Earnings Transcript for CLDX - Q2 Fiscal Year 2020

Operator: Welcome to the Celldex Therapeutics Midyear 2020 Conference Call. My name is James, and I'll be your operator for today's call. All participants are in a listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instructions] And then I'd like to turn the call over to Sarah Cavanaugh. Sarah, you may begin.

Sarah Cavanaugh: Thank you very much. Good afternoon and thank you all for joining us. With me on the call today are Anthony Marucci, Co-founder, President and CEO of Celldex; Dr. Tibor Keler, Co-founder, Executive Vice President and Chief Scientific Officer; Dr. Diane Young, Senior Vice President and Chief Medical Officer; Sam Martin, Senior Vice President and Chief Financial Officer; Dr. Margo Heath-Chiozzi, Senior Vice President of Regulatory; and Dr. Diego Alvarado, Senior Director of Research. Before we begin our discussion, I would like to mention that today's speakers will be making forward-looking statements. Such statements reflect on current views with respect to future events and are based on assumptions and subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. Certain of the factors that might cause Celldex's actual results to differ materially from those in the forward-looking statements, include those set forth under the headings Risk Factors and Management's Discussion and Analysis of Financial Condition and Results of Operation in Celldex's annual report on Form 10-K, quarterly reports on Form 10-Q and its current reports on Form 8-K as well as those described in Celldex's other filings with the SEC and its press releases. All forward-looking statements are expressly qualified in their entirety by this cautionary notice. You should carefully review all of these factors and be aware that there may be other factors that could cause these differences. These forward-looking statements are based on information, plans and estimates as of this call, and Celldex does not promise to update any forward-looking statements to reflect changes in underlying assumptions or factors, new information, future events or other changes. Please be advised that the question-and-answer period will be held at the close of the call. I would also like to mention that because of the current COVID-19 situation and also two of our offices are located in the areas of the hurricane. We do have folks dialing in from a number of different remote locations. And I ask that you bear with us if phone lines are a little scratchy because we're dealing with multiple issues on that end. So with that, I'd like to turn the call over to Anthony, Anthony?

Anthony Marucci: Thank you, Sarah. Good afternoon, everyone, and thank you for joining us. We hope you're all safe and healthy and appreciate you taking the time to connect with us today. We're looking forward to updating all of you on our progress and providing more detail on our plans for the future. I want to take a few minutes to review the recent events, and then I will ask Diane to update you on our clinical programs and Sam to review the financials. We will close the call with your questions, as you may likely know in early June of this year, Dr. Marcus Maurer, a leading medical expert in urticaria, whose research focuses on mast cells presented data from our KIT inhibitor, CDX-0159 in a late breaking session at the EAACI Annual Congress. These data provided an important proof-of-concept for the program and suggested significant potential to dramatically impact mast cell driven disorders. These data also helps support $150 million public offering driven by high quality healthcare investors. Importantly, these proceeds will fund the company through 2023 and a number of very important milestones. We are on track to initiate two studies of CDX-0159 in chronic urticaria this fall and have completed considerable work that Diane will discuss to support expanded development in 2021 and beyond. As we have always done, we believe it is important to focus our resources both people and financial on the programs that hold the most promise for the patients and shareholders. Based on the current data we have in-house, we have prioritized the development of our KIT inhibitor, CDX-0159, our CD40 agonist, CDX-1140, and the first candidate from our bi-specific program, CDX-527, which combines our proprietary CD27 agonist with PD-1 blockade. In turn, we have made a decision now to advance our ErbB3 inhibitor, CDX-3379, which has been in an exploratory study with cetuximab to assess the utility of biomarkers for patient selection, a cetuximab-resistant head and neck cancer. Despite prophylactic treatment, which Diane will discuss in more detail. Patients continue to have difficulty tolerating the therapy, and we believe our resources are best utilized to expand the development of CDX-0159 and our other pipeline programs. For our CDX-0159 program, we intend to start two urticaria studies, one in inducible urticaria and the other in spontaneous urticaria this fall and to initiate both the Phase 1 study of CDX-527 in refractory, advanced cancers, as well as the combination cohort of CDX-1140 with chemotherapy in treatment naïve metastatic pancreatic cancer later this year. These programs will support multiple data readouts later this year and next year, including results from the CDX-0159 in inducible urticaria in the first quarter of 2021 and the results from the study in spontaneous urticaria in the second half of next year. We are also in the midst of a thorough assessment of additional opportunities for CDX-0159 and as we narrow this list, we plan to initiate a third study in another mast cell driven disease next summer. With this introduction, I would like to ask Diane to cover these activities in more detail. Diane?

Diane Young: Thank you, Anthony. Let me start with CDX-0159. CDX-0159 is a humanized monoclonal antibody developed by Celldex that binds to the KIT receptor with high specificity and potently inhibits its activity. The KIT receptor tyrosine kinase is expressed in mast cells, which mediate inflammatory responses such as hypersensitivity and allergic reactions. Ultimately, KIT signaling controls the differentiation, tissue recruitment, survival and activity of mast cells. And we believe targeting KIT represents a unique strategy in diseases involving mast cells. At the EAACI meeting, results from our recently completed Phase 1a study in healthy volunteers will present it. CDX-0159 demonstrated a favorable safety profile as well as profound and durable reductions of plasma tryptase, a protease made almost exclusively by mast cell. The Phase 1a study was a randomized, double-blind, placebo-controlled, single ascending dose escalation study of CDX-0159 in 32 healthy subjects. Subjects received a single intravenous infusion of CDX-0159 at 0.3, 1, 3, or 9 milligrams per kilogram or placebo. As Dr. Maurer presented a single dose of CDX-0159 suppress plasma tryptase levels in a dose-dependent manner indicative of systemic mast cell suppression or ablation. Tryptase reduction was evident at 24 hours after infusion and minimal levels were typically observed within one week. Tryptase suppression below the level of detection was observed after a single one milligram per kilogram dose and was maintained for more than two months at single doses of both three and nine milligrams per kilogram. A subset of subjects from the three milligram per kilogram and nine milligram per kilogram cohorts agreed to continue to follow up for tryptase analysis, which was ongoing at the time of the EAACI meeting. This follow up and analysis was completed in July and tryptase levels remain below the level of detection for 14 weeks in the three milligram per kilogram cohort for 50% of the returning subjects and 18 weeks in the nine milligram per kilogram cohorts for all returning subjects. In the study, dose-dependent increases in plasma stem cell factor also mirror decreases in tryptase, consistent with allosteric blockade of stem cell factor to KIT and further demonstrating complete target engagement in vivo. Importantly, CDX-0159 also demonstrated a favorable safety profile. The most common adverse events were mild infusion-related reactions, which spontaneously resolved without intervention. Asymptomatic decreases in neutrophil and white blood cell counts were also observed in laboratory testing, but were returning toward normal at the end of the study. We also observed long serum half-life and lack of antidrug antibodies, which provides support to explore less frequent dosing in future studies. Based on these results, we plan to initiate two Phase 1b studies of CDX-0159 this fall. One in chronic inducible urticaria, and one in chronic spontaneous urticaria, both of which are mast cell driven diseases specifically selected to provide clinical proof-of-concept for CDX-0159. I'll start with the study in the inducible urticaria as this indication will read out first, with data expected in the first quarter of next year. There were multiple forms of inducible urticaria and 0.5% of the total population suffer from them. We have selected two of the most common forms, symptomatic dermographism and cold-induced urticaria. Symptomatic dermographism is characterized by the development of a wheal and flare reaction in response to a stroking, scratching or rubbing of the skin usually occurring within minutes of the inciting stimulus. People afflicted with cold-induced urticaria experience symptoms like itching, burning wheals and angioedema, where their skin comes in contact with temperatures below skin temperature. For both of these diseases, mast cell activation, leading to release of soluble mediators is thought to be the driving mechanism leading to the wheals and other symptoms. As you can tell, based on their names, what's unique about these indications is that they are induced by certain triggers and importantly, investigators can induce these same reactions in the clinic. Dr. Maurer will lead this study in his specialty clinic for urticaria in Berlin. We expect to enroll 20 patients, 10 with symptomatic dermographism and 10 with cold-induced urticaria or resistant to antihistamine treatment. Their symptoms will be induced in the clinic and a single dose of CDX-0159 at three milligram per kilogram will be administered. Patients will be followed for 12 weeks to evaluate safety and tolerability, clinical activity and pharmacokinetics and pharmacodynamics. Importantly, we intend to perform serial skin biopsies on patients so we can explore the impact of CDX-0159 on mast cells in the skin. This will help address whether CDX-0159 is inactivating the mast cells or leading to their death and elimination from skin. The second study will be in chronic spontaneous urticaria or CSU and indication where patients experience urticaria symptoms without identification of a known cause. This is a disease driven by mast cell activation. The release of mediators results in episodes of itchy hives, swelling, and inflammation of the skin that can go on for years or even decades. It is one of the most frequent dermatologic diseases with a prevalence of 0.5% to 1% of the total population and up to 3.2 million cases annually in the U.S. This study will be a randomized, double-blind, placebo-controlled, Phase 1b dose escalation study that includes patients who are still symptomatic despite antihistamine therapy. We expect to enroll 40 patients across four cohorts who will receive CDX-0159 or placebo. The dose and dosing schedule will vary by cohorts. Patients dosed at 0.5 and 1.5 milligram per kilogram will receive three doses at four week intervals and patients dosed at 3 and 4.5 milligrams per kilogram will receive two doses at an eight week interval. The 12-week treatment period will be followed by another 12 weeks of follow-up, so 24 weeks total. This design will provide necessary data on the safety of multiple doses and also allow us to evaluate the potential clinical activity of CDX-0159 in this patient population. Again, we will be evaluating safety and tolerability, symptomatic relief as measured through disease activity scores and pharmacokinetics and pharmacodynamics. The study will be conducted at four to five centers in the USA beginning in the fall of 2020. We anticipate results from this study in the second half of next year. For both inducible and spontaneous urticaria, it is clear that these patients can truly suffer. The two top complaints are constant intense itch and poor self image. Their symptoms prevent regular sleep, interfere with daily life and work activities, which subsequently promotes social withdrawal, isolation and depression. There is truly an unmet need for efficacious therapies that address the root cause of their disease mast cell. Beyond urticaria, there are many diseases in which mast cells are the principle driver or a thought to significantly contribute to the pathology. We are digging deeply into the potential opportunity for CDX-0159 in these indications to select additional areas for expansion. Our evaluation includes review of scientific literature, medical guidelines, regulatory documents and market analysis and discussions with medical experts. We are prioritizing indications in which there is strong evidence that mast cells play an important role in pathophysiology, where there are unmet medical needs and where we can envision a clinical development path with clear early decision point. We have narrowed what began as a list of over 50 indications to four major areas of focus, mast cell activation syndromes, including mastocytosis, asthma, including severe forms of asthma, allergic asthma and exercise induced asthma, allergic conditions, including food allergies and allergy mediated dermatologic conditions and mast cell driven gastrointestinal disorders. Our next step is to lay out the clinical development and regulatory path, as well as commercial opportunities to help them the final indication selection. We will also be monitoring the field closely to ensure our plans continually reflect all available bispecific clinical regulatory and competitive data. Certainly as data begin to emerge from the urticaria studies, this will also inform our final decision. We will continue to update you as we complete our diligence, but are confident, we will be in a position to initiate a Phase 1b2 study in a third indication by summer 2021. Finally, in closing for CDX-0159, I want to point out that we have initiated formulation work for subcutaneous delivery, which we believe will be important to the candidate's future success. We believe we are well positioned, given CDX-0159 enhanced PK profile and the durable tryptase suppression we observed even at low doses. The preliminary feasibility studies at 150 milligrams per mil look promising. With that overview on CDX-0159, let me turn now to CDX-1140 and CDX-527. CDX-1140 is a cell death developed human agonist anti-CD40 monoclonal antibody that was specifically designed to balance good systemic exposure and safety with potent biological activity, a profile which differentiates CDX-1140 from other CD40 activating antibodies for systemic therapy. CD40 expressed on dendritic cells and other antigen presenting cells is an important target for immunotherapy, as it plays a critical role in the activation of innate and adaptive immune responses. CDX-1140 completed dose escalation as monotherapy, and in combination with CDX-301, a dendritic cell growth factor in an ongoing Phase 1 study in patients with recurrent, locally advanced or metastatic solid tumors and B cell lymphomas. A critical goal of this study was to achieve dosing levels that provide good systemic exposure without dose limiting toxicity. As reported at the SITC meeting last November, CDX-1140 reached this goal with a maximum tolerated dose and recommended Phase 2 dose of 1.5 milligram per kilogram. One of the highest systemic dose levels in the CD40 agonist class. We believe that relatively low doses of other potent CD40 agonist antibodies tested in the clinic to date may limit their potential in modifying the tumor microenvironment and are hopeful that CDX-1140 at this dose level will better penetrate tumor and be more impactful. Importantly, from a safety perspective, at 1.5 milligram per kilogram, CDX-1140 is associated with manageable immune related adverse events that are consistent with those observed with approved effective therapies like checkpoint inhibitors, while CDX-1140 has shown promising signs of single-agent activity, it's clear that combination approaches the target multiple pathways in the immune system, likely offer patients the best opportunities for improvement. To that end, we have added multiple combination expansion cohorts, including with Keytruda in patients who have progressed on checkpoint therapy and with CDX-301 in patients with head and neck squamous cell carcinoma. We also expect to initiate a combination with standard of care chemotherapy in first line metastatic pancreatic cancer later this year, an indication we are very interested in because both preclinical and clinical data suggests that the CD40 pathway may have important anti-tumor potential in this disease. We also expect to report our interim data from CDX-1140 this fall, that would focus on data from the monotherapy expansion cohorts in squamous cell head and neck cancer and renal cell carcinoma, data from the combination with CDX-301 and preliminary data from the combination with Keytruda. CDX-527, our first bispecific antibody program is also expected to enter the clinic later this year, CDX-527 combines CD27 mediated T cell activation with PD-1 blockade. We have developed CDX-527 from our proprietary highly active PD-L1 and CD27 human antibodies and demonstrated the bispecific to be more potent than the combination of the individual antibodies in preclinical models. Importantly, our prior clinical experience combining the CD27 agonist antibody, Varlilumab with PD-1 blockade supports the integration of these two antibodies from a dosing safety and activity perspective. We would expect initial data from this program in the first half of 2021. Before I turn the call over to Sam to discuss the financials, I want to provide a little more clinical context surrounding the decision on CDX-3379 development. At ASCO 2019, we presented a retrospective analysis that suggested that the antitumor activity with CDX-3379 might be associated with somatic mutations in particular genes associated with tumor suppression. We decided to examine this hypothesis in an exploratory manner in the ongoing trial to see if there was a path forward that would allow us to utilize biomarkers to identify a targeted population that would respond to CDX-3379. In parallel, we knew that we needed to improve the tolerability of the combination of CDX-3379 and cetuximab specifically diarrhea management. Unfortunately, despite diarrhea prophylaxis measures, this continued to be a side effect, which in addition to severe skin rash caused dose reductions and delays in a majority of patients, making it difficult to achieve clinical benefit. When considered together, and after talking to our study investigators, we believe the risk benefit profile does not support further development in patients, and that the resources allocated to this program would be best focused on expanded development of CDX-0159, CDX-1140 and CDX-527. We will also continue to advance our preclinical pipeline, which is exploring several interesting targets, including AXL, ILT4 for CD24 and Siglec-15. Updates on our preclinical programs will be presented at scientific meetings later this year and next. In summary, we are very pleased with the progress we've made so far this year. We believe CDX-0159 has the potential to be a field changing product across multiple mast cell driven indications and the CDX-1140 is establishing itself as a clearly differentiated CD40 agonist. We're excited to bring CDX-527 into the clinic and all combined look forward to a very busy rest of 2020. We continue to be mindful of COVID-19 and are partnering closely with our clinical trial sites to mitigate any COVID-related impact on our studies. So far, we have been very successful in these efforts, but like everyone else, we are looking cautiously at this fall and winter and contingency planning to help mitigate any risks to our timeline. With that, I thank you for your time and I will hand the call over to Sam to review the financials. Sam?

Sam Martin: Thank you, Diane. For the second quarter of 2020, net loss was $11 million or $0.50 per share, compared to a net loss of $11.8 million or $0.84 per share for the second quarter of 2019. Net loss for the six months ended June 30, 2020 was $23.7 million or $1.20 per share, compared to $29 million or $2.21 per share for the comparable period in 2019. Research and development expenses were $21.4 million for the six months ended June 30, 2020, compared to $21.2 million for the comparable period in 2019. General and administrative expenses were $7.2 million for the six months ended June 30, 2020, compared to $8.8 million for the comparable period in 2019. As of June 30, 2020, we reported cash, cash equivalents and marketable securities of $206.9 million, compared to $53.7 million as of March 31st, 2020. The increase was primarily driven by net proceeds of $141.4 million from our June, 2020 underwritten public offering and net proceeds of $23.7 million from sales of common stock under our controlled equity offering agreement with Cantor completed in the second quarter prior to the public offering in June. These increases were offset by second quarter cash used in operating activities of $11.2 million. We expect the cash, cash equivalents and marketable securities at June 30, 2020 are sufficient to meet estimated working capital requirements and fund planned operations through 2023. At June 30, 2020, we had 39.1 million shares outstanding. I will now turn the call over to Anthony to close. Anthony Marucci Thank you, Sam, and thank you all for joining us today. To recap as always, we remain focused on the successful development of our clinical programs. We look forward to initiating the two Phase 1b studies of CDX-0159 this fall and the Phase 1 study of CDX-527 and the CDX-1140 expansion cohort later this year, followed by the third study of CDX-0159 in an additional mast cell indication next summer. For data read outs, we planned to present a data update for the CDX-1140 program later this year. In 2021, we anticipate data from the CDX-0159 study and chronic inducible urticaria in the first quarter, data from CDX-527 in the first half and data from the CDX-0159 study and the chronic spontaneous urticaria study in the second half of the year. I would also anticipate data from the CDX-1140 combination with Keytruda and other expansion cohorts in 2021. As Sam said, we are well capitalized to complete the studies necessary to reach these milestones. And for that, I'd like to thank the investors that participated in our recent financing. We look forward to keeping you all up to date as we continue our progress on these programs. With that review, we'll open the floor to questions. Operator?

Operator: Thank you. [Operator Instructions] And our first question comes from Kristen Kluska of Cantor Fitzgerald.

Kristen Kluska: Hi everyone. Thanks for taking my questions and congrats on the great progress that you've made over this past quarter. So the first question is for the CDX-0159 program, given that some of these patients are likely to have comorbidities. I'm wondering if you might think these are worth evaluating in the background in either or both the Phase 1b and Phase 2 studies to provide any early conclusive effect, given these indications could also be mast cell driven?

Anthony Marucci: Sure Kristen, thanks, this is Anthony. I'll have Diane answer that question.

Diane Young: Yes. So that's an excellent, very good point, Kristen, that there is a lot of overlap and other conditions that overlap that may also be impacted. So that is our intention to – even in those early studies to try to capture, what are their comorbidities that patients have and to try to assess a response in some way.

Kristen Kluska: Great, thank you. And then as it relates to choosing the third mast cell driven indication and initiating studies in the summer of next year, I wanted to ask if you think the results from the CIndU trial in the first quarter of next year will in any way help determine which one you ultimately choose as the third indication.

Diane Young: Yes. So, I think we'll definitely take the data from the CIndU study, that's going to give us information about how we're impacting mast cells and some ideas of dose and duration of clinical effects. So, I think that will definitely help to inform what we do next year.

Kristen Kluska: Okay. Thanks. And then I understand that the patients that you'll be evaluating in your Phase 1b trials are refractory to antihistamines. Do you expect that the majority of these patients who are refractory have already been prescribed up to the 4 times dosage, which is part of the guidelines associated with the disease? And then do you also expect or anticipate that perhaps some of the patients in the CSU trial could have failed Xolair use previously?

Anthony Marucci: Yes. Margo, Do you want to take that one?

Margo Heath-Chiozzi: Sure. I’d be glad to take that. So thanks for the questions Kristen. That 4 times dosage is a common usage, but we're not going to require that they have gone that high, because individual clinicians may choose to manage individual patients differently. So we do need them to have failed at least the approved dose, and then they can go higher if the clinicians would like to. In terms of the Xolair prior use for the CSU study, we are interested in what prior Xolair use might look like in terms of pattern of response to 0159. So we're going to allow it, but we're not going to mandate it. And so if someone has had Xolair previously, we're going to need them to be off of it for at least three months with washed out, but we're not going to restrict patients who have previously seen Xolair coming into the study.

Kristen Kluska: Okay. Got it. Thank you. And then for CDX-1140, are you able to provide any more color as it relates to patient numbers or specific endpoints from some of the cohorts where you could have some data available at the second half of this year?

Margo Heath-Chiozzi: So we’ve – yes, we're still – the study is still ongoing and we're collecting data in the cohorts. I can't actually give you an idea of the precise numbers that we were going to have. We're going to have the complete data from the dose escalation cohort with 301. And then we expect to have data from several of our expansion cohorts, as many patients as we've put on, it'll be interim data. And then we expect to have an early look at the combination with pembrolizumab in that study.

Kristen Kluska: Okay. Thank you. And then my last question, if I may for Sam. How should we think about spending trends with the addition of these new trials, but then also factoring the discontinuation of CDX-3379?

Sam Martin: Sure. Thank you. I think that we've factored that in as far as our guidance of through 2023. And as we build out those plans over the next 12 months, we can consider if that can be extended or not, and go from there.

Kristen Kluska: Okay, great. Thanks so much again, everyone.

Anthony Marucci: Thank you, Kristen.

Operator: And as there are no more questions, I'll turn the call back to Anthony Marucci.

Anthony Marucci: Thank you, operator. And thank you to everyone for joining us today. We appreciate your time and support, and we look forward to talking to you later on this year. As always, we welcome your questions at any time. So have a great evening and a safe summer. Thank you.

Operator: Thank you. Ladies and gentlemen, this concludes today's conference. Thank you for participating. You may now disconnect.