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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 September 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 October 31, 2022, 47,099,831 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 September 30, 2022

Table of Contents

 

    

Page

Part I — Financial Information

Item 1. Unaudited Financial Statements

3

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

3

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

4

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 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 1A. Risk Factors

30

Item 5. Other Information

30

Item 6. Exhibits

32

Exhibit Index

32

Signatures

33

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)

September 30, 

December 31, 

    

2022

    

2021

Assets

Current assets:

Cash and cash equivalents

$

18,583

$

39,143

Marketable securities

 

304,888

 

369,107

Accounts and other receivables

 

189

 

172

Prepaid and other current assets

 

10,939

 

2,417

Total current assets

 

334,599

 

410,839

Property and equipment, net

 

3,753

 

3,551

Operating lease right-of-use assets, net

3,580

2,970

Intangible assets, net

 

27,190

 

27,190

Other assets

 

104

 

104

Total assets

$

369,226

$

444,654

Liabilities and stockholders’ equity

Current liabilities:

Accounts payable

$

2,272

$

1,228

Accrued expenses

 

11,425

 

12,000

Current portion of operating lease liabilities

1,438

1,746

Current portion of other long-term liabilities

 

1,152

 

1,554

Total current liabilities

 

16,287

 

16,528

Long-term portion of operating lease liabilities

2,190

1,296

Other long-term liabilities

 

5,333

 

7,354

Total liabilities

 

23,810

 

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 September 30, 2022 and December 31, 2021

 

 

Common stock, $.001 par value; 297,000,000 shares authorized; 47,096,063 and 46,730,198 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively

 

47

 

47

Additional paid-in capital

 

1,574,926

 

1,561,142

Accumulated other comprehensive income

 

(112)

 

1,894

Accumulated deficit

 

(1,229,445)

 

(1,143,607)

Total stockholders’ equity

 

345,416

 

419,476

Total liabilities and stockholders’ equity

$

369,226

$

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

Nine Months
Ended

Nine Months
Ended

    

September 30, 2022

    

September 30, 2021

    

September 30, 2022

    

September 30, 2021

Revenues:

Product development and licensing agreements

$

$

$

30

$

29

Contracts and grants

 

407

 

153

 

714

 

4,288

Total revenues

 

407

 

153

 

744

 

4,317

Operating expenses:

Research and development

 

21,572

 

13,557

 

59,359

 

38,633

General and administrative

 

6,531

 

5,821

 

20,596

 

14,247

Intangible asset impairment

3,500

3,500

Gain on fair value remeasurement of contingent consideration

(1,901)

(6,862)

(1,160)

Litigation settlement related loss

15,000

Total operating expenses

 

28,103

 

20,977

 

88,093

 

55,220

Operating loss

 

(27,696)

 

(20,824)

 

(87,349)

 

(50,903)

Investment and other income, net

 

912

 

145

 

1,511

 

313

Net loss before income tax benefit

(26,784)

(20,679)

(85,838)

(50,590)

Income tax benefit

227

227

Net loss

$

(26,784)

$

(20,452)

$

(85,838)

$

(50,363)

Basic and diluted net loss per common share

$

(0.57)

$

(0.45)

$

(1.83)

$

(1.21)

Shares used in calculating basic and diluted net loss per share

 

46,916

 

45,453

 

46,806

 

41,582

Comprehensive loss:

Net loss

$

(26,784)

$

(20,452)

$

(85,838)

$

(50,363)

Other comprehensive income (loss):

Unrealized gain (loss) on marketable securities

 

305

 

(44)

 

(2,006)

 

(41)

Comprehensive loss

$

(26,479)

$

(20,496)

$

(87,844)

$

(50,404)

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)

Nine Months
Ended

Nine Months
Ended

    

September 30, 2022

    

September 30, 2021

Cash flows from operating activities:

Net loss

$

(85,838)

$

(50,363)

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

Depreciation and amortization

 

2,223

 

2,291

Amortization and premium of marketable securities, net

 

1,366

 

(3,407)

Loss (gain) on sale or disposal of assets

1

(23)

Intangible asset impairment

3,500

Gain on fair value remeasurement of contingent consideration

(6,862)

(1,160)

Non-cash income tax benefit

(227)

Stock-based compensation expense

 

11,103

 

5,813

Changes in operating assets and liabilities:

Accounts and other receivables

 

(17)

 

1,549

Prepaid and other current assets

 

(7,928)

 

(2,261)

Accounts payable and accrued expenses

 

720

 

1,757

Other liabilities

 

3,262

 

(3,855)

Net cash used in operating activities

 

(81,970)

 

(46,386)

Cash flows from investing activities:

Sales and maturities of marketable securities

 

192,866

 

129,000

Purchases of marketable securities

 

(132,613)

 

(325,342)

Acquisition of property and equipment

(1,593)

(895)

Proceeds from sale or disposal of assets

69

25

Net cash provided by (used in) investing activities

 

58,729

 

(197,212)

Cash flows from financing activities:

Net proceeds from stock issuances

 

 

269,893

Proceeds from issuance of stock from employee benefit plans

 

2,681

 

2,053

Net cash provided by financing activities

 

2,681

 

271,946

Net (decrease) increase in cash and cash equivalents

 

(20,560)

 

28,348

Cash and cash equivalents at beginning of period

 

39,143

 

43,836

Cash and cash equivalents at end of period

$

18,583

$

72,184

Non-cash investing activities

Accrued construction in progress

$

38

$

46

See accompanying notes to unaudited condensed consolidated financial statements

5

Table of Contents

CELLDEX THERAPEUTICS, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

September 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 September 30, 2022, the Company had cash, cash equivalents and marketable securities of $323.5 million. The Company has had recurring losses and incurred a loss of $85.8 million for the nine months ended September 30, 2022. Net cash used in operations for the nine months ended September 30, 2022 was $82.0 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.

COVID-19 continues to have an impact in the US and around the world. 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 September 30, 2022.

6

Table of Contents

(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 nine months ended September 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.

(3)  Fair Value Measurements

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

As of

    

September 30, 2022

    

Level 1

    

Level 2

    

Level 3

(In thousands)

Assets:

Money market funds and cash equivalents

$

10,729

$

10,729

Marketable securities

304,888

304,888

$

315,617

$

315,617

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.

7

Table of Contents

The following table reflects the activity for the Company’s contingent consideration liabilities measured at fair value using Level 3 inputs for the nine months ended September 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 September 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 nine months ended September 30, 2022, the Company recorded a $0.0 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 nine months ended September 30, 2021, the Company recorded a $1.9 million and $1.2 million gain on fair value remeasurement of contingent consideration, respectively, primarily due to updated assumptions for the TAM program, 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 nine months ended September 30, 2022.

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(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)

September 30, 2022

Marketable securities

U.S. government and municipal obligations

Maturing in one year or less

$

132,422

$

$

(1,042)

$

131,380

Maturing after one year through three years

3,912

(71)

3,841

Total U.S. government and municipal obligations

$

136,334

$

$

(1,113)

$

135,221

Corporate debt securities

Maturing in one year or less

$

168,698

$

$

(1,548)

$

167,150

Maturing after one year through three years

2,564

(47)

2,517

Total corporate debt securities

$

171,262

$

$

(1,595)

$

169,667

Total marketable securities

$

307,596

$

$

(2,708)

$

304,888

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 September 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 $0.7 million and $1.3 million in accrued interest at September 30, 2022 and December 31, 2021, respectively.

(5)  Intangible Assets

At September 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 September 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:

    

September 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)

 

222

 

433

Total

 

6,485

 

8,908

Less current portion

 

(1,152)

 

(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 September 30, 2022, the Company had $50.0 million remaining in aggregate gross offering price available under the Company’s November 2020 prospectus.

The changes in Stockholders’ Equity during the three and nine months ended September 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

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

Shares issued under stock option and employee stock purchase plans

331,360

2,306

2,306

Stock-based compensation

4,496

4,496

Unrealized gain on marketable securities

305

305

Net loss

(26,784)

(26,784)

Consolidated balance at September 30, 2022

47,096,063

$

47

$

1,574,926

$

(112)

$

(1,229,445)

$

345,416

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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

Shares issued under stock option and employee stock purchase plans

201,406

2,004

2,004

Shares issued in underwritten offering, net

6,845,238

7

269,886

269,893

Stock-based compensation

3,029

3,029

Unrealized loss on marketable securities

(44)

(44)

Net loss

(20,452)

(20,452)

Consolidated balance at September 30, 2021

46,663,340

$

47

$

1,557,576

$

2,548

$

(1,123,459)

$

436,712

(8)  Stock-Based Compensation

A summary of stock option activity for the nine months ended September 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

 

1,584,900

$

22.89

Exercised

 

(353,622)

$

6.71

Canceled

 

(118,974)

$

50.12

Options outstanding at September 30, 2022

 

5,189,971

$

28.97

8.07

Options vested and expected to vest at September 30, 2022

 

5,031,072

$

29.21

8.05

Options exercisable at September 30, 2022

 

1,985,506

$

41.56

6.74

Shares available for grant under the 2021 Plan

 

1,838,291

The weighted average grant-date fair value of stock options granted during the three and nine months ended September 30, 2022 was $25.38 and $17.36, respectively.

The aggregate intrinsic value of stock options vested and expected to vest at September 30, 2022 was $45.6 million. The aggregate intrinsic value of stock options exercisable at September 30, 2022 was $23.6 million. As of September 30, 2022, total compensation cost related to non-vested employee, consultant and non-employee director stock options not yet recognized was approximately $46.7 million, net of estimated forfeitures, which is expected to be recognized as expense over a weighted average period of 2.8 years.

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

Three months ended September 30, 

Nine months ended September 30, 

    

2022

    

2021

    

2022

    

2021

(In thousands)

(In thousands)

Research and development

$

2,342

$

1,504

$

5,754

$

2,927

General and administrative

 

2,154

 

1,525

 

5,349

 

2,886

Total stock-based compensation expense

$

4,496

$

3,029

$

11,103

$

5,813

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

Three months ended September 30, 

Nine months ended September 30, 

    

    

2022

    

2021

    

2022

    

2021

Expected stock price volatility

 

91%

98%

9097%

9798%

Expected option term

 

6.0 Years

6.0 Years

6.0 Years

6.0 Years

Risk-free interest rate

 

2.93.5%

1.11.2%

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 nine months ended September 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

 

(2,006)

 

 

(2,006)

Balance at September 30, 2022

$

(2,708)

$

2,596

$

(112)

No amounts were reclassified out of accumulated other comprehensive income during the nine months ended September 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 $0.0 million and $0.2 million in revenue under these agreements during the three and nine months ended September 30, 2022, respectively, and $0.1 million and $4.0 million during the three and nine months ended September 30, 2021, respectively.

Contract Assets and Liabilities

At September 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 September 30, 2022, the Company had $0.2 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 nine months ended September 30, 2022 was $0.2 million and $0.4 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 September 30, 2022 and December 31, 2021.

The net deferred tax liability of $1.6 million at September 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.

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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:

Nine Months Ended September 30, 

    

2022

    

2021

Stock Options

 

5,189,971

 

4,129,626

Restricted Stock

 

 

 

5,189,971

 

4,129,626

(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 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.

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 $15.0 million upon execution of the Settlement Agreement (the “Initial Payment”).

(ii)The Company shall pay $15.0 million 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 $2.5 million contractual credit as set forth in the Merger Agreement.

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(iii)The Company shall pay $52.5 million 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 paid the Initial Payment in cash during the three months ended September 30, 2022. 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;