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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2022

OR

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

Commission File Number: 000-15006

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.)

Perryville III Building, 53 Frontage Road, Suite 220, Hampton, New Jersey 08827

(Address of principal executive offices) (Zip Code)

(908) 200-7500

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

    

Trading Symbol(s)

    

Name of each exchange on which registered

Common Stock, par value $.001

CLDX

Nasdaq Capital Market

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  No 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes  No 

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

Large accelerated filer 

    

Accelerated filer 

Non-accelerated filer 

Smaller reporting company

Emerging growth company 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

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

As of July 29, 2022, 46,772,351 shares of common stock, $.001 par value per share, were outstanding.

Table of Contents

CELLDEX THERAPEUTICS, INC.

FORM 10-Q

For the Quarterly Period Ended June 30, 2022

Table of Contents

 

    

Page

Part I — Financial Information

Item 1. Unaudited Financial Statements

3

Condensed Consolidated Balance Sheets at June 30, 2022 and December 31, 2021

3

Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three and Six Months Ended June 30, 2022 and 2021

4

Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2022 and 2021

5

Notes to Unaudited Condensed Consolidated Financial Statements

6

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

15

Item 3. Quantitative and Qualitative Disclosures About Market Risk

29

Item 4. Controls and Procedures

29

Part II — Other Information

Item 1. Legal Proceedings

29

Item 1A. Risk Factors

30

Item 6. Exhibits

31

Exhibit Index

31

Signatures

32

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)

June 30, 

December 31, 

    

2022

    

2021

Assets

Current assets:

Cash and cash equivalents

$

28,401

$

39,143

Marketable securities

 

328,416

 

369,107

Accounts and other receivables

 

97

 

172

Prepaid and other current assets

 

11,065

 

2,417

Total current assets

 

367,979

 

410,839

Property and equipment, net

 

3,744

 

3,551

Operating lease right-of-use assets, net

3,944

2,970

Intangible assets, net

 

27,190

 

27,190

Other assets

 

104

 

104

Total assets

$

402,961

$

444,654

Liabilities and stockholders’ equity

Current liabilities:

Accounts payable

$

902

$

1,228

Accrued expenses

 

11,229

 

12,000

Litigation settlement payable

15,000

Current portion of operating lease liabilities

1,425

1,746

Current portion of other long-term liabilities

 

1,393

 

1,554

Total current liabilities

 

29,949

 

16,528

Long-term portion of operating lease liabilities

2,586

1,296

Other long-term liabilities

 

5,333

 

7,354

Total liabilities

 

37,868

 

25,178

Commitments and contingent liabilities

Stockholders’ equity:

Convertible preferred stock, $.01 par value; 3,000,000 shares authorized; no shares issued and outstanding at June 30, 2022 and December 31, 2021

 

 

Common stock, $.001 par value; 297,000,000 shares authorized; 46,764,703 and 46,730,198 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively

 

47

 

47

Additional paid-in capital

 

1,568,124

 

1,561,142

Accumulated other comprehensive income

 

(417)

 

1,894

Accumulated deficit

 

(1,202,661)

 

(1,143,607)

Total stockholders’ equity

 

365,093

 

419,476

Total liabilities and stockholders’ equity

$

402,961

$

444,654

See accompanying notes to unaudited condensed consolidated financial statements

3

Table of Contents

CELLDEX THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)

(In thousands, except per share amounts)

Three Months
Ended

Three Months
Ended

Six Months
Ended

Six Months
Ended

    

June 30, 2022

    

June 30, 2021

    

June 30, 2022

    

June 30, 2021

Revenues:

Product development and licensing agreements

$

$

26

$

30

$

29

Contracts and grants

 

163

 

3,454

 

307

 

4,136

Total revenues

 

163

 

3,480

 

337

 

4,165

Operating expenses:

Research and development

 

20,731

 

12,356

 

37,786

 

25,076

General and administrative

 

7,154

 

4,306

 

14,066

 

8,426

(Gain) loss on fair value remeasurement of contingent consideration

(6,326)

258

(6,862)

741

Litigation settlement related loss

15,000

15,000

Total operating expenses

 

36,559

 

16,920

 

59,990

 

34,243

Operating loss

 

(36,396)

 

(13,440)

 

(59,653)

 

(30,078)

Investment and other income, net

 

392

 

67

 

599

 

167

Net loss

$

(36,004)

$

(13,373)

$

(59,054)

$

(29,911)

Basic and diluted net loss per common share

$

(0.77)

$

(0.34)

$

(1.26)

$

(0.76)

Shares used in calculating basic and diluted net loss per share

 

46,759

 

39,616

 

46,749

 

39,615

Comprehensive loss:

Net loss

$

(36,004)

$

(13,373)

$

(59,054)

$

(29,911)

Other comprehensive income (loss):

Unrealized (loss) gain on marketable securities

 

(529)

 

5

 

(2,311)

 

3

Comprehensive loss

$

(36,533)

$

(13,368)

$

(61,365)

$

(29,908)

See accompanying notes to unaudited condensed consolidated financial statements

4

Table of Contents

CELLDEX THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW

(Unaudited)

(In thousands)

Six Months
Ended

Six Months
Ended

    

June 30, 2022

    

June 30, 2021

Cash flows from operating activities:

Net loss

$

(59,054)

$

(29,911)

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortization

 

1,552

 

1,539

Amortization and premium of marketable securities, net

 

1,308

 

(173)

Loss (gain) on sale or disposal of assets

57

(24)

(Gain) loss on fair value remeasurement of contingent consideration

(6,862)

741

Stock-based compensation expense

 

6,607

 

2,784

Changes in operating assets and liabilities:

Accounts and other receivables

 

75

 

1,306

Prepaid and other current assets

 

(8,485)

 

(1,544)

Accounts payable and accrued expenses

 

(862)

 

(750)

Litigation settlement payable

15,000

Other liabilities

 

3,886

 

(3,982)

Net cash used in operating activities

 

(46,778)

 

(30,014)

Cash flows from investing activities:

Sales and maturities of marketable securities

 

106,756

 

116,000

Purchases of marketable securities

 

(69,847)

 

(85,739)

Acquisition of property and equipment

(1,248)

(710)

Proceeds from sale or disposal of assets

24

Net cash provided by investing activities

 

35,661

 

29,575

Cash flows from financing activities:

Proceeds from issuance of stock from employee benefit plans

 

375

 

49

Net cash provided by financing activities

 

375

 

49

Net decrease in cash and cash equivalents

 

(10,742)

 

(390)

Cash and cash equivalents at beginning of period

 

39,143

 

43,836

Cash and cash equivalents at end of period

$

28,401

$

43,446

Non-cash investing activities

Accrued construction in progress

$

54

$

See accompanying notes to unaudited condensed consolidated financial statements

5

Table of Contents

CELLDEX THERAPEUTICS, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

June 30, 2022

(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 subsidiary. All intercompany balances and 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, 2021, which are included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 28, 2022. 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 condensed 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, 2022.

At June 30, 2022, the Company had cash, cash equivalents and marketable securities of $356.8 million. The Company has had recurring losses and incurred a loss of $59.1 million for the six months ended June 30, 2022. Net cash used in operations for the six months ended June 30, 2022 was $46.8 million. The Company believes that the cash, cash equivalents and marketable securities at the filing date of this Form 10-Q will be sufficient to meet estimated working capital requirements and fund planned operations for at least the next twelve months from the date of issuance of these financial statements.

During the next twelve months and beyond, the Company may take further steps to raise additional capital to meet its long-term liquidity needs including, but not limited to, one or more of the following: the licensing of drug candidates with existing or new collaborative partners, possible business combinations, issuance of debt, or the issuance of common stock or other securities via private placements or public offerings. Although the Company has been successful in raising capital in the past, there can be no assurance that additional financing will be available on acceptable terms, if at all, and the Company’s negotiating position in capital-raising efforts may worsen as existing resources are used. There is also no assurance that the Company will be able to enter into further collaborative relationships. Additional equity financings may be dilutive to the Company’s stockholders; debt financing, if available, may involve significant cash payment obligations and covenants that restrict the Company’s ability to operate as a business; and licensing or strategic collaborations may result in royalties or other terms which reduce the Company’s economic potential from products under development. The Company’s ability to continue funding its planned operations beyond twelve months from the issuance date is also dependent on the timing and manner of payment of amounts due under the Settlement Agreement with Shareholder Representative Services LLC (“SRS”) (refer to Note 13), in the event that the Company achieves the milestones related to those payments. The Company, at its option, may decide to pay those milestone payments in cash, shares of its common stock or a combination thereof. If the Company is unable to raise the funds necessary to meet its long-term liquidity needs, it may have to delay or discontinue the development of one or more programs, discontinue or delay ongoing or anticipated clinical trials, license out programs earlier than expected, raise funds at a significant discount or on other unfavorable terms, if at all, or sell all or a part of the Company.

6

Table of Contents

The COVID-19 pandemic continues to have a major impact in the US and around the world. The availability of vaccines holds promise for the future, though new variants of the virus and potential waning immunity from vaccines may result in continued impact from this pandemic in the future, which could adversely impact our operations. To date, we have managed delays and disruptions without significant impact in planned and ongoing preclinical and clinical trials, manufacturing or shipping. Potential impacts to our business include delays in planned and ongoing preclinical and clinical trials including enrollment of patients, disruptions in time and resources provided by independent clinical investigators, contract research organizations, and other third-party service providers, temporary closures of our facilities, disruptions or restrictions on our employees’ ability to travel, and delays in manufacturing and/or shipments to and from third-party suppliers and contract manufacturers for APIs and drug product. Any prolonged negative impacts to our business could materially impact our operating results and could lead to impairments of our intangible in-process research and development (“IPR&D”) assets with a carrying value of $27.2 million at June 30, 2022.

(2)  Significant Accounting Policies

The significant accounting policies used in preparation of these condensed consolidated financial statements on Form 10-Q for the three and six months ended June 30, 2022 are consistent with those discussed in Note 2 to the financial statements in our Annual Report on Form 10-K for the year ended December 31, 2021.

Recent Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the 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 consolidated financial statements upon adoption.

In June 2016, the FASB issued guidance on the Measurement of Credit Losses on Financial Instruments. The guidance requires that credit losses be reported using an expected losses model rather than the incurred losses model that is currently used, and establishes additional disclosures related to credit risks. For available-for-sale debt securities with unrealized losses, the standard now requires allowances to be recorded instead of reducing the amortized cost of the investment. This standard will be effective for the Company on January 1, 2023. The adoption of this new guidance is not expected to have a material impact on the Company’s consolidated financial statements and related disclosures.

7

Table of Contents

(3)  Fair Value Measurements

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

As of

    

June 30, 2022

    

Level 1

    

Level 2

    

Level 3

(In thousands)

Assets:

Money market funds and cash equivalents

$

7,114

$

7,114

Marketable securities

328,416

328,416

$

335,530

$

335,530

Liabilities:

Kolltan acquisition contingent consideration

$

$

$

$

As of

    

December 31, 2021

    

Level 1

    

Level 2

    

Level 3

(In thousands)

Assets:

Money market funds and cash equivalents

$

26,220

$

26,220

Marketable securities

369,107

369,107

$

395,327

$

395,327

Liabilities:

Kolltan acquisition contingent consideration

$

6,862

$

6,862

$

6,862

$

6,862

The Company’s financial assets consist mainly of money market funds, cash equivalents and marketable securities and are classified as Level 2 within the valuation hierarchy. The Company values its marketable securities utilizing independent pricing services which normally derive security prices from recently reported trades for identical or similar securities, making adjustments based on significant observable transactions. At each balance sheet date, observable market inputs may include trade information, broker or dealer quotes, bids, offers or a combination of these data sources.

The following table reflects the activity for the Company’s contingent consideration liabilities measured at fair value using Level 3 inputs for the six months ended June 30, 2022 (in thousands):

Other Liabilities:

Contingent

    

 Consideration

Balance at December 31, 2021

$

6,862

Fair value adjustments included in operating expenses

 

(6,862)

Balance at June 30, 2022

$

The valuation technique used to measure fair value of the Company’s Level 3 liabilities, which consist of contingent consideration related to the acquisition of Kolltan Pharmaceuticals, Inc. ("Kolltan") in 2016, was primarily an income approach. The significant unobservable inputs used in the fair value measurement of the contingent consideration are estimates including probability of success, discount rates and amount of time until the conditions of the milestone payments are met.

During the three and six months ended June 30, 2022, the Company recorded a $6.3 million and $6.9 million gain on fair value remeasurement of contingent consideration, respectively, primarily due to the Company's decision to deprioritize the CDX-1140 program. During the three and six months ended June 30, 2021, the Company recorded a $0.3 million and $0.7 million loss on fair value remeasurement of contingent consideration, respectively, primarily due to changes in discount rates and the passage of time. The assumptions related to determining the fair value of contingent consideration include a significant amount of judgment, and any changes in the underlying estimates could have a material impact on the amount of contingent consideration adjustment recorded in any given period.

The Company did not have any transfers in or out of Level 3 assets or liabilities during the six months ended June 30, 2022.

8

Table of Contents

(4)  Marketable Securities

The following is a summary of marketable debt securities, classified as available-for-sale:

Gross Unrealized

Amortized

Fair

    

Cost

    

Gains

    

Losses

    

Value

(In thousands)

June 30, 2022

Marketable securities

U.S. government and municipal obligations

Maturing in one year or less

$

152,518

$

$

(1,494)

$

151,024

Maturing after one year through three years

3,887

(17)

3,870

Total U.S. government and municipal obligations

$

156,405

$

$

(1,511)

$

154,894

Corporate debt securities

Maturing in one year or less

$

149,304

$

$

(829)

$

148,475

Maturing after one year through three years

25,720

(673)

25,047

Total corporate debt securities

$

175,024

$

$

(1,502)

$

173,522

Total marketable securities

$

331,429

$

$

(3,013)

$

328,416

Gross Unrealized

Amortized

Fair

Cost

    

Gains

    

Losses

    

Value

(In thousands)

December 31, 2021

Marketable securities

U.S. government and municipal obligations

Maturing in one year or less

$

80,674

$

$

(133)

$

80,541

Maturing after one year through three years

51,319

(184)

51,135

Total U.S. government and municipal obligations

$

131,993

$

$

(317)

$

131,676

Corporate debt securities

Maturing in one year or less

$

170,034

$

$

(28)

$

170,006

Maturing after one year through three years

67,782

(357)

67,425

Total corporate debt securities

$

237,816

$

$

(385)

$

237,431

Total marketable securities

$

369,809

$

$

(702)

$

369,107

The Company holds investment-grade marketable securities, and none were in a continuous unrealized loss position for more than twelve months as of June 30, 2022 and December 31, 2021. The unrealized losses are attributable to changes in interest rates and the Company does not believe any unrealized losses represent other-than-temporary impairments. Marketable securities include $1.1 million and $1.3 million in accrued interest at June 30, 2022 and December 31, 2021, respectively.

(5)  Intangible Assets

At June 30, 2022 and December 31, 2021, the carrying value of the Company’s indefinite-lived intangible assets was $27.2 million. Indefinite-lived intangible assets consist of acquired IPR&D related to the development of the anti-KIT program, including barzolvolimab (also referred to as CDX-0159), which was recorded in connection with the Kolltan acquisition. Barzolvolimab is in Phase 2 development. As of June 30, 2022, the IPR&D asset related to the anti-KIT program had not reached technological feasibility nor did the asset have alternative future uses.

The Company performs an impairment test on IPR&D assets at least annually, or more frequently if events or changes in circumstances indicate that IPR&D assets may be impaired. Due to the nature of IPR&D projects, the Company may experience future delays or failures to obtain regulatory approvals to conduct clinical trials, failures of such clinical trials or other failures to achieve a commercially viable product, and as a result, may recognize further impairment losses in the future.

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(6) Other Long-Term Liabilities

Other long-term liabilities include the following:

    

June 30, 

    

December 31, 

2022

2021

(In thousands)

Net deferred tax liabilities related to IPR&D (Note 11)

$

1,613

$

1,613

Deferred Income From Sale of Tax Benefits

 

4,650

 

Contingent milestones (Note 3 and Note 13)

6,862

Deferred revenue (Note 10)

 

463

 

433

Total

 

6,726

 

8,908

Less current portion

 

(1,393)

 

(1,554)

Long-term portion

$

5,333

$

7,354

In March 2022, the Company received approval from the New Jersey Economic Development Authority and agreed to sell New Jersey tax benefits of $5.0 million to an independent third party for $4.7 million. Under the agreement, the Company must maintain a base of operations in New Jersey for five years or the tax benefits must be paid back on a pro-rata basis based on the number of years completed.

(7) Stockholders’ Equity

In May 2016, the Company entered into a controlled equity offering sales agreement (the “Cantor Agreement”) with Cantor Fitzgerald & Co. (“Cantor”) to allow the Company to issue and sell shares of its common stock from time to time through Cantor, acting as agent. At June 30, 2022, the Company had $50.0 million remaining in aggregate gross offering price available under the Company’s November 2020 prospectus.

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The changes in Stockholders’ Equity during the three and six months ended June 30, 2022 and 2021 are summarized below:

    

    

    

    

Accumulated

    

    

Common

Common

Additional

Other

Total

Stock

Stock Par

Paid-In

Comprehensive

Accumulated

Stockholders’

    

Shares

    

Value

    

Capital

    

 Income

    

Deficit

    

 Equity

(In thousands, except share amounts)

Consolidated balance at December 31, 2021

 

46,730,198

 

$

47

 

$

1,561,142

 

$

1,894

 

$

(1,143,607)

 

$

419,476

Shares issued under stock option and employee stock purchase plans

 

24,150

 

 

 

 

304

 

 

 

 

 

 

304

Stock-based compensation

 

 

 

 

 

3,153

 

 

 

 

 

 

3,153

Unrealized loss on marketable securities

 

 

 

 

 

 

 

(1,782)

 

 

 

 

(1,782)

Net loss

 

 

 

 

 

 

 

 

 

(23,050)

 

 

(23,050)

Consolidated balance at March 31, 2022

 

46,754,348

 

$

47

 

$

1,564,599

 

$

112

 

$

(1,166,657)

 

$

398,101

Shares issued under stock option and employee stock purchase plans

10,355

71

71

Stock-based compensation

3,454

3,454

Unrealized loss on marketable securities

(529)

(529)

Net loss

(36,004)

(36,004)

Consolidated balance at June 30, 2022

46,764,703

$

47

$

1,568,124

$

(417)

$

(1,202,661)

$

365,093

    

    

    

    

Accumulated

    

    

Common

Common

Additional

 Other

Total

 Stock

 Stock Par

 Paid-In

 Comprehensive

Accumulated 

Stockholders’

 Shares

 Value

 Capital

 Income

Deficit

 Equity

(In thousands, except share amounts)

Consolidated balance at December 31, 2020

 

39,603,771

$

40

$

1,279,824

$

2,589

$

(1,073,096)

$

209,357

Shares issued under stock option and employee stock purchase plans

 

10,867

 

 

74

 

 

 

74

Stock-based compensation

 

 

 

1,275

 

 

 

1,275

Unrealized loss on marketable securities

 

 

 

 

(2)

 

 

(2)

Net loss

 

 

 

 

 

(16,538)

 

(16,538)

Consolidated balance at March 31, 2021

 

39,614,638

$

40

$

1,281,173

$

2,587

$

(1,089,634)

$

194,166

Shares issued under stock option and employee stock purchase plans

2,058

(25)

(25)

Stock-based compensation

1,509

1,509

Unrealized gain on marketable securities

5

5

Net loss

(13,373)

(13,373)

Consolidated balance at June 30, 2021

39,616,696

$

40

$

1,282,657

$

2,592

$

(1,103,007)

$

182,282

(8)  Stock-Based Compensation

A summary of stock option activity for the six months ended June 30, 2022 is as follows:

Weighted

Weighted

Average

Average

Exercise

Remaining

Price

Contractual

    

Shares

    

Per Share

    

Term (In Years)

Options outstanding at December 31, 2021

 

4,077,667

$

30.02

8.0

Granted

 

1,570,900

$

22.79

Exercised

 

(29,910)

$

8.05

Canceled

 

(28,444)

$

36.24

Options outstanding at June 30, 2022

 

5,590,213

$

28.07

8.20

Options vested and expected to vest at June 30, 2022

 

5,428,921

$

28.25

8.17

Options exercisable at June 30, 2022

 

2,135,506

$

39.84

6.76

Shares available for grant under the 2021 Plan

 

1,761,761

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The weighted average grant-date fair value of stock options granted during the three and six ended June 30, 2022 was $17.20 and $17.29, respectively.

The aggregate intrinsic value of stock options vested and expected to vest at June 30, 2022 was $48.6 million. The aggregate intrinsic value of stock options exercisable at June 30, 2022 was $26.2 million. As of June 30, 2022, total compensation cost related to non-vested employee, consultant and non-employee director stock options not yet recognized was approximately $51.2 million, net of estimated forfeitures, which is expected to be recognized as expense over a weighted average period of 3.0 years.

Stock-based compensation expense for the three and six months ended June 30, 2022 and 2021 was recorded as follows:

Three months ended June 30, 

Six months ended June 30, 

    

2022

    

2021

    

2022

    

2021

(In thousands)

(In thousands)

Research and development

$

1,798

$

762

$

3,412

$

1,423

General and administrative

 

1,656

 

747

 

3,195

 

1,361

Total stock-based compensation expense

$

3,454

$

1,509

$

6,607

$

2,784

The fair values of employee, consultant and non-employee director stock options granted during the three and six months ended June 30, 2022 and 2021 were valued using the Black-Scholes option pricing model with the following assumptions:

Three months ended June 30, 

Six months ended June 30, 

    

    

2022

    

2021

    

2022

    

2021

Expected stock price volatility

 

9091%

9798%

9097%

9798%

Expected option term

 

6.0 Years

6.0 Years

6.0 Years

6.0 Years

Risk-free interest rate

 

2.73.6%

1.21.3%

1.73.6%

0.81.3%

Expected dividend yield

 

None

None

None

None

(9)  Accumulated Other Comprehensive Income

The changes in accumulated other comprehensive income, which is reported as a component of stockholders’ equity, for the six months ended June 30, 2022 are summarized below:

Unrealized

Loss on

Marketable

Foreign

    

Securities

    

Currency Items

    

Total

(In thousands)

Balance at December 31, 2021

$

(702)

$

2,596

$

1,894

Other comprehensive loss

 

(2,311)

 

 

(2,311)

Balance at June 30, 2022

$

(3,013)

$

2,596

$

(417)

No amounts were reclassified out of accumulated other comprehensive income during the six months ended June 30, 2022.

(10)  Revenue

Contract and Grants Revenue

The Company has entered into agreements with Rockefeller University and Gilead Sciences pursuant to which the Company performs manufacturing and research and development services on a time-and-materials basis or at a negotiated fixed-price. The Company recognized $0.1 million and $0.2 million in revenue under these agreements during the three and six months ended June 30, 2022, respectively, and $3.2 million and $3.8 million during the three and six months ended June 30, 2021, respectively.

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Contract Assets and Liabilities

At June 30, 2022 and December 31, 2021, the Company’s right to consideration under all contracts was considered unconditional, and as such, there were no recorded contract assets. At June 30, 2022, the Company had $0.5 million in contract liabilities recorded, which is expected to be recognized during the next 12 months as manufacturing and research and development services are performed. At December 31, 2021, the Company had $0.4 million in contract liabilities recorded. Revenue recognized from contract liabilities as of December 31, 2021 during the three and six months ended June 30, 2022 was $0.1 million and $0.2 million, respectively.

(11)  Income Taxes

The Company has evaluated the positive and negative evidence bearing upon the realizability of its net deferred tax assets and considered its history of losses, ultimately concluding that it is “more likely than not” that the Company will not recognize the benefits of federal, state and foreign deferred tax assets and, as such, has maintained a full valuation allowance on its deferred tax assets as of June 30, 2022 and December 31, 2021.

The net deferred tax liability of $1.6 million at June 30, 2022 and December 31, 2021 relates to the temporary differences associated with the IPR&D intangible assets acquired in previous business combinations and is not deductible for tax purposes.

Massachusetts, New Jersey, New York and Connecticut are the jurisdictions in which the Company primarily operates or has operated and has income tax nexus. The Company is not currently under examination by these or any other jurisdictions for any tax year.

(12)  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. In periods in which the Company reports a net loss, there is no difference between basic and diluted net loss per share because dilutive shares of common stock are not assumed to have been issued as their effect is anti-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:

Six Months Ended June 30, 

    

2022

    

2021

Stock Options

 

5,590,213

 

4,344,622

Restricted Stock

 

 

 

5,590,213

 

4,344,622

(13)  Kolltan Acquisition

On November 29, 2016, the Company acquired all of the share and debt interests of Kolltan, a clinical-stage biopharmaceutical company, in exchange for 1,217,200 shares of the Company’s common stock plus contingent consideration in the form of development, regulatory approval and sales-based milestones (“Kolltan Milestones”) of up to $172.5 million payable in cash, in shares of Celldex’s common stock or a combination of both, in the sole discretion of Celldex and subject to provisions of the Agreement and Plan of Merger, dated November 1, 2016 (the “Merger Agreement”).

In October 2019, the Company received a letter from Shareholder Representative Services LLC (“SRS”), the hired representative of the former stockholders of Kolltan, notifying the Company that it objected to the Company’s characterization of the development, regulatory approval and sales-based Kolltan Milestones relating to CDX-0158 as having been abandoned and contending instead that the related milestone payments are due from Celldex to the Kolltan stockholder.

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On August 18, 2020, Celldex filed a Verified Complaint in the Court of Chancery of the State of Delaware against SRS (acting in its capacity as the representative of the former stockholders of Kolltan pursuant to the Merger Agreement) seeking declaratory relief with respect to the rights and obligations of the parties relating to certain contingent milestone payments under the Merger Agreement relating to the discontinued CDX-0158 program (the “Litigation”).

On June 20, 2022, the Company entered into a binding settlement term sheet (the “Term Sheet”) with SRS, related to the Litigation, which, upon execution of a definitive settlement agreement and the payment of the Initial Payment (as defined below), would result in the joint dismissal, with prejudice, of all claims and counterclaims in the Litigation. The definitive settlement agreement between the Company and SRS was executed on July 15, 2022 (the “Settlement Agreement”) and the Company and SRS jointly filed a Stipulation of Dismissal with prejudice relating to the Litigation on July 19, 2022.

Pursuant to the terms of the Term Sheet and the Settlement Agreement, all milestone payments provided for by the Merger Agreement are replaced in their entirety with the following payments, each of which is payable only once:

(i)The Company paid $15,000,000 upon execution of the Settlement Agreement (the “Initial Payment”).

(ii)The Company shall pay $15,000,000 upon the Successful Completion (as defined in the Term Sheet) of a Phase 2 Clinical Trial (as defined in the Merger Agreement) of CDX-0159, subject to the $2,500,000 contractual credit as set forth in the Merger Agreement.

(iii)The Company shall pay $52,500,000 upon the first United States Food and Drug Administration or European Medicines Agency, or, in each case, any successor organization, regulatory approval of a Surviving Company Product (as defined the Term Sheet).

The above payment obligations replace, in their entirety, the contingent consideration in the form of development, regulatory approval and sales-based milestones of up to $172.5 million contained in the Merger Agreement.

Under the Settlement Agreement, each of the Company and SRS provided broad mutual releases of all claims relating to or arising out of the Merger Agreement, including without limitation, all claims brought in the Litigation or that could have been brought in the Litigation.

The Company elected to pay the Initial Payment in cash. A litigation settlement payable of $15.0 million has been recorded as of June 30, 2022 related to the Initial Payment. Any future milestone payments related to the CDX-0159 program, which was subject to the Litigation, will be recorded when and if payment becomes probable and reasonably estimable in accordance with the loss contingency model under ASC 450. Milestones related to the remaining Surviving Company Products are measured at fair value (refer to Note 3). When and if any of the remaining payments described above become due, they shall be payable, at the Company’s sole election, in either cash or stock (as set forth in the Merger Agreement) or a combination thereof.

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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 dependence on product candidates, which are still in an early development stage;
our ability to successfully complete research and further development, including preclinical and clinical studies, and, if we obtain regulatory approval, commercialization of our drug candidates and the growth of the markets for those drug candidates;
our anticipated timing for preclinical development, regulatory submissions, commencement and completion of clinical trials and product approvals;
the impact of the COVID-19 pandemic on our business or on the economy generally;
whether the COVID-19 pandemic will affect the timing of the completion of our planned and/or currently ongoing preclinical/clinical trials;
our ability to negotiate strategic partnerships, where appropriate, for our drug candidates;
our ability to manage multiple clinical trials for a variety of drug candidates at different stages of development;
the cost, timing, scope and results of ongoing preclinical and clinical testing;
our expectations of the attributes of our product and development candidates, including pharmaceutical properties, efficacy, safety and dosing regimens;
the cost, timing and uncertainty of obtaining regulatory approvals for our drug candidates;
the availability, cost, delivery and quality of clinical management services provided by our clinical research organization partners;
the availability, cost, delivery and quality of clinical and commercial-grade materials produced by our own manufacturing facility or supplied by contract manufacturers, suppliers and partners;
our ability to develop and commercialize products before competitors that are superior to the alternatives developed by such competitors;

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our ability to develop technological capabilities, including identification of novel and clinically important targets, exploiting our existing technology platforms to develop new drug candidates and expand our focus to broader markets for our existing targeted therapeutics;
the cost of paying the future milestones, if any, under the Settlement Agreement with SRS;
our ability to raise sufficient capital to fund our preclinical and clinical studies and to meet our long-term liquidity needs, on terms acceptable to us, or at all. 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, discontinue or delay ongoing or anticipated clinical trials, license out programs earlier than expected, raise funds at significant discount or on other unfavorable terms, if at all, or sell all or part of our business;
our ability to protect our intellectual property rights and our ability to avoid intellectual property litigation, which can be costly and divert management time and attention;
our ability to develop and commercialize products without infringing the intellectual property rights of third parties; and
the risk factors set forth elsewhere in this quarterly report on Form 10-Q and the factors listed under the headings “Business,” “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our annual report on Form 10-K for the year ended December 31, 2021 and other reports that we file 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 a biopharmaceutical company dedicated to developing therapeutic monoclonal and bispecific antibodies that address diseases for which available treatments are inadequate. Our drug candidates include antibody-based therapeutics which have the ability to engage the human immune system and/or directly affect critical pathways to improve the lives of patients with inflammatory diseases and many forms of cancer.

We are focusing our efforts and resources on the continued research and development of:

Barzolvolimab (also referred to as CDX-0159), a monoclonal antibody that specifically binds the KIT receptor and potently inhibits its activity, is currently being studied across multiple mast cell driven diseases including:
-Chronic Urticarias: In June and July 2022 respectively, we announced that enrollment had opened and the first patients had been dosed in Phase 2 studies in chronic spontaneous urticaria (CSU) and chronic inducible urticaria (CIndU). Positive interim data from the ongoing Phase 1b study in CSU were reported in July 2022. Positive interim data from the Phase 1b study in CIndU were reported in July and September 2021 in patients with cold urticaria and symptomatic dermographism;

-Prurigo Nodularis (PN): In December 2021 we announced that the first patient had been dosed in a Phase 1b study in PN; and

-Eosinophilic Esophagitis (EoE): We plan to initiate a Phase 2 study in EoE by the end of 2022.

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CDX-527, a bispecific antibody that uses our proprietary highly active anti-PD-L1 and CD27 human antibodies to couple CD27 co-stimulation with blockade of the PD-L1/PD-1 pathway, for which we initiated a Phase 1 study in advanced solid tumors in August 2020.

We routinely work with external parties to collaboratively advance our drug candidates. In addition to Celldex-led studies, we also have an Investigator Initiated Research (IIR) program with multiple studies ongoing with our drug candidates.

Our goal is to build a fully integrated, commercial-stage biopharmaceutical company that develops important therapies for patients with unmet medical needs. We believe our program assets provide us with the strategic options to either retain full economic rights to our innovative therapies or seek favorable economic terms through advantageous commercial 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. Currently, all programs are fully owned by us.

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 drug candidate. It is not unusual for the clinical development of these types of drug candidates to each take five years or more, and for total development costs to exceed $100 million for each drug candidate. We estimate that clinical trials of the type we generally conduct are typically completed over the following timelines:

    

Estimated

 

Completion

Clinical Phase

 

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 drug candidate.

We test potential drug candidates in numerous preclinical studies for safety, toxicology and immunogenicity. We may then conduct multiple clinical trials for each drug candidate. As we obtain results from trials, we may elect to discontinue or delay clinical trials for certain drug candidates in order to focus our resources on more promising drug candidates.

An element of our business strategy is to pursue the discovery, research and development of a broad portfolio of drug candidates. This is intended to allow us to diversify the risks associated with our research and development expenditures. To the extent we are unable to maintain a broad range of drug candidates, our dependence on the success of one or a few drug candidates increases.

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Regulatory approval is required before we can market our drug candidates as therapeutic products. In order to proceed to subsequent clinical trial stages and to ultimately achieve regulatory approval, the regulatory agencies must conclude that our clinical data demonstrate that our product candidates are 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 and biologics 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 drug candidates. In the event that third parties take over the clinical trial process for one of our drug 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, it is difficult to accurately estimate the duration and completion costs of our research and development projects or when, if ever, and to what extent we 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, 2021, we incurred an aggregate of $301.1 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 six months ended June 30, 2022 and 2021. 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.

Six Months 

Six Months 

Ended

Ended

    

June 30, 2022

    

June 30, 2021

 

(In thousands)

Barzolvolimab/Anti-KIT Program

$

21,918

$

10,973

CDX‑1140 and CDX-301

 

1,751

 

2,845

CDX‑527

 

1,195

 

2,328

Other Programs

 

12,922

 

8,930

Total R&D Expense

$

37,786

$

25,076

Clinical Development Programs

The COVID-19 pandemic continues to have a major impact in the US and around the world. The availability of vaccines holds promise for the future, though new variants of the virus and potential waning immunity from vaccines may result in continued impact from this pandemic in the future, which could adversely impact our operations. To date, we have managed delays and disruptions without significant impact in planned and ongoing preclinical and clinical trials, manufacturing or shipping. Potential impacts to our business include delays in planned and ongoing preclinical and clinical trials including enrollment of patients, disruptions in time and resources provided by independent clinical investigators, contract research organizations, and other third-party service providers, temporary closures of our facilities, disruptions or restrictions on our employees’ ability to travel, and delays in manufacturing and/or shipments to and from third-party suppliers and contract manufacturers for APIs and drug product.

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Barzolvolimab (also referred to as CDX-0159)

Barzolvolimab is a humanized monoclonal antibody that specifically binds the receptor tyrosine kinase KIT and potently inhibits its activity. KIT is expressed in a variety of cells, including mast cells, and its activation by its ligand SCF regulates mast cell growth, differentiation, survival, chemotaxis and degranulation. Barzolvolimab is designed to block KIT activation by disrupting both SCF binding and KIT dimerization. We believe that by targeting KIT, barzolvolimab may be able to inhibit mast cell activity and decrease mast cell numbers to provide potential clinical benefit in mast cell related diseases.

In certain inflammatory diseases, such as chronic spontaneous urticaria (CSU), also known as chronic idiopathic urticaria (CIU) and chronic inducible urticaria (CIndU), mast cell degranulation plays a central role in the onset and progression of the disease. In June 2020, we completed a randomized, double-blind, placebo-controlled, single ascending dose escalation Phase 1a study of barzolvolimab in healthy subjects (n=32; 8 subjects per cohort, 6 barzolvolimab; 2 placebo). Subjects received a single intravenous infusion of barzolvolimab at 0.3, 1.0, 3.0, or 9.0 mg/kg or placebo. The objectives of the study included safety and tolerability, pharmacokinetics (PK) and pharmacodynamics (tryptase and stem cell factor) and immunogenicity. Tryptase is an enzyme synthesized and secreted almost exclusively by mast cells and decreases in plasma tryptase levels are believed to reflect a systemic reduction in mast cell burden in both healthy volunteers and in disease. Data from the study were featured in a late breaking presentation at the European Academy of Allergy and Clinical Immunology (EAACI) Annual Congress 2020 in June. Barzolvolimab demonstrated a favorable safety profile as well as profound and durable reductions of plasma tryptase, consistent with systemic mast cell suppression.

These data supported expansion of the barzolvolimab program into mast cell driven diseases, including initially in CSU and CIndU, diseases where mast cell degranulation plays a central role in the onset and progression of the disease. The prevalence of CSU and CIndU is approximately 0.5-1% of the total population or up to 1 to 3 million patients in the United States alone (Weller et al. 2010. Hautarzt. 61(8), Bartlett et al. 2018. DermNet. Org). CSU presents as itchy hives, angioedema or both for at least six weeks without a specific trigger; multiple episodes can play out over years or even decades. About 50% of patients with CSU achieve symptomatic control with antihistamines or leukotriene receptor antagonists. Omalizumab, an IgE inhibitor, provides relief for roughly half of the remaining antihistamine/leukotriene refractory patients. Consequently, there is a need for additional therapies. CIndUs are forms of urticaria that have an attributable cause or trigger associated with them, typically resulting in hives or wheals. We are exploring cold-induced, dermographism (scratch-induced) and cholinergic (exercise-induced) urticarias. In June and July 2022 respectively, we announced the initiation of Phase 2 studies in both CSU and CIndU.

In October 2020, we announced that enrollment had opened and the first patient had been dosed in a Phase 1b multi-center study of barzolvolimab in CSU. This study is a randomized, double-blind, placebo-controlled clinical trial designed to assess the safety of multiple ascending doses of barzolvolimab in up to 40 patients with CSU who remain symptomatic despite treatment with antihistamines. Secondary and exploratory objectives include pharmacokinetic and pharmacodynamic assessments, including measurement of tryptase and stem cell factor levels and clinical activity outcomes (impact on urticaria symptoms, disease control, clinical response) as well as quality of life assessments. Barzolvolimab is administered intravenously (0.5, 1.5, 3 and 4.5 mg/kg at varying dosing schedules) as add on treatment to H1-antihistamines, either alone or in combination with H2-antihistamines and/or leukotriene receptor agonists.

In June 2022, we reported positive interim data from the CSU study. As of the data cut-off on May 23, 2022, 34 patients with CSU were enrolled and treated [26 barzolvolimab (n=9 in 0.5 mg/kg; n=8 in 1.5 mg/kg; n=9 in 3.0 mg/kg) and 8 placebo]. The 0.5 mg/kg and 1.5 mg/kg cohorts had completed study participation through 24 weeks; 7 of 12 patients in the 3.0 mg/kg cohort had completed week 12; enrollment in the 4.5 mg/kg cohort was ongoing. Adverse events through data cutoff and hematology data through week 12 were included for all dose groups; clinical activity and tryptase data were included through week 12 for 0.5 mg/kg and 1.5 mg/kg, and through week 8 for 3 mg/kg (ongoing; reflecting the administration of only one dose). Data shows that barzolvolimab results in rapid, marked and durable responses in patients with moderate to severe CSU refractory to antihistamines, including patients with prior omalizumab treatment.

Mean reduction from baseline in urticaria activity (Urticaria Activity Score over 7 days or UAS7) of 66.6% in all patients in the 1.5 mg/kg dose group (n=8) at week 12 and 75.1% in all patients in the 3.0 mg/kg dose group (n=9) at week 8 (reflects one dose; ongoing), demonstrating clinically meaningful symptom improvements for patients.

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Complete response (UAS7=0) of 57.1% in the 1.5 mg/kg dose group at week 12 and 44.4% at week 8 (reflects one dose; ongoing) in the 3 mg/kg dose group which is a key therapeutic goal.

75% well-controlled disease by Urticaria Control Test (UCT) in the 1.5 mg/kg dose group at week 12 and 83.3% in the 3 mg/kg dose group at week 8 (reflects one dose; ongoing).

Patients with prior omalizumab therapy had similar symptom improvement as all patients.

All three doses of barzolvolimab markedly improved urticaria symptoms and disease control, with rapid improvement in itch and hives. As predicted, the lowest dose of 0.5 mg/kg resulted in suboptimal clinical activity compared to the higher doses.

Rapid onset of responses after initial dosing and sustained durability were observed; onset as early as 1 week after the first dose.

Tryptase suppression, indicative of mast cell depletion, paralleled symptom improvement, demonstrating the impact of mast cell depletion on CSU disease activity.

Barzolvolimab was well tolerated with a favorable safety profile; effects of multiple dose administration were consistent with observations in single dose studies. Most AEs were mild or moderate in severity and resolved while on study, with none leading to treatment discontinuation. The most common treatment emergent adverse events were urinary tract infections, headache, neutropenia and back pain. UTIs, headache and backpain were all reported as unrelated to treatment. Changes in hematologic parameters were consistent with observations in single dose studies, with no pattern of further decreases with multiple doses; hematologic values generally remained within the normal range.

In June 2022, we announced that the first patient has been dosed in a Phase 2 study in patients with CSU who remain symptomatic despite antihistamine therapy. The study will be conducted at more than 75 sites across 10 or more countries. The study is a randomized, double-blind, placebo-controlled, parallel group Phase 2 study evaluating the efficacy and safety profile of multiple dose regimens of barzolvolimab to determine the optimal dosing strategy. Approximately 168 patients will be randomly assigned on a 1:1:1:1 ratio to receive subcutaneous injections of barzolvolimab at 75 mg every 4 weeks, 150 mg every 4 weeks, 300 mg every 8 weeks or placebo during a 16-week placebo-controlled treatment phase. Patients will then enter a 36-week active treatment phase, in which patients not already randomized to barzolvolimab at 150 mg every 4 weeks or 300 mg every 8 weeks will be randomized 1:1 to receive one of these two dose regimens; patients already randomized to these treatment arms will remain on the same regimen as during the placebo-controlled treatment phase. Following the treatment period, patients will enter a 24-week follow up phase. The primary endpoint of the study is mean change in baseline to Week 12 in UAS7 (Urticaria Activity Score over 7 days). Secondary endpoints include safety and other assessments of clinical activity including ISS7 (Itch Severity Score over 7 days), HSS7 (Hive Severity Score over 7 days) and AAS7 (Angioedema Activity Score over 7 days).

In December 2020, we announced that enrollment had opened and the first patient had been dosed in a Phase 1b study in CIndU being conducted in Germany in patients who are refractory to antihistamines. This study is an open label clinical trial designed to evaluate the safety of a single dose (3 mg/kg) of barzolvolimab in patients with cold urticaria (n=10) or symptomatic dermographism (n=10). In March and June 2021, respectively, we added a third cohort (single dose, 3 mg/kg) in patients with cholinergic urticaria (n=10) and a fourth cohort at a lower dose (single dose, 1.5 mg/kg) in cold urticaria. Patient’s symptoms are induced via provocation testing that resembles real life triggering situations. Secondary and exploratory objectives include pharmacokinetic and pharmacodynamic assessments, including changes from baseline provocation thresholds, measurement of tryptase and stem cell factor levels, clinical activity outcomes (impact on urticaria symptoms, disease control, clinical response), quality of life assessments and measurement of tissue mast cells through skin biopsies. Barzolvolimab is administered intravenously on Day 1 as add on treatment to H1-antihistamines.

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In July 2021, we reported positive interim data from the cold urticaria and symptomatic dermographism cohorts. As of the data cut-off on June 11, 2021, 20 patients had received a single intravenous infusion of barzolvolimab at 3 mg/kg, including 11 patients with cold urticaria and 9 patients with symptomatic dermographism. Patients had high disease activity as assessed by provocation threshold testing. In patients with cold urticaria and symptomatic dermographism baseline critical temperature thresholds were 18.9°C/66°F (range: 5-27°C/41-80.6°F) and FricTest® thresholds were 3.8 (range: 3-4) of 4 pins. Safety results were reported for all 20 patients; activity results were reported for the 19 patients who received a full dose of barzolvolimab. 14 of 19 patients completed the 12-week study observation period and five were ongoing (range of 2-8 weeks) as of June 11, 2021.

All 19/19 (100)% patients experienced a clinical response as assessed by provocation threshold testing; 18/19 (95)% experienced a complete response and 1/19 (5)% experienced a partial response.10/10 (100)% patients with cold urticaria experienced a complete response. 8/9 (89)% patients with symptomatic dermographism experienced a complete response and 1/9 (11)% experienced a partial response. Compete responses were observed in all 3 patients (1 cold urticaria; 2 symptomatic dermographism) with prior Xolair® (omalizumab) experience, including two who were Xolair refractory.
Rapid onset of responses after dosing and sustained durability were observed. Most patients with cold urticaria and symptomatic dermographism experienced a complete response by week 1 and by week 4, respectively. The median duration of response for patients was 77+ days for cold urticaria and 57+ days for symptomatic dermographism.
Improvements in disease activity as reported by physician’s and patient’s global assessment of disease severity were consistent with the complete responses as measured by provocation testing.
A single 3 mg/kg dose of barzolvolimab resulted in rapid, marked and durable suppression of serum tryptase and depletion of skin mast cells (87% depletion) as measured through biopsy. The kinetics of serum tryptase and skin mast cell depletion mirrored clinical activity. This confirmed that serum tryptase level is a robust pharmacodynamic biomarker for assessing mast cell burden and clinical activity in inducible urticaria and potentially in other diseases with mast cell driven involvement.
Barzolvolimab was generally well tolerated. The most common adverse events were hair color changes, mild infusion reactions, and transient changes in taste perception. Hair color changes (generally small areas of hair color lightening) and taste disorders (generally partial changes of ability to taste salt) are consistent with inhibiting KIT signaling in other cell types and are expected to be fully reversible. As previously reported in March 2021, a single severe infusion reaction of brief loss of consciousness was observed in a patient with a history of fainting. The patient rapidly recovered. Importantly, no evidence of mast cell activation as measured by serum tryptase monitoring was observed. There was no evidence of clinically significant decreases in hematology parameters—an important finding for a KIT inhibitor.
One patient with symptomatic dermographism enrolled in the study also had a diagnosis of prurigo nodularis (PN). After a single dose of barzolvolimab, this patient experienced both a complete response of symptomatic dermographism and notable improvement of the PN.

In September 2021, we reported additional positive data from the study on measurements of symptom control and quality of life. A single dose of barzolvolimab (3 mg/kg) resulted in a rapid and sustained improvement in urticaria control and greatly reduced disease impact on quality of life, as measured by the Urticaria Control Test (UCT) and Dermatology Life Quality Index (DLQI).

In July 2022 we announced that the first patient has been dosed in a Phase 2 study in patients with CIndU who remain symptomatic despite antihistamine therapy. The study will be conducted at more than 75 sites across 10 or more countries. The randomized, double-blind, placebo-controlled, parallel group Phase 2 study is evaluating the efficacy and safety profile of multiple dose regimens of barzolvolimab in patients with CIndU to determine the optimal dosing strategy. Approximately 180 patients in 2 cohorts (differentiated by CIndU subtype) including 90 patients with cold urticaria and 90 patients with symptomatic dermographism will be randomly assigned on a 1:1:1 ratio to receive subcutaneous injections of barzolvolimab at 150 mg every 4 weeks, 300 mg every 8 weeks or placebo during a 20-week treatment phase. Patients will then enter a follow-up phase for an additional 24 weeks. The primary endpoint of the study is the percentage of patients with a negative provocation test at Week 12 (using TempTest(R) and FricTest(R)). Secondary endpoints include safety and other assessments of clinical activity including CTT (Critical Temperature Threshold), CFT (Critical Friction Threshold) and WI-NRS (Worst itch numeric rating scale).

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We have expanded clinical development of barzolvolimab into prurigo nodularis (PN). PN is a chronic skin disease characterized by the development of hard, intensely itchy (pruritic) nodules on the skin. Mast cells through their interactions with sensory neurons and other immune cells are believed to play an important role in amplifying chronic itch and neuroinflammation, both of which are a hallmark of PN. There are currently no FDA approved therapies for PN, representing an area of significant unmet need. Industry sources estimate there are approximately 154,000 patients in the United States with PN who have undergone treatment within the last 12 months and, of these, approximately 75,000 would be biologic-eligible. In December 2021, the first patient was dosed in a Phase 1b multi-center, randomized, double-blind, placebo-controlled study designed to assess the safety and treatment effects across multiple dosing cohorts of barzolvol