Celldex Therapuetics: Bottom play with upcoming catalysts Print E-mail
By Patrick Crutcher   
Wednesday, 01 September 2010 07:36

Shares of Celldex Therapuetics Inc.(NASDAQ:CLDX) appears to have hit a stable bottom, having fallen more than 50% from their ASCO 2010 highs. With shares now at substantially cheaper levels, investors may want to consider the investment in CLDX given several upcoming catalysts. They are currently trading just roughly $0.30 cents above all-time lows with a great future ahead of them. At these levels, CLDX represents a unique buying opportunity, as they are poised to be a leading player in the future of immunotherapy.

CLDX has emerged as a bio-pharmaceutical company that is developing a robust pipeline of innovative, applied immunology product candidates focused on the treatment of cancer and infectious disease. CLDX's Precision Targeted Immunotherapy Platform generates product candidates for clinical development that include therapeutic cancer vaccines, monoclonal antibodies, and vaccines which are targeted to specific markers associated with the underlying disease.

Their main clinical development has been in Rindopepimut (formerly PF-04948568 or CDX-110), which is a peptide-based cancer immunotherapy product candidate targeting the tumor specific molecule called EGFRvIII, which is a functional variant (tumor-specific) of the epidermal growth factor receptor (EGFR), a protein that has been well validated as a target for cancer therapy. While originally discovered in glioblastoma multiforme (GBM), the most common and aggressive form of brain cancer, the expression of EGFRvIII has also been observed in various other cancers such as breast, ovarian, metastatic prostate, colorectal, and head & neck cancers.

CDX-110 has been granted both Fast Track and Orphan Drug designations by the U.S. Food and Drug Administration (FDA), as an investigational immunotherapy for the treatment of EGFRvIII expressing Glioblastoma Multiforme(GBM). In April 2008, Celldex entered into an agreement with Pfizer Inc.(PFE), which granted PFE an exclusive worldwide license to CDX-110. Pfizer Vaccines has exclusive rights to the use of EGFRvIII vaccines in other potential indications. Pfizer made an upfront payment of $40M and a $10M equity investment in CLDX. Pfizer will fund all development costs for these programs. CLDX is also eligible to receive milestone payments exceeding $390 million for the successful development and commercialization of CDX-110 and additional EGFRvIII vaccine products, as well as double-digit royalties on any product sales.

So far, CDX-110 has lived up to the technology’s potential. At ASCO 2010, they reported interim results on their ACT III study. 70 percent of ACT III patients were progression-free at 5.5 months after initiating treatment with CDX-110, which corresponds to the 8.5 months seen in ACT II and ACTIVATE when measured from diagnosis and surgery. This is significant, since historic controls from Duke/MDACC studies had median progression free survival for patients with EGFRvIII positive GBM was 6.3 months. In the ACTIVATE phase IIa study, CDX-110 treated GBM patients showed a median survival time of 30 months, more than a 100 percent increase in survival, vs historical control's median of 14.5 months. The study demonstrated a median time-to-progression of 13 months (p=0.0001) vs. historical control's median of 6.4 months.

Investors can find results from their Phase 2 study ACTIVATE and ACT II  and their clinical trial page for ACT III.

There are some upcoming catalysts (before year’s end) investors should be looking forward to:

Phase 3 initiation of CDX-110: The future of CDX-110 is out of CLDX’s hands now, as Pfizer Inc.(PFE) will be in charge of the Phase 3 trials. PFE is currently working with the FDA and several international regulatory agencies to set up a pivotal(Phase 3) trial that will use a commercially feasible EGFRvIII diagnostic kit to identify vIII positive patients. The recent failures in the cancer arena at PFE could be even more incentive for CLDX, as a renewed interest in their technology could fuel further development to replace failures at Pfizer. The initiation of this trial, CLDX should be set to receive an undisclosed milestone payment. Some believe it could be within the range of $40-50 million, adding significant value to CLDX. Additionally, Phase 2 overall survival data from the ACTII trial will be published when the median is reached, which is extremely encouraging given the trial length to-date.

Phase 2b trial initiation in 3Q2010 of CDX-011:
CDX-011 is an antibody-drug conjugate (ADC) in Phase 2 development for the treatment of melanoma and advanced breast cancer. CDX-011 is a fully-human monoclonal antibody-drug conjugate that targets glycoprotein NMB (GPNMB). CLDX has developed a commercial diagnostic assay to diagnose GPNMB positive patients. At ASCO 2010, results for the Phase 1/2 trial in advanced breast cancer and Phase 2 in melanoma were presented. The results from the breast cancer trial are very encouraging and the planned pivotal trial could prove it to be effective treatment for GPNMB postive patients. The objective response rate of 25% in end-stage breast cancer compares favorably with the 12% ORR shown by the approved drug ixabepilone.The estimated market is $400M for advanced breast cancer. Additionally, CLDX’s Chief Medical Officer, Dr. Tom Davis, will be presenting about the “Clinical Development of CDX-011, an ADC Targeting GPNMB” at World ADC Summit, an antibody-drug conjugate meeting.

For brevity, CLDX also has 2 other candidates worth noting, specifically CDX-1307 and CDX-1401. CDX-1307, their lead APC Targeting Technology™ product candidate, is in development for the treatment of cancers that express the beta chain of human chorionic gonadotropin ( hCG-β). hCG-β is an established tumor-associated antigen that is over-expressed in a variety of common cancers including those of the colon, lung, pancreas, esophagus, breast, bladder, cervix, stomach, and prostate, but not expressed in most normal tissues. A Phase 2 trial of CDX-1307 in the treatment of newly diagnosed bladder cancer is underway, full enrollment is expected by 4Q2011.  

CDX-1401, is in Phase 1/2 development for the treatment of cancers known to express NY-ESO-1, including cancers of the bladder, breast, ovary, non-small cell lung cancer, myeloma, sarcoma and melanoma. CLDX intends to update investors on CDX-1401 Phase 1/2 trial for several solid tumors in 4Q2010.

CLDX has roughly $68M in cash and cash equivalents, which should take them well through 2011 and into 2012. Milestone payments relating to initiation of Phase 3 in CDX-110 should certainly help bolster their reserves. They have roughly 32M outstanding shares and strong institutional backing. As of 8/13/2010, there are roughly 4M shares short yet analysts are very bullish on CLDX.

Investors are encouraged to read their 2nd quarter report and see their June 2010 presentation. Going forward, I believe CLDX is currently undervalued and believe they have a bullish outlook for the rest of 2010.

Disclosure: No Positions

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