Good day, ladies and gentlemen, and welcome to the Celldex Therapeutics Mid-Year 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 be given at that time. [Operator Instructions] As a reminder, today's program is being recorded.

And I would 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 our current views with respect to future events and are based on assumptions and subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such forward-looking statements.

Certain 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 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 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 the 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 program, Sam will review the financials, and 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 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 they targeted the 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 that 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 of 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 a 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 costimulation 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 immuno suppressive mechanisms that can - that needs 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 of this, in April we made significant cuts to our business operations, including a corporate restructuring that decreased our headcount by approximately 30%, and the cost savings initiatives that has reduced our projected burn 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?.

colorectal cancer; ovarian cancer; head and neck squamous cell carcinoma; renal cell carcinoma; and glioblastoma. For 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, demonstrate a significant increases in tumor expression of PD-L1 and CD8+ tumor infiltrating lymphocyte, and more than half of the patients.

These increases were associated with improved clinical outcomes, including progression-free survival of seven 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 information how we may select for the patient or defined additional combinations that can further improve clinical outcomes.

We've 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 two prior lines of therapy, 63% had PD-L1 negative tumors and 52% had HPV positive tumors.

The overall response rate was 15% with all four 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 one to four prior treatments, and half of the patients were PD-L1 negative, 39% of patients experienced stable disease.

While, the data to-date from these cohorts has 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 are 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 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 1 study of CDX-1140 based on the synergy observed in our preclinical lymphoma models when combined with varlilumab. Earlier this year at ACR, 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 CD27 PD-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 an IND enabling studies will be completed this year, and that will enter the clinical in 2019.

We'd 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 the 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 six 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 non-cash impairment expenses.

Research and development expenses were $43.3 million for the six 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 six 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 cash, cash equivalents and marketable securities at June 30, 2018 combined with the anticipated proceeds from future sales of common stock under the cancer 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 program themselves, but also the approach we are taking to build the right regimen to come back in tractable cancers. As we look to the future, we are focused on execution, for CDX-1140, we will continue to enroll the Phase 1 study over the remainder of the year.

And I'm looking forward to opening up the 301 combination cohort very soon. We believe that in the next six to nine 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 the - to the first portion of the Phase 2 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 2 Opdivo combination in glioblastoma will be presented later this year.

And we may have a cohort to the 1140 study to evaluate the combination of CD27 and CD40 and B-cell lymphomas, where we'll 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 year and would anticipate initiate Phase 1 studies in 2019. With that review, I will open up the floor to questions.

Operator?.

Certainly. [Operator Instructions] Our first question comes from the line of Joe Pantginis from H.C. Wainwright. Your question, please..

Hey, guys, good afternoon. Thanks for taking the question. Hope you're all staying cool. 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, Joe. 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 dose levels 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. Thank you. 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 is rationale for that. So that is why we selected an every four week dosing strategy in our Phase 1 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..

Great. Thanks a lot, Tibor..

You're welcome..

Thank you. [Operator Instructions] Our next question comes from the line of Boris Peaker from Cowen. Your question, please..

Great. Good evening. So my first question is on CD40.

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

So, Boris, this is Tibor. It'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 subcu 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 stimulation. Cytokine expression in the blood will have additional biomarkers that will show and suggest the combination relative to, for example, the CDX-1140 monotherapy arm..

Got you. And 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 a timeline where you could actually assess it?.

In reference to, in combination with Opdivo?.

Yeah.

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 which point would you get to that dataset 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 have mentioned, currently from the data that we reported 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 into enhance that clinical activity in those patients that don't respond..

Yeah..

Boris, remember also many of the patients in the study are PD-L1 negative, and there isn't a heck of a lot of information on single-agent activity with Opdivo or pembro in the setting. So when we look at what the hurdle rates going to be, we need to do, be able to do an apples to apples comparison here..

Got you. Thank you very much for taking my questions..

Thanks, Boris..

Thank you. Our next question comes from the line of Stephen Brozak from WBB Securities. Your question, please..

Hey, good afternoon, gentlemen. Thanks for taking the question. 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 discounted 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 the trials that you're running, what we should look at think about in evaluating the franchise? Can you give us what - how you position Celldex in 2018? And then, I've got follow-up after that, please..

Yeah, I mean, I think, again this whole immuno-oncology space is taking a little bit of ahead, so I think, we've suffered along with that. But the strategy from our perspective, Steve, as 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 that will continue. I just think that with the IOs taken 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 together in order to really enhance the immune system of the patients to handle itself..

And that leads me to the follow-up, because you obviously just mentioned that. Given the fact that we're looking at a combination therapy universe and we've been doing so far quite a while.

How do you position yourselves along that line, understanding that there are multiple drugs out there, that you potentially could collaborate with multiple companies that you are - that you could work with multiple companies that you could collaborate with.

How should we look at that given the fact that - you pretty have the ability to do more than anyone else 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. Thank you..

Yeah, I mean, I think that something that's very real for us to look forward to down the road. Obviously, let's get through the Phase 1s and see what the data tells us. And at that point, we can decide or engage the appropriate parties for collaborations, partnerships and what have you..

Great. Thanks again, gentlemen..

Yeah..

Thank 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 everyone for joining us today. We appreciate your time and support. And we look forward to keeping you up-to-date throughout 2018. And 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..