Celldex Therapeutics: Breakthrough Drugs At A Bargain Price

| About: Celldex Therapeutics, (CLDX)

Celldex Therapeutics (NASDAQ:CLDX), even after the recent run up in share price, presents one of the few values left in an overbought market. With around 80 million shares outstanding, the present market cap of near $700 million is a bargain that will not last much longer as the rest of Wall Street finally catches on.

I remember the days when I first got in the stock, when 100,000 shares traded daily was the norm and institutional interest was scant. Recently, Celldex just raised $90 million in its recent equity offering, and the stock actually traded up as a result! Over the past year, I've seen daily trading volume move up steadily to over a million shares, in addition to increased coverage from Wall Street analysts with an average price target of $12. All signs are bullish...

The company has management that came over from Medarex, which was acquired by Bristol-Meyers for a song at $2.4 Billion. Yervoy, its lead drug candidate, is projected to be a blockbuster as sales continue to consistently grow.

Celldex's pipeline drugs are wholly owned and available for partnering. Additionally, that also makes it an ideal "bolt-on" acquisition target for big pharma.

The first drug to focus on is Rindopepimut, an immunotherapy treatment that targets EGFRvIII. As it's not found at significant levels in normal tissues but expressed in 30ish% of primary glioblastoma, it's an ideal target that has produced promising results to date. The drug candidate has shown consistent benefit for patients across three phase 2 studies- that's no fluke! It's currently in a global phase 3 trial in patients with newly diagnosed glioblastoma with results due in a couple years. In the near term, "Rindo" is also in a phase 2 combination study with Avastin in patients with glioblastoma that have relapsed and have few other options. Results from this trial should read out toward the end of the year! Also, a small phase 1 trial is being conducted at Stanford in children with pontine gliomas with results reading out toward the end of the year as well. Given the FDA's newly created category of "breakthrough status", I wouldn't be surprised if Rindo receives the designation. It's just speculation, but the drug certainly fits the bill in my opinion.

The second drug candidate is CDX-011, which uses ADC technology from Seattle Genetics on the proprietary target GPNMB. Patients who highly express this target have been shown to have significantly shorter overall survival. The target is expressed in many cancers, including melanoma, breast, glioma, lung, lymphoma, leukemia, and kidney cancer. I guess you can see why I'm so excited! The drug uses ADC technology to bind to target GPNMB and release the toxin MMAE, also used in approved drug Adcetris from Seattle Genetics. A prior phase 1/2 study in melanoma resulted in a 23% overall rate of response. Recent phase 2 study results in advanced, heavily pretreated breast cancer showed an impressive survival benefit in patients who had high expression of GPNMB. The company is currently in talks, which they characterized as "positive" with the FDA to design a trial that would potentially lead to approval. We should hear more in the conference call in March. Later on, the company wants to push ahead in squamous carcinoma of the lung (50%+ express high GPNMB) and lymphoma/leukemia (high expression in 20-30% of patients). Management has stated that the drug has the potential to change the current landscape of breast cancer treatments, and comparisons have been made to Genentech's Herceptin in regards to its blockbuster sales potential. I expect the FDA to help this one along, and it's another potential candidate for "breakthrough status" in my opinion.

CDX-1127 is currently in a phase 1 trial in various types of cancer, with results reading out later this year. The two armed trial consists of solid tumors & leukemia/lymphomas. The first phase will look at its safety profile (apparently so far, so good) & effect on cancer, while the second phase up to 30 patients will continue to receive treatment for further safety testing & evidence of anti-tumor activity until disease progression or forced to stop treatment for other reasons. I view it as a "dark horse", an immunotherapy with much promise but proof will be in the data. It has a dual mode of action, by which it stimulates T cells and also binds to its target CD27 to induce cell death. Management has made comparisons to Yervoy and the promising PD-1 from BMY. More importantly, to date it's been shown to have a solid safety profile in preclinical and animal models. Potentially, it could be used a monotherapy, in addition to chemo, or in combination with other approved drugs such as Yervoy or Zelboraf.

CDX-1135 is a complement inhibitor similar to Alexion's Soliris, currently recruiting patients for a phase 1 trial in Dense Deposit Disease with results coming year end. If positive, the company plans to initiate a trial that could lead to accelerated approval for this ultra-orphan indication. Additionally, whereas Soliris only binds to C5, CDX1135 binds to both C3 and C5. The drug has shown a good safety profile in prior studies in over 500 patients. Results in mice were promising, as the drug showed control of C3 based damage to kidneys (no other treatments have done so).

The company has other promising drug candidates, but I chose to focus on the above 4. As always, only invest dollars that you can afford to lose in biotech. My plan is to sit on my shares and wait for product approvals (2015/2016) or buyout, whichever comes first.

Disclosure: I am long CLDX. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.