Celldex Therapeutics Inc (CLDX) 2018 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Celldex Therapeutics Midyear 2018 Conference Call.

(Operator Instructions) As a reminder, today's program is being recorded.

And now I'd like to introduce your host for today's program, Sarah Cavanaugh.

Please go ahead.

Good afternoon, and thank you for joining us.

With me on the call today are Anthony Marucci, Co-Founder, President and CEO of Celldex Therapeutics; Dr. Tibor Keler, Co-Founder, Executive Vice President and Chief Scientific Officer; and Sam Martin, Senior Vice President and Chief Financial Officer.

Before we begin our discussion, I'd like to mention 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 are 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 headings Risk Factors and Management's Discussion and Analysis of Financial Condition and Results of Operation 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 other filings with the SEC and its press releases.

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

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 a question-and-answer period will be held at the close of the call.

On today's call, Anthony will begin with a review of the business strategy; Tibor will update you on our clinical programs; Sam will review the financials; and then Anthony will close, outlining key milestones for the remainder of the year.

I'd now like to turn the call over to Anthony.

Thank you, Sarah.

Good afternoon, and thank you for joining us.

As you know, Celldex has a long-held interest and deep experience in immunotherapy.

We have used this knowledge to develop a very unique set of immunotherapies and targeted biologics.

Core to our scientific approach is the belief that when a targeted immune system, combination therapy is the most promising approach to support clinical benefit.

When considering the cancer immunity cycle, there are a number of key areas to intervene.

While the checkpoint inhibitors can help keep an active immune response from being turned off, we also need agents that extend beyond the role of checkpoint therapies and can help initiate immune responses.

This is where we are focused, on enhancing the antigen presentation pathway to allow new immune responses to be generated against liberated antigens resulting from immunogenic cell death by tumor-targeted products, like CDX-3379, or in certain indications, CDX-1140 or varlilumab, and other modes of therapies like radiation.

One key to this process are dendritic cells, which are relatively rare cells, especially in tumors and are the most effective cells to prime immune responses.

Specifically, T-cell responses against tumors.

We are developing CDX-301 as boosting agent to prime the immune system by increasing the number of dendritic cells and promoting the efficiency of the process.

That said, not only do we need dendritic cells in reasonable numbers, you need to activate them, which is where CDX-1140 plays a critical role in activating dendritic cells through the CD40 pathway.

Likewise, T-cell co-stimulation is also an important part of the immune cascade, which is where varlilumab can fit in by targeting the CD27 pathway.

And beyond the PD-1 and CTLA-4 checkpoint pathways, there are other immunosuppressive mechanisms that can -- that need to be addressed to optimize clinical benefit, and we need several earlier-stage programs that target this pathway.

Importantly, as Sam will outline later on the call, we are confident we have the required financial resources on hand to see these programs through to key inflection points.

In direct support to this, in April, we made significant cuts to our business operations, including a corporate restructuring that decreased our headcount by approximately 30% and a cost savings initiatives that has reduced our protected burden for 2018 by 20%.

As 2018 included significant glemba cost, cost savings realized from this effort in 2019 will be more significant.

These efforts are solely focused on extending and directing our financial resources to the advancement of the programs we believe can bring the most value to both patients and shareholders.

We continue to believe we are well positioned to succeed and look forward to a productive second half of the year.

With that, overview, I will ask Tibor to provide an update on the pipeline progress.

Tibor?

Thanks, Anthony.

So let me start first with an update on CDX-1140, a fully human antibody targeted to CD40, a key activator of immune responses, which is found, as mentioned, on dendritic cells and also on macrophages, B-cells and several cancer types.

Potent CD40 agonist antibodies have shown encouraging results in early clinical studies.

However, systemic toxicity associated with broad CD40 activation has limited their dosing.

We believe CDX-1140 has unique properties relative to other CD40 agonist antibodies.

It binds to a unique part of the CD40 molecule that results in agonist activity that does not require cross-linking through Fc receptor interactions, allowing more consistent and controlled immune cell activation.

Also, CDX-1140 does not interfere with the natural activation of CD40 by its ligand, and we have observed strong synergy with CD40 ligand that may potentiate the agonist activity.

Finally, CDX-1140 has a remarkably good safety profile while demonstrating potent immune activation in our preclinical studies.

Our ongoing Phase I study is designed to answer a few important questions.

First, our primary goal is to identify the optimal dose through dose escalation.

During this phase, patients with recurrent, locally advanced or metastatic solid tumors receive CDX-1140 at dose levels ranging from 0.01 mg/kg to 3 milligrams per kilogram, once every 4 weeks until disease progression or intolerance.

It's important to point out that the goal in this study is not necessarily to get to the highest 3 milligrams per kilogram dose, but rather achieve a dose level that will provide good systemic exposure without dose limiting toxicity, a goal that has eluded other potent CD40 agonist antibodies tested in the clinic to date.

As we have guided in the past, given the potency of prior CD40 agonists, the dose escalation portion of this study will take some time.

We are required to wait between dosing patients within a specific cohort and must also clear a 4-week observation period after the last patient in each cohort is dosed before we can increase to the next dose level.

We have made great progress so far with 3 dosing cohorts completed, 0.01, 0.03 and the 0.9 milligrams per kilogram.

Data to date from these cohorts suggest that CDX-1140 has a desirable safety profile without any dose-limiting toxicities, and based on the biomarker data, is demonstrating clear signs of biological activity associated with CD40 activation.

We're currently enrolling to the fourth cohort at 0.18 milligrams per kilogram.

As Anthony mentioned at the start of the call, from a scientific perspective, increasing the number of dendritic cells could enhance the potential impact of CDX-1140.

CDX-301 is a dendritic cell growth factor that want to use as a priming agent to increase the number of dendritic cells available to respond to CDX-1140.

To this end, we have added CDX-1140 plus CDX-301 combination cohort to the dose escalation phase of the study using a fixed dose of CDX-301 with increasing doses of CDX-1140.

We expect to begin enrolling this new cohort next month.

Once we have the optimal dose identified, we will move into expansion arms in both the single agent and combination cohort in specific tumor types.

Our interest in this combination cohort has continued to grow as we have seen some very intriguing CDX-301 data coming out of an investigator-sponsored study at Montefiore Medical Center and led by Dr. Chandan Guha and Dr. Nitin Ohri.

Early data from the study were presented in a plenary session at the AACR Annual Meeting in April.

The study is evaluating the combination of CDX-301 with stereotactic body radiotherapy in patients with advanced metastatic non-small cell lung cancer.

In this study, patients receive radiation directed to a single lung tumor lesion, along with 5 once-a-day subcutaneous injections of CDX-301.

The nonirradiated tumors are then evaluated for a response with the rationale that the dendritic cells mobilized by CDX-301 will help initiate a systemic immune response to the tumor antigens released by the irradiated tumor.

Preliminary data has provided important proof of concept by demonstrating partial responses in nonirradiated tumors in several patients and with associated with better progression-free survival and overall survival than expected for these refractory patients.

We look forward to receiving additional updates and we'll continue to monitor the study as we move forward.

Next, I will update on CDX-3379, a monoclonal antibody targeting ErbB3, which is also called HER3.

ErbB3 is found on tumor cells in a variety of cancers and is implicated in cancer cell growth, survival as well as resistance to targeted therapies.

CDX-3379 may play an important role in overcoming this resistance as it specifically targets ErbB3 with potent affinity and locks it into a deactivated state, uniquely blocking its interaction with ligands and also with other oncogenic drivers.

In a previously completed Phase Ib study, we saw evidence of antitumor activity among the 9 patients with head and neck cancer who were treated with CDX-3379 in combination Erbitux, an EGFR inhibitor, including a durable complete response in a patient who had previously progressed on Erbitux as monotherapy.

An open label Phase II study of CDX-3379, given in combination with Erbitux, is currently enrolling patients with HPV negative, advanced head and neck squamous cell carcinoma whose tumors have previously been treated with an anti-PD-1 checkpoint inhibitor and have become resistant to Erbitux.

Using a Simon two-stage design, the first portion of the study will enroll 13 patients.

And if at least 1 patient achieves a partial response, enrollment can progress to the second stage.

We have already experienced a confirmed partial response, but plan to complete enrollment to the entire first stage and we'll use the full data set to inform next decisions.

Beyond head and neck cancer, ErbB3 is believed to play a role in several other solid tumor types, such as thyroid, breast, lung and gastric cancers as well as melanoma.

We continue to explore potential other opportunities and additional indications, and data from the first portion of the head and neck study will largely inform our decisions on next steps.

Moving to varlilumab.

During an oral presentation at the ASCO Annual Meeting in June, we started to report results from several cohorts in our Phase I/II study of varlilumab, our CD27 agonist antibody, in combination with Opdivo which is being conducted in collaboration with Bristol-Myers Squibb.

As a reminder, the Phase II portion of the study was designed to enroll patients across 5 indications: colorectal cancer, ovarian cancer, head and neck squamous cell carcinoma, renal cell carcinoma and glioblastoma.

While the ASCO data was covered in great detail in June, I do want to highlight some of our observations from the ovarian cancer cohort.

Analysis of paired tumor samples from before and during treatment demonstrated significant increases in tumor expression of PD-L1 and CD8 positive tumor infiltrating lymphocytes in more than half of the patients.

These increases were associated with improved clinical outcomes, including progression-free survival of 7 months and greater than 30% response rate, which compares very favorably to historical outcomes with checkpoint inhibitors alone.

We continue to analyze the biological signatures that may distinguish the patients that have response to therapy to inform how we may select for the patients or define additional combinations that can further improve clinical outcomes.

We very recently reviewed preliminary data from the head and neck squamous cell carcinoma and renal cell carcinoma cohorts.

27 patients with head and neck cancer, 96% of whom had stage IV disease, were treated in the study.

Patients had a median of 2 prior lines of therapy, 63% had PD-L1 negative tumors and 52% had HPV positive tumors.

The overall response rate was 15%, with all 4 responses being confirmed and primarily occurring in PD-L1 negative or low patients.

Given the changing environment in the renal cell carcinoma treatment, only 14 patients with RCC were treated in the renal cell cohort.

These were all stage IV disease, and all patients had prior anti-angiogenic therapy with a range of 1 to 4 prior treatments and half of the patients were PDL1 negative.

39% of the patients experienced stable disease.

While the data to date from these cohorts have not led to a clear path forward for the combination, we have seen that varli-nivo combination can have meaningful biological effects on the tumor in some patients.

And there were some impressive responses in some patients that typically have low probability of response to checkpoint therapy alone.

As I said earlier, moving forward for varli, understanding what the differences are between those patients who respond and those who don't will be important as it could allow us to select for patients best suited for varli therapy.

Finally, to close out the study, we look forward to presenting data from the last cohort in glioblastoma at a medical meeting later this year.

We continue to explore varli externally through several investigator-initiated studies, and internally, through inclusion and combination studies.

An option to further test varli's potential would be as a combination partner in the ongoing Phase I study of CDX-1140 based on the synergy observed in our preclinical lymphoma models when combined with varlilumab.

Earlier this year, at AACR, we provided data from our first bispecific antibody which targets both CD27 and PD-L1.

And we are pleased to see enhanced in vivo and in vitro activity when comparing the CD27xPD-L1 bispecific compared to the combination of the CD27 and PD-L1 monoclonal antibodies.

Also in our preclinical portfolio, we continue to advance our anti-KIT program, CDX-0159.

Our clinical experience with the first generation, CDX-0158, demonstrated prolonged suppression of tryptase levels, suggesting a marked decrease in mast cells that we believe will translate to clinical benefit in mast cell-related diseases.

We anticipate manufacturing and IND-enabling studies will be completed this year, and that it will enter the clinic in 2019.

We also continue to make good progress on our TAM program by selecting lead candidate antibodies against these important checkpoint targets, Tyro3, Axl and MerTK, which have potentially broad applications in oncology, inflammation and infectious disease.

I'd like to now hand the call over to Sam to review the financials.

Thank you, Tibor.

For the second quarter of 2018, net loss was $16.4 million or $0.11 per share compared to a net loss of $28.6 million or $0.23 per share for the second quarter of 2017.

Net loss for the 6 months ended June 30, 2018, was $134.5 million or $0.93 per share compared to $62.8 million or $0.51 per share for the comparable period in 2017.

During the first quarter of 2018, we recorded $109.7 million or $0.78 per share in one-time goodwill and intangible asset noncash impairment expenses.

Research and development expenses were $43.3 million for the 6 months ended June 30, 2018, compared to $50.8 million for the comparable period in 2017.

General and administrative expenses were $11.2 million for the 6 months ended June 30, 2018, compared to $13.8 million for the comparable period in 2017.

As of June 30, 2018, we reported cash, cash equivalents and marketable securities of $114 million.

We expect the cash, cash equivalents and marketable securities at June 30, 2018, combined with the anticipated proceeds from future sales of common stock under the Cantor agreement are sufficient to meet estimated working capital requirements and fund planned operations through 2020.

At June 30, 2018, we had 156.6 million shares outstanding.

I will now turn the call over to Anthony to close.

Thank you, Sam.

I believe today's review provides not only a good overview of the programs themselves but also the approach we are taking to build the right regimen to combat intractable cancers.

As we look to the future, we are focused on execution.

For CDX-1140, we will continue to enroll the Phase I study over the remainder of the year and are looking forward to opening up the 301 combination cohort very soon.

We believe that in the next 6 to 9 months, we should have a very good understanding of the important role we believe CDX-1140 can play in the treatment of cancer.

For CDX-3379, we will complete enrollment of -- to the first portion of the Phase II study in head and neck cancer in the coming months, and we'll use the data to determine next steps for the program.

For varli, results of the Phase II Opdivo combination in glioblastoma will be presented later this year, and we may add a cohort to the 1140 study to evaluate the combination of CD27 and CD40 in B-cell lymphomas, where we will potentially have the ability to take advantage of the dual mechanism of action of both direct killing and immune activation.

Finally, for CDX-0159, our anti-KIT antibody, we will complete IND-enabling studies by the end of the year and would anticipate initiate Phase I studies in 2019.

With that review, I will open up the floor to questions.

Operator?

(Operator Instructions) Our first question comes from the line of Joe Pantginis from H.C. Wainwright.

So maybe -- this is for Tibor.

With regard to 1140, really appreciate the details with regard to what's unique about your antibody.

Maybe can you do a little bit more compare and contrast about how it might compare to others, especially with regard to some of the points you made with regard to what appears to be, so far, reduced systemic toxicity relative to others?

And then I have a quick follow up.

Sure.

Thank you.

There have been several different approaches taken to enhance the activity of CD40 agonist antibodies.

Some of the approaches include modifications in the Fc domain or Fc region of the antibody to enhance interaction with Fc receptor, which helps provide cross-linking for signaling.

That approach, of course, requires the presence of the appropriate Fc receptors to lead to the cross-linking and agonist activity.

The antibody we selected, CDX-1140, is able to bind and activate the receptor without requiring any other interactions with other molecules.

So that's one clear distinction.

Another factor that we used in the selection of CDX-1140 was to ensure that it would bind in such a way and activate cells in a dose-dependent manner that would allow us to achieve a dose level that would give good systemic exposure.

We think it's really important that the antibody is able to engage with dendritic cells, macrophages within the tumor microenvironment.

And we believe that will require doses that are greater than doses being used with some of the current CD40 agonist antibodies in the clinic so far.

That's actually very helpful.

And I guess, my quick follow up is as you're looking at the dose escalation, are there any considerations that might be analogous to varli with regard to your decisions for dosing and scheduling identification relative to immune activation.

Because I know that was important for varli, is that something you're thinking about here, or is it not even relevant?

No, it's certainly relevant.

And we do think that it's important.

We have some prior experience with CD40 agonist antibodies that suggests dosing too frequently may not be optimal, and we certainly believe there's rationale for that.

So that's why selected an every 4-week dosing strategy in our Phase I dose escalation.

But of course, the data will drive the appropriate regimens.

But certainly the dosing frequency as well as the dose level are both things that we're really going to pay attention to in terms of determining the best regimen to move forward with.

(Operator Instructions) Our next question comes from the line of Boris Peaker with Cowen.

My first question is on CD40.

When you combine 1140 and 301, I'm just curious, how can you tell, which agent's actually working, or how do you even best dose-adjust each individual drug?

This is Tibor.

That's a good question.

They both have very unique effects biologically.

And so we will certainly be able, from a biomarker perspective, be able to track the effect of the drugs, which for CDX-301, we have a very significant body of data that describes the effects that we see, including the increased number of dendritic cells, which is the most pertinent biological effect from our point of view.

So I think we will be able to determine that both drugs are having their effects.

We've already landed on a 5-daily sub-Q regimen for CDX-301 as our recommended dose moving forward in these combination studies.

And we have quite a bit of data suggesting that that's an active regimen that effectively enhances the number of dendritic cells.

And of course, for 1140, which will activate these cells, resulting in cytokine simulation, cytokine expression in the blood, we'll have additional biomarkers that will show and suggest the combination relative to, for example, the CDX-1140 monotherapy arm.

My second question for varli, I'm just curious, what specific efficacy threshold do you have for this drug to continue development in head and neck and renal cell carcinoma?

And when is kind of the timeline where you can actually assess it?

In reference to in combination with Opdivo?

Yes.

Or in general, just at which point could you -- what do you need to see, in the ongoing studies, since you have several ongoing studies, and at which point would you get to that data set to make a decision to move forward or not on this program?

So I think we've seen some very important biologic, as well as clinical, effects with varli.

We continue to explore what combinations will provide the best opportunities for it.

We haven't set a specific bar of what needs to be seen.

As I had mentioned, currently from the data that we've reported on, on head and neck and renal, we don't see a clear path forward for the nivo combination.

But we are continuing to understand better the difference between the patients which have significant responses and where we are able to turn their tumors from cold to hot, to understand whether either through patient selection, by understanding the difference in those patients, or by perhaps additional combinations that could be brought in to enhance that clinical activity in those patients that don't respond.

Remember also, many of the patients in this study are PD-L/PD-1 negatives and there isn't a heck of a lot of information on single agent activity with Opdivo or pembro in this setting.

So when we look at what the hurdle rate is going to be, we need to be able to do an apples-to-apples comparison here.

Our next question comes from the line of Stephen Brozak with WBB Securities, your question please.

I'd actually like to go more of a macro picture with Celldex, in terms of how we should look at Celldex right now.

Because, obviously, the realities are that you're trading at a discount to cash and there aren't that many franchises that I know of at any market cap size that have as much immuno-oncology experience as you do.

So, in positioning yourselves in terms of trials that you're running, what we should look at and think about in valuing the franchise?

Can you give us what -- how you position Celldex in 2018?

And then I got one follow up after that, please.

Yes.

I mean -- again, this whole immuno-oncology space has taken a little bit of a hit, so I think we've suffered along with that.

But the strategy, from our perspective, Steve, has always been combination therapy around oncology and other diseases.

Obviously, we've talked about -- a lot about 1140 today, we think that, that's an important asset for us.

We think it's a highly differentiated CD40 compared to what's out there now.

But it's going to take a few more months to see the fruits of that.

So expect some early data at SITC in late November on that while we're doing the dose escalation.

But I definitely -- what we've said today about activating the immune system, targeting APCs and what have you, that's been the focus of the company for a long time and will continue.

I just think that with the I-Os taking a little bit of a hit this year, we've suffered accordingly.

But that's basically the way we've always looked at ourselves, putting the right combination drugs to gather in order to really enhance the immune system of the patient to handle itself.

And that leads me to the follow up because you, obviously, just mentioned that.

Given the fact that we are looking at a combination therapy universe, and we've been doing so for quite a while, how do you position yourself along that line, understanding that there are multiple drugs out there that you potentially could collaborate with, multiple companies that you could work with, multiple companies that you could collaborate with?

How should we look at that, given the fact that you pretty much have the ability to do more than anyone else had -- can for any size company given what options in the immuno-oncology space there are?

And I'll hop back in the queue after that.

I mean, I think that's something that's very real for us to look forward to down the road.

Obviously, let's get through the Phase Is and see what the data tells us.

At that point, we can decide or engage the appropriate parties for collaborations, partnerships and what have you.

And this does conclude the question-and-answer session of today's program.

I'd like to hand the program back to Anthony Marucci, CEO, for any further remarks.

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

We appreciate your time and support and we look forward to keeping you up-to-date throughout 2018.

As always, we welcome your questions at any time.

Have a great evening.

Thank you.

Ladies and gentlemen, for your participation in today's conference.

This does conclude the program.

You may now disconnect.

Good day.