CLDX - NASDAQ

Good day, ladies and gentlemen. And welcome to the Celldex Therapeutics Year End 2018 Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this call is being recorded. I would now like to introduce your host for today's conference, Sarah Cavanaugh, Senior Vice President of Corporate Affairs. Ma'am, you may begin.

Thank you. Good afternoon and thank you for joining us. With me on the call today are Anthony Marucci, Co-Founder, President, and CEO of Celldex; 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 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 the question and answer period will be held at the end of the call. I'd now like to the call over to Anthony.

Thank you, Sarah. Good afternoon and thank you for joining us. On today's call, I will provide a review of our business and an update of our clinical programs, specifically the ongoing Celldex-led studies of CDX-1140 and CDX-3379. As you'll likely read in this afternoon's press release, we will have a number of preclinical programs that we will be presenting data on in 2019, and I've asked Tibor to walk you through these efforts and how they fit into the larger clinical development strategy. Sam will then review the financials, and we'll close with your questions. As we look at the business overall, our pipeline remains strong and well diversified. We have two programs in the clinic and continue to execute on our development strategy to file a new IND every 12 to 18 months. We've made a series of difficult but necessary decisions over the last year as we've 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, and we thank you for your continued support. As we look forward to the future, we believe we are all well positioned for potential success and look forward to a productive year. Let me first start with an update of CDX-1140. This is a full human antibody targeted to CD40, a key activator of immune response, which is found on dendritic cells, 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 selected CDX-1140 based on its unique properties relative to other CD40 agonist antibodies. It binds to the CD40 receptor in a manner that results in a linear dose-dependent agonist activity, which may allow for higher systemic dosing and better tumor penetration at the optimal agonist levels. 1140 does not require cross-linking through Fc receptor interactions for its agonist activity, allowing more consistent and controlled immune cell activation. Also, 1140 does not interfere with the natural activation of CD40 by its ligand, which may further potentiate local immune response. Finally, 1140 has a remarkably good safety profile while demonstrating potent immune activation in our preclinical studies. The ongoing Phase 1 trial is a multidose dose-escalation study of CDX-1140 in patients with recurrent, locally advanced or metastatic solid tumors and B-cell lymphomas. An important goal of the study is to achieve dosing levels that will provide good, systemic exposure without dose-limiting toxicity. We believe the relatively low doses of the other potent CD40 agonist antibodies tested in the clinic to date may limit their potential in modifying the tumor microenvironment. We have made great progress so far. Six cohorts have been completed, and we are now enrolling the seventh cohort in which patients are dosed at 1.5 mg per kg of CDX-1140, a dose significantly higher than other agonists targeting CD40s. Assuming we successfully complete this cohort, we will enroll the eighth cohort dosing at 3 mg pr kg of CDX-1140. Data to date from these cohorts suggest that 1140 has a desirable safety profile without any dose-limiting toxicities and based on biomarker data is demonstrating clear signs of biological activity associated with CD40 activation. The main target cells of 1140 are dendritic cells, which are the key cells for initiating anti-tumor immune responses. However, studies have shown that many patients are lacking in these cells. Our CDX-301 is a recombinant dendritic cell growth factor known also as C Flt3 Ligand. It has been clinically shown to greatly increase the number of dendritic cells in patients, leading to more potent immune responses. Therefore, we have included CDX-301 in a separate arm of this Phase 1 study as a priming agent to increase the number of dendritic cells available to respond to CDX-1140. Study participants receive a fixed dose of CDX-301 and increasing doses of 1140. We are nearing the close of the VLT window for the second of six potential cohorts right now. While this is still very early in the study, preliminary evidence of enhanced immune activation has been observed without additional safety concerns. Our goal in this study is to identify the recommended dose and regimen of 1140 with or without CDX-301. The study allows for expansion cohorts and specific tumor types that will help define our regimen for additional accommodation therapies such as with Varlilumab in B-cell lymphomas, which has looked promising in preclinical models. We're excited about the 1140 program and its clinical potential. We presented data from this study at SITC in late November and look forward to updating that presentation at AACR in early April. Our next program is CDX-3379, a monoclonal antibody targeting ErbB3, which is also called HER3. ErbB3 is found on tumor cells in a variety of cancers, including head and neck, thyroid, breast, lung, and gastric cancers, as well as melanoma. It is implicated in cancer cell growth and survival as well as resistance to targeted therapies. 3379 may play an important role in overcoming this resistance and specifically targets ErbB3 with potent affinity and locks it into a deactivated state, uniquely blocking its interactions with its ligand and also with other oncogenic drivers. In a previously completed Phase 1 study, we saw evidence of anti-tumor activity among the nine patients with head and neck cancer who were treated with 3379 in combination with Erbitux, an EGFR inhibitor, including a durable complete response in a patient who had previously progressed on Erbitux as a model therapy. We recently completed enrollment to the first stage of a Simon two-stage design Phase 2 study. 3379 is being given in combination with Erbitux in patients with HPV-negative, advanced head and neck squamous cell carcinomas whose tumors have previously been treated with an anti-PD-1 check point inhibitor and have become resistant to Erbitux. In accordance to the study design, if at least one of the 13 patients enrolled in the first stage achieves a partial response, enrollment can progress to the second stage. While a durable, confirmed, complete response has been documented, we will conduct a comprehensive review including the full data set before making decisions on future development as patients are still undergoing treatment and are eligible for evaluation. We plan to present updated data from this study at a medical meeting later this year. Beyond our clinical stage programs, we have been actively advancing a portfolio of unique pre-clinical antibodies and bispecific molecules. These candidates are being developed for use in strategic combinations that engage the human immune system to treat specific types of cancer or other diseases. In 2019, you'll see data from a number of these programs, and we thought it would be helpful to highlight a few of them on this call. So I will turn the call over to Tibor. Tibor?

Thank you, Anthony. I'm going to expand on the three pre-clinical programs you referenced, CDX-0159, our KIT inhibitor, CDX-527, our first bispecific antibody, and our growing programs targeting the TAM tyrosine kinase receptors. Data on both the bispecific and the TAM programs will be presented at AACR next month. We are currently progressing our KIT antagonist antibody program, CDX-0159, through IND-enabling studies to support the initiation of the clinical program. KIT is a key regulator of mast cell survival and activation, and we believe targeting KIT represents a unique strategy in diseases involving mast cells. CDX-0159 is a humanized monoclonal antibody and a very potent inhibitor of KIT in mast cells, and collectively, our data support that CDX-0159 can reduce the number and activity of mast cells, which may provide clinical benefit to patients with diseases that are driven by mast cells, such as chronic idiopathic urticaria and neurofibromatosis type 1. Our initial clinical strategy is to define the safety, pharmacokinetic and pharmacodynamic profile in healthy subjects, followed by a focused study design in patients. As we get closer to initiating clinical development anticipated later this year, we look forward to providing more detail on the specific clinical path. Our first bispecific antibody program called CDX-527 combines CD27-mediated T cell activation with PD-1 blockade. We have developed CDX-527 from our proprietary highly active anti-PD-L1 and CD27 human antibodies, and we've demonstrated that the bispecific is more potent than the combination of the individual antibodies in multiple pre-clinical models. Our experience with combining Varlilumab and PD-1 blockades supports the integration of these two antibodies from a dosing, safety, and activity perspective in recurrently initiating manufacturing activities for the bispecific CDX-527. We have also been making significant progress on developing lead candidates for the receptor tyrosine kinases, collectively known as TAMs for Tyro3, Axl, and MerTK. These receptors have been gaining importance in the immunotherapy field due to their role as checkpoint molecules on macrophages, dendritic cells, and other immune cells where they can negatively regulate anti-tumor immunity. Our most advanced program is targeting MerTK where we have demonstrated that antibody targeting of MerTK in mice elicits an inflammatory cytokine response and had anti-tumor activity when dosed alone or in combination with an anti-PD-1 inhibitor. Our lead human antibodies promote potent activation of human macrophages and dendritic cells, and we look forward to continuing the progress on these candidates. I'd now like to hand the call over to Sam to review the financials.

Thank you, Tibor. All of the following share have been per-share amounts, reflect a one for fifteen reverse stock split, which became effective February 8th, 2019. For the fourth quarter of 2018, net loss was $9.4 million, or $0.81 per share, compared to a net loss of $3.8 million, or $0.42 per share, for the fourth quarter of 2017. Net loss for the year ended December 31, 2018 was $151.2 million, or $14.48 per share, compared to $93 million, or $10.86 per share, for the comparable period in 2017. During 2018, we recorded $91 million in non-cash goodwill impairment expense. Research and development expenses were $66.4 million for the year ended December 31, 2018, compared to $96.2 million for the comparable period in 2017. General and administrative expenses were $19.3 million for the year ended December 31, 2018, compared to $25 million for the comparable period in 2017. As of December 31, 2018, we reported cash, cash equivalents, and marketable securities of $94 million. We expect that our cash, cash equivalents, and marketable securities at December 31, 2018 combined with the anticipated proceeds from future sales of common stock under our Cantor agreement are sufficient to meet estimated working capital requirements and fund planned operations through 2020. At December 31, 2018, we had 12 million shares outstanding. I will now turn the call over to Anthony to close.

Thank you, Sam. As we have said on past calls, we remain focused on execution. For CDX-1140, we will continue to enroll the Phase 1 study, and determine the optimal dose, and are actively mapping out future plans for both single agent and combination expansions arms in specific tumor types at the specified dose. We continue to believe we are nearing a point where we should have a good understanding of the important role of 1140 can potentially play in the treatment of cancer. For CDX-3379, we need to let the first stage of the study complete, and then we'll conduct a comprehensive review to determine next steps for the program. Finally, for CDX-0159, our anti-KIT antibody, we would anticipate initiating a Phase 1 study following completion of the IND-enabling work. In the near term, we are slated for four presentations at AACR, one on our ongoing Phase 1 study of CDX-1140, one on our bispecific candidate CDX-527, and third, on the MerTK, Axl, and Tyro3 antibody program, and a fourth that covers a pre-clinic collaboration of CDX-1140, CDX-301, and a TOR-9 agonist, so we're off to a busy, data-filled start to the year. With that review, we'll open the floor to questions. Operator?

Thank you. [Operator Instructions] And your first question comes from Joe Pantginis with H.C. Wainwright. Your line is open.

Hey, guys, good afternoon and thanks for the additional details today. A few questions if you don't mind, maybe the first one for Tibor. With regard to 527, you did mention that you're seeing increased potency versus the individual antibody. So I'm just curious first do you see any potential safety differentiation, and then also, do you attribute some of this potential increased potency based on just increased localization because of the bispecific nature?

Hi, Joe. Thank you for the question. So, regarding the safety issue, there's nothing that we have in our data so far that leads us to any concerns of any added safety concerns. As you know, we have significant amount of clinical data from combining varlilumab, our CD27 agonist, with nivolumab, and we've demonstrated that there really is no additional safety concerns when those two are combined compared to the individual components. In terms of the activity, we believe that at least part of the additional activity of the bispecific is due to better CD27 co-stimulation when the bispecific antibody is crosslinked not only through Fc receptors but also by PD-L1 binding. This leads to more potent CD27 activation, and as you've mentioned, I agree that this may occur predominately in the tumor microenvironment where PD-L1 expression can be upregulated. Does that address…

Got it. Yeah, it absolutely does. Thanks, Tibor. And then just out of curiosity, not in any particular order, so maybe just a little more detail of the types of things you'll be looking at with the CDX-3379 data. You're being very deliberate and cautious, obviously, even though you've hit the hurdle in Stage 1 to be able to move to Stage 2, so beyond just additional responses, what additional things might you be looking at?

So, in addition to clearly understanding fully the clinical data and the response data, we're certainly looking at comprehensive biomarker analysis, understanding what's happening in the field of head and neck cancer that is having some changes in the paradigms, so all of that will go into our decision about what the best approach for the next steps are.

Got it. Got it. And then with regard to the 1140 program, I don't know if it's too early to maybe ask if you have a favorite with regard to expansion indications yet, but I'll ask. Off of the SITC data in late 2018, as you continue to increase the dose cohorts, what level of activity from a biomarker standpoint are you waiting to see to say you have reached the right dosing cohort or the right dose?

So, the biomarker data that we have available through the dose escalation is primarily based on the serum biomarkers, which is what we're collecting, which are quite informative. But the most informative will come from biopsies that we're taking to really understand how we're modifying the tumor microenvironment. We are just not entering this phase with some backfill patients that will help because those on-study biopsies are mandatory. So the combination of the tumor biopsy and serum biomarkers will help inform the best data to know that we are truly modifying the tumor microenvironment, which is the goal with this program.

Got it. And then just lastly if you don't mind, thanks for your patience, with 1140, I guess maybe you've done this in the past, but can you remind us and other people on the call maybe why the safety profile here again appears to be differentiated versus other anti-CD40 approaches?

So for us, we wanted to select an antibody that could achieve higher systemic exposure. We are seeing some of the same changes that you might expect with any of the CD40 agonists. They are more moderate, particularly at the low doses, than perhaps observed so far, so as Anthony mentioned, it's this linear dose response that we have with this particular antibody compared to some of the other agonists that have been optimized for very high agonist activity, even at very low doses.

Got it. Thanks for the added details, Tibor.

Sure.

Thank you. And I am showing no further questions at this time. I'd like to turn the call back over to Anthony Marucci, President and CEO, for closing remarks.

Thank you, operator, and thanks to everyone joining us today. We appreciate your time and support, and we look forward to keeping you up to date throughout 2019. And as always, we welcome your questions at any time. Have a great day.