Smith On Stocks
Review of Amazing and Volatile Stock Price
From the closing price on December 30, 2011 through October 1,
2013, Celldex's (
) stock price increased 15 fold from $2.60 to $37.83; its shares
have recently backed off to about $26.00. The number of shares
outstanding nearly doubled over this 21 month time frame from 44.2
million to 81.1 million and the market capitalization increased 27
fold from $115 million to $3.1 billion.
This is a vivid example of what is so compelling about investing
in emerging biotechnology companies. While the number of investment
failures may significantly exceed the number of successes, there
are occasional spectacular successes that can more than offset
several failures in a balanced portfolio of emerging biotechnology
stocks. It is also a graphic example of the extreme volatility on
the upside and downside that can occur with emerging biotechnology
In the next table, I have pointed out a few key points that were
important in this dramatic stock price increase. The analysts' day
presentation on January 23, 2012 may have gotten the ball rolling
as the company explained that there would be important clinical
trial data in 2012 on EMERGE, aPhase IIb trial of CDX-011 in
refractory breast cancer andPhase II data on the use of the cancer
vaccine rindopepimut in glioblastoma.
(Click to enlarge)
Topline results on the EMERGE trial were then presented on May
23, 2012 and final data on December 8, 2012. Wedged in between was
three year survival data fromPhase II trials of rindopepimut on
November 30, 2012. From November 15, 2012 until August 12, 2013,
the stock price increased by 172%. There were no periods when the
stock had a dramatic jump, it was pretty much a steady month after
month increase indicating the stock was under heavy accumulation by
big institutions. Then the expansion of patient enrollment in the
ReACT trial of rindopepimut on August 12, 2013 was followed by a
65% increase in stock price in a little over one month.
Investment Overview of Key Products
Celldex has two products in advanced stage clinical trials.
These are the cancer vaccine rindopepimut that is inPhase III
development for a targeted subset of newly diagnosed glioblastoma
patients and is in aPhase II trial in recurrent glioblastoma.
CDX-011 is a unique antibody-toxin conjugate that is now inPhase II
development for a subset of metastatic breast cancer patients.
There has also been excitement about two earlier stage products.
CDX-1127 is an antibody that increases T cell activity that
although somewhat differentiated in mechanism of action can be
compared to the checkpoint inhibitors Yervoy and the anti-PD1
antibodies that are in late stage development. (Note that the
recent strong move in Bristol-Myers (
) has been fueled by excitement about these two drugs.) These
products are paving the way to a new immunotherapeutic approach to
treating many types of cancer. Also CDX-1135 is a complement
inhibitor which can be compared to Alexion's (
) extremely successful drug for ultra-orphan diseases, Soliris.
Celldex hopes that CDX-1135 can be the second coming of Soliris in
This note focuses on these four products, but Celldex also has a
technology platform in humanized antibodies that has given rise to
a large number of other earlier stage candidates. It was a
technology spin-off of Medarex which was acquired by Bristol-Myers
Squibb, a strategic move which vaulted Bristol-Myers into the front
ranks of cancer drug development. It was Medarex's technology that
spawned Yervoy (ipilimumab) and the anti-PD-1 molecule,
As a cancer vaccine, rindopepimut is something of an outlier
from the Celldex technology platform, but it is an important part
of the investment story. It was studied in three separatePhase II
trials that enrolled glioblastoma patients who were positive for
EGFRvIII, a mutation of the EGF receptor. This is a mutation that
occurs in about 30% of glioblastoma patients according to Celldex.
Rindopepimut is a cancer vaccine that generates an immune response
specifically targeted at cancer cells that express this mutation.
Reported results were encouraging in threePhase II trials and were
consistent among the three trials.
The largest of thePhase II trials was ACT-III which enrolled 65
patients. Because there was no control group in any of these
studies, comparisons were made to a subgroup of 29 patients from a
retrospective study who most closely matched the characteristics of
ACT-III patients. Against this control group, rindopepimut showed
21.8 months of median overall survival versus 16.0 months in the
control, a 5.8 month improvement.
Based on this data, in December 2011 Celldex began the ACT
IVPhase III trial in patients with newly diagnosed EGFRvIII
positive glioblastoma. This trial will enroll up to 440 patients
and should report topline results in 2H, 2015. At the same time,
the company began aPhase II trial in EGFRvIII positive patients
with recurrent glioblastoma called ReACT.
As ReACT was originally designed, it was to have 95 patients
divided into two groups. The first group was to be comprised of 70
Avastin naive patients and the second group was to have 25
patients. The 70 patients in group one were randomized one to one.
Patients in one arm received rindopepimut plus Avastin plus GM-CSF.
Patients in the second arm were to receive KLH plus Avastin. The
second group of 25 patients was refractory to Avastin and they were
given rindopepimut plus Avastin plus GM-CSF. Celldex has guided
investors that there will be data from these 25 patients presented
at the Society for Neuro-Oncology Annual Meeting in November of
Celldex announced on August 12, 2013 that it had completed
enrollment in the initial cohort of 25 patients who were refractory
to Avastin. Based on preliminary evidence of stable disease, tumor
shrinkage and investigator-reported response, the company has
decided to add an expansion cohort of approximately 75 patients to
better characterize the potential activity of rindopepimut in this
refractory patient population. This seems to have given a major
boost to the stock.
The data in the EMERGE trial indicated that CDX-011 appeared to
have dramatic effects in extremely difficult to treat triple
negative, GNMPB positive, breast cancer patients as it showed a
10.0 month median overall survival versus 5.5 months for comparator
drugs. While the results were dramatic, there were only 12 patients
on CDX-011 and 4 in the control group who were triple negative,
GNMPB positive. This was a small number of patients, but the
results were still statistically significant and encouraged Celldex
to plan aPhase II trial (soon to start) that is eligible for
accelerated approval. Topline data on this trial will be available
in late 2015 or 2016 and could be the basis for approval in the
subset of triple negative GNMPB positive breast cancer
Celldex may be most excited about CDX-1127. The mode of action
of this drug bears some similarity to the checkpoint inhibitors
Yervoy and the anti-PD1 antibodies, nivolimumab of Bristol-Myers
Squibb and lambrolizumab of Merck (
). Yervoy was introduced by Bristol-Myers in March 2011 and has
current sales of nearly $1 billion. The anti-PD1 inhibitors are
among the most exciting new cancer drugs in development with Street
estimates of over $5 billion of sales in 2020. The mode of action
of checkpoint inhibitors is to block the regulatory mechanism used
to turn down the activity of T cells. The result is increased
T-cell activity against cancer.
This drug is an antibody that stimulates T-cell activity. The
effect of all three drugs- Yervoy, anti-PD1 s and CDX-1127- is to
increase the activity of T-cells against cancer. A meaningful
difference is that the checkpoint inhibitors need an immune
response to be underway to be effective while CDX-1127 actually
initiates the immune response. Its mechanism of action is
differentiated from the checkpoint inhibitors. This may mean that
the products could be used in combination or in sequence. This
product is an extremely exciting concept, but it is still inPhase I
The final drug that has gotten the attention of investors is
It is a soluble complement inhibitor that targets both C3 and
C5. This drug was developed by Avant (acquired by Celldex) which
called this drug TP10. It is a technology that is similar to that
which Alexion used to develop Soliris. Both companies tested their
drugs against cardiac ischemia in the late 1990s and early 2000s,
but both failed. However, Alexion determined that complement was
very important in some ultra-orphan diseases. This has led to
extraordinary success for Alexion in ultra-rare orphan diseases
with its lead drug Solaris; it was approved by the FDA in 2007, had
sales on $1.1 billion in 2012 and Alexion currently has a market
capitalization of $21 billion.
Avant had unfortunately shelved their program, but with the
acquisition of Avant in 2008, Celldex resurrected the program and
has started a program in ultra-orphan disease that bears
similarities to that of Alexion. Whereas Solaris has targeted
diseases caused by excessive activation of C5, Celldex is going
after ultra-rare orphan diseases caused by excessive C3 and dense
deposit disease has been selected as the first indication. This
parallel with Alexion has excited some investors who hope that
Celldex could be the second coming of Alexion.
I wish that I could say that I recommended Celldex at $2.60, but
that is not the case. My particular approach to analysis and
investing requires a considerable amount of due diligence that
takes much time. I do not have the bandwidth to cover all or even a
significant percentage of publicly traded biotechnology companies.
My interest in Celldex really came from the work that I had done on
Northwest Biotherapeutics (
), ImmunoCellular Therapeutics (IMUC) and Agenus (AGEN). Those
three companies are each developing cancer vaccines targeted at
glioblastoma and Celldex's lead product rindopepimut is a cancer
vaccine aimed at the same target.
While my reason for looking at Celldex was based on wanting to
understand how rindopepimut potentially fits into the glioblastoma
landscape, I was drawn into a deeper analysis and came to
understand why investors are so excited about the company. I am not
recommending Celldex at this particular combination of time, stage
of product development and stock price. However, it is a stock that
I plan to be involved with at some future point.
This report is excerpted from a larger and more
comprehensive report that is available to subscribers to my
I am long [[BMY]], [[AGEN]], [[NWBO]], [[IMUC]]. I wrote this
article myself, and it expresses my own opinions. I am not
receiving compensation for it. I have no business relationship with
any company whose stock is mentioned in this article.
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