Celldex Therapeutics (NASDAQ:CLDX) Q2 2019 Earnings Call

0:00 Hello, and welcome to Celldex Therapeutics Mid-Year 2019 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. If anyone should require assistance during the conference, please press star then zero on your touch-tone telephone. As a reminder, this conference is being recorded. I would now like to introduce your host for today's call, Sarah Cavanaugh. You may begin.

0:29 Thank you. Good afternoon. 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, Dr. Margo Heath-Chiozzi, senior vice president of regulatory affairs, Sam Martin, senior vice president and chief financial officer, and new to our team, Dr. Diane Young, senior vice president and chief medical officer. Before we begin our discussion, I would 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 CELDX'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 CELDX'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 SELVEX's other filings with the SEC and its press releases.

1:37 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 SELDIS 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 Anthony.

2:05 Thank you, Sarah. Good afternoon, and thank you for joining us. We made excellent progress in the first half of the year and look forward to providing you a thorough update on our programs this afternoon. As you look at the business overall, our pipeline remains strong and well diversified. We have two programs advancing nicely in the clinic, a third poised to enter clinical development before the year end, and a fourth lined up for 2020. We also made an important hire this summer that we believe will further strengthen our clinical development efforts and support the continued progress of our product pipeline. Dr. Diane Young has joined the Celldex team as a Senior Vice President and Chief Medical Officer. Diane is a medical oncologist and has led clinical and cross-functional research and development teams responsible for the global development of numerous novel therapies from Phase I through successful product registrations.

3:06 Most recently, Diane served as Chief Medical Officer of GTX, Inc., a public biopharmaceutical company focused on the development of drugs that target nuclear hormone receptors. Previously, Diane spent 13 years at Novartis Oncology and senior leadership roles in global clinical development and medical affairs. As the head of oncology clinical development, she directed the clinical programs leading to successful regulatory approvals for more than a dozen, half dozen important oncology drugs. Prior to Novartis, Diane held senior leadership positions in clinical development at the R.W. Johnson Pharmaceutical Research Institute of J&J, as well as Hoffman, LaRoche, and Sandoz.

3:54 We are very pleased to have Diane on our team. She will join us at both medical and investor conferences this fall, and I'm sure our shareholders will enjoy meeting her at these venues. We continue to strengthen our balance sheet to extend and direct our financial resources to the advancement of the programs we believe can bring the most value to both patients and shareholders. In direct support of this, in June we decided to consolidate our Massachusetts laboratory and manufacturing facilities. The lease for the Needham, Massachusetts facility will not be renewed, and most functions and employees will be integrated into the company's Fall River manufacturing facilities. We estimate that this consolidation along with the reduction in the square footage of our Hampton, New Jersey facility executed earlier this year will decrease our facility footprint by over 35% and will save us over $3.5 million annually starting in the second half of 2020.

4:57 With that, I'd like to turn to a review of our pipeline. I'm going to start with an update of the CVX1140 CDX 0159, and our preclinical programs. Then I'm going to ask Dr. Margo Heath-Chiozzi, our Senior VP of Regulatory Affairs, to provide an update on CDX 3379. Margo has served as the medical lead for this program to date. Sam Martin, our CFO, will then review the financials before we open the call to your questions. CDX1140 is a fully human antibody targeted to CD40, a key activator of immune response, which is found on dendritic cells, macrophages, B cells, and several cancer types.

5:47 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 CDX1140 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, non-dose-dependent agonist activity which may allow for higher systemic dosing and better tumor penetration at the optimal agonist levels. CDX1140 does not require cross-linking through FC receptor interactions for its agonist activity, allowing more consistent and controlled immune cell activation.

6:40 Also, CDX1140 does not interfere with the natural activation of CD40 by its ligand, which may further potentiate local immune responses. Finally, CDX1140 had a strong safety profile all demonstrating potent immune activation in our preclinical studies. The ongoing phase one trial is a multi-dose dose escalation study of CDX1140 in patients with locally advanced recurrent or metastatic solid tumors and B-cell lymphomas. The study also includes a separate dose escalation arm of CDX1140 in combination with CDX301.

7:26 CVX301 is a potent dendritic cell growth factor that increases the number of these important cells which are a key target for CVX1140. An important goal of this study is to achieve dosing levels of CVX1140 that will provide good systemic exposure without dose-limiting toxicity. To this end, we have made excellent progress completing all eight cohorts in the monotherapy dose escalation arm. Importantly, based on biomarker data, CVX1140 is demonstrating strong biological activity associated with CV40 activation. Currently, we are adding additional patients at the three highest dose levels to provide additional data in the selection of our recommended phase two dose as we await completion of the dose escalation in the combination arm of the study.

8:24 With CDX1140 and 301 combination, we are nearing the close of the BLT window for the fourth of six potential cohorts at the 0.72 milligrams per kilogram, and assuming successful clearance, the 1.5 milligram per kilogram combination cohort should open shortly. Overall, we are pleased with the data to date, which have shown that CDX1140 can be safely administered at doses that Celldex believes will support good tissue and tumor penetration and at doses significantly higher than most other potent agonists targeting CD40. Our next step is to add an additional arm to the study that will include the combination of a PD-1 inhibitor with CDX1140.

9:15 This cohort is important as we'll be both enhancing the immune system with CVX1140 and releasing the brake on the immune system with the introduction of the checkpoint inhibitor. We are also exploring future combination opportunities with chemotherapy, radiation therapy, and cell dexapodin CD27 agonist monoclonal antibody Morley-Lumab. We are excited about the 1140 program and its clinical potential. We presented data from this study at AACR in early April and hope to present an update at the CITSE meeting in November. Before year end, we will also initiate a phase one study of CVX0159, our kit antagonist antibody program in healthy subjects.

10:05 CVX0159 is a reengineered variant of CVX0158. Kit is a key regulator of mast cells and preclinical and clinical data with CDX-0158 demonstrated robust inhibition of mast cell activity and decreased mast cell numbers, supporting the concept that targeting kit with an antagonist antibody can modulate mast cell activity and potentially provide clinical benefit in mast cell-related diseases. CDX0159 was redesigned to ablate FC receptor interactions and affect their functions and approve its safety profile while preserving full kit inhibitory activity.

10:52 In addition, CDX0159 was modified to provide extended half-life following an administration. This Phase Ia study is designed to evaluate the safety profile, pharmacokinetics, and pharmacodynamics of single ascending doses of CDXO159 in healthy subjects. Following completion of this study, we plan to further study CDXO159 in chronic idiopathic urticaria, or CIU. CIU presents as itchy hives, angioedema, or both for at least six weeks without a specific trigger. Multiple episodes can play out over years or even decades.

11:37 The prevalence of CIU is estimated to be 0.5% to 1% of the total population, or up to 3.2 million cases in the United States. About 50% of patients with CIU achieve symptomatic control with antihistamines and leukotrienes, receptor agonists such as Zolair. An IgE inhibitor provides relief for roughly half of the remaining antihistamine Luca Triang and refractory patients. Consequently, there is need for more effective later line therapies. We believe targeting KIT with CVX0159 represents a unique strategy in diseases involving mast cells such as CIU.

12:24 We hope to present the scientific rationale and supportive data of our development strategy in CIU at a medical meeting this fall and we'll continue to keep you updated on this program. Before I hand the call over to Margo to discuss CDX3379, I want to touch on our preclinical pipeline which had a strong showing at AACR in the second quarter. CDX527, our first bispecific antibody program, combined CD27 mediated cell activation with PD1 blockade. We have developed CDX527 from our proprietary highly active anti-PDL1 and CD27 human antibodies and demonstrated the bispecific to be more potent than the combination of the individual antibodies in preclinical models.

13:19 CDX527 provides Celldex with its own PD1 pathway inhibitor with potentially broader activity and sets us up for unique combinations within our own pipeline. We are currently initiating manufacturing activities for CDX 527 to support an IND targeted for 2020. We have also been making significant progress on developing lead candidates targeting the receptor tyrosine kinases, TYRO3, AXL, and MRTK, collectively known as the TAMs. 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 the anti-tumor immunity.

14:11 We recently presented our progress on lead antibody characterizations for all three receptors at AACR. The antibodies targeting to Tyro3, Axyl, and MRTK all promote activation of human macrophages and dendritic cells and we look forward to moving these candidates towards development activities. With that overview, I will ask Margo to discuss the progress we've made with CDX3379. Margo?

14:40 Thank you, Anthony. CDX3379 is a monoclonal antibody that targets ERB3, which is also called HER3. ERB3 is found on tumor cells in a variety of cancers, including head and neck, thyroid, breast, lung, gastric cancers, as well as melanoma. is implicated in cancer cell growth and survival as well as resistance to targeted therapy. Uniquely among IRB3 targeted antibodies, CDX3379 blocks IRB3 into an inactive state, blocking its interactions with its ligand and interactions with other family members that are necessary for IRB3 signaling. In addition, CDX3379 is engineered to have an extended half-life further enhancing its product profile.

15:30 We are conducting a Phase II study of CDX3379 in combination with Erbitux, generic name Cetuximab, in patients with Cetuximab-resistant advanced HPV-negative head and neck squamous cell carcinoma who have previously been treated with a PD-1 checkpoint inhibitor. These patients have extremely limited treatment options and a particularly poor prognosis. In addition to the ongoing Phase II study, CDX3379 has been studied in two other clinical trials that included patients with head and neck cancer. We've observed intriguing clinical activity in a number of patients with head and neck cancer across these three studies. Emerging data from exploratory biomarker analyses across the CDX3379 clinical development program suggests that this anti-tumor activity may be associated with somatic mutations in specific genes.

16:24 Dr. Julie Bauman of the University of Arizona Cancer Center, an investigator in the Phase II study, presented interim results from the CDX3379 Clinical Program and the biomarker analyses at the ASCO Annual Meeting in Chicago. First, let me give you a quick overview of the Phase II interim study results, and then we will dive into the biomarker analysis. In the study, The Toximab is dosed weekly, and CDX-3379 is administered once every three weeks. Treatment continues until disease progression or intolerance, and the assessments occur every six weeks. Using assignment two stage design, the first stage of the study was designed to enroll 13 patients, and if at least one patient achieved a partial or complete response, enrollment would progress to the second stage.

17:13 This objective was met. Fifteen patients were enrolled in stage one of the studies. The patients had a median of three prior cancer therapies with a range of two to six. All patients had received prior checkpoint treatment and 14 of the 15 were cetuximab refractory. Notable clinical activity was observed in this refractory treatment population where treatment options are very limited, including a durable complete response that continues over a year. This patient continues to receive treatment. and an unconfirmed partial response in the patient who had not received cetuximab. 47% of the patients experienced stable disease as their overall best response, including the unconfirmed partial responder, and a clinical benefit rate of 29% was observed.

18:03 The combination of CDX3379 with cetuximab was generally associated with the expected on-target mediated adverse events of diarrhea and rash. The clinical activity was notable in this difficult to treat patient population and was similar to the experience observed in head and neck patients from our previous studies. Understanding that a biomarker enrichment strategy could change the standard of care for these patients, we performed next generation sequencing on tumor samples from 18 patients with head and neck cancer treated with CDX3379 across the three clinical studies. In total, this data set included four patients with clinical responses, including two durable complete responses, the patient with over a year and the patient with 8.3 months in the cetuximab refractory patient treated with the combination of CDX3379 and cetuximab.

18:57 The unconfirmed partial response in the cetuximab naive patient and an exceptional partial response with greater than 92% tumor shrinkage in a previously untreated patient who received two doses of CDX3379 monotherapy. also included eight patients with stable disease and or tumor shrinkage and six patients with progressive disease. We found that across the CDX3379 program, there were mutations in specific genes, including FAT1 and NOTCH1, NOTCH2, and NOTCH3, that were associated with clinical activity. In head and neck cancer, these genes may function as tumor suppressors, genes that normally prevent uncontrolled cell growth Inactivating mutations in FAT1 and NOTCH genes occur in a sizable subset of HPV-negative head and neck tumors, with 32% containing FAT1 and 26% containing FAT2 mutations.

19:58 Specifically, in the exploratory analyses presented at ASCO, seven patients were identified as having FAT1-mutated tumors, and four of these patients demonstrated a clinical response, three of which were confirmed. Three of the four clinical responses occurred in patients who had notched one, two, or three mutations. Out of note, all patients who experienced clinical benefit, seven of the total 18, had FAT1 and or notched one, two, or three mutations. Finally, we also observed that all four clinical responses occurred in patients with a primary tumor site of oral cavity. We discussed these interim results with our clinical investigators, and there was significant enthusiasm for exploring these findings in a larger setting.

20:48 As a result, we have expanded our current Phase II study and will enroll up to 45 patients, including at least 15 with Batman mutations, to evaluate the clinical utilities of these biomarkers for future patient selection. Enrollment is ongoing. We are also conducting preclinical studies investigating the association of CDX3379 sensitivity, and inactivating mutations of FAT1 and NOTCH genes. As Dr. Bauman said at ASCO in her presentation, these data, while early, are provocative and suggest the potential for a biomarker enrichment strategy that could change the standard of care for these patients. We look forward to obtaining additional data in this ongoing study to more fully elucidate the potential here.

21:35 With that, I will turn the call over to Sam to review the financials.

21:40 Thank you, Margo. All of the following share and per share amounts reflect a 1 for 15 reverse stock split, which became effective February 8, 2019. For the second quarter of 2019, net loss was $11.8 million, or $0.84 per share, compared to a net loss of $16.4 million, or $1.67 per share, for the second quarter of 2018. Net loss for the six months ended June 30, 2019 was $29 million or $2.21 per share compared to $134.5 million or $14.01 per share for the comparable period in 2018. During the first quarter of 2018, we recorded $109.7 million in one-time goodwill and intangible asset non-cash impairment expenses. Research and development expenses were $21.2 million for the six months ended June 30, 2019, compared to $43.3 million for the comparable period in 2018.

22:40 General and administrative expenses were $8.8 million for the six months ended June 30, 2019, compared to $11.2 million for the comparable period in 2018. As of June 30, 2019, We reported cash, cash equivalents, and marketable securities of $81.3 million. We expect that our cash, cash equivalents, and marketable securities at June 30, 2019, 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 June 30, 2019, we had 14.8 million shares outstanding.

23:33 I will now turn the call over to Anthony to close.

23:36 Thank you, Sam. Thank you, Margo. I'm very pleased with our progress on both the CVX1140 and the CVX3379 programs. Importantly, we have advanced these programs to the point that we should be able to answer key questions over the next six to 12 months on their clinical potential. Expansion and additional combination cohorts with other key mechanism of actions will be important for CVX1140 and those are well underway. The CDX1140-CDX301 combination cohort is nearing completion of dose escalation, putting us in a good position to select the appropriate dose for additional combinations, including the PD-1 inhibitor combination that is planned next.

24:22 We have amended the CDX3379 study to allow us to validate the potential for a biomarker strategy in head and neck cancer which would be a significant development for the field overall and are actively enrolling new patients with significant investigator support. We also remain on track to initiate the phase one study of CDXO159 before year end and to advance the bispecific program to the clinic next year. We are pleased with the expanding breadth and depth of our pipeline and believe it will support significant news flow and meaningful inflection points in the coming months and 2020. With that review, we will open the floor to questions. Operator?

25:07 Ladies and gentlemen, at this time, if you'd like to ask a question, please press star then the one key on your touchtone telephone. If your question has been answered and you wish to remove yourself from the queue, you may do so by pressing the pound key. One moment while the questions queue up. Our first question comes from the line of Joe Kent Guinness with AC Weinreich. Your line is open.

25:33 Hey, guys. Good afternoon. Thanks for taking the questions. First, I just wanted to focus on 1140, if you don't mind, specifically the safety profile. I don't know if my question is really apples to oranges, but do you feel that as part of your dose escalation for 1140, you've maybe surpassed levels where you might have expected to see and a safety signal that might be related to others in the competitive landscape.

26:04 Sure. Tibor, can you answer that question?

26:06 Sure. Hi, Joe. I don't know exactly what you mean by surpass the levels. You know, we are certainly seeing the kinds of biological activity that are associated with CD40 activation that have been reported in clinical trials by some of the other agonist antibodies. This has generally increased somewhat with our higher doses, but we have not, you know, we have not reached the level where any of these have become limiting from a safety or dose point of view. So that's been very nice while we see, you know, a clear increase. Signals in terms of cytokine and chemokine responses, immune activation that we expect to see, that has looked very good at the high dose levels.

27:02 Right, so yeah, just basically where others have shown safety signals at their levels, at their own personal levels.

27:11 Correct.

27:12 Okay, got it. And then moving to the... and the 3379 program, obviously you're pursuing a very nice personalized medicine approach. So I wanted to get a sense of looking ahead a bit here, you know, with regard to the FAT1 and NOTCH mutations, you know, what kind of population sizes are you looking at or maybe stated differently, the overall frequency of these mutations in the general population, maybe just starting with head and neck or if you have any additional data. and then with that, are you using more lab diagnostics at this point? I know you said next generation sequencing, but are these something that can be translated commercially if it were to be approved from a diagnostic standpoint? Thanks.

27:58 Joe, this is Vardo. As I mentioned earlier, when you look at head and neck tumor epidemiology, it appears that the FAT1 is seen in about a third of tumors. and the notch may be a quarter. The current genotyping of head and neck tumors is sort of evolving because there haven't been as many targeted therapies that the currently available genetic tests have good drugs to guide the patients to, but we're going to do next generation sequencing on the and a number of others. A two-stage process, really, and we're actively pursuing enlarging our understanding of stage one.

29:11 Got it. No, that's very helpful. I think I was combining some of the comments you made with regard to what patients on the study had the particular mutation. So thanks for clarifying that. All right. Thanks, guys. Appreciate it. Thanks, Joe. Thank you. I'm sure no further questions at this time. I would now like to turn the call back over to Anthony Marucci for closing remarks.

29:35 Thank you, Operator, and thanks to everyone for joining us today. We appreciate your time and support. As always, we welcome your questions at any time. Have a great day. Enjoy the rest of the summer. Ladies and gentlemen, that concludes today's call. Thank you for participating. You may now disconnect. Everyone have a wonderful day.