Celldex: Near-Term Catalysts Could Send This Biotech Much Higher

Sep.11.13 | About: Celldex Therapeutics, (CLDX)

In June 2011 at a tiny market capitalization of $150 million, I suggested that Celldex Therapeutics (NASDAQ:CLDX) was set for a "transformational year." In February 2013 at a market cap of $700 million, I called the company "a bargain that would not last much longer." Now, at a market cap nearing $2 billion, I suggest that the best is yet to come.

It appears that Wall Street is finally catching on. On July 24th Joe Pantginis at Roth Capital Partners issued at $34 price target for the company. Then, on September 4th Gregory Wade at Wedbush Securities issued a $35 price target. Expanded analyst coverage is an important potential catalyst that could provide continued upside.

The first near-term catalyst is with its lead drug candidate, rindopepimut, in recurrent glioblastoma. The company expects to share results from the first 25 patients in November at the Society for Neuro-Oncology Annual Meeting in November. Because the company pre-announced this presentation and recently chose to expand the study to include an additional 75 patients based on early evidence of anti-tumor activity, I'm led to believe that the results are likely to be positive. Additionally, I expect the Act IV phase 3 trial to finish enrollment by year end per management commentary.

Second, the company expects to present initial results for a pilot study of CDX 1135 in dense deposit disease (DDD) by year end. If results are positive, the company intends to advance the candidate into late stage studies as soon as possible. This drug could turn the company into an ultra orphan drug stock much like Alexion, although we need to wait for results before jumping to any conclusions. Soliris, like CDX 1135, is a complement modulator and it racked up $1.1 billion of sales in 2012. Soliris was tested in DDD early stage trials but has not progressed to later stage, which I believe was due to only showing modest improvements in patients. In brief, Soliris binds to the C5 component, whereas CDX 1135 binds to both C3 and C5. As DDD is caused by a dysregulation of C3, it would make sense that Celldex's candidate would beat out Soliris in this indication.

Third, by year end the company expects to report initial results from CDX 1127 in assorted cancers. I'm reading into management commentary when they state that the drug is "an exciting entrant into the field of immunotherapy" and that they "look forward to presenting clinical data by year-end." I encourage readers to look at the pre-clinical data in the Research and Development Day Presentation to see why I'm excited about the upside if initial results are positive. The drug has the potential to be used alone, with chemo, or alongside other immunotherapies such as Yervoy (set to pass $1 billion in sales this year), anti-PD-1 inhibitors, or Zelboraf.

As is typical with development stage biotech companies, the usual caveats apply. Any of the above trial results could be negative, resulting in significant downside in the stock. The latter two drugs have only seen preclinical results to date, and so these early stage trials will be key to seeing if they hold true promise in these disease indications.

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.