Table of Contents

 

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 


 

FORM 10-Q

 

x  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2010

 

OR

 

o  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

Commission File Number:  0-15006

 

CELLDEX THERAPEUTICS, INC.

(Exact name of registrant as specified in its charter)

 

Delaware

 

No. 13-3191702

(State or other jurisdiction of incorporation or
organization)

 

(I.R.S. Employer Identification No.)

 

119 Fourth Avenue, Needham, Massachusetts 02494

(Address of principal executive offices) (Zip Code)

 

(781) 433-0771

(Registrant’s telephone number, including area code)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x  No o

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes o  No o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer o

 

Accelerated filer x

 

 

 

Non-accelerated filer o

 

Smaller reporting company o

(Do not check if a smaller reporting company)

 

 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  o No x

 

As of May 3, 2010, 31,779,718 shares of common stock, $.001 par value per share, were outstanding.

 

 

 



Table of Contents

 

CELLDEX THERAPEUTICS, INC.

 

FORM 10-Q

 

Three Months Ended March 31, 2010
Table of Contents

 

 

 

Page

 

 

 

Part I—Financial Information

 

 

 

 

 

Item 1. Unaudited Financial Statements

 

 

 

 

 

Condensed Consolidated Balance Sheets at March 31, 2010 and December 31, 2009

 

3

 

 

 

Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2010 and 2009

 

4

 

 

 

Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2010 and 2009

 

5

 

 

 

Notes to Unaudited Condensed Consolidated Financial Statements

 

6

 

 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

17

 

 

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

31

 

 

 

Item 4. Controls and Procedures

 

31

 

 

 

Part II — Other Information

 

 

 

 

 

Item 1. Legal Proceedings

 

31

 

 

 

Item 1A. Risk Factors

 

31

 

 

 

Item 6. Exhibits

 

33

 

 

 

Signatures

 

34

 

 

 

Exhibit Index

 

35

 

2



Table of Contents

 

PART I—FINANCIAL INFORMATION

Item 1. Unaudited Financial Statements

 

CELLDEX THERAPEUTICS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

(In thousands, except share and per share amounts)

 

 

 

March 31, 2010

 

December 31, 2009

 

ASSETS

 

 

 

 

 

Current Assets:

 

 

 

 

 

Cash and Cash Equivalents

 

$

42,666

 

$

57,002

 

Marketable Securities

 

32,700

 

25,451

 

Accounts and Other Receivables

 

859

 

544

 

Prepaid and Other Current Assets

 

2,058

 

979

 

Total Current Assets

 

78,283

 

83,976

 

Property and Equipment, Net

 

10,965

 

11,489

 

Intangible Assets, Net

 

28,459

 

29,979

 

Other Assets

 

5,773

 

5,955

 

Goodwill

 

8,965

 

8,965

 

Total Assets

 

$

132,445

 

$

140,364

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

Accounts Payable

 

$

1,617

 

$

1,445

 

Accrued Expenses

 

3,810

 

5,615

 

Current Portion of Deferred Revenue

 

5,144

 

5,191

 

Current Portion of Long-Term Liabilities

 

2,387

 

2,156

 

Convertible Subordinated Debt

 

11,866

 

 

Total Current Liabilities

 

24,824

 

14,407

 

Deferred Revenue

 

33,138

 

34,191

 

Convertible Subordinated Debt

 

 

11,684

 

Other Long-Term Liabilities

 

6,024

 

6,315

 

Total Liabilities

 

63,986

 

66,597

 

 

 

 

 

 

 

Commitments and Contingent Liabilities

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ Equity:

 

 

 

 

 

Convertible Preferred Stock, $.01 Par Value; 3,000,000 Shares Authorized; No Shares Issued and Outstanding at March 31, 2010 and December 31, 2009

 

 

 

Common Stock, $.001 Par Value; 297,000,000 Shares Authorized; 31,759,718 and 31,685,061 Shares Issued and Outstanding at March 31, 2010 and December 31, 2009, respectively

 

32

 

32

 

Additional Paid-In Capital

 

230,020

 

228,863

 

Accumulated Other Comprehensive Income

 

2,663

 

2,546

 

Accumulated Deficit

 

(164,256

)

(157,674

)

Total Stockholders’ Equity

 

68,459

 

73,767

 

Total Liabilities and Stockholders’ Equity

 

$

132,445

 

$

140,364

 

 

See accompanying notes to unaudited condensed consolidated financial statements

 

3



Table of Contents

 

CELLDEX THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

(In thousand, except per share amounts)

 

 

 

Three Months Ended

 

 

 

March 31, 2010

 

March 31, 2009

 

REVENUE:

 

 

 

 

 

Product Development and Licensing Agreements

 

$

1,347

 

$

1,502

 

Contracts and Grants

 

220

 

139

 

Product Royalties

 

2,146

 

2,091

 

Total Revenue

 

3,713

 

3,732

 

 

 

 

 

 

 

OPERATING EXPENSE:

 

 

 

 

 

Research and Development

 

6,438

 

6,456

 

Royalty

 

2,327

 

2,230

 

General and Administrative

 

2,835

 

3,341

 

Gain on Sale of Assets

 

 

(604

)

Amortization of Acquired Intangible Assets

 

1,520

 

95

 

Total Operating Expense

 

13,120

 

11,518

 

 

 

 

 

 

 

Operating Loss

 

(9,407

)

(7,786

)

Investment and Other Income, Net

 

3,162

 

123

 

Interest Expense

 

(337

)

(40

)

Net Loss

 

$

(6,582

)

$

(7,703

)

 

 

 

 

 

 

Basic and Diluted Net Loss Per Common Share (Note 4)

 

$

(0.21

)

$

(0.49

)

 

 

 

 

 

 

Shares Used in Calculating Basic and Diluted Net Loss per Share (Note 4)

 

31,695

 

15,819

 

 

See accompanying notes to unaudited condensed consolidated financial statements

 

4



Table of Contents

 

CELLDEX THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

(In thousands)

 

 

 

Three Months Ended

 

 

 

March 31, 2010

 

March 31, 2009

 

Cash Flows from Operating Activities:

 

 

 

 

 

Net Loss

 

$

(6,582

)

$

(7,703

)

Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities:

 

 

 

 

 

Depreciation and Amortization

 

908

 

686

 

Amortization of Intangible Assets

 

1,520

 

95

 

Loss on Sales and Maturities of Marketable Securities

 

21

 

 

Gain on Sales or Disposal of Assets

 

 

(598

)

Stock-Based Compensation Expense

 

970

 

1,112

 

Non-Cash Interest Expense

 

182

 

 

Changes in Operating Assets and Liabilities:

 

 

 

 

 

Accounts and Other Receivables

 

(315

)

750

 

Prepaid and Other Current Assets

 

(1,079

)

(405

)

Other Assets

 

182

 

180

 

Accounts Payable and Accrued Expenses

 

(1,633

)

112

 

Deferred Revenue

 

(1,100

)

191

 

Other Long-Term Liabilities

 

(14

)

30

 

Net Cash Used in Operating Activities

 

(6,940

)

(5,550

)

 

 

 

 

 

 

Cash Flows from Investing Activities:

 

 

 

 

 

Sales and Maturities of Marketable Securities

 

6,816

 

 

Purchases of Marketable Securities

 

(13,968

)

 

Acquisition of Property and Equipment

 

(384

)

(140

)

Proceeds from Sales or Disposal of Assets

 

 

850

 

Net Cash (Used in) Provided by Investing Activities

 

(7,536

)

710

 

 

 

 

 

 

 

Cash Flows from Financing Activities:

 

 

 

 

 

Net Proceeds from Stock Issuances

 

187

 

10

 

Payments of Other Long-Term Liabilities

 

(46

)

(51

)

Net Cash Provided by (Used in) Financing Activities

 

141

 

(41

)

 

 

 

 

 

 

Effect of Exchange Rate Changes on Cash and Cash Equivalents

 

(1

)

(12

)

 

 

 

 

 

 

Net Decrease in Cash and Cash Equivalents

 

(14,336

)

(4,893

)

Cash and Cash Equivalents at Beginning of Period

 

57,002

 

44,257

 

Cash and Cash Equivalents at End of Period

 

$

42,666

 

$

39,364

 

 

 

 

 

 

 

Supplemental Disclosure of Non-Cash Flow Information

 

 

 

 

 

Shares Issued to Executive Officers

 

$

 

$

250

 

 

See accompanying notes to unaudited condensed consolidated financial statements

 

5



Table of Contents

 

CELLDEX THERAPEUTICS, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2010

 

(1)  Basis of Presentation

 

The accompanying unaudited condensed consolidated financial statements have been prepared by Celldex Therapeutics, Inc. (the “Company” or “Celldex”) in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and reflect the operations of the Company and its wholly-owned subsidiaries. All intercompany transactions have been eliminated in consolidation.

 

These interim financial statements do not include all the information and footnotes required by U.S. GAAP for annual financial statements and should be read in conjunction with the audited financial statements for the year ended December 31, 2009, which are included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 12, 2010.  In the opinion of management, the interim financial statements reflect all normal recurring adjustments necessary to fairly state the Company’s financial position and results of operations for the interim periods presented.  The year-end consolidated balance sheet data presented for comparative purposes was derived from audited financial statements, but does not include all disclosures required by U.S. GAAP.

 

The results of operations for the interim periods are not necessarily indicative of the results of operations to be expected for any future interim period or the fiscal year ending December 31, 2010.

 

AVANT Merger

 

On March 7, 2008, the Company (formerly known as AVANT Immunotherapeutics, Inc.) (“AVANT”) merged with Celldex Research Corporation (formerly known as Celldex Therapeutics, Inc.) (“Celldex Research”), a privately-held company, (the “AVANT Merger”). Effective October 1, 2008, the Company changed its name from AVANT Immunotherapeutics, Inc. to Celldex Therapeutics, Inc.  The AVANT Merger was accounted for using the former purchase method of accounting and was treated as an acquisition by Celldex Research of AVANT, with Celldex Research being considered the accounting acquirer even though AVANT was the issuer of common stock and the surviving legal entity in the transaction.

 

Acquisition of CuraGen Corporation (“CuraGen”)

 

As more fully discussed in Note 12, on October 1, 2009, CuraGen, a former publicly-traded company, merged with a wholly-owned subsidiary (“Merger Sub”) of the Company (the “CuraGen Merger”). Following the CuraGen Merger, the financial statements reflect the financial position, results of operation and cash flows of the combined companies.  On December 31, 2009, the Company completed the merger of the Merger Sub with and into Celldex pursuant to a short-form merger effected under Delaware law. As a result, the separate corporate existence of CuraGen has ceased and the Company has succeeded to all rights, privileges, powers and franchises of CuraGen.

 

(2)  Significant Accounting Policies

 

The significant accounting policies used in preparation of these condensed consolidated financial statements for the three months ended March 31, 2010 are consistent with those discussed in Note 2 to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2009, except for the adoption of new accounting standards during the first three months of 2010 as discussed below.

 

Recent Accounting Pronouncements

 

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) or other standard setting bodies that are adopted by the Company as of the specified effective date. Unless otherwise discussed, the Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on the Company’s financial position or results of operations upon adoption.

 

6



Table of Contents

 

In January 2010, the Company adopted a new U.S. GAAP accounting standard which requires additional disclosure about the amounts of and reasons for significant transfers in and out of Level 1 and Level 2 fair value measurements. This standard also clarifies existing disclosure requirements related to the level of disaggregation of fair value measurements for each class of assets and liabilities and disclosures about inputs and valuation techniques used to measure fair value for both recurring and nonrecurring Level 2 and Level 3 measurements. As this newly issued accounting standard only requires enhanced disclosure, the adoption of this standard did not impact the Company’s financial position or results of operations. In addition, effective for interim and annual periods beginning January 1, 2011, this standard will require additional disclosure and require an entity to present disaggregated information about activity in Level 3 fair value measurements on a gross basis, rather than as one net amount.

 

In January 2010, the Company adopted a new U.S. GAAP accounting standard which amends existing revenue recognition accounting guidance to provide accounting principles and application guidance on whether multiple deliverables exist, how the arrangement should be separated, and the consideration allocated. This new guidance eliminates the requirement to establish objective evidence of fair value of undelivered products and services and instead provides for separate revenue recognition based upon management’s estimate of the selling price for an undelivered item when there is no other means to determine the fair value of that undelivered item. The old guidance previously required that the fair value of the undelivered item be the price of the item either sold in a separate transaction between unrelated third parties or the price charged for each item when the item is sold separately by the vendor. This was difficult to determine when the product was not individually sold because of its unique features. Under the old guidance, if the fair value of all of the undelivered elements in the arrangement was not determinable, then revenue was deferred until all of the items were delivered or fair value was determined. The adoption of the new standard was done on a prospective basis and did not impact the Company’s financial position or results of operations.   This standard may impact the Company in the event it completes future transactions or modifies existing collaborative relationships.

 

(3)  Comprehensive Loss

 

For the three months ended March 31, 2010, comprehensive loss was as follows:

 

 

 

Three months ended March 31,

 

 

 

2010

 

2009

 

 

 

(In thousands)

 

Net loss

 

$

(6,582

)

$

(7,703

)

Other comprehensive loss:

 

 

 

 

 

Net change in unrealized gain on marketable securities

 

118

 

 

Unrealized foreign exchange translation loss

 

(1

)

(13

)

Total other comprehensive gain (loss)

 

117

 

(13

)

Total comprehensive loss

 

$

(6,465

)

$

(7,716

)

 

(4)  Net Loss Per Share

 

Basic net loss per common share is based upon the weighted-average number of common shares outstanding during the period, excluding restricted stock that has been issued but is not yet vested. Diluted net loss per common share is based upon the weighted-average number of common shares outstanding during the period plus additional weighted-average potentially dilutive common shares outstanding during the period when the effect is dilutive. The potentially dilutive common shares that have not been included in the net loss per common share calculations because the effect would have been anti-dilutive are as follows:

 

 

 

Three months ended March 31,

 

 

 

2010

 

2009

 

 

 

 

 

 

 

Stock options

 

4,299,850

 

2,773,318

 

Convertible debt

 

353,563

 

 

Restricted stock

 

12,000

 

 

 

 

4,665,413

 

2,773,318

 

 

7



Table of Contents

 

(5)  Fair Value Measurements

 

The fair value of the Company’s assets and liabilities reflects the Company’s estimate of the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants on the measurement date. Market participants are buyers and sellers in the principal market that are (i) independent, (ii) knowledgeable, (iii) able to transact, and (iv) willing to transact.

 

In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from sources independent from the Company) and to minimize the use of unobservable inputs (the Company’s assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:

 

Level 1:

 

Observable inputs such as quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.

Level 2:

 

Observable inputs other than Level 1 prices, such as quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active.

Level 3:

 

Unobservable inputs based on the Company’s assessment of the assumptions that market participants would use in pricing the asset or liability.

 

The following tables set forth the Company’s financial assets subject to fair value measurements:

 

 

 

As of
March 31, 2010

 

Level 1

 

Level 2

 

Level 3

 

 

 

(In thousands)

 

Cash equivalents

 

$

39,705

 

$

39,705

 

 

 

Marketable securities

 

$

32,700

 

 

$

32,700

 

 

 

 

$

72,405

 

$

39,705

 

$

32,700

 

 

 

 

 

As of
December 31, 2009

 

Level 1

 

Level 2

 

Level 3

 

 

(In thousands)

 

Cash equivalents

 

$

53,780

 

$

53,780

 

 

 

Marketable securities

 

$

25,451

 

 

$

25,451

 

 

 

 

$

79,231

 

$

53,780

 

$

25,451

 

 

 

There have been no transfers of assets or liabilities between the fair value measurement classifications.  The Company’s financial instruments consist mainly of cash and cash equivalents, marketable securities, short-term accounts receivable, accounts payable and debt obligations. Marketable securities have been valued by a third party pricing service at each balance sheet date, using observable market inputs that may include trade information, broker or dealer quotes, bids, offers or a combination of these data sources. Short-term accounts receivable and accounts payable are reflected in the accompanying consolidated financial statements at cost, which approximates fair value due to the short-term nature of these instruments. Based on current market interest rates available to the Company for long-term liabilities with similar terms and maturities, the Company believes the fair value of the loan payable and note payable approximates its carrying value at March 31, 2010.  At March 31, 2010, the estimated fair value of the Company’s outstanding $12.5 million in CuraGen Debt was approximately $12.2 million based on quoted market prices.

 

8



Table of Contents

 

(6) Marketable Securities

 

A summary of cash, cash equivalents and marketable securities is shown below:

 

March 31, 2010

 

Amortized
Cost

 

Gross
Unrealized
Gains

 

Gross
Unrealized
Losses

 

Fair Value

 

 

 

(In thousands)

 

Cash and cash equivalents

 

 

 

 

 

 

 

 

 

Cash and money market funds

 

$

42,666

 

$

 

$

 

$

42,666

 

Total cash and cash equivalents

 

$

42,666

 

$

 

$

 

$

42,666

 

Marketable securities

 

 

 

 

 

 

 

 

 

U.S. government obligations

 

 

 

 

 

 

 

 

 

Maturing in one year or less

 

$

3,271

 

$

10

 

$

 

$

3,281

 

Maturing after one year through two years

 

9,764

 

60

 

2

 

9,822

 

Total U.S. government obligations

 

$

13,035

 

$

70

 

$

2

 

$

13,103

 

Corporate debt securities

 

 

 

 

 

 

 

 

 

Maturing in one year or less

 

$

11,880

 

$

3

 

$

15

 

$

11,868

 

Maturing after one year through two years

 

7,715

 

18

 

4

 

7,729

 

Total corporate debt securities

 

$

19,595

 

$

21

 

$

19

 

$

19,597

 

Total marketable securities

 

$

32,630

 

$

91

 

$

21

 

$

32,700

 

Total cash, cash equivalents and marketable securities

 

$

75,296

 

$

91

 

$

21

 

$

75,366

 

 

December 31, 2009

 

Amortized
Cost

 

Gross
Unrealized
Gains

 

Gross
Unrealized
Losses

 

Fair Value

 

 

 

(In thousands)

 

Cash and cash equivalents

 

 

 

 

 

 

 

 

 

Cash and money market funds

 

$

57,002

 

$

 

$

 

$

57,002

 

Total cash and cash equivalents

 

$

57,002

 

$

 

$

 

$

57,002

 

Marketable securities

 

 

 

 

 

 

 

 

 

U.S. government obligations

 

 

 

 

 

 

 

 

 

Maturing in one year or less

 

$

9,698

 

$

5

 

$

 

$

9,703

 

Maturing after one year through two years

 

7,129

 

6

 

22

 

7,113

 

Total U.S. government obligations

 

$

16,827

 

$

11

 

$

22

 

$

16,816

 

Corporate debt securities

 

 

 

 

 

 

 

 

 

Maturing in one year or less

 

$

 

$

 

$

 

$

 

Maturing after one year through two years

 

8,672

 

 

37

 

8,635

 

Total corporate debt securities

 

$

8,672

 

$

 

$

37

 

$

8,635

 

Total marketable securities

 

$

25,499

 

$

11

 

$

59

 

$

25,451

 

Total cash, cash equivalents and marketable securities

 

$

82,501

 

$

11

 

$

59

 

$

82,453

 

 

As of March 31, 2010, unrealized losses in the portfolio were primarily due to increases in interest rates. The marketable securities held by the Company were high investment grade and the Company did not consider any investments to be other-than-temporarily impaired as of March 31, 2010.

 

(7)  Stock-Based Compensation

 

At March 31, 2010, the Company had two stock-based compensation plans: the 2004 Employee Stock Purchase Plan (the “2004 ESPP Plan”) and the 2008 Stock Option and Incentive Plan (the “2008 Plan”).

 

9



Table of Contents

 

Employee Stock Purchase Plan

 

At March 31, 2010, a total of 62,500 shares of common stock are reserved for issuance under the 2004 ESPP Plan. Under the 2004 ESPP Plan, each participating employee may purchase up to 250 shares of common stock per year, through payroll deductions, at a purchase price equal to 85% of the lower of the fair market value of the common stock at either the beginning of the offering period or the applicable exercise date.  During the three months ended March 31, 2010 and 2009, the Company issued 1,063 and 1,497 shares under the 2004 ESPP Plan, respectively. At March 31, 2010, 55,843 shares were available for issuance under the 2004 ESPP Plan.

 

Employee Stock Option and Incentive Plan

 

The 2008 Plan permits the granting of incentive stock options (intended to qualify as such under Section 422A of the Internal Revenue Code of 1986, as amended), non-qualified stock options, stock appreciation rights, performance share units, restricted stock and other awards of restricted stock in lieu of cash bonuses to employees, consultants and outside directors.

 

At March 31, 2010, the 2008 Plan allowed for a maximum of 3,900,000 shares of common stock to be issued prior to October 19, 2017. The Company’s board of directors determines the term of each option, option price, and number of shares for which each option is granted and the rate at which each option vests. Options generally vest over a period not to exceed four years. The term of each option cannot exceed ten years (five years for options granted to holders of more than 10% of the voting stock of the Company) and the exercise price of stock options cannot be less than the fair market value of the common stock at the date of grant (110% of fair market value for incentive stock options granted to holders of more than 10% of the voting stock of the Company).  Vesting of all employee and non-employee director stock option awards is accelerated upon a change in control as defined in the 2008 Plan.

 

In connection with the CuraGen Merger, the Company assumed the obligations of CuraGen under CuraGen’s 2007 Stock Plan (the “CuraGen 2007 Plan”) and each outstanding option to purchase CuraGen common stock (a “CuraGen Stock Option”) granted under the CuraGen 2007 Plan. Each CuraGen Stock Option assumed by the Company is deemed to constitute an option to acquire, on the same terms and conditions as were applicable under the CuraGen 2007 Plan, shares of the Company’s common stock that have been adjusted consistent with the ratio at which the Company’s common stock was issued in exchange for CuraGen’s common stock in the CuraGen Merger. As of October 1, 2009, the Company assumed options to acquire 931,315 shares of its common stock with a weighted average exercise price of $3.17.  As of October 1, 2009, all of the CuraGen Stock Options were fully vested except for 8,993 shares which generally vest over a two year period. No additional awards will be issued under the CuraGen 2007 Plan. The fair value of the CuraGen Stock Options that were attributed to precombination service was included in the CuraGen Merger consideration.

 

A summary of stock option activity under the 2008 Plan, CuraGen 2007 Plan and Celldex Research 2005 Plan for the three months ended March 31, 2010 is as follows:

 

 

 

Shares

 

Weighted
Average
Exercise
Price
Per Share

 

Weighted
Average
Remaining
Contractual
Term (In Years)

 

Options Outstanding at December 31, 2009

 

3,576,159

 

$

7.10

 

6.6

 

Granted

 

804,500

 

4.53

 

 

 

Exercised

 

(73,594

)

2.49

 

 

 

Canceled/forfeited

 

(1,000

)

6.22

 

 

 

Expired

 

(6,215

)

2.57

 

 

 

Options Outstanding at March 31, 2010

 

4,299,850

 

$

6.71

 

7.1

 

Options Vested and Expected to Vest at March 31, 2010

 

3,984,175

 

$

6.76

 

 

 

Options Exercisable at March 31, 2010

 

2,707,011

 

$

6.93

 

 

 

Shares Available for Grant under the 2008 Plan

 

1,691,147

 

 

 

 

 

 

10



Table of Contents

 

The total intrinsic value of stock options exercised during the three months ended March 31, 2010 was $0.2 million. No stock options were exercised during the three months ended March 31, 2009. The weighted average grant-date fair value of stock options granted during the three months ended March 31, 2010 and 2009 was $2.81 and $5.33, respectively. The total fair value of stock options that vested during the three months ended March 31, 2010 and 2009 was $1.6 million and $1.4 million, respectively.

 

The aggregate intrinsic value of stock options outstanding at March 31, 2010 was $3.7 million. The aggregate intrinsic value of stock options vested and expected to vest at March 31, 2010 was $3.4 million. As of March 31, 2010, total compensation cost related to non-vested employee and non-employee director stock options not yet recognized was approximately $4.8 million, net of estimated forfeitures, which is expected to be recognized as expense over a weighted average period of 3.1 years.

 

Restricted Stock

 

A summary of restricted stock activity under the 2008 Plan for the three months ended March 31, 2010 is as follows:

 

 

 

Shares

 

Weighted
Average
Grant Date
Fair Value
(per share)

 

Outstanding and unvested at December 31, 2009

 

16,000

 

$

4.48

 

Granted

 

 

 

Vested

 

(4,000

)

4.48

 

Canceled

 

 

 

Outstanding and unvested at March 31, 2010

 

12,000

 

$

4.48

 

 

Valuation and Expenses Information

 

Stock-based compensation expense related to employee and non-employee stock options, restricted stock and employee stock purchases for the three months ended March 31, 2010 and 2009 was recorded as follows:

 

 

 

Three months ended March 31,

 

 

 

2010

 

2009

 

 

 

(In thousands)

 

Research and development

 

$

516

 

$

400

 

General and administrative

 

454

 

712

 

Total stock-based compensation expense

 

$

970

 

$

1,112

 

 

The fair values of employee and non-employee director stock options and employee stock purchases granted during the three months ended March 31, 2010 and 2009 were valued using the Black-Scholes option-pricing model with the following assumptions:

 

 

 

Three months ended March 31,

 

 

 

2010

 

2009

 

Expected stock price volatility (options)

 

65

%

68

%

Expected stock price volatility (2004 ESPP)

 

51

%

98

%

Expected option term (options)

 

6.2 Years

 

6.3 Years

 

Expected option term (2004 ESPP)

 

0.5 Years

 

0.5 Years

 

Risk-free interest rate (options)

 

3.1 – 3.2

%

1.9 – 2.7

%

Risk-free interest rate (2004 ESPP)

 

0.2

%

0.3

%

Expected dividend yield

 

None

 

None

 

 

Prior to January 1, 2010, the Company used the simplified method of estimating the expected term for share-based compensation.  Starting January 1, 2010, the Company ceased using the simplified method, and now

 

11



Table of Contents

 

uses the average of expected terms for industry peers.  Due to the AVANT Merger and the CuraGen Merger, historical exercise patterns do not provide a reasonable basis to estimate expected term of current option grants.  Industry peers consist of several public companies that are similar in size in the biopharmaceutical industry.  The Company uses its historical stock price volatility consistent with the expected term of grant as the basis for its expected volatility assumption. The risk-free interest rate is based upon the yield of U.S. Treasury securities consistent with the expected term of the option. The dividend yield assumption is based on the Company’s history of zero dividend payouts and expectation that no dividends will be paid in the foreseeable future.

 

(8)  Intangible Assets and Goodwill

 

Intangible assets, net of accumulated amortization, and goodwill are as follows:

 

 

 

 

 

March 31, 2010

 

December 31, 2009

 

 

 

Estimated
Life

 

Cost

 

Accumulated
Amortization

 

Net

 

Cost

 

Accumulated
Amortization

 

Net

 

 

 

 

 

(In thousands)

 

Intangible Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

IPR&D

 

Indefinite

 

$

11,800

 

 

$

11,800

 

$

11,800

 

 

$

11,800

 

Amgen Amendment

 

16 years

 

14,500

 

$

(448

)

14,052

 

14,500

 

$

(224

)

14,276

 

TopoTarget Agreement

 

1.75 years

 

2,400

 

(1,543

)

857

 

2,400

 

(343

)

2,057

 

Core Technology

 

4.5 - 11 years

 

2,193

 

(908

)

1,285

 

2,193

 

(832

)

1,361

 

Strategic Partner Agreement

 

8 years

 

630

 

(165

)

465

 

630

 

(145

)

485

 

Total Intangible Assets

 

 

 

$

31,523

 

$

(3,064

)

$

28,459

 

$

31,523

 

$

(1,544

)

$

29,979

 

Goodwill

 

Indefinite

 

$

8,965

 

 

$

8,965

 

$

8,965

 

 

$

8,965

 

 

In January 2009, the Company entered into a purchase agreement (the “LAHI Agreement”) with Lohmann Animal Health International (“LAHI”) to sell its poultry vaccines assets to LAHI. Under the LAHI Agreement, LAHI paid an upfront fee of $0.8 million and agreed to pay potential milestone payments. The Company recorded a gain of $0.6 million during the three months ended March 31, 2009 related to the LAHI Agreement based on the upfront fee less the net book value of the related asset.

 

The estimated fair value attributed to the April 2008 agreement (“TopoTarget Agreement”) between the Company (as a successor to CuraGen) and TopoTarget A/S (“TopoTarget”) relates to the Company’s rights under the TopoTarget Agreement to receive up to $6 million in either potential commercial milestone payments related to future net sales of Belinostat or 10% of any sublicense income received by TopoTarget (“TopoTarget Payments”).  In February 2010, TopoTarget entered into a co-development and commercialization agreement for Belinostat with Spectrum Pharmaceuticals, Inc. which resulted in the Company’s receipt of $3 million of the TopoTarget Payments.  The Company recorded this cash receipt as Other Income for the three months ended March 31, 2010 and recorded amortization expense related to the TopoTarget Agreement of $1.2 million for the three months ended March 31, 2010.

 

(9)  Income Taxes

 

Massachusetts, New Jersey and Connecticut are the three states in which the Company primarily operates or has operated and has income tax nexus. The Company is currently under examination for sales and use taxes by the State of Connecticut for CuraGen’s operations for the period from July 1, 2006 through June 30, 2009. The Company is not currently under examination by any other jurisdictions for any tax year.

 

The Company has evaluated the positive and negative evidence bearing upon the realizability of its net deferred tax assets, which are comprised principally of net operating loss carryforwards, capitalized R&D expenditures and R&D tax credit carryforwards. The Company has determined that it is more likely than not that it will not recognize the benefits of federal and state deferred tax assets and, as a result, a full valuation allowance was maintained at March 31, 2010 and December 31, 2009 against the Company’s net deferred tax assets.

 

12



Table of Contents

 

(10)  Significant Revenue Arrangements

 

A summary of the Company’s significant revenue contracts and arrangements follows:

 

GlaxoSmithKline plc (“Glaxo”) and Paul Royalty Fund II, L.P. (“PRF”)

 

In 1997, the Company entered into an agreement with Glaxo to collaborate on the development and commercialization of the Company’s oral rotavirus strain and Glaxo assumed responsibility for all subsequent clinical trials and all other development activities. The Company’s licensed-in the rotavirus strain that was used to develop Glaxo’s Rotarix® rotavirus vaccine in 1995 and owes a license fee of 30% to Cincinnati Children’s Hospital Medical Center (“CCH”) on net royalties received from Glaxo. The Company is obligated to maintain a license with CCH with respect to the Glaxo agreement. The term of the Glaxo agreement is through the expiration of the last of the relevant patents covered by the agreement, although Glaxo may terminate the agreement upon 90 days prior written notice.

 

In May 2005, the Company entered into an agreement whereby an affiliate of PRF purchased an interest in the net royalties the Company will receive on worldwide sales of Rotarix®. The Company’s retained interests in Rotarix® net royalties which were not sold to PRF are recorded as product royalty revenue and a corresponding amount that is payable to CCH is recorded as royalty expense. Product royalty revenue and royalty expense related to the Company’s retained interest in Rotarix® was $2.1 million and $2.0 million for the three months ended March 31, 2010 and 2009, respectively.

 

Royalty rates on Rotarix® escalate from 7% to 10% based on net product sales in countries that have valid patent protection. These royalty rates are discounted by 30% for “non-patent” countries (primarily international markets). In September 2006, the Company received notice from Glaxo that Glaxo would begin paying royalties on sales of Rotarix® at the lower of the two royalty rates under their 1997 license agreement. Glaxo’s decision to pay the lower royalty rate (which is 70% of the full rate) is based upon Glaxo’s assertion that Rotarix® is not covered by the patents Glaxo licensed from the Company in Australia and certain European countries. If Glaxo’s position stands, the royalties to which PRF is entitled will no longer be limited by a $27.5 million annual threshold, which the Company projected may have been reached in later years as sales of Rotarix® increased.  Irrespective of Glaxo’s position, the Company will still retain approximately 65% of the royalties on worldwide sales of Rotarix® once PRF receives 2.45 times the aggregate cash payments of $60 million it made to the Company, though the potential amount of such residual royalties will be lower if Glaxo’s position stands. The Company has received $60 million in total milestone payments under the PRF agreement. No additional milestone payments are due from PRF under the agreement. In late March 2010, the Company learned that the FDA decided to temporarily suspend the use of Rotarix® in the United States as a precautionary measure following the discovery of PCV-1 DNA material in the vaccine.

 

Pfizer Inc (“Pfizer”)

 

On April 16, 2008, the Company and Pfizer entered into a License and Development Agreement (the “Pfizer Agreement”) under which Pfizer was granted an exclusive worldwide license to a therapeutic cancer vaccine candidate, CDX-110, in Phase 2 development for the treatment of glioblastoma multiforme. The Pfizer Agreement also gives Pfizer exclusive rights to the use of EGFRvIII vaccines in other potential indications. Under the Pfizer Agreement, Pfizer made an upfront payment to the Company of $40 million and made a $10 million equity investment in the Company. Pfizer will fund all development costs for these programs. The Company is also eligible to receive potential milestone payments exceeding $390 million for the successful development and commercialization of CDX-110 and additional EGFRvIII vaccine products, as well as royalties on any product sales. The Pfizer Agreement became effective after clearance under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (as amended) on May 19, 2008.

 

On May 27, 2008, the Company received $10 million from Pfizer in exchange for 781,250 shares of the Company’s common stock having a fair value of $10.9 million, or $13.91 per share, on that date. The $0.9 million over the amount received from Pfizer was recorded as a reduction to deferred revenue of the $40 million upfront payment received from Pfizer on June 18, 2008.

 

13



Table of Contents

 

The Company has determined that its performance obligations under this collaboration should be accounted for as a single unit of accounting. The Company’s deliverables under this collaboration primarily include an exclusive license to its CDX-110 product candidate and its EGFRvIII technologies, research and development services as required under the collaboration and participation in the joint clinical development committee. The Company has estimated that its performance period under the collaboration will be 9.5 years based on an assessment of the period over which the Company will have met its performance obligations under the collaboration. Revenue, including research and development reimbursements, is being recognized on a straight-line basis over this period using the Contingency Adjusted Performance Model (“CAPM”). The $40 million up-front payment, less the $0.9 million in excess fair value for the Company’s common stock discussed above, was recorded as deferred revenue and is being amortized over the 9.5-year performance period at a rate of $1.0 million per quarter.

 

The Pfizer Agreement also provides for reimbursement by Pfizer of all costs incurred by the Company in connection with the collaboration since the effective date. The Company invoices Pfizer monthly for its reimbursable costs and records the invoiced amount as deferred revenue. These deferred revenue amounts are amortized to revenue over the estimated 9.5-year performance period on a straight-line basis using the CAPM model. The Company incurred and invoiced Pfizer $0.3 million and $1.6 million in reimbursable costs related to the Pfizer collaboration for the three months ended March 31, 2010 and 2009, respectively.

 

The Company recorded product development and licensing agreement revenue under the Pfizer Agreement as follows:

 

 

 

Three Months Ended March 31,

 

 

 

2010

 

2009

 

 

 

(In thousands)

 

Up-front portion

 

$

1,030

 

$

1,030

 

Reimbursable costs portion

 

266

 

272

 

 

 

$

1,296

 

$

1,302

 

 

In connection with the Pfizer Agreement, the Company paid a total of $6.9 million in sublicense fees to Duke University and Thomas Jefferson University. The Company recorded these deferred sublicense fees to other assets in the consolidated balance sheets and is amortizing them to royalty expense over the 9.5-year performance period.  The Company recorded $0.2 million in royalty expense related to these deferred sublicense fees during the three months ended March 31, 2010 and 2009.  At March 31, 2010 and December 31, 2009, the unamortized balance of deferred costs was $5.5 million and $5.7 million, respectively.

 

Rockefeller University (“Rockefeller”)

 

The Company is providing research and development support to Rockefeller on the development of their vaccine, DCVax-001, which the Company refers to as CDX-2401, aimed at providing protection from infection with HIV, the virus known to cause AIDS. This program is in a Bill & Melinda Gates Foundation funded partnership called the Grand Challenges initiative. Preclinical studies and manufacturing development are in progress and payments to the Company are made on a time and materials basis. The Company recorded grant revenue from Rockefeller of $0.2 million and $0.1 million for the three months ended March 31, 2010 and 2009, respectively.

 

14



Table of Contents

 

(11) Other Long-Term Liabilities

 

Other long-term liabilities include the following:

 

 

 

March 31, 2010

 

December 31, 2009

 

 

 

(In thousands)

 

Deferred Rent

 

$

390

 

$

377

 

CuraGen Merger Severance

 

2,596

 

2,623

 

Deferred Tax Liabilities

 

4,661

 

4,661

 

Loan Payable

 

619

 

632

 

Note Payable

 

145

 

178

 

Total

 

8,411

 

8,471

 

Less Current Portion

 

(2,387

)

(2,156

)

Long-Term Portion

 

$

6,024

 

$

6,315

 

 

(12) CuraGen Acquisition

 

In connection with the CuraGen Merger, effective October 1, 2009, the Company (i) issued 15,722,713 shares of common stock of the Company, or 0.2739 shares, in exchange for each share of outstanding CuraGen common stock, plus cash in lieu of fractional shares (the “CuraGen Exchange Ratio”), (ii) assumed all of the CuraGen Stock Options and (iii) assumed the CuraGen Debt. The Company acquired CuraGen to gain access to a pipeline of oncology-focused antibodies, including CDX-011 currently in Phase 2 clinical development for the treatment of breast and melanoma cancer, and cash, cash equivalents and marketable securities of $70.3 million.

 

The transaction was accounted for under the acquisition method of accounting. All of the assets acquired and liabilities assumed in the transaction are recognized at their acquisition-date fair values, while transaction costs associated with the transaction are expensed as incurred.

 

Purchase Price

 

The purchase price for CuraGen was based on the acquisition-date fair value of the consideration transferred, which was calculated based on the closing price of the Company’s common stock of $5.43 per share on October 1, 2009. The acquisition-date fair value of the consideration transferred consisted of the following (in thousands):

 

Fair value of common stock issued

 

$

85,374

 

Fair value of CuraGen Stock Options

 

2,868

 

Total consideration transferred

 

$

88,242

 

 

U.S. GAAP requires that the fair value of replacement awards attributable to precombination service be included in the consideration transferred. Of the CuraGen Stock Options assumed, all but 1%, were immediately vested upon closing in accordance with the terms of the stock option agreements and employment agreements. The fair value of the CuraGen Stock Options that has been attributed to precombination service was included in the consideration transferred.

 

Allocations of Assets and Liabilities

 

The Company allocated the consideration transferred for CuraGen to net tangible assets, intangible assets, goodwill and a severance obligation. The difference between the aggregate consideration transferred and the fair value of assets acquired and liabilities assumed was allocated to goodwill. This goodwill relates to the potential synergies from the CuraGen Merger and a deferred tax liability related to acquired IPR&D intangible assets. None of the goodwill is expected to be deductible for income tax purposes. The following table summarizes the fair values of the assets acquired and liabilities assumed at the acquisition date (in thousands):

 

15



Table of Contents

 

Cash and cash equivalents

 

$

51,654

 

Marketable securities

 

18,638

 

Identifiable intangible assets:

 

 

 

IPR&D

 

11,800

 

Amgen Amendment

 

14,500

 

TopoTarget Agreement

 

2,400

 

Other current and long-term assets

 

756

 

Goodwill

 

8,965

 

CuraGen Debt

 

(11,503

)

Deferred tax liabilities, net

 

(5,190

)

Other assumed liabilities

 

(3,778

)

Total

 

$

88,242

 

 

The purchase price allocation has been prepared on a preliminary basis and is subject to change as additional information becomes available concerning the fair value and tax basis of the acquired assets and liabilities. Any adjustments to the purchase price allocation will be made as soon as practicable but no later than one year from the acquisition date.

 

Pro Forma Financial Information

 

If the operations of the Company and CuraGen were combined as of January 1, 2009, the unaudited pro forma net loss for the three months ended March 31, 2009 would have been $14.4 million. The unaudited pro forma combined results are not necessarily indicative of the actual results that would have occurred had the acquisition been consummated at that date or of the future operations of the combined entities.

 

(13) Stockholders’ Equity

 

In April 2010, the Company filed a shelf registration statement with the Securities and Exchange Commission to register for sale any combination of the types of securities described in the filing up to a dollar amount of $150 million.  The shelf registration went effective on April 22, 2010.  No securities have been sold by the Company from this shelf registration.

 

16



Table of Contents

 

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995:  This report on Form 10-Q contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 under Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements include statements with respect to our beliefs, plans, objectives, goals, expectations, anticipations, assumptions, estimates, intentions and future performance, and involve known and unknown risks, uncertainties and other factors, which may be beyond our control, and which may cause our actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. All statements other than statements of historical fact are statements that could be forward-looking statements. You can identify these forward-looking statements through our use of words such as “may,” “will,” “can,” “anticipate,” “assume,” “should,” “indicate,” “would,” “believe,” “contemplate,” “expect,” “seek,” “estimate,” “continue,” “plan,” “point to,” “project,” “predict,” “could,” “intend,” “target,” “potential” and other similar words and expressions of the future.

 

There are a number of important factors that could cause the actual results to differ materially from those expressed in any forward-looking statement made by us. These factors include, but are not limited to:

 

·                  our ability to successfully complete product research and further development, including animal, preclinical and clinical studies, and commercialization of CDX-110, CDX-011, CDX-1307, CDX-1401, CDX-1135, and other products and the growth of the markets for those product candidates;

 

·                  our ability to raise sufficient additional capital on terms acceptable to us, or at all;

 

·                  the cost, timing, scope and results of ongoing safety and efficacy trials of CDX-110, CDX-011, CDX-1307, CDX-1401, CDX-1135, and other preclinical and clinical testing;

 

·                  our ability to adapt our APC Targeting Technology™ to develop new, safe and effective vaccines against oncology and infectious disease indications;

 

·                  the ability to negotiate strategic partnerships or other disposition transactions for our non-core programs;

 

·                  our ability to manage multiple clinical trials for a variety of product candidates at different stages of development;

 

·                  the strategies and business plans of our partners, such as Pfizer’s plans for CDX-110, GlaxoSmithKline’s plans with respect to Rotarix® and Vaccine Technologies’ plans concerning the CholeraGarde® (Peru-15) and ETEC E. coli vaccines, which are not within our control, and our ability to maintain strong, mutually beneficial relationships with those partners;

 

·                  our ability to successfully integrate our and CuraGen’s business without causing delays in the research and development necessary to select drug development candidates and/or delays in clinical trials, and to operate the combined business efficiently;

 

·                  our ability to develop technological capabilities and expand our focus to broader markets for vaccines;

 

·                  the availability, cost, delivery and quality of clinical and commercial grade materials produced by our own manufacturing facility or supplied by contract manufacturers and partners;

 

·                  the timing, cost and uncertainty of obtaining regulatory approvals for product candidates;

 

·                  our ability to develop and commercialize products before competitors that are superior to the alternatives developed by such competitors;

 

17



Table of Contents

 

·                  the validity of our patents and our ability to avoid intellectual property litigation, which can be costly and divert management time and attention; and

 

·                  the factors listed under the headings “Business,” “Risk Factors” and Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s annual report on Form 10-K for the year ended December 31, 2009 and other reports that Celldex files with the Securities and Exchange Commission.

 

All forward-looking statements are expressly qualified in their entirety by this cautionary notice. You are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date of this report or the date of the document incorporated by reference into this report. We have no obligation, and expressly disclaim any obligation, to update, revise or correct any of the forward-looking statements, whether as a result of new information, future events or otherwise. We have expressed our expectations, beliefs and projections in good faith and we believe they have a reasonable basis. However, we cannot assure you that our expectations, beliefs or projections will result or be achieved or accomplished.

 

OVERVIEW

 

We are an integrated biopharmaceutical company that applies our comprehensive Precision Targeted Immunotherapy Platform to generate a pipeline of candidates to treat cancer and other difficult-to-treat diseases. Our immunotherapy platform includes a complementary portfolio of monoclonal antibodies, antibody-targeted vaccines, antibody-drug conjugates and immunomodulators to create novel disease-specific drug candidates.

 

Our strategy is to develop and demonstrate proof-of-concept for our product candidates before leveraging their value through partnerships or, in appropriate situations, continuing late stage development through commercialization ourselves. Demonstrating proof-of-concept for a product candidate generally involves bringing it through Phase 1 clinical trials and one or more Phase 2 clinical trials so that we are able to demonstrate, based on human trials, good safety data for the product candidate and some data indicating its effectiveness. We thus leverage the value of our technology portfolio through corporate, governmental and non-governmental partnerships. This approach allows us to maximize the overall value of our technology and product portfolio while best ensuring the expeditious development of each individual product.

 

Our current collaborations include the commercialization of an oral human rotavirus vaccine and the development of oncology and infectious disease vaccines. Our product candidates address large market opportunities for which we believe current therapies are inadequate or non-existent.

 

Acquisition of CuraGen

 

In connection with the CuraGen Merger, effective October 1, 2009, we (i) issued 15,722,713 shares of our common stock, or 0.2739 shares, in exchange for each share of outstanding CuraGen common stock, plus cash in lieu of fractional shares (the “CuraGen Exchange Ratio”), (ii) assumed all of the CuraGen Stock Options and (iii) assumed the CuraGen Debt. We acquired CuraGen to gain access to a pipeline of oncology-focused antibodies, including CDX-011 (formerly CR011) currently in Phase 2 clinical development for the treatment of breast and melanoma cancer, and cash, cash equivalents and marketable securities of $70.3 million.

 

The transaction was accounted for under the acquisition method of accounting. All of the assets acquired and liabilities assumed in the transaction are recognized at their acquisition-date fair values, while transaction costs associated with the transaction are expensed as incurred.

 

Purchase Price

 

The purchase price for CuraGen was based on the acquisition-date fair value of the consideration transferred, which was calculated based on the closing price of our common stock of $5.43 per share on October 1, 2009. The acquisition-date fair value of the consideration transferred consisted of the following (in thousands):

 

18



Table of Contents

 

Fair value of common stock issued

 

$

85,374

 

Fair value of CuraGen Stock Options

 

2,868

 

Total consideration transferred

 

$

88,242

 

 

U.S. GAAP requires that the fair value of replacement awards attributable to precombination service be included in the consideration transferred. Of the CuraGen Stock Options assumed, all but 1%, were immediately vested upon closing in accordance with the terms of the stock option agreements and employment agreements. The fair value of the CuraGen Stock Options that has been attributed to precombination service is included in the consideration transferred.

 

Allocations of Assets and Liabilities

 

We have allocated the consideration transferred for CuraGen to net tangible assets, intangible assets, goodwill and a severance obligation. The difference between the aggregate consideration transferred and the fair value of assets acquired and liabilities assumed was allocated to goodwill. This goodwill relates to the potential synergies from the CuraGen Merger and a deferred tax liability related to acquired IPR&D intangible assets. None of the goodwill is expected to be deductible for income tax purposes. The following table summarizes the fair values of the assets acquired and liabilities assumed at the acquisition date (in thousands):

 

Cash and cash equivalents

 

$

51,654

 

Marketable securities

 

18,638

 

Identifiable intangible assets:

 

 

 

IPR&D

 

11,800

 

Amgen Amendment

 

14,500

 

TopoTarget Agreement

 

2,400

 

Other current and long-term assets

 

756

 

Goodwill

 

8,965

 

CuraGen Debt

 

(11,503

)

Deferred tax liabilities, net

 

(5,190

)

Other assumed liabilities

 

(3,778

)

Total

 

$

88,242

 

 

The purchase price allocation has been prepared on a preliminary basis and is subject to change as additional information becomes available concerning the fair value and tax basis of the acquired assets and liabilities. Any adjustments to the purchase price allocation will be made as soon as practicable but no later than one year from the acquisition date.

 

CURRENT PROGRAMS AND PARTNERSHIPS

 

Our products are derived from a broad set of complementary technologies which have the ability to utilize the human immune system and enable the creation of preventative and therapeutic agents. We are using these technologies to develop vaccines and targeted immunotherapeutics that prevent or treat cancer and disease caused by infectious organisms, and treatment vaccines that modify undesirable activity by the body’s own proteins or cells. A number of our immunotherapeutic and vaccine product candidates are in various stages of clinical trials. We expect that a large percentage of our research and development expenses will be incurred in support of our current and future clinical trial programs.

 

19



Table of Contents

 

The following table includes the programs that we currently believe are material to our business:

 

Product (generic)

 

Indication/Field

 

Partner

 

Status

CLINICAL

 

 

 

 

 

 

CDX-110
(rindopepimut)

 

Glioblastoma multiforme

 

Pfizer (PF-4948568)

 

Phase 2b

CDX-011
(glembatumumab vedotin)

 

Metastatic melanoma and breast cancer

 

 

Phase 2

CDX-1307

 

Colorectal, bladder, pancreas, ovarian and breast tumors

 

 

Phase 1

CDX-1401

 

Multiple solid tumors

 

 

Phase 1/2

CDX-1135

 

Renal disease

 

 

Phase 1/2

PRECLINICAL

 

 

 

 

 

 

CDX-301

 

Cancer, autoimmune disease and transplant

 

 

Preclinical

CDX-1127

 

Immuno-modulation, multiple tumors

 

 

Preclinical

CDX-014

 

Renal and ovarian cancer

 

 

Preclinical

CDX-1189

 

Renal disease

 

 

Preclinical

MARKETED PRODUCTS

 

 

 

 

 

 

Rotarix®

 

Rotavirus infection

 

GlaxoSmithKline

 

Marketed*

 


* In late March 2010, we learned that the FDA decided to temporarily suspend the use of Rotarix® in the United States as a precautionary measure following the discovery of PCV-1 DNA material in the vaccine.

 

The expenditures that will be necessary to execute our business plan are subject to numerous uncertainties. Completion of clinical trials may take several years or more, and the length of time generally varies substantially according to the type, complexity, novelty and intended use of a product candidate. It is not unusual for the clinical development of these types of product candidates to each take five years or more, and for total development costs to exceed $100 million for each product candidate. Our estimates that clinical trials of the type we generally conduct are typically completed over the following timelines:

 

Clinical Phase

 

Estimated
Completion
Period

 

Phase 1

 

1 - 2 Years

 

Phase 2

 

1 - 5 Years

 

Phase 3

 

1 - 5 Years

 

 

The duration and the cost of clinical trials may vary significantly over the life of a project as a result of differences arising during the clinical trial protocol, including, among others, the following:

 

·                  the number of patients that ultimately participate in the trial;

 

·                  the duration of patient follow-up that seems appropriate in view of results;

 

·                  the number of clinical sites included in the trials;

 

·                  the length of time required to enroll suitable patient subjects; and

 

·                  the efficacy and safety profile of the product candidate.

 

We test potential product candidates in numerous preclinical studies for safety, toxicology and immunogenicity. We may then conduct multiple clinical trials for each product candidate. As we obtain results from

 

20



Table of Contents

 

trials, we may elect to discontinue or delay clinical trials for certain product candidates in order to focus our resources on more promising product candidates.

 

An element of our business strategy is to pursue the research and development of a broad portfolio of product candidates. This is intended to allow us to diversify the risks associated with our research and development expenditures. As a result, we believe our future capital requirements and our future financial success are not substantially dependent on any one product candidate. To the extent we are unable to maintain a broad range of product candidates, our dependence on the success of one or a few product candidates increases.

 

Regulatory approval is required before we can market our product candidates as therapeutic or vaccine products. In order to proceed to subsequent clinical trial stages and to ultimately achieve regulatory approval, the regulatory agency must conclude that our clinical data is safe and effective. Historically, the results from preclinical testing and early clinical trials (through Phase 2) have often not been predictive of results obtained in later clinical trials. A number of new drugs, biologics and vaccines have shown promising results in early clinical trials, but subsequently failed to establish sufficient safety and efficacy data to obtain necessary regulatory approvals.

 

Furthermore, our business strategy includes the option of entering into collaborative arrangements with third parties to complete the development and commercialization of our product candidates. In the event that third parties take over the clinical trial process for one of our product candidates, the estimated completion date would largely be under control of that third party rather than us. We cannot forecast with any degree of certainty which proprietary products, if any, will be subject to future collaborative arrangements, in whole or in part, and how such arrangements would affect our development plan or capital requirements. Our programs may also benefit from subsidies, grants, contracts or government or agency-sponsored studies that could reduce our development costs.

 

As a result of the uncertainties discussed above, among others, we are unable to estimate the duration and completion costs of our research and development projects or when, if ever, and to what extent it will receive cash inflows from the commercialization and sale of a product. Our inability to complete our research and development projects in a timely manner or our failure to enter into collaborative agreements, when appropriate, could significantly increase our capital requirements and could adversely impact our liquidity. These uncertainties could force us to seek additional, external sources of financing from time to time in order to continue with our business strategy. Our inability to raise additional capital, or to do so on terms reasonably acceptable to us, would jeopardize the future success of our business.

 

During the past five years through December 31, 2009, we incurred an aggregate of $73.5 million in research and development expenses. The following table indicates the amount incurred for each of our significant research programs and for other identified research and development activities during the three months ended March 31, 2010 and 2009. The amounts disclosed in the following table reflect direct research and development costs, license fees associated with the underlying technology and an allocation of indirect research and development costs to each program. Prior to 2008, the privately-held Celldex Research did not maintain records that allowed for quantification of research and development expenses by project.

 

21



Table of Contents

 

 

 

Three Months Ended March 31,

 

 

 

2010

 

2009

 

 

 

(In thousands)

 

CLINICAL

 

 

 

 

 

CDX-110

 

$

304

 

1,311

 

CDX-011

 

932

 

 

CDX-1307

 

850

 

1,724

 

CDX-1401

 

765

 

1,833

 

CDX-1135

 

118

 

65

 

PRECLINICAL

 

 

 

 

 

CDX-301

 

1,894

 

250

 

CDX-1127

 

558

 

216

 

CDX-014

 

6

 

 

CDX-1189

 

20

 

109

 

OTHER

 

 

 

 

 

CDX-2401

 

272

 

206

 

Other Programs

 

719

 

742

 

Total R&D Expense

 

$

6,438

 

$

6,456

 

 

Clinical Development Programs

 

CDX-110

 

Our lead clinical development program, CDX-110, is a peptide-based immunotherapy that targets the tumor specific molecule called EGFRvIII, a functional variant of the naturally expressed epidermal growth factor receptor (“EGFR”), a protein which has been well validated as a target for cancer therapy. Unlike EGFR, EGFRvIII is not present in normal tissues, and has been shown to be a transforming oncogene that can directly contribute to the cancer cell growth. EGFRvIII is commonly present in glioblastoma multiforme, or GBM, the most common and aggressive form of brain cancer, and has also been observed in various other cancers such as breast, ovarian, prostate, colorectal, and head & neck cancer.

 

In April 2008, we and Pfizer Inc. (“Pfizer”) entered into a License and Development Agreement (the “Pfizer Agreement”) under which Pfizer was granted an exclusive worldwide license to CDX-110. The Pfizer Agreement also gives Pfizer exclusive rights to the use of EGFRvIII vaccines in other potential indications. Pfizer funds all development costs for these programs. We and Pfizer are currently pursuing the development of CDX-110 for GBM therapy and plan to expand the clinical development into other cancers through additional clinical studies. The FDA has granted orphan drug designation for CDX-110 for the treatment of EGFRvIII expressing GBM as well as fast track designation.

 

Initial clinical development of EGFRvIII immunotherapy was led by collaborating investigators at the Brain Center at Duke Comprehensive Cancer Center in Durham, North Carolina and at M.D. Anderson Cancer Center in Houston, Texas. The results from the Phase 1 (VICTORI) and Phase 2a (ACTIVATE) studies, which enrolled 16 and 21 patients, respectively, have demonstrated a significant increase in the time to disease progression (greater than 113%) in the patients who were vaccinated, and also in overall survival rates (greater than 100%), both relative to appropriately matched historical controls. An extension of the Phase 2a program (ACT II) at the same two institutions has enrolled 23 additional GBM patients treated in combination with temozolomide (the current standard of care). Preliminary results from this study (ACT II) currently estimates median overall survival to be 23.6 months, although the median has not yet been reached, while the survival of a matched historical control group was 15.0 months with a p value = 0.0237. Overall time to progression in the ACT II study was 15.2 months compared with 6.3 months for the historical control group.

 

We initiated a Phase 2b/3 randomized study (ACT III) of CDX-110 combined with standard of care, temozolomide, versus standard of care alone in patients with GBM in over 30 sites throughout the United States. In December 2008, we announced an amendment to convert the ACT III study to a single-arm Phase 2 clinical trial in

 

22



Table of Contents

 

which all patients will receive CDX-110 in combination with temozolomide. The decision, which followed the recommendation of the Independent Data Monitoring Committee, was based on the observation that the majority of patients randomized to the control (standard of care) arm withdrew from this open-label study after being randomized to the control arm. Patients participating on the control arm of the study were offered the option to receive treatment with CDX-110. Under this amendment, the ACT III study provided for a multi-center, non-randomized dataset for CDX-110 in patients with newly diagnosed GBM. These data will provide important additional information that can be used to better design the future development of CDX-110. Enrollment in ACT III is complete with a total of over 60 patients enrolled and we expect to present updated results during 2010.

 

CDX-011

 

CDX-011 (formerly CR011-vcMMAE) is an antibody-drug conjugate (ADC) that consists of a fully-human monoclonal antibody, CR011, linked to a potent cell-killing drug, monomethyl-auristatin E (MMAE). The CR011 antibody specifically targets glycoprotein NMB or (GPNMB) that is expressed in a variety of human cancers including breast cancer and melanoma. The ADC technology, comprised of MMAE and a stable linker system for attaching it to CR011, was licensed from Seattle Genetics, Inc. The ADC is designed to be stable in the bloodstream. Following intravenous administration, CDX-011 targets and binds to GPNMB and upon internalization into the targeted cell, CDX-011 is designed to release MMAE from CR011 to produce a cell-killing effect. We acquired the rights to CDX-011 in connection with the CuraGen Merger.

 

Treatment of Breast Cancer:  In June 2008, an open-label, multi-center Phase 1/2 study was initiated of CDX-011 administered intravenously once every three weeks to patients with locally advanced or metastatic breast cancer who have received prior therapy (median of seven prior regimens). The study began with a bridging phase to confirm the maximum tolerated dose (“MTD”) and has expanded into a Phase 2 open-label, multi-center study.

 

The study confirmed the safety of CDX-011 at the pre-defined maximum dose level (1.88 mg/kg) in 6 patients. An additional 28 patients were enrolled as an expanded Phase 2 cohort (for a total of 34 treated patients at 1.88 mg/kg, the Phase 2 dose) to evaluate the progression-free survival (“PFS”) rate at 12 weeks. As previously seen in melanoma patients, the 1.88 mg/kg dose was well tolerated in this patient population with the most common adverse events of rash, alopecia, and fatigue. The primary activity endpoint, which called for at least 5 of 25 (20%) patients in the Phase 2 study portion to be progression-free at twelve weeks, has been met. To date, 9 of 26 (35%) evaluable patients are without progression of disease at twelve weeks.

 

In addition, at the Phase 2 dose level, 4 of 32 (13%) evaluable patients achieved confirmed or unconfirmed Partial Responses (“PR”) while 15 of 25 (60%) evaluable patients with measurable disease experienced some reduction in tumor size. GPNMB expression was identified in 10 of 14 (71%) of analyzed tumor samples and treatment with CDX-011 was associated with improved outcomes in all activity parameters in patients whose tumors expressed GPNMB. Notably, in patients who received the Phase 2 dose and whose tumors expressed GPNMB, 2 of 7 (29%) had confirmed PR, 5 of 7 (71%) had decreases in tumor size, and all 7 achieved at least stable disease with duration from 17.3 to 26.9 weeks. The median PFS in all patients was 9.1 weeks, but in patients whose tumors expressed GPNMB, median PFS was 18.3 weeks, compared to median PFS of 5.9 weeks for patients whose tumors did not express GPNMB. In patients with triple negative disease, 5 of 7 (71%) analyzed samples expressed GPNMB, 7 of 9 (78%) evaluable patients had tumor shrinkage, and the median PFS for these patients was 17.9 weeks.

 

We expect to initiate a randomized Phase 2b controlled study in patients with advanced breast cancer that express GPNMB in the second half of 2010.

 

Treatment of Metastatic Melanoma Cancer:  In June 2006, a Phase 1/2 open-label, multi-center, dose escalation study was initiated to evaluate the safety, tolerability and pharmacokinetics of CDX-011 for patients with un-resectable Stage III or Stage IV melanoma who have failed no more than one prior line of cytotoxic therapy. During the Phase 1 portion of the study, doses of CDX-011 between 0.03 mg/kg to 2.63 mg/kg were evaluated and generally well tolerated, with rash and neutropenia emerging at higher doses. The MTD was determined to be 1.88 mg/kg administered intravenously (IV) once every three weeks.

 

23



Table of Contents

 

In June 2009, results were announced for the 36 patients who were treated in the Phase 2 portion of the study. Of the patients enrolled, 94% had Stage IV disease of which two-thirds were classified as M1c, the poorest risk group. The study successfully met its primary activity endpoint, with 5 objective responses (1 unconfirmed) observed in 34 evaluable patients, and median duration of response of 5.3 months. The median overall PFS was 4.4 months. Tumor shrinkage was observed in 58% of patients, and 20 patients had best response of stable disease. Dermatologic adverse events consisting of rash, alopecia, and pruritus were the most common toxicities in this study. Other adverse events included fatigue, diarrhea, musculoskeletal pain, anorexia and nausea. Grade 3 or 4 neutropenia was observed in 5 patients. The absence of rash in the first cycle of treatment predicted a worse PFS. Additionally, in a subset of patients with tumor biopsies, high levels of tumor expression of GPNMB appeared to correlate with favorable outcome.

 

Enrollment has been completed in the Phase 1 portion of the melanoma trial to evaluate more frequent dosing schedules of CDX-011, including a weekly and a two out of every three-week regimen, to explore if more frequent administration can provide additional activity in patients with metastatic melanoma. A dose of 1.0 mg/kg given once every week has been identified as the MTD in a weekly schedule, and a dose of 1.5mg/kg was being explored in the two out of three week schedule. Although median duration of follow-up was only 6 weeks, objective responses have thus far been observed in 3 of 11 evaluable patients treated with weekly CDX011 (1 confirmed) and 1 confirmed response in 8 evaluable patients treated with CDX-011 two out of every three weeks. We expect to present updated results during the first half of 2010.

 

CDX-1307

 

Our lead APC Targeting Technology™ product candidate, CDX-1307, is in development for the treatment of epithelial tumors such as colorectal, pancreatic, bladder, ovarian and breast cancers. CDX-1307 targets the beta chain of human chorionic gonadotropin, known as hCG-Beta, which is an antigen often found in epithelial tumors. The presence of hCG-Beta in these cancers correlates with a poor clinical outcome, suggesting that this molecule may contribute to tumor growth. Normal adult tissues have minimal expression of hCG-Beta; therefore, targeted immune responses are not expected to generate significant side effects.

 

Enrollment is complete in our two Phase 1 studies at multiple centers designed to explore safety and dose/effect relationships via two administration routes—intradermal (ID), a traditional vaccine route that allows efficient access to local dermal dendritic cells and intravenous (IV), a novel systemic approach to vaccination that might target a much larger population of dendritic cells. The Phase 1 studies investigated the safety and immunogenicity of CDX-1307 alone and in combination with adjuvants, including GM-CSF (known to increase mannose receptor expression on dendritic cells) and Toll-Like Receptor (“TLR”) agonists (poly-ICLC or Hiltonol™ and R848 or resiquimod). Patients with an assortment of different tumor types that are known to express hCG-Beta were enrolled with retrospective analysis for hCG-Beta expression. An escalating four dose regimen was utilized with the possibility of retreatment if patients demonstrate tumor regression or stable disease.

 

The Phase 1 studies enrolled over 80 patients with heavily pretreated, advanced-stage breast, colon, bladder and pancreatic cancer, with an average of 4.6 prior therapies across the treatment population. All patient cohorts demonstrated a favorable safety profile with no dose limiting toxicity to date. The combination of CDX-1307 with TLR agonists significantly enhanced immune responses against hCG-Beta, providing strong humoral responses in 88% of patients and cellular immune responses in 57% of patients analyzed to date. Immune responses occurred even in the presence of high circulating levels of hCG-Beta, suggesting that the CDX-1307 can overcome antigen tolerance in advanced and heavily pretreated cancers. Nine patients in the studies experienced disease stabilization from 2.3 months to 11.4 months following the initiation of CDX-1307 vaccination. Two of these patients have received multiple courses of CDX-1307 and continue treatment with stable disease at 6.4 and 11.4 months. These data provide the basis for advancing CDX-1307 into a front-line patient population selected for hCG-Beta expressing cancers.

 

We expect to initiate a randomized Phase 2b controlled study in patients with newly diagnosed invasive bladder cancer in the second quarter of 2010. Patient’s whose bladder cancer expresses hCG-Beta are predicted to have more aggressive disease and shorter survival. In this study we plan to select only patients with confirmed hCG-Beta expression using a specific diagnostic assay.

 

24



Table of Contents

 

CDX-1401

 

CDX-1401 is a fusion protein consisting of a fully human monoclonal antibody with specificity for the dendritic cell receptor, DEC-205, linked to the NY-ESO-1 tumor antigen. In humans, NY-ESO-1 is one of the most immunogenic tumor antigens and has been detected in 20 - 30% of cancers, thus representing a broad opportunity. This product is intended to selectively deliver the NY-ESO-1 antigen to APCs for generating robust immune responses against cancer cells expressing NY-ESO-1. Unlike CDX-1307, which targets the mannose receptor expressing dendritic cells, CDX-1401 is the first APC product targeting DEC-205 expressing dendritic cells. We are developing CDX-1401 for the treatment of malignant melanoma and a variety of solid tumors which express the proprietary cancer antigen NY-ESO-1, which we licensed from the Ludwig Institute for Cancer Research in 2006. We believe that preclinical studies have shown that CDX-1401 is effective for activation of human T-cell responses against NY-ESO-1.

 

In September 2009, we initiated enrollment in a dose-escalating Phase 1/2 clinical trial aimed at determining the optimal dose for further development based on the safety, tolerability, and immunogenicity of the CDX-1401 vaccine. The trial will evaluate three different doses of the vaccine in combination with resiquimod, an activator of TLR 7 and 8. We expect to enroll approximately 36 patients with solid tumor cancers at multiple clinical sites in the United States.

 

CDX-1135

 

CDX-1135 is a molecule that inhibits a part of the immune system called the complement system. The complement system is a series of proteins that are important initiators of the body’s acute inflammatory response against disease, infection and injury. Excessive complement activation also plays a role in some persistent inflammatory conditions. CDX-1135 is a soluble form of naturally occurring Complement Receptor 1 that inhibits the activation of the complement cascade in animal models and in human clinical trials. We believe that regulating the complement system could have therapeutic and prophylactic applications in several acute and chronic conditions, including organ transplantation, multiple sclerosis, rheumatoid arthritis, age-related macular degeneration (“AMD”), atypical Hemolytic Uremic Syndrome (“aHUS”), Paroxysmal Nocturnal Hemaglobinuria (“PNH”), Dense Deposit Disease (“DDD”) in kidneys, and myasthenia gravis. We are currently defining the most appropriate clinical development path for CDX-1135 and are focusing on rare disease conditions of unregulated complement activation as the fastest route to FDA approval.

 

Preclinical Development Programs

 

CDX-301

 

CDX-301 is a FMS-like tyrosine kinase 3 ligand (Flt3L) that we licensed from Amgen in March 2009. CDX-301 is a growth factor for stem cells and immune cells called dendritic cells. Based on previous experience with this molecule, we believe that CDX-301 has considerable opportunity in various transplant settings as a stem cell mobilizing agent. In addition, CDX-301 is an immune modulating molecule that increases the numbers and activity of specific types of immune cells. We believe CDX-301 has significant opportunity for synergistic development in combination with proprietary molecules in our portfolio. We expect to file an IND application for CDX-301 before the end of 2010.

 

CDX-1127

 

We have entered into a License Agreement with the University of Southampton, UK, to develop human antibodies to CD27, a potentially important target for immunotherapy of various cancers. In preclinical models, antibodies to CD27 alone have been shown to mediate anti-tumor effects, and may be particularly effective in combination with other immunotherapies. CD27 is a critical molecule in the activation pathway of lymphocytes. It is downstream from CD40, and may provide a novel way to regulate the immune responses. Engaging CD27 with the appropriate monoclonal antibody has proven highly effective at promoting anti-cancer immunity in mouse models. We are evaluating new human monoclonal antibodies in preclinical models.

 

25



Table of Contents

 

CDX-014

 

CDX-014 (formerly CR014-vcMMAE) is a fully-human monoclonal ADC that targets TIM-1, an immunomudulatory protein that appears to down regulate immune response to tumors. The antibody, CDX-014, is linked to a potent chemotherapeutic, monomethyl auristatin E (MMAE), using Seattle Genetics’ proprietary technology. The ADC is designed to be stable in the bloodstream, but to release MMAE upon internalization into TIM-1-expressing tumor cells, resulting in a targeted cell-killing effect. CDX-014 has shown potent activity in preclinical models of ovarian and renal cancer. We acquired the rights to CDX-014 in connection with the CuraGen Merger.

 

CDX-1189

 

We are developing therapeutic human antibodies to a signaling molecule known as CD89 or Fcα receptor type I (FcαRI). CD89 is expressed by some white blood cells and leukemic cell lines, and has been shown to be important in controlling inflammation and tumor growth in animal models. We have proprietary, fully human antibodies to CD89 in preclinical development. Depending upon the specific antibody used, anti-CD89 antibodies can either be activating and thus stimulate immune responses, or down-regulating and act as an anti-inflammatory agent.

 

Marketed Products

 

Rotavirus Vaccine

 

Rotavirus is a major cause of diarrhea and vomiting in infants and children. In 1997, we licensed our oral rotavirus strain to Glaxo and Glaxo assumed responsibility for all subsequent clinical trials and all other development activities. Glaxo gained approval for its rotavirus vaccine, Rotarix®, in Mexico in July 2004, which represented the first in a series of worldwide approvals and commercial launches for the product leading up to the approval in Europe in 2006 and in the U.S. in 2008. We licensed-in our rotavirus strain in 1995 and owe a license fee of 30% to Cincinnati Children’s Hospital Medical Center (“CCH”) on net royalties received from Glaxo. We are obligated to maintain a license with CCH with respect to the Glaxo agreement. The term of the Glaxo agreement is through the expiration of the last of the relevant patents covered by the agreement, although Glaxo may terminate the agreement upon 90 days prior written notice.

 

In May 2005, we entered into an agreement whereby an affiliate of PRF purchased an interest in the milestone payments and net royalties that we will receive on the development and worldwide sales of Rotarix®. We have received a total of $60 million in milestone payments under the PRF agreement. No additional milestone payments are due from PRF under the agreement.

 

Royalty rates on Rotarix® escalate from 7% to 10% based on net product sales in countries that have valid patent protection. These royalty rates are discounted by 30% for “non-patent” countries (primarily international markets). In September 2006, we received notice from Glaxo that Glaxo would begin paying royalties on sales of Rotarix® vaccine at the lower of the two royalty rates under their 1997 license agreement. Glaxo’s decision to pay the lower royalty rate (which is 70% of the full rate) is based upon Glaxo’s assertion that Rotarix® is not covered by the patents Glaxo licensed from us in Australia and certain European countries. We are currently evaluating the basis for Glaxo’s action and our potential remedies. If Glaxo’s position stands, the royalties to which PRF is entitled will no longer be limited by a $27.5 million annual threshold, which we projected may have been reached in later years as sales of Rotarix® increased. Irrespective of Glaxo’s position, we will still retain approximately 65% of the royalties on worldwide sales of Rotarix® once PRF receives 2.45 times the aggregate cash payments of $60 million it made to us, though the potential amount of such residual royalties will be lower if Glaxo’s position stands.

 

In late March 2010, we learned that the FDA decided to temporarily suspend the use of Rotarix® in the United States as a precautionary measure following the discovery of PCV-1 DNA material in the vaccine.  Glaxo has reported that the FDA’s decision did not significantly impact sales of Rotarix® for the quarter ended March 31, 2010.  We can provide no assurances that sales of Rotarix®, and therefore our royalties from sales of Rotarix®, will not be negatively impacted by the FDA’s decision to suspend use of Rotarix® in future

 

26



Table of Contents

 

quarters.  However, if our royalty revenue from Rotarix® is negatively impacted by the FDA’s decision, our royalty expense for Rotarix® would be similarly impacted and therefore our net loss or cash position will not be impacted as a result of the FDA’s decision.

 

CRITICAL ACCOUNTING POLICIES

 

Our critical accounting policies are more fully described in Note 2 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2009 and there have been no material changes to such critical accounting policies.  We believe our most critical accounting policies include accounting for business combinations, revenue recognition, property and equipment, impairment of long-lived assets, marketable securities, research and development expenses and stock-based compensation expense.

 

RESULTS OF OPERATIONS

 

Our financial statements prior to the CuraGen Merger reflect the financial position, results of operations and cash flows of Celldex.  Following the CuraGen Merger, our financial statements reflect the financial position, results of operation and cash flows of Celldex and CuraGen.

 

Three Months Ended March 31, 2010 compared with Three Months Ended March 31, 2009

 

 

 

Three Months Ended
March 31,

 

Increase/
(Decrease)

 

Increase/
(Decrease)

 

 

 

2010

 

2009

 

$

 

%

 

 

 

(In thousands)

 

Revenue:

 

 

 

 

 

 

 

 

 

Product Development and Licensing Agreements

 

$

1,347

 

$

1,502

 

$

(155

)

(10

)%

Contracts and Grants

 

220

 

139

 

81

 

58

%

Product Royalties

 

2,146

 

2,091

 

55

 

3

%

Total Revenue

 

$

3,713

 

$

3,732

 

$

(19

)

(1

)%

Operating Expense:

 

 

 

 

 

 

 

 

 

Research and Development

 

6,438

 

6,456

 

(18

)

0

%

Royalty

 

2,327

 

2,230

 

97

 

4

%

General and Administrative

 

2,835

 

3,341

 

(506

)

(15

)%

Gain on Sale of Assets

 

 

(604

)

604

 

100

%

Amortization of Acquired Intangible Assets

 

1,520

 

95

 

1,425

 

1,500

%

Total Operating Expense

 

13,120

 

11,518

 

1,602

 

14

%

Operating Loss

 

(9,407

)

(7,786

)

1,621

 

21

%

Investment and Other Income, Net

 

3,162

 

123

 

3,039

 

2,471

%

Interest Expense

 

(337

)

(40

)

297

 

743

%

Net Loss

 

$

(6,582

)

$

(7,703

)

$

(1,121

)

(15

)%

 

Net Loss

 

The $1.1 million decrease in net loss for the three months ended March 31, 2010 compared to the three months ended March 31, 2009 was primarily the result of an increase in other income, partially offset by increased amortization expense on acquired intangible assets.

 

Revenue

 

The $0.2 million decrease in product development and licensing agreement revenue for the three months ended March 31, 2010 was primarily due to $0.1 million in revenue recorded for the three months ended March 31, 2009 related to the Corixa termination agreement.  The $0.1 million increase in contract and grant revenue for the three months ended March 31, 2010 was due to an increase in revenue related to our vaccine development work on

 

27



Table of Contents

 

Rockefeller’s CDX-2401 program. The $0.1 million increase in product royalty revenue for the three months ended March 31, 2010 was primarily related to our retained interests in Rotarix® net royalties which were not sold to PRF and which is equal to the amount payable to CCH and recognized in royalty expense by us.

 

Research and Development Expense

 

Research and development expenses consist primarily of (i) personnel expenses, (ii) laboratory supply expenses relating to the development of our technology, (iii) facility expenses, and (iv) product development expenses associated with our product candidates as follows:

 

 

 

Three Months Ended
March 31,

 

Increase/
(Decrease)

 

Increase/
(Decrease)

 

 

 

2010

 

2009

 

$

 

%

 

 

 

(In thousands)

 

Personnel

 

$

3,160

 

$

2,542

 

$

618

 

24

%

Laboratory Supplies

 

536

 

596

 

(60

)

(10

)%

Facility

 

1,491

 

1,248

 

243

 

19

%

Product Development

 

791

 

1,477

 

(686

)

(46

)%

 

Personnel expenses primarily include salary, benefits, stock-based compensation, payroll taxes and recruiting costs. The $0.6 million increase in personnel expenses for the three months ended March 31, 2010 was primarily due to higher headcount.  We expect personnel expenses to increase over the next twelve months as we plan to continue to increase our headcount.

 

Laboratory supply expenses include laboratory materials and supplies, services, and other related expenses incurred in the development of our technology.  Laboratory supply expense for the three months ended March 31, 2010 was relatively consistent as compared to the three months ended March 31, 2009.  We expect supply expenses to increase over the next twelve months as a result of increased research and development activities, although there may be fluctuations on a quarterly basis.

 

Facility expenses include depreciation, amortization, utilities, rent, maintenance, and other related expenses incurred at our facilities. The $0.2 million increase in facility expenses for the three months ended March 31, 2010 was primarily due to higher depreciation and amortization expenses.  We expect facility expenses to increase over the next twelve months as a result of continued capital expansion, although there may be fluctuations on a quarterly basis.

 

Product development expenses include clinical investigator site fees, external trial monitoring costs, data accumulation costs, contracted research and outside clinical drug product manufacturing. The $0.7 million decrease in product development expenses for the three months ended March 31, 2010 was primarily due to a decrease in clinical expenses of $0.6 million largely due to the transfer of clinical management of our CDX-110 program to Pfizer in 2009.  We expect product development expenses to increase over the next twelve months due to the increase in clinical trial expenses related to our CDX-011, CDX-1307, and CDX-1401 programs, although there may be fluctuations on a quarterly basis.

 

Royalty Expense

 

Royalty expenses include product royalty and sublicense royalty fees on our out-licensed programs. The $0.1 million increase in royalty expenses for the three months ended March 31, 2010 was due to an increase in Rotarix® related royalty fees. Our retained interests in Rotarix® net royalties which were not sold to PRF are recorded as product royalty revenue and a corresponding amount that is payable to CCH is recorded as royalty expense.

 

General and Administrative Expense

 

The $0.5 million decrease in general and administrative expenses for the three months ended March 31, 2010 was primarily due to $0.7 million in severance expense, including related non-cash stock-based compensation

 

28



Table of Contents

 

expense, incurred during the three months ended March 31, 2009 related to the departure of our former SVP, Business Development. The effect of these decreases was partially offset by $0.2 million in higher personnel expense during the three months ended March 31, 2010, primarily related to higher headcount.  We expect general and administrative expense to remain relatively consistent over the next twelve months, although there may be fluctuations on a quarterly basis.

 

Amortization Expense

 

The $1.4 million increase in amortization expenses for the three months ended March 31, 2010 was due to intangible assets acquired in connection with the CuraGen Merger including the TopoTarget Agreement.  In February 2010, TopoTarget entered into a co-development and commercialization agreement for Belinostat with Spectrum Pharmaceuticals, Inc. which resulted in our receipt of $3.0 million which we recorded as Other Income for the three months ended March 31, 2010 and we recorded amortization expense related to the TopoTarget Agreement of $1.2 million for the three months ended March 31, 2010.  We expect amortization expense of acquired intangible assets to decrease over the next twelve months as the remaining value of the TopoTarget Agreement is being amortized over its estimated useful life.

 

Investment and Other Income, Net

 

The $3.0 million increase in investment and other income, net for the three months ended March 31, 2010 was primarily due to $3.0 million received in connection with the TopoTarget Agreement.  We anticipate investment income to decrease over the next twelve months due to lower cash and investment balances caused by the utilization of cash and investment balances in the normal course of operations.

 

Interest Expense

 

The $0.3 million increase in interest expense for the three months ended March 31, 2010 was primarily due to the CuraGen Debt we assumed in connection with the CuraGen Merger. We anticipate interest expense to remain relatively consistent over the next twelve months until the CuraGen Debt matures in February 2011.

 

LIQUIDITY AND CAPITAL RESOURCES

 

At March 31, 2010, our principal sources of liquidity consisted of cash, cash equivalents and marketable securities of $75.4 million. Our working capital at March 31, 2010 was $53.5 million. At March 31, 2010, we had 4% convertible subordinated debt due in February 2011 of $12.5 million. We incurred a loss of $6.6 million for the three months ended March 31, 2010.  Net cash used in operations for the three months ended March 31, 2010 was $6.9 million. We believe that the cash inflows from existing collaborations, interest income on invested funds and our current cash, cash equivalents and marketable securities at March 31, 2010 are sufficient to meet estimated working capital requirements and fund planned operations for at least the next twelve months.

 

Our cash equivalents are highly liquid investments with a maturity of three months or less at the date of purchase and consist primarily of investments in money market mutual funds with commercial banks and financial institutions. We maintain cash balances with financial institutions in excess of insured limits. We do not anticipate any losses with respect to such cash balances. We invest our excess cash balances in marketable securities including municipal bond securities, U.S. government agency securities, and high-grade corporate bonds that meet high credit quality standards, as specified in our investment policy. Our investment policy seeks to manage these assets to achieve our goals of preserving principal and maintaining adequate liquidity.

 

The use of our cash flows for operations has primarily consisted of salaries and wages for our employees, facility and facility-related costs for our offices, laboratories and manufacturing facility, fees paid in connection with preclinical studies, clinical studies, contract manufacturing, laboratory supplies and services, consulting, legal and other professional fees. To date, and for the foreseeable future, the primary sources of cash flows from operations have been payments received from our collaborative partners and from government entities. The timing of any new collaboration agreements, government contracts or grants and any payments under these agreements, contracts or grants cannot be easily predicted and may vary significantly from quarter to quarter.

 

29


 


Table of Contents

 

During the next twelve to twenty-four months, we may take further steps to raise additional capital to meet our long-term liquidity needs including, but not limited to, the licensing of technology programs with existing or new collaborative partners, possible business combinations, or the issuance of common stock or other securities via private placements or public offerings. While we may continue to seek capital through a number of means, there can be no assurance that additional financing will be available on acceptable terms, if at all, particularly in light of the recent disruptions in the financial markets and our negotiating position in capital-raising efforts may worsen as existing resources are used. There is also no assurance that we will be able to enter into further collaborative relationships. Additional equity financing may be dilutive to our stockholders; debt financing, if available, may involve significant cash payment obligations and covenants that restrict our ability to operate as a business; and licensing or strategic collaborations may result in royalties or other terms which reduce our economic potential from products under development. If we are unable to raise the funds necessary to meet our long-term liquidity needs, we may have to delay or discontinue the development of one or more programs, license out programs earlier than expected, raise funds at significant discount or on other unfavorable terms, or sell all or part of us.

 

Operating Activities

 

Net cash used in operating activities was $6.9 million for the three months ended March 31, 2010 compared to $5.6 million for the three months ended March 31, 2009. The increase in net cash used in operating activities was primarily due to a decrease of $1.6 million in accounts payable and accrued expenses the three months ended March 31, 2010 as compared to increase of $0.1 million for the three months ended March 31, 2009. We expect that cash used in operations will continue to increase in over the next twelve months primarily related to the continued development of our therapeutic product pipeline, including bringing forward new product candidates into clinical development.

 

We have incurred and will continue to incur significant costs in the area of research and development, including preclinical and clinical trials, as our product candidates are developed. We plan to spend significant amounts to progress our current product candidates through the clinical trial and commercialization process as well as to develop additional product candidates. As our product candidates progress through the clinical trial process, we may be obligated to make significant milestone payments.

 

Investing Activities

 

Net cash used in investing activities was $7.5 million for the three months ended March 31, 2010 compared to net cash provided by investing activities of $0.7 million for the three months ended March 31, 2009. The increase in net cash used in investing activities was primarily due to net purchases of marketable securities for the three months ended March 31, 2010 of $7.2 million. We expect to incur future facility cost as a result of continued capital expansion, renovation and replacements. Our investment in capital equipment is discretionary and there may be significant fluctuations on a quarterly basis.

 

Financing Activities

 

Net cash provided by financing activities was $0.1 million for the three months ended March 31, 2010, primarily due to proceeds from stock option exercises of former CuraGen employees, was relatively consistent with the three months ended March 31, 2009.

 

Other Liquidity Matters

 

Under the Pfizer Agreement, Pfizer made an upfront payment $40 million, an equity investment of $10.0 million and will fund all development costs for the licensed programs. We are also eligible to receive potential milestone payments exceeding $390.0 million for the successful development and commercialization of CDX-110 and additional EGFRvIII vaccine products, as well as royalties on any product sales.

 

30



Table of Contents

 

AGGREGATE CONTRACTUAL OBLIGATIONS

 

The disclosures relating to our contractual obligations reported in our Annual Report on Form 10-K for the year ended December 31, 2009 which was filed with the SEC on March 12, 2010 have not materially changed since we filed that report.

 

Item 3.         Quantitative and Qualitative Disclosures about Market Risk

 

We own financial instruments that are sensitive to market risk as part of our investment portfolio. Our investment portfolio is used to preserve our capital until it is used to fund operations, including our research and development activities. None of these market-risk sensitive instruments are held for trading purposes. We invest our cash primarily in money market mutual funds. These investments are evaluated quarterly to determine the fair value of the portfolio. From time to time, we invest our excess cash balances in marketable securities including municipal bond securities, U.S. government agency securities, and high-grade corporate bonds that meet high credit quality standards, as specified in our investment policy. Our investment policy seeks to manage these assets to achieve our goals of preserving principal and maintaining adequate liquidity. Because of the short-term nature of these investments, we do not believe we have material exposure due to market risk. The impact to our financial position and results of operations from likely changes in interest rates is not material.

 

We do not utilize derivative financial instruments. The carrying amounts reflected in the consolidated balance sheet of cash and cash equivalents, accounts receivables and accounts payable approximates fair value at March 31, 2010 due to the short-term maturities of these instruments.

 

Item 4.         Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures.

 

As of March 31, 2010, we evaluated, with the participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of March 31, 2010. Our disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within time periods specified by the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

 

Changes in Internal Control Over Financial Reporting.

 

There were no changes in our internal control over financial reporting during the three months ended March 31, 2010 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

PART II — OTHER INFORMATION

 

Item 1.         Legal Proceedings

 

None.

 

Item 1A.      Risk Factors

 

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2009, which could materially affect our business, financial condition or future results. The risks described in our

 

31



Table of Contents

 

Annual Report on Form 10-K may not be the only risks facing the Company. Additional risks and uncertainties not currently known to the Company or that the Company currently deems to be immaterial also may materially adversely affect the Company’s business, financial condition and/or operating results.

 

There were no material changes to the risk factors previously disclosed in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 12, 2010.

 

32



Table of Contents

 

Item 6.         Exhibits

 

3.1

 

Third Restated Certificate of Incorporation of the Company, incorporated by reference to Exhibit 3.1 of the Company’s Registration Statement on Form S-4 (Reg. No. 333-59215), filed July 16, 1998 with the Securities and Exchange Commission.

3.2

 

Certificate of Amendment of Third Restated Certificate of Incorporation of the Company, incorporated by reference to Exhibit 3.1 of the Company’s Registration Statement on Form S-4 (Reg. No. 333-59215), filed July 16, 1998 with the Securities and Exchange Commission.

3.3

 

Second Certificate of Amendment of Third Restated Certificate of Incorporation of the Company, incorporated by reference to Exhibit 3.2 of the Company’s Registration Statement on Form S-4 (Reg. No. 333-59215), filed July 16, 1998 with the Securities and Exchange Commission.

3.4

 

Third Certificate of Amendment of Third Restated Certificate of Incorporation of the Company, incorporated by reference to Exhibit 3.1 of the Company’s Quarterly Report on Form 10-Q, filed May 10, 2002 with the Securities and Exchange Commission.

3.5

 

Fourth Certificate of Amendment of Third Restated Certificate of Incorporation of the Company, incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K, filed on March 11, 2008 with the Securities and Exchange Commission.

3.6

 

Fifth Certificate of Amendment of Third Restated Certificate of Incorporation of the Company, incorporated by reference to Exhibit 3.2 of the Company’s Current Report on Form 8-K, filed on March 11, 2008 with the Securities and Exchange Commission.

3.7

 

Sixth Certificate of Amendment of Third Restated Certificate of Incorporation of the Company, incorporated by reference to Exhibit 3.7 of the Company’s Quarterly Report on Form 10-Q, filed November 10, 2008 with the Securities and Exchange Commission.

4.3

 

Amendment No. 2 to Shareholder Rights Agreement dated November 5, 2004, between the Company and Computershare Trust Company, N.A. (formerly EquiServe Trust Company, N.A.), as Rights Agent, incorporated by reference to Exhibit 10.1 of the Company’s Registration Statement on Form 8-A1G/A, filed on March 7, 2008 with the Securities and Exchange Commission.

*31.1

 

Certification of President and Chief Executive Officer

*31.2

 

Certification of Senior Vice President and Chief Financial Officer

**32.1

 

Section 1350 Certifications

 


*

Filed herewith.

**

Furnished herewith.

 

33



Table of Contents

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

 

CELLDEX THERAPEUTICS, INC.

 

 

 

 

 

BY:

 

 

 

 

 

/s/ ANTHONY S. MARUCCI

Dated: May 6, 2010

 

Anthony S. Marucci

 

 

President and Chief Executive Officer

 

 

(Principal Executive Officer)

 

 

 

 

 

/s/ AVERY W. CATLIN

Dated: May 6, 2010

 

Avery W. Catlin

 

 

Senior Vice President, Treasurer and Chief Financial Officer

 

 

(Principal Financial and Accounting Officer)

 

34



Table of Contents

 

EXHIBIT INDEX

 

Exhibit
No.

 

Description

3.1

 

Third Restated Certificate of Incorporation of the Company, incorporated by reference to Exhibit 3.1 of the Company’s Registration Statement on Form S-4 (Reg. No. 333-59215), filed July 16, 1998 with the Securities and Exchange Commission.

3.2

 

Certificate of Amendment of Third Restated Certificate of Incorporation of the Company, incorporated by reference to Exhibit 3.1 of the Company’s Registration Statement on Form S-4 (Reg. No. 333-59215), filed July 16, 1998 with the Securities and Exchange Commission.

3.3

 

Second Certificate of Amendment of Third Restated Certificate of Incorporation of the Company, incorporated by reference to Exhibit 3.2 of the Company’s Registration Statement on Form S-4 (Reg. No. 333-59215), filed July 16, 1998 with the Securities and Exchange Commission.

3.4

 

Third Certificate of Amendment of Third Restated Certificate of Incorporation of the Company, incorporated by reference to Exhibit 3.1 of the Company’s Quarterly Report on Form 10-Q, filed May 10, 2002 with the Securities and Exchange Commission.

3.5

 

Fourth Certificate of Amendment of Third Restated Certificate of Incorporation of the Company, incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K, filed on March 11, 2008 with the Securities and Exchange Commission.

3.6

 

Fifth Certificate of Amendment of Third Restated Certificate of Incorporation of the Company, incorporated by reference to Exhibit 3.2 of the Company’s Current Report on Form 8-K, filed on March 11, 2008 with the Securities and Exchange Commission.

3.7

 

Sixth Certificate of Amendment of Third Restated Certificate of Incorporation of the Company, incorporated by reference to Exhibit 3.7 of the Company’s Quarterly Report on Form 10-Q, filed November 10, 2008 with the Securities and Exchange Commission.

4.3

 

Amendment No. 2 to Shareholder Rights Agreement dated November 5, 2004, between the Company and Computershare Trust Company, N.A. (formerly EquiServe Trust Company, N.A.) as Rights Agent, incorporated by reference to Exhibit 10.1 of the Company’s Registration Statement on Form 8-A1G/A, filed on March 7, 2008 with the Securities and Exchange Commission.

*31.1

 

Certification of President and Chief Executive Officer

*31.2

 

Certification of Senior Vice President and Chief Financial Officer

**32.1

 

Section 1350 Certifications

 


*

Filed herewith.

**

Furnished herewith.

 

35


 

Exhibit 31.1

 

CERTIFICATION

 

I, Anthony S. Marucci, certify that:

 

1.

I have reviewed this report on Form 10-Q of Celldex Therapeutics, Inc.;

 

 

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

 

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

 

4.

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

 

 

 

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

 

 

 

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

 

 

 

(c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

 

 

 

(d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

 

 

5.

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

 

 

 

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

 

 

 

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: May 6, 2010

 

By

/s/ ANTHONY S. MARUCCI

 

 

Name:

Anthony S. Marucci

 

 

Title:

President and Chief Executive Officer

 


 

Exhibit 31.2

 

CERTIFICATION

 

I, Avery W. Catlin, certify that:

 

1.

I have reviewed this report on Form 10-Q of Celldex Therapeutics, Inc.;

 

 

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

 

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

 

4.

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

 

 

 

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

 

 

 

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

 

 

 

(c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

 

 

 

(d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

 

 

5.

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

 

 

 

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

 

 

 

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: May 6, 2010

 

By:

/s/ AVERY W. CATLIN

 

 

Name:

Avery W. Catlin

 

 

Title:

Senior Vice President and

 

 

 

Chief Financial Officer

 


 

Exhibit 32.1

 

SECTION 1350 CERTIFICATIONS

 

Pursuant to 18 U.S.C. §1350 as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, the undersigned officers of Celldex Therapeutics, Inc. (the “Company”) hereby certify that to their knowledge and in their respective capacities that the Company’s quarterly report on Form 10-Q to which this certification is attached (the “Report”), fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

 

Date: May 6, 2010

 

By:

/s/ ANTHONY S. MARUCCI

 

 

Name:

Anthony S. Marucci

 

 

Title:

President and Chief Executive Officer

 

 

 

 

Date: May 6, 2010

 

By:

/s/ AVERY W. CATLIN

 

 

Name:

Avery W. Catlin

 

 

Title:

Senior Vice President and

 

 

 

Chief Financial Officer

 

 

This certification shall not be deemed “filed” for any purpose, nor shall it be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Exchange Act. A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Celldex Therapeutics, Inc. and will be retained by Celldex Therapeutics, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.