

I was wondering, with the non-cash revenue items and the borrowing of 10, and the 1.7 that you got from the government, how much extra did you take down from the Cantor item to gain $3 million over the quarter?

We haven't taken anything down from the Cantor, Jonathan.

How did you gain $3 million over the quarter, then?

Well, we got in some cash on the -- we brought in the debt and we also currently looking to upscale the term debt facility, Jonathan, with another $5 million, so that's in the process.

Okay.

Can I assume that -- is 301 going into healthy volunteers first, or straight into stem cell transplant?

Jonathan, Tom here.

We're going into Healthy Volunteers first.

As you probably know, 301 has a fairly extensive history in the clinic under the development of Immunex and Amgen.

Our initial efforts are to show that this particular compound is similar to the previous one and in Healthy Volunteers, we can compare the results with their experience though we certainly want to progress into malignant and other indications as quickly as we can thereafter.

So you understand that the healthy volunteer study is that you can progress the study quite quickly and get the data in a very efficient fashion.

Okay, and 1127 is not going to be just a lymphoma Phase I, it will be a mix?

So, what we really like about 27 is as you heard in the presentation, it does have two mechanisms of action, which means that it could very well function in solid tumors as well as lymphomas.

I think what's particularly attractive is that in lymphomas, you're going to get both mechanisms against the lymphoma itself.

So, our plan for Phase I would be to target both solid tumors and lymphomas, as you're suggesting.

Okay.

Is there any read into 1307 being deprioritized?

Is that something one should take away from the comments?

Well I think, Jonathan, we want to efficiently use the resources we have, so, we're going to put more of those resources toward these later stage studies and continue 1307 on a more limited basis with the resources we have.

Okay and I guess, finally, it's kind of a non-question.

Any asking for more FDA meeting color is not going to get me anywhere, is it.

No.

Thanks a lot, guys.

Your next question comes from the line of Steve Brozak with WBB Securities.

Please proceed.

Hello, good morning, gentlemen.

Let me put the cart before the horse, because there is one item here for our modeling purposes that I'd like to ask on the financial side.

What would the ballpark -- and if you haven't thought about it in length, be for treatment cost protocol, because obviously you're talking about severely debilitated -- potentially debilitated patients.

What are we looking at in terms of potential price points here for all future modeling purposes because obviously a lot of people are saying, look, you do have models in Dendreon?

We're talking about these types of prices.

Is that a fair assumption as the first question?

Yes, I think it's a fair assumption, Steve.

This is Anthony.

We look at what Avastin's done, we see what the pricing is for Provenge and other similar type of molecules and we think that would be a fair range.

Okay, now the next question is you obviously -- you know how we feel about large pharmaceutical companies, but we've seen them start to react slightly differently, especially some of the Europeans, with obviously Genzyme having just been taken out and I know that you've just had mixed reactions in dealing with large pharma, but would that preclude you from and probably, are you in discussions -- I'm sure you're always in discussions, but are you in any kind of discussions for let's say any earlier stage or any future partnerings where you might say look, your plate is full obviously, you do have the ability to go out there and do this project by yourselves in its entirety, but there is the assumption that you will also start to think about, if you already haven't, start to partner on other projects or possibly even go back into a partnering.

Is that also a correct assumption?

Yes, I think that we're always keeping our options open to really create shareholder value and do the best for the patients.

So, if we can work with a partner that can help us achieve those goals, we are always willing to listen and have a conversation, sure.

All right.

Lastly, I would just like the soup to nuts.

In terms of going out there and doing everything from GMP production, testing, FDA, across the board, you have in-house resources and also quote, unquote, consultants that have previous experience in doing everything you need to get a product to market.

Is that correct?

Correct.

So, for all intents and purposes, you don't need to make any acquisitions as far as personnel and/or anything like that, and/or any type of manufacturing, so that you could -- given all the green lights from all the regulatory bodies and all the IRBs and everything else, you can basically run this show yourself, given resource -- the financial resources which you're going to -- which you've stated that you're comfortable with for the next 12 months?

Right, so, but the one exception here is the Phase III manufacturing, which we don't have those capabilities as they tend to -- the infrastructure cost there tends to be expensive.

Having said that, we don't believe that manufacturing for Phase III of rindo is going to be expensive at all.

We do have a commercial product ready to go, Steve, but we do need to do a couple of more consistency lots for FDA requirements, but the cost of that is -- it's going to be a few million dollars.

That's it.

And so, it's the same thing Dendreon faces.

We're not talking about any ridiculous economies of scale difference.

No, no, this is a -- this is going to be a very efficient and cost-effective product on the market.

Okay.

Okay.

We guarantee.

You've answered my questions.

And any color in terms of potential publications or anything we might be expecting to see during 2011?

Anything we should be looking at as far as that goes?

Well, of course, we can't predict specifically what's going to come out at what time, everything has to go through peer-review.

We do think that there will be more data coming out on the 1307 program.

We've of course completed those Phase I studies and look forward to formally publishing the results there.

Yes.

You may be seeing additional data on 110, but we can't predict exactly when.

We do have the preliminary data from ACT III, but we're still waiting for a final overall survival number before considering the data from that trial complete.

So, that won't be coming out in the near future, but certainly we're hoping to get that published as quickly as we can.

The earlier program, there's some pre-clinical data on 1401, 301, other things that will be coming through, but for the most part, it's really the ACT III data that we're excited to be able to get out in public when we have a final overall survival numbers.

Steve, that's not to say that some of the researchers we're working with outside of Celldex won't publish on some of the things that they're working on, so that's the best answer we can give you right now you.

Under flair, fair disclosure, good enough.

Thank you, gentlemen.

I'll jump back in the queue.

Your next question comes from the line of Joe Pantginis with Roth Capital Partners.

Please proceed.

Hi, guys.

Good morning.

Thanks for taking the question.

A couple quick questions.

I know you probably can't discuss this, if you had any more color regarding the placebo arm for the planned Phase III in rindo, but more specifically are you going to also look to seek a SPA for this study?

We certainly can talk about our thoughts around the placebo arm, Joe.

As you're suggesting, it's very important that we have an adequate blind in the study.

What causes the local reaction in these patients is clearly the KLH molecule that's included in rindopepimut, and we certainly believe that using a lower dose of the same molecule, KLH, would give us a very effective blind in these patients.

We were able to see that in some of the early work that John Sampson performed at Duke University and we believe that would be a very functional approach.

We, as you've heard, have spoken with the FDA.

I can tell you they would have no problems with KLH as the placebo and that's likely what we would use.

As far as an SPA goes, that's a much more complicated question and we are in active negotiations with the FDA around specific protocol design and future plans.

I think it's really too early to comment on whether that would be necessary.

Okay, and maybe just a quick follow-up, combining rindo and 011, you did outline for rindo, you're looking at other potential indications, in glio, also head and neck.

Also could you sort of touch upon other potential indications you might be looking towards for 011, and then when you've decided on these indications, is this something that you might look to start in a step-wise fashion with regard to indications?

I know it will depend on resources, or will you just sort of go full-force into a broad development program?

Well, obviously the resourcing issue is important to us at this point.

We would very much like to go into expanded Phase II development for both 110 and for 11.

The other indications are very exciting, and certainly have tremendous potential in the market as well.

We're looking to collaborate on those with groups that do have large resources and we already have a collaboration in place with the National Cancer Institute around 110 and are discussing other collaborations around 11.

So, our intent is to push forward as quickly as we can, but again, we're not dedicating all of our resources to do that.

We're trying to do that in collaboration.

Right, and as far as the indication, Joe, that we're looking at for 11 that we really have a high interest is in lymphoma, leukemia.

OK, great.

Thanks a lot, guys.

Thank you.

Your next question comes from the line of Richard Mansouri with Ridge Road Asset Management.

Please proceed.

Hello.

Yes, thank you.

Just a couple of questions.

Specific to this Biovex transaction, Biovex is developing this compound, OncoVEX, which they characterize as a novel oncolytic vaccine.

Are any of you familiar with it and can -- can you compare it to rindopepimut in any way?

We always hesitate to comment on other programs that are out there.

We have a very specific target, EGFRvIII, that appears to be an excellent immune target, because it is so immunogenic in patients.

That said, we don't believe that it's fair to really compare it to other programs that don't have a similar target.

That's fair, actually, I should really focus more on the financial aspect of it, to see if you have any insight on this.

It says here that Amgen is paying them something like $425 million in closing and up to $575 million in additional payments.

So, looks on the surface of it, according to this announcement, a fairly sizable transaction for a compound that looks like it's in Phase III.

Does this -- how does this -- how do you look at this vis-a-vis the Company's current market valuation of $134 million?

Would you characterize your valuation as relatively undervalued in the context of what's going on in the marketplace?

Can you speak to that a bit?

Well, obviously from a standpoint of valuation, we do believe the Company is undervalued.

But certainly, as we push the programs through and show the data that we've generated from the programs that we have, I think, we believe the stock price will be reflected in the data that we show.

Thank you.

Anthony, let me just ask you, given what seems to be in the last couple of months a resurgence in deal activity, whether it's licensing or M&A activity, specifically in the oncology space, are you finding that you're getting more indications of interest from other parties?

And does that bode well for you when and if you go down a partnering route, or need to bring in incremental resources?

Yes, Richard, we're not having any problems attracting discussions.

So, we've had that and we're continuing to have those discussions.

Yes, that's great.

Thanks.

Okay.

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

Please proceed.

Good morning from New York City and thanks for taking the call.

Good morning, Mark.

No need to bring the umbrella today, because it's nice and sunny out here.

The umbrella is unwelcome and I was hoping that would allow me to transition to the question on how welcome Avastin has been received really as a second line therapy in glioblastoma and then maybe your thoughts on how rindo might -- an active immunotherapy, might combine with a passive immunotherapy.

Mark, you're totally right, that Avastin has had a significant impact in glioblastoma, and is widely used in the recurrent setting.

As you know, it's currently in Phase III studies evaluating its role up front in the same population.

I'm not sure exactly when we'll see data from that, but it's a couple of years away at least.

In the recurrent setting, the data are very interesting at this point.

It certainly appears to reduce the symptoms that patients suffer, but there's a lot of concern that the tumor isn't really stopping from growing.

And I think there's a growing body of data that once you use Avastin, the tumors are fairly resistant to subsequent therapy, which means there is concern in the field that if you use it up front, you may find that you don't have any other effective agents you can use when the tumor comes back.

So, that said, it's not clear to us where rindo -- I'm sorry, where Avastin will fit in the upfront treatment line, but in the recurrent setting, I think a combination with Avastin, a drug that can augment immune response, would make perfect sense, and that's what we're hoping to test, rindo plus Avastin in the recurrent setting.

And up front, we still think we have a preferential position as an agent that's effective for the vIII expressing population and that would still allow Avastin to be used after the vIII effect wears off.

That was helpful.

Thank you.

And then I think I have a growing appreciation of EGFRvIII as a target and I was wondering if you could update, please, on your -- the next generation, I guess, agent for looking at other tumors outside of GBM that might be expressing the vIII.

Well as you observed, rindo generates very strong humoral responses in patients.

We think that that's a very potent effect in glioblastoma.

When we look at other types of tumors, we certainly are considering efforts to increase a T cell effect that could be more active in killing tumor cells.

Our current plans certainly are to see what rindo can do, both alone and in combination with other immune-augmenting agents in the tumors that we mentioned.

Although the initial steps certainly are identifying the right population of vIII expressors there, but we certainly are eager to consider down the line adding vIII as an antigen to our APC platform, and particularly combining with other antigens, and with the TLR agonists that we are using to again, see if we can get an even more potent effect in patients who do have tumor on board.

So, I think there a lot of potentials for second and third line agents and combinations in the future, and we're very eager to get into those tumors as soon as we can.

That was helpful.

And then to get you into those tumors and to help with the people resources there, Chip, can you comment, how many people now at the Celldex Therapeutics and what's the optimal number for 2011.

We currently have about 100, and we have a plan to add five to eight people over the year.

Most of that is in the clinical and regulatory area.

And again, that's to support Tom's activities in the two later stage programs, rindopepimut and CDX-011.

Thanks again for the added information.

We look forward to the upcoming events.

Thank you, Mark.

And at this time, we have no further questions.

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

Anthony Marucci for any closing remarks.

Thank you, operator.

And thank you, everyone again for joining us this morning.

We look forward to keeping you updated on Celldex's progress throughout what we believe is going to be a very busy year, and as we move forward with our programs and we can have more information, we'll certainly let our shareholders and all of those of you interested in Celldex know about it.

We thank you for the call.

Thank you.

Ladies and gentlemen, that concludes today's conference.

Thank you for your participation.

You may now disconnect.

Have a great day.