Celldex Stock: Pipeline Of Drug Candidates Is Worth A Look (NASDAQ:CLDX)

Celldex Therapeutics (CLDX) is a clinical-stage drug discovery company. After the failure of its leading drug candidate in 2018 you could have bought the company stock for almost nothing from then until well into 2020. More lately, as newer drugs have moved from the preclinical stage to human testing, the stock rose to over $50 per share. Lately it has trended down, in my view better lining up with the reality of the potential and risk in the pipeline. It closed on January 27, 2022, at $27.64, giving it a market capitalization approaching $1.4 billion. Some of the decline in the past few months has paralleled the general decline of stock prices in its class of small biotechnology companies. I believe it has become reasonably priced, though that in itself does not ensure that the price will buck up short run. Longer run, the price will depend on data reported from trials, regulatory applications, and whether the current drug candidates ever generate real-world revenue.

CDX-0159

In its most recent news Celldex announced dosing the first patient in its Phase 1 CDX-1059 Prurigo Nodularis trial on December 8, 2021. Prurigo Nodularis causes serious, long-term itching of the skin. Patients typically present with nodules that have been scratched and which can become infected. While itching may seem like a minor problem, or a low priority, this form of it is quite a detriment to those who suffer it. Current therapy tends to steroids, with varying effect.

CDX-0159 is an antibody that binds to and inhibits KIT, a tyrosine kinase that mediates inflammatory responses. More specifically, KIT interferes with the activity of mast cells, which are a key player in Prurigo Nodularis and chronic urticaria.

Clinical trials of CDX-0159 for chronic urticaria, or hives, are more advanced. Interim results from the Phase 1b, open label chronic inducible urticaria trial were presented on September 29, 2021. A single 3 mg/kg dose of CDX-0159 resulted in a rapid and sustained improvement in urticaria control. 80% of patients achieved well-controlled status by week 4, and that increased to 100% by week 8. No safety concerns were reported.

Relief for prurigo and urticaria patients would doubtless be welcome. It is too early for me to speculate on just how much insurers would be willing to pay for such a therapy. While preliminary results look brilliant, often Phase 2 and later trials do not reproduce results from earlier trials. In particular, trials with larger numbers of patients may begin to show adverse events that were not in smaller trials.

I am not yet willing to put a numerical value on CDX-0159, but I am impressed by the science behind controlling mast cells. That could be beneficial in quite a few disease conditions beyond the two already mentioned. By way of disclosure, I should note that I had owned stock in Celldex when its leading candidate failed in 2018. In theory that trial should be statistically independent of these trials, so I may be being more cautious than is warranted. Celldex has said it will use a subcutaneous formulation of CDX-0159 when it begins Phase 2 trials for chronic urticaria in this first half of 2022. Usually for non-life-threatening diseases a Phase 3 trial will be required for regulatory approval.

CDX-527

In June 2021 Celldex started a Phase 1 trial of CDX-527 in patients in several varieties of solid tumors. Initial data reported a good safety profile with promising pharmacodynamic activity [but no reports yet of objective responses]. Dose expansion cohorts have also been initiated. Additional data is expected this year. CDX-527 is a bispecific antibody that couples to both PD-L1 and CD27, both well-known cancer immunotherapy targets.

CDX-1140

CDX-1140 has completed a monotherapy and combination (with CDX-301) portion of a Phase 1 trial for solid tumors and lymphomas. Expansion cohorts are recruiting patients. In one expansion cohort CDX-1140 is being combined with Keytruda for squamous cell head and neck cancers and non-small cell lung cancers. That cohort has already observed a confirmed partial response. Another cohort tested it in combination with standard chemotherapy in first line metastatic pancreatic cancer, but emerging data were characterized as not optimal. Expect more data this year. CDX-1140 targets CD40, which is expressed on many cancer cells.

Cash runway

At the end of the third quarter of 2021 Celldex reported cash and equivalents of $423 million, largely due to a $270 million stock offering in July. Expenses ran over $19 million in the quarter. I would expect expenses to ramp considerably as larger Phase 2 and Phase 3 trials are conducted. Still, Celldex expects current cash should last through 2025, and that looks reasonable to me. The hope would be that good data in the meantime would make it easy to raise more cash, if necessary.

Conclusion

Cancer therapies can generate hundreds of millions or even over a billion dollars in annual revenue, but most do not. In cancer it is a long way from good Phase 1 results to approvable Phase 3 results. There is a lot of competition, so the value of a new therapy will depend on that. That said, the two cancer therapies, 527 and 1140, look promising so far. CDX-0159 looks solid, but again that is based on early results, and therapy for hives is not priced like cancer therapies. Given all that, a market cap between $1 billion and $2 billion can be argued for. The current market cap of $1.4 billion seems about right, for those who are optimistic and can stand the risk. For me it is certainly worth watching the data roll in. If I owned the stock, I would likely hold it at the current price.