Celldex Therapeutics Inc (CLDX) 2012 Q2 法說會逐字稿

Good morning and welcome to Celldex Therapeutics' second quarter and 2012 update conference call.

My name is Chanel 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 include those set forth under the heading "Risk Factors," and "Management's Discussions 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 releases and filings with the Securities and Exchange Commission.

All forward-looking statements are expressly qualified in their entirety by this cautionary notice.

You should carefully review all 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.

Good morning and thank you for joining us.

I am Anthony Marucci, President and CEO of Celldex.

Joining me on the call today are Chip Catlin, our Senior Vice President and Chief Financial Officer; Dr. Tom Davis, our Senior Vice President and Chief Medical Officer; and Dr. Tibor Keler, our Senior Vice President and Chief Scientific Officer.

The second quarter was an extremely productive quarter for Celldex.

We had a number of key accomplishments which I want to take a few moments to review this morning before asking Chip to walk through the financial results.

We will then open the call for your questions.

During the second quarter of 2012, Celldex continued to progress well with our two ongoing rindopepimut clinical trials, the pivotal ACT IV study in patients with newly diagnosed EGFRvIII-positive glioblastoma and the Phase 2 ReACT study in patients with recurrent EGFRvIII-positive glioblastoma.

As we have discussed in the past, the ACT IV study will be conducted worldwide in approximately 19 countries around the globe with almost half the sites located outside the United States.

This has been a major undertaking for our clinical team and they are doing a great job.

In total, there are now more than 150 clinical sites around the world that have been selected to participate in the Phase 3 ACT IV study and at last count 78 of these sites were actively screening patients.

The Phase 2 ReACT study is also well-positioned with 25 study sites selected to participate and 17 actively screening.

In May, we also reported exciting preliminary results for our second late stage candidate in our pipeline, CDX-011 in metastatic breast cancer.

As most of you know, CDX-011 is a first in class next-generation antibody drug conjugate that targets a Celldex proprietary target, glycoprotein NMB or GPNMB.

GPNMB is an internalizable glycoprotein that has been identified in multiple malignancies and has been reported to be presented specifically in 40% to 75% of all breast cancers.

In breast cancer, there has been a marked correlation with high expression and poorer outcomes, including metastases and death.

This is particularly true in the triple negative breast cancer population.

The Phase 2b study randomized EMERGE study was designed by Celldex to help us understand the role CDX-011 could play in treating patients with GPNMB-expressing breast cancer.

Earlier work in both breast cancer and melanoma clearly signal that CDX-011 could play an important role in GPNMB-expressing cancers, but further study was needed to identify the most responsive patient populations and their corresponding GPNMB expression pattern.

While CDX-011 demonstrated a consistent response profile in comparison to our prior studies in breast cancer, we now have new insight into the drug's ability to elicit more pronounced response rates in the predicted patient subsets.

Preliminary results from the EMERGE study suggests that CDX-011 induces impressive response rates compared to the currently available therapies in patients with advanced, refractory breast cancer and with high GPNMB expression, defined as expression in equal to or greater than 25% of tumor cells and in patients with triple negative.

In the high GPNMB expressing patient population, treatment with CDX-011 resulted in a 32% overall response rate which includes both confirmed and unconfirmed responses whereas treatment in the Investigator's Choice single agent chemotherapy arm resulted in a 13% response rate.

CDX-011 also demonstrated strong response rate in patients with the extremely difficult to treat diagnoses of triple negative breast cancer across all levels of GPNMB expression with a CDX-011 overall response rate of 21% compared to a 0% response rate for Investigator's Choice.

In addition in patients with triple negative breast cancer who are also highly express GPNMB, even greater activity was seen.

In the CDX-011 arm, we reported an overall response rate of 36% versus a 0% response rate for Investigator's Choice.

Importantly while tumor expression of GPNMB correlated with improved response rates for CDX-011 treated patients, this was not observed for patients receiving Investigator's Choice signifying that the on target effect of CDX-011.

Looking forward, a critical question is durability of response and progression-free survival overall.

PFS is an important indicator of duration of response.

While the PFS data from the EMERGE study is not yet mature as treatment continues and there are patients who have not yet crossed over or progressed, the Kaplan-Meier curve shows an improvement in PFS, present in triple negative patients overall, but more significant in high GPNMB expressors, and most marked in the combined group, where the difference between the curves meets the statistical significance despite the small patient numbers.

These results are particularly encouraging in the heavily pretreated population such as this, where the median number of prior courses of therapy for metastatic disease was 6 in the CDX-011 cohort and in 5 in the Investigator's Choice.

While study data continue to mature and patients continue to be followed based on these initial data, we are confident that we have now established a clearly defined, enriched patient population for targeted CDX-011 therapy and that we have a reliable diagnostic assay that identifies the relevant GPNMB expression patterns and levels in breast cancer.

Together patients with high GPNMB expression levels and patients with triple negative disease account for more than 35% of the total breast cancer patient population and we believe CDX-011 could play a vital role as a much-needed treatment option for these patients.

Importantly, the EMERGE study results have put us in a position to confidently discuss possible approval paths with the regulators.

We look forward to finalizing the data from this study and anticipated updated results in the fourth quarter of 2012 and to exploring CDX-011's potential in other indications that are known to express GPNMB.

As we look to the second half of the year, we have a number of initiatives underway.

For rindopepimut, we will continue to bring on additional centers around the world and screen and enroll patients in the ACT IV study and the ReACT studies in glioblastoma, while also providing ongoing support to the pontine glioma study sponsored by Stanford University.

The survival data from the Phase 2 Act III study continues to mature and we expect to release updated data at an appropriate venue later this year.

Likewise, as I mentioned a few minutes ago, we expect to present updated results from the EMERGE CDX-011 study in metastatic breast cancer during the fourth quarter of 2012.

We expect to also present mature results from our Phase 1 study of CDX-1401 in the fourth quarter of 2012.

CDX-1401 is a novel antibody-based targeted cancer vaccine candidate being evaluated as a treatment for patients with melanoma and other cancers that are known to express the tumor antigen NY-ESO-1.

NY-ESO-1 represents an important target for developing therapeutics against multiple cancers.

The antigen, which is expressed in a wide variety of cancer cells not at significant levels in most normal tissues, has been extensively characterized in preclinical and clinical studies and has been found to be highly immunogenic.

We will report data on all 45 patients treated in the Phase 1 study, which tested various doses of CDX-1401 in combination with activators of toll-like receptors.

In the second half of the year, we plan to initiate a Phase 2 pilot study in CDX-1135 in dense deposit disease, an orphan kidney disease in children and young adults.

Dense deposit disease is caused by uncontrolled activation of the alternative pathway of complement.

Complement activation can lead to progressive kidney damage and failure.

CDX-1135 has been shown to inhibit the complement cascade at both the C3 and C5 levels and has shown clear biological activity, both restoring renal function and reversing kidney damage in animals of dense deposit disease and blocking complement activity in earlier human clinical trials.

The pilot study will be conducted in a small number of patients to define an appropriate dosing regimen for further clinical development.

Since we expect to see disease control in these patients, the endpoints of complement control in the early reversal of kidney damage can trigger a modestly sized registration strategy.

We have already discussed these plans with the FDA in a pre-IND meeting and have their agreement with this approach.

We are also on track to complete the Phase 1 trial of CDX-1127 in solid tumors during the second half of 2012 and hematological cancers in the first half of 2013.

We will also complete accrual of the Phase 1 study of CDX-301 in healthy volunteers, which will provide important safety data and dosage information to inform the next steps for this program which we believe will involve the treatment of cancer patients requiring hemotopoietic stem cell transplantation.

So as you can see, the second half of the year will be just as busy as the first with data readouts across three programs and the initiation of new clinical study.

With that, I will turn the call over to Chip to review the second quarter financial results and then we will open the call open to your questions.

Chip?

Thank you, Anthony.

For the second quarter of 2012, Celldex reported a net loss of $13.8 million or $0.23 per share compared to a net loss of $10.2 million or $0.27 per share for the second quarter of 2011.

The increase in net loss of $3.5 million between the three-month periods is primarily due to higher R&D expenses in 2012 versus 2011, including increased clinical trials costs incurred in ramping up enrollment in the rindopepimut ACT IV and ReACT studies.

For the six months ended June 30, 2012, Celldex reported a net loss of $27.3 million or $0.50 per share compared to a net loss of $20.3 million, or $0.58 per share for the six months ended June 30, 2011.

Again, the increased loss resulted in higher R&D expenses primarily for clinical trials costs, partially offset by lower amortization expenses in the first six months of 2012.

At June 30, 2012, Celldex reported cash, cash equivalents and marketable securities of $78.7 million.

The decrease in cash, cash equivalents and marketable securities of $13.5 million from March 31, 2012 is primarily due to planned increased operational expenses during the quarter related to ongoing studies of rindopepimut including the pivotal ACT IV study and the Phase 2 ReACT study.

During the six months ended June 30, 2012, we raised net proceeds of $8.5 million through the sale of 2.5 million shares of common stock under a controlled equity financing facility with Cantor Fitzgerald and issued 12.1 million shares of our common stock in an underwritten public offering that resulted in net proceeds of $43.4 million together providing a financial runway into 2014.

As of June 30, 2012, Celldex had 58.8 million shares outstanding.

I will now turn the call back over to Anthony for closing comments.

Anthony?

Thank you, Chip.

On a final note, I am very pleased to announce today that Celldex has added two important positions to its management team.

First, Dr. Rick Wright has joined Celldex as our Vice President of Commercial Development.

Rick has over 20 years of diverse experience in the biopharmaceutical industry including leadership positions in R&D, new product commercialization and marketing and sales at Bristol-Myers and Novartis.

Secondly, Sarah Cavanaugh has joined Celldex team as our new Vice President of Investor Relations and Corporate Communications.

Sarah is a proven IR professional with over 15 years experience in the life sciences and healthcare industries and I look forward to working closely with both Rick and Sarah as Celldex continues the development of its product pipeline.

This concludes our prepared remarks and we are now ready for your questions.

Operator?

(Operator Instructions).

Jonathan Aschoff, Brean Murray.

Thank you.

Good morning.

I have three questions.

I was wondering if you could better pin down when results from each of those Phase 2 recurrent brain cancer trials will be available?

And I guess far more importantly than that, are you still comfortable describing at least one of them as being able to support or being able to be the primary data set in support of some sort of accelerated approval prior to any Phase 3 conclusion?

Yes, hi Jonathan.

So the most important study that you are describing is the ReACT study which is focusing on patients with recurrent glioblastoma.

We know this population still expresses vIII and based on some anecdotal experience we have had in compassionate use, we believe that we can actually have a fairly profound impact even in patients with significant disease.

We still are on track to complete accrual to the study by the end of this year, perhaps early next year, so things are going well at this point.

It's a good-sized Phase 2 study and if we do see significant results, it certainly could perform the basis for a discussion with the FDA around approval but we have not yet had that discussion.

But a lot will depend on the data, if the data really do look like there is clear activity, then there is potential for that trial to be used for registration.

Okay.

Regarding any BD surrounding CDX-011, is the data that you already have in hand essentially all you need to bring to the table or is December's upcoming data something potential partners would really rather see first?

We are having discussions on the program with the data we have already, Jonathan.

So there are a number of discussions ongoing now.

Okay.

And lastly, regardless of a patient's triple negative status, would any future trial with 011 enroll only patients that at least also express GPNMB on 25% plus of the cells?

The tricky questions in this program are accelerated approval based on a limited sized study versus a large randomized trial and in order to obtain accelerated approval, it makes sense to target the highest responding population and as you saw from the study, the triple negatives who also express high levels of GPNMB would appear to have the greatest benefit.

At least you would always put someone in there who is a 25% plus -- triple negative fine, but they would definitely also at least always be 25% plus?

Right.

So right now that looks like the population to go after, but the discussion with the FDA will revolve around whether they would accept that population with a very high response rate or would prefer a randomized study in which case we might consider a larger patient population that of course ultimately could lead to a larger market.

So there are some variables there, but the key message from 011, the EMERGE study, really was the fact that targeting makes a difference and that the drug clearly works better in populations with higher expression.

Thanks a lot.

Mara Goldstein, Cantor Fitzgerald.

Hi, thanks for taking the question.

I have two questions and the first is just a follow-up on CDX-011 and I believe you said that you expected an end of Phase 2 meeting with the FDA in the fourth quarter.

I am just curious about the supply quantities product for doing a Phase 3. If I recall you had some issues with a contract manufacturer on that and I am wondering how that stands at this point in time?

And then secondarily on the R&D spending on CDX-1135, in your filings it appears that the amount of money that you're spending on that program is quite high relative to the stage of development compared to other products at a similar stage, and I am wondering if you can speak to the activities associated with this work and why these appear so much higher than other compounds?

Hi Mara.

This is Tibor Keler.

With regards to your first question regarding product supply, we believe we are in good position that the product supply is not going to be the rate limiting factor for initiating our next trial with this CDX-011, which is likely to happen in the second to middle of next year.

Okay.

But you have supply that can be used currently, correct?

Yes.

And then on CDX-1135?

Could you repeat that question?

It's just the R&D spending, if you look at your filings what you're spending on that relative to other compounds at similar stage of development is a pretty big number and I am just wondering if you could give us an idea of what are the activities associated with the work and why they appear are so high relative to other things?

So for CDX-1135, it was really a matter of us producing the clinical grade material for initiating this study.

So really all of our efforts in spending has been internally around the manufacture of the product.

Okay.

And if I could just sneak one more question in if you don't mind and it actually is around some news I saw yesterday about Avastin in a front-line trial in GBM seeing a statistical significance and I was just curious if you have seen any of this yet and if you think it will have any impact on enrollment in ReACT or even in the main rindopepimut trial?

We are still working through the results there and of course, need to see significantly more data to really understand what this means for patients as well as talk to our consultants.

However all along, we have made it fairly clear that Avastin is an active drug in this space, but it is not necessarily a competitor.

We have reason to believe that Avastin and rindopepimut can work very well together and certainly our expectations would be to get the combination rather than try to compete with Avastin.

Okay, thank you.

Biren Amin, Jefferies.

Yes, hi guys.

Thanks for taking my questions.

Just a question on EMERGE.

Have all the patients progressed in the CDX-011 arm and will we have mature PFS data at San Antonio Breast?

Thanks.

I can tell you at this point that no, the patients have not all progressed in the 011 arm.

There are patients still being treated.

Certainly the data that we would present at the end of the year will be more mature, but it will not necessarily be final because of course final data relies on all the patients having completed treatment.

Great, thank you.

Joe Pantginis, ROTH Capital Partners.

Hi guys, good morning.

Thanks for taking the question.

Just a quick question then -- well a couple of quick questions obviously.

First on rindo, you already addressed the AVAGLIO study so thank you for that.

The second part of the question is can you disclose any data so far with the 78 sites that are actively screening with regard to say success rates with regard to patients that are screened that can then be enrolled?

Not at this time, Joe.

Our focus right now is getting up all the sites and we will give more updates later on in the year and into next year.

Okay, that's fair.

And then just maybe a couple of additional color comments on 1135.

I know you talked about looking to have a potential discussion with the FDA about a registrational path.

Is there anything you can add color wise since this is an orphan indication about how this -- the further color like you said, it could be a much smaller study and how it can get to the market in a relatively quick fashion because of its orphan status?

Well Joe, we have already had that discussion with the FDA around the possibilities and they certainly are very open to rapid approval for a drug that clearly shows activity.

So for us this current pilot study will be critical if we see the kind of activity that has been seen with other complement inhibitors and other diseases and I think it is pretty clear that a very modestly sized study would be adequate to support approval.

How would you define moderately sized?

Well it really all depends on how active the drug is.

So a trial size is very dependent on the effect you are looking for.

That study could be as small as 30 to 40 patients.

It could be larger than that.

It really depends on the results of the first patients we treat.

Sure.

No, but the magnitude is certainly understanded -- okay great, thanks a lot guys.

Mani Mohindru, ThinkEquity.

Hi.

Thanks guys for taking my questions.

A lot of them have been answered, but a couple of questions I have.

I just wanted to get a little more sense into what assumptions went into your cash (use guidance) or cash all the way into to 2014 like for example like what are you assuming for CDX-011 in terms of the next steps in doing the trial either on your own or looking for a partner before you start the trial as well as for rindo's ex-US partnership?

So what sort of is built into your guidance there?

Yes, so as far as partnerships for rindo, we are not building anything into the assumptions.

The assumption for CDX-011 is that we would manufacture a little bit more product and start the Phase 3 trial if we did it on our own sometime in 2013, which again that allows us to have the runway into 2014.

Some of the earlier programs like 1401 and 301, we're talking to the NCI and CTEP about doing future studies and then we are going to look for the results for 1127 Phase 1 before making any decisions on a Phase 2 study going forward.

So that is how we get to that point.

Okay and if I may have a follow-up question that Mara had on the contract manufacturer.

So my assumption was that their facility was in clinical hold and that you were allowed to use whatever product you had, but would that be enough for the next study or are you going to look for another clinical research CRO?

As we had described, we had negotiations with the FDA around being able to use the material that we have on hand with the reprocessing of the particular batch.

So we are still going through that process with the agency, and we believe that will be successful.

Having said that, Mani, to get commercial product you have to do several more consistency runs so additional manufacturing will be required, but certainly what we have on hand is enough to start the trial and get along.

Okay.

And if I may again follow up on one of the questions Mara brought forward, in terms of the Avastin frontline topline data released yesterday, do you think that you have the possibility of an amendment down the road?

It probably obviously depends on how you enroll and what the status could be for Avastin in frontline, but have you started thinking along those lines if at all you may have to amend anything in your ACT IV study if actually Avastin gets into frontline?

We have sort of been aware that these data were coming for quite some time and all along have been planning to work alongside of Avastin, as I mentioned earlier, if necessary.

It is a larger issue because of course the data are important in subsections of the world, but our global study would not necessarily be able to access Avastin in every country.

So we will need to see what the data are.

We will need to see how rapidly we think it is going to become standard of care and then we will need to figure out exactly what the FDA would consider here.

But there is plenty of time before the standards are going to change.

And has the FDA given you some kind of guidance around the number of patients that have to be enrolled within the US for the pivotal trial?

We have had detailed discussions with the regulators and they do not specify a specific number of US patients that are needed.

Thank you.

That is very helpful.

Steve Brozak, WBB Securities.

Hey, good morning gentlemen.

As you have answered most of the questions that I was looking at, there is one question I have got that is general and I will go along and I would like to see what your general answer is.

Celldex has an understanding of everything involved with the manufacturing, the clinical development, not just clinical in the US, clinical global on the regulatory side and the business development.

Yet there was one thing that caught my eye that you have got a small SBIR grant collaboration with Rockefeller.

Can you describe the differentiation that you have, the ability to go out there and do something that the major pharmas, the major biotechs are doing yet you are still able to go out there and be as nimble as doing something like that?

Can you describe what differentiates Celldex from other companies, without mentioning those companies by name of course, but how you guys can do business and how you guys are able to do everything just like the big boys, quote unquote, according to market cap, yet you are different?

Steve, this is Tibor.

I will start with that question and I think it is a very important part of our culture that we do keep a very strong scientific based ability to work with both academia and government institutions to help really develop our technology to its best and without expending all the resources from Celldex.

So certainly we prioritize our later stage programs from a resource point of view, but have been able to leverage our relationships with the NCI, NIH and academic institutions such as Rockefeller University for really extended research programs and that really speaks a little bit to the kinds of technologies that we have because there is great interest in the academic and scientific community to work with Celldex and it is really based on the technologies that we have and their great interest in developing them.

So I think that will continue to be part of the way we will develop our pipeline and bring new programs forward.

Great.

And just so that you know I guess Wall Street and the investment community looks at you as probably one of the strongest if not the strongest freestanding monoclonal antibody technology companies on the Street.

Would you say that that is a good assessment without patting yourselves on the back too much and I will hop off-line after that answer.

Sure.

I think it is a great assessment, Steve.

Great.

Thank you.

There are no further questions.

I would now like to turn the call back over -- sorry, it looks like we do have a question comes from the line of Matthew Pommer, Oppenheimer.

Good morning, guys.

Thank you for taking the question.

I am in for Boris Peaker.

Hey, Matthew.

Earlier you mentioned that the CDX-011, the next study might kick off in mid-2013.

I was wondering if there was anything more you could tell us about the structure of that study and sort of if there is any more color you could add?

Well obviously, it is a very high priority for us right now to get to that next stage as quickly as we can but again the key question is whether or not a modestly sized Phase 2 would be adequate for accelerated approval or whether we need to go right into the large randomized 3. So for us the discussion with the FDA and EMA is most critical.

If there does appear to be a fairly fast path forward, we would hope to start the study sooner.

If it is going to require a greater effort to put together a large randomized 3, it will take a little bit longer, but still we very much believe early to mid-2013 to start that study is a reasonable timeframe.

Okay, and given what you are seeing in the results you have now for EMERGE I guess with regard to GPNMB expression, do you have any thoughts about the size or the cut off there that you might look for?

So the data we have currently seen in triple negatives with high GPNMB expression, our response rate in the 30% range, would be very exciting data in a larger population of patients and I think the FDA have made it very clear that they can and have approved drugs based on that kind of response rate from a single arm Phase 2 study of 150 patients.

So I think that would be a best case scenario.

If we need to be more cautious and look at PFS and overall survival as well, it would need to be a larger randomized study and those typically run 400 to 500 patients.

But again, there are a lot of variables and a lot of discussions we still need to have.

Okay, thank you for taking the question.

Now there are no further questions.

I would like to turn the call back over to Mr. Anthony Marucci.

Thank you, operator, and thanks to everyone for joining us this morning.

We look forward to a very productive second half of the year and while we will have multiple opportunities to update you on our progress over the coming months, as always we welcome your questions at any time.

With that have a great summer and we look forward to talking to you in the future.

Thank you.

Ladies and gentlemen, that concludes the presentation.

Thank you for your participation.

You may now disconnect.

Have a great day.