Stock Dives as Celldex Cuts 20% of Staff After Phase II Breast Cancer Failure
On April 16, Celldex Therapeutics reported that its Phase IIb trial of glembatumumab vedotin (glemba) failed in a trial of metastatic triple-negative breast cancer. Now the company has filed with the U.S. Securities and Exchange Commission (SEC) that it is cutting about 20 percent of staff.
The company’s Phase IIb METRIC trial of glembatamumab vedotin compared to Genentech’s Xeloda (capacitabine) in patients with metastatic triple-negative breast cancers that overexpress gpNMB did not meet its primary endpoint of progression-free survival (PFS). It also reported no significant advantage in its secondary endpoints, which included overall response rate, duration of response and overall survival.
At the time, Anthony Marucci, the company’s co-founder, president and chief executive officer, announced, “Based on these results, we have also made the decision to discontinue the glembatumumab vedotin program across all indications and are currently prioritizing our pipeline, which includes five candidates in ongoing clinical studies. In line with this, we are evaluating our operational and workforce needs to extend our financial resources and direct them to continued pipeline advancement. Once we solidify these plans, we intend to update investors.”
Those plans include cutting its 2018 budgeted workforce by 59 positions, 41 by layoffs and another 18 budgeted or open positions won’t be filled. That will leave the company with 148 staffers. Celldex is offering severance packages to the affected employees that include cash payments, reimbursement of medical insurance premiums, and outplacement services.
Celldex believes the workforce reduction with cost about $1.3 billion in the second quarter related to several payments and other costs.
This is not the first big hit for the company. In 2015, its cancer vaccine Rintega tanked in a Phase III clinical trial in glioblastoma. It then shifted to the current drug, glemba.
The company’s remaining pipeline is varlilumab, a CD27 agonist that is in a Phase II trial with Bristol-Myers Squibb’s Opdivo. Data is expected sometime this year. It also has CDX-3379, an ErbB3 inhibitor being studied with Eli Lilly’s Erbitux in a Phase II trial. It also has a CD40 agonist and a dendritic cell mobilizer, both in Phase I studies.
The company, as of the end of 2017, had about $140 million in cash. Now that it doesn’t have to concern itself with potential commercialization of glemba, the money should carry it a little bit further, perhaps beyond 2019.
Todd Campbell, with The Motley Fool, commented in a conversation with the Fool’s Kristine Harjes, said, “Varli is being developed in Phase II trials with Bristol-Myers’ Opdivo, so, as part of a combination therapy. And we should start to get data reading out on that this year. I think at first, we’re going to get ovarian and colorectal and kidney cancer […] to read out data, and I think that’s going to happen probably sometime by the fall. So, if the Varli data is good, maybe, just maybe, that reignites the share price a little bit. I think one of the things investors might be scratching their heads and wondering about, so I think maybe we should talk about it, is that there’s $140 million in cash on the books and no debt, but the market cap is only $111 million.”
With the stock plummeting, currently at $0.69 per share, the market cap is actually at $99.74 million. The 52-week high was $3.42 per share with a low of $0.65 per share.
Despite the track record of failures, Campbell argues that investors aren’t valuing the company’s pipeline. But most investors were looking at promising late-stage compounds, and if Varli doesn’t pan out, the company’s pipeline is all early stage, which is not what most investors were looking for. But the stock was pretty risky even before and as Harjes notes, “Hopefully, any of our listeners out there that built a position have heard us talk about this company recognized how risky it was, and you didn’t put any money into it that you couldn’t afford to lose.”