Celldex Therapeutics' CEO Presents at Deutsche Bank dbAccess BioFEST (Transcript)

Dec. 5.12 | About: Celldex Therapeutics, (CLDX)

Celldex Therapeutics, Inc. (NASDAQ:CLDX)

Deutsche Bank dbAccess BioFEST

December 3, 2012 2:50 pm ET

Executives

Anthony Marucci - President, Chief Executive Officer and Director

Analysts

Robyn Karnauskas - Deutsche Bank

Robyn Karnauskas - Deutsche Bank

Thank you for joining us. My name is Robyn Karnauskas. I am the Deutsche Bank biotechnology analyst. Thank you so much. We have with us Anthony Marucci, the President and CEO of Celldex Therapeutics. This is a company that maybe some people don’t know very well but they do have a data rich year, a catalyst rich here. So it's definitely a company that will have a lot of news over 2013. So thank you very much for joining us.

Anthony Marucci

Thank you, Robyn. Thank you for having us.

Robyn Karnauskas - Deutsche Bank

For those of you on the webcast who are listening, if you have any questions you would like to email me, please e-mail me at robyn.karnauskas@db.com and I am happy to read it anonymously.

So since, maybe, this is a company that some people are less familiar with that you have been around a long time, maybe give a little bit of your background since Medarex.

Anthony Marucci

Sure. So prior to our time here at Celldex, I was the treasurer at Medarex. Tibor Keller who is the cofounder of Celldex along with myself was head of preclinical development. So we spun the company out in late 2005. We took some of the Medarex technology with us to develop vaccines targeting dendritic cells.

We also have some licenses from the Medarex technology to create human monoclonal antibodies and then along the line through several acquisitions, one of them AVANT and another of CuraGen, we brought both soluble and complement inhibitors in-house as well as antibody-drug conjugates. So with that, six years into our existence, we have products now in Phase III, a couple in Phase II, and several others in earlier stages. So the pipeline is rounding up nicely.

Question-and-Answer Session

Robyn Karnauskas - Deutsche Bank

So your lead program in glioblastoma, you have two clinical trials ongoing Act IV and ReACT. Can you talk a little bit about, first of all, I guess, we should describe EGFRVIII as a target and then the timeline for those two trials so far.

Anthony Marucci

Sure. So, EGFRVIII is the most common mutation of EGFR. As we all know, it is a commercial molecule. It's an oncogene. So it's constituently active. The patients that have just used VIII have a worse prognosis of survival and on averages it's anywhere between 13 and 16 months of survival. We have run three Phase II studies in front-line glioblastoma and the results are quite consistent reaching 24 month timeframe.

Importantly, the long-term survival in the front-line glioblastoma has been very consistent as well. We just presented additional data at the Society for Neuro-Oncology in November where we showed the three-year survival rate for our three studies of in the high 20% to low 30% range versus historical controls which are in the 10% range. So we are getting that long-term tail that we believe could be very important in approval of the drug going forward.

Robyn Karnauskas - Deutsche Bank

When you think about little bit of the reactor, the refractory glioblastoma, what are your thoughts on the market opportunities there?

Anthony Marucci

We think the market opportunity in the recurrent could be as high as $300 million worldwide. Certainly with a 31% expression rate of VIII of these previous cancers we think that the market is very achievable as well as because we are the only ones going after VIII, especially in the vaccine setting. It's an area where we can control if we are successful.

Robyn Karnauskas - Deutsche Bank

So the 31%, like what population is that?

Anthony Marucci

So it turns out, in the U.S. to be approximately 4,000 patients that have VIII. Worldwide, it's much larger than that, according to Europe and other parts of the world.

Robyn Karnauskas - Deutsche Bank

Are there more greater percentage of the refractory patient population?

Anthony Marucci

What we are seeing is about consistent.

Robyn Karnauskas - Deutsche Bank

It’s the same.

Anthony Marucci

Yes. It's pretty consistent.

Robyn Karnauskas - Deutsche Bank

Perfect. Can you talk a little bit about the side effects with your therapy and any risk toward seeing any new side effects developed beyond what we have seen?

Anthony Marucci

Yes, the biggest side effect we see is that every patient who gets an injection site reaction, gets a fairly large swell. But it has been a pretty safe drug in the three studies that we have run, nothing is a showstoppers. So the toxicity profile on this program is very, very good.

Robyn Karnauskas - Deutsche Bank

What would be clinically meaningful for ReACT? What would be the great expectation for data?

Anthony Marucci

If we, obviously, can extend survival in this area. Avastin, they get approved on a 9.3 months survival in that point recurrent brain cancer. So the ReACT study has three arms to it. Group one being those patients that are both naïve to both Rindo and Avastin. So that would be the first recurrent arm.

Then the second arm is those patients that have recurred through Avastin and historically their survival has been four months. So if we can improve upon that that certainly would be a win for us.

Robyn Karnauskas - Deutsche Bank

And which patients are they around? Is the duration long enough when in the ongoing trial, do you think they actually see benefit?

Anthony Marucci

We are hoping because the survival is not long at all. They progress rapidly.

Robyn Karnauskas - Deutsche Bank

What is the mechanism of resistance to ReACT in your patients?

Anthony Marucci

The tumor just comes back very angry and they become very resistant to other chemotherapy but this is not a chemotherapy. So we are hoping is that because we are targeting VIII that the effect on VIII will certainly make the tumor less aggressive.

Robyn Karnauskas - Deutsche Bank

Again-we still see about 30% of patients across the board, even within any subset, about 30% are really positive. So it doesn’t make a difference.

Anthony Marucci

We haven’t seen that yet.

Robyn Karnauskas - Deutsche Bank

Okay, interesting. You have cash on hand through 2014.

Anthony Marucci

Into 2014.

Robyn Karnauskas - Deutsche Bank

So how do you think about the readout? Your need to go to the market or financing, because Act IV would be out later, 2014?

Anthony Marucci

Correct. So we have, as I said, several drugs in development. We will be presenting data at San Antonio for our CDX-011 program, which is our antibody drug conjugate. So we presented early data in May. We will present updated data on that program Saturday. So that could be a catalyst. Certainly, the design around next study for 011 and breast could be important. So we are expected to have conversations with the FDA towards the end of this year or the early part of next year.

Then behind that, the ReACT data should readout in the second half of 2013 as well as 1127, which is our first human monoclonal antibody that targets the CD27 pathway as well as potentially data from 1135 which is our soluble complement inhibitor. So a lot of data coming out over the next year that we think anyone of those events can help us.

Robyn Karnauskas - Deutsche Bank

Talk a little bit more about 011 and how do you view the development path for 011 breast cancer?

Anthony Marucci

So we have completed the randomized II study which was an important study from our perspective. We wanted to see really what the expression rates were GPNMB in this patient population because it was a targeted therapy. Obviously we were looking to see if the higher levels of expression lead to better outcome. So what we have found out is that even at very low levels many patients do express GPNMB on the cell surface.

So we are moving to see at the higher levels what the benefit was and the early data that we put out in May showed that at the high expression levels in particular, the response rates were very much higher than the investigators choice which by the way the investigators choice was more approved drugs in breast cancer. So they have already have a proven track record.

So the response rates were very reasonable and the early PFS data was trending very favorably. So when we present the data on Saturday, we are looking for extended PFS data as well as some survival data. So that would be helpful in our determining what the path is going to be, what the next study would be, what the design would be.

Robyn Karnauskas - Deutsche Bank

You had good results on triple negative breast cancer. AVEO announced today and they have been talking about going forward in triple negative breast cancer. How do you think about the competition? How do you think about developing drugs in a competitive landscape?

Anthony Marucci

So from our perspective, again, it's all about targeting. We know that, in our study we saw about 40% of the patients being triple negative. The high expressers being a smaller percentage of that. So we think at the end of the day by going after a targeted population in triple negative, again, it's harder we are the only ones that will be doing that. So we think if the drug is successful, we can capture that market because it would benefit the patients more.

Robyn Karnauskas - Deutsche Bank

Then you would be starting similar timeline for enrollment as certain patient? Are there enough triple negative breast cancer patients?

Anthony Marucci

Yes, we think overall triple negatives make up about 15% of the total breast cancer market. So there are enough patients and then when we look at the expression rates of GPNMB, we think that overall that could be as much as 6% of the total breast cancer market being high expressing GPNMB triple negatives. So we think that there is ample number of patients to go after.

Robyn Karnauskas - Deutsche Bank

Got it. Maybe talk a little bit about 1135 because obviously there is a few people interested in Alexion?

Anthony Marucci

Yes. So this drug is obviously a little bit different than Alexion's drug. Alexion's drug is an antibody going after the C5. It targets C5. 35 targets both C3 and C5 but where we want to go is in the C3 type is being dispersed in dense deposit disease. It is one of those diseases that is predominantly C3. So we have preclinical data with the 1135. It showed that 35 does clear the C3 pathway in preclinical development. So now we just want to go in with a small pilot study. See if we would have similar effects in humans.

Robyn Karnauskas - Deutsche Bank

Then theoretically, what are the safety risks of targeting those upstream pathways?

Anthony Marucci

The drug has been in patients before as was Soliris. Both drugs were going after cardiac ischemia an early days. So we do have a safety profile with this that it is safe. The question would be, can we dose the patients chronically. So that’s what we would be looking forward to see also if chronically we can do this.

Robyn Karnauskas - Deutsche Bank

Just taking a step back, with so many different antibodies in development, but 011 comes in mind and 1135 also because its the understanding of the market, how do you view partnership, how do you view licensing and do you need to do those as a way to finance the company?

Anthony Marucci

No, we don’t need to do them but how we look at partnerships is if a deal that we can put in place is beneficial to us long term we would do it. If the economics and the long-term benefit to the company are there, we would be more than happy to develop the programs ourselves through a time point where there is value creation.

In the early days we licensed Rindo, as you may know to Pfizer. At that point we were a young, struggling company and those dollars meant a lot to our survival financially. Having gotten it back, we have had opportunities to license that but we feel that its best put in our hands and put it forward and create the economics.

It's one of these drugs that specialize docs, we require specialized sales force and we can bring that drug over to the goal line ourselves, and market it ourselves. We think that’s the best path forward.

Some of the other drugs, perhaps 11 and some others may require bigger infrastructure but again when the right value creating event happens, that’s when I think we would think about doing it. So we are open to it but certainly we don’t want to box ourselves in.

Robyn Karnauskas - Deutsche Bank

When you think about agreement, are you looking for a greater upfront payment or long-term royalties?

Anthony Marucci

We are looking for overall long-term benefits. So we are not necessarily looking for a big upfront and then nothing on the backend. I think you if we can do deals that give us a good upfront, give us some milestones going out, a reasonable royalty and on top of that, if the drug does have multiple opportunities to develop additional therapeutic indications whether we get those royalties and milestones, whether we can participate in potential upside, those are all things that are important for us.

Robyn Karnauskas - Deutsche Bank

Just taking a step back to 11, since that is one of the products that you are further along in, what are your thoughts on the FDA and the development or how FDA is going to be view the requirements for developing drugs in cancer? Like recently they have approved better therapeutics based on actually no survival benefit like Abraxane and you will see about other drugs moving through the pipeline. I am just curious, ZIOPHARM and a lot of drugs that maybe prevent PFS. What are your thoughts on PFS survival?

Anthony Marucci

Well, unfortunately I don’t think PFS always links itself to overall survival. But I think if you have a response rate that correlates to a PFS advantage then certainly, you would hope that it leads to an OS advantage. That’s not always the case. I can see where the FDA would have some cause there.

But I think what a drug like 11 that we are developing, I think PFS would be a marker for it but it all depends on the kind of responses you are getting and how thorough they will be, which again leaves you with the PFS and depending on where you are working, whether its third line, fourth line or fifth line, the OS and PFS could be shortly thereafter. So I think at the end of the day response rates are important but I think at the end of the day, survival is also going to be the end goal for a lot of these drugs. If you have a survival benefit then that’s the check mark.

Robyn Karnauskas - Deutsche Bank

For triple negative breast cancer, what is typically the duration of therapy for third line therapy for these patients?

Anthony Marucci

So I think once they get past third line or second line, they deteriorate very rapidly. So historically triple negatives have not had the survival that other population have had. That’s why depending on what we show survival in these patients that’s been an important discussion with the FDA, whether it's going to be fifth line, third line, fourth line, so on and so forth.

Robyn Karnauskas - Deutsche Bank

So expression of GPNMB, does that vary by line or is this just a general percentage of patients because that changes over the course of triple negative?

Anthony Marucci

We haven’t seen that change over the course. So I think once they have been diagnosed and have an expression pattern, it doesn’t vary that greatly. But when have it, they have it. So its not like you will be able tell if there is a expression rate of GPNMB of just how intense is that expression level.

Robyn Karnauskas - Deutsche Bank

So is there a quicker path going forward first line? Is there, given that there are really…

Anthony Marucci

Well, we have to prove ourselves where the unmet need is and whether that’s third line or fourth line, that will be the discussion with the FDA. So we will go for the unmet need.

Robyn Karnauskas - Deutsche Bank

You will go for the unmet need in the rest of the (inaudible) first line.

Anthony Marucci

Correct.

Robyn Karnauskas - Deutsche Bank

When you think about antibodies in general, or your products in general, what do you think about monotherapy or do you think the future is combination and if so, what about the regulatory challenges?

Anthony Marucci

I think for antibodies in general, there are certain indications where monotherapy will be successful, (inaudible) proving melanoma but I think long term development pathway for these types of drugs would be in combination therapy. You have already seen that. There hit just different pathways. They hit different targets. I think long-term, it will be combination therapy that would have most benefit for any therapy in general.

Robyn Karnauskas - Deutsche Bank

Have you thought about licensing deals? I guess not about M&A deals or licensing deals but maybe combinations or partnerships to evaluate various combinations?

Anthony Marucci

Having been involved with the development of IPI and PD-1, we certainly view all these kinds of assets, 27 in combination with IPI, in combination with PD-1. So we view all of these kinds of things in the long-term development pathways.

Robyn Karnauskas - Deutsche Bank

We even talked about 27. Maybe talk a little bit about 27 in Phase I? What are the next steps?

Anthony Marucci

Yes, so it's in a two arm study currently in Phase I. It's in a dose escalation for both solid tumors and lymphomas. Interestingly, 27, IPI, IPI1, taking the brake off the new system whereas 27 is foot on the accelerator. So it activates the immune system. So we are looking in both solid tumors and the lymphomas.

We are near completion of the dose escalation part in solid tumors. So data should be coming out late Q2 on this Phase I part. The lymphomas are a little bit further behind and so we would imagine completing accrual in Q1, Q2 and then with data later on in the second half of the year.

In lymphomas, 27 is very interesting that it has a dual mechanism of action. So not only does it activate the CD27 pathway but a number of B cell lymphoma have CD27 on their cell surface. So you can see that we have both the direct killing as well as the activating of the immune system to fight the disease. So that would be interesting going forward.

Robyn Karnauskas - Deutsche Bank

At what point would you combine it?

Anthony Marucci

As early as Phase II.

Robyn Karnauskas - Deutsche Bank

As early as Phase II.

Anthony Marucci

Yes, I mean we could do arms and trials both in monotherapy as well as combination.

Robyn Karnauskas - Deutsche Bank

Any safety risk that you can give?

Anthony Marucci

All that’s going to be what we have to see. I mean IPI has its toxicities and we haven’t seen anything in the way of 27 because it is downstream of CD40. So we think that if we don’t have those toxicities especially in solid tumors in combination it would be really exciting.

Robyn Karnauskas - Deutsche Bank

Do you think you will have enough dose data to go forward or do you think you will have stricter dose?

Anthony Marucci

I think we will have enough data. We did five cohorts in the start at 0.1 mg/kg all the way up to 10 mg/kg. So may even do an expansion on the Phase I just to the see whatever dose level we feel is appropriate for therapeutic indication but we are getting that now.

Robyn Karnauskas - Deutsche Bank

Okay, any questions? Maybe just a broader question for you. When you think about the company as a whole, do I think of the company more like a Seattle Genetics where you are going to move forward with key pipeline products maybe or you are going to do more licensing deals or would you rather just sell the company? I know you can't comment on that but how do you view this company?

Anthony Marucci

I view this company as a development company that is certainly moving close to commercialization. I don’t necessarily view ourselves as a human antibody company because Rindo is not a therapeutic-only monoclonal antibody, but 27 is and 11, you would consider a Seattle Genetics type technology because we are using their linker and toxin and the antibody is fully human. But I just think of ourselves as a recombinant therapeutic protein company.

I do view us as being a commercial entity. By moving our programs forward we certainly don’t have the bandwidth at this point to do everything but certainly we do see also commercial entity and we don’t at ourselves as licensing everything out and waiting for milestones and royalties.

Robyn Karnauskas - Deutsche Bank

Okay, and when you think about the company as far as indications, some of your indications are working and some are not. Do you have a preference?

Anthony Marucci

No, I don’t have a preference at all. We keep an open mind to what we are doing and again, we are going after important targets. We are going after therapeutic indications where our drugs benefit the patients the most and if they happen to be ultra-orphan or orphan, so be it. If they happen to be large populations, so be it. But we let the science dictate where we are going and where these drugs work best, we will operate.

Robyn Karnauskas - Deutsche Bank

Okay, and then lastly what royalties do you owe Seattle Genetics on your linker technology?

Anthony Marucci

It was an early deal done between CureGen and Seattle Genetics. So it’s some milestones single-digit royalties.

Robyn Karnauskas - Deutsche Bank

And how does that affect partnering discussions?

Anthony Marucci

It doesn’t. We own the antibody. We own the targets. So I don’t think it affects any partnering discussions.

Robyn Karnauskas - Deutsche Bank

And IP for some of the other products?

Anthony Marucci

We have the IP around those. We have the IP around VIII. We have the IP around 27. We have the IP around GPNMB and 11 and 35. So we have those IPs.

Robyn Karnauskas - Deutsche Bank

And how do you view the long term? How do you view the pricing of the antibodies in general or I guess not all your products are antibodies but non-small molecule therapeutic?

Anthony Marucci

Well, we have seen some interesting pricing on some of the antibodies that have come out recently.

Robyn Karnauskas - Deutsche Bank

Did it inspire you?

Anthony Marucci

It inspires me but certainly the data is going to dictate how you can price, what benefit you are having on patients and there are all other sorts of issues that you are going to have to deal with that. I think we are surprised at some of the prices but it inspires for sure.

Robyn Karnauskas - Deutsche Bank

Do you think though that’s sustainable and is there an advantage to strategically going after some of the orphan indications that you are going after?

Anthony Marucci

I think it's helpful because we are not going after the larger population. We are going after the targeted population that you think your drug would work and I think that’s where the payers will pay. You are you having a real impact in these populations that should work and I think the answer is yes and I think that they will be paying.

Robyn Karnauskas - Deutsche Bank

Okay. Any other questions?

Anthony Marucci

Great, thank you.

Robyn Karnauskas - Deutsche Bank

Thank you.

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