CELLDEX THERAPEUTICS, INC.
FORM 10-K
(Annual Report)
Filed 03/14/17 for the Period Ending 12/31/16
Address
Telephone
CIK
53 FRONTAGE ROAD
SUITE 220
HAMPTON, NJ 08827
908-200-7500
0000744218
Symbol CLDX
SIC Code
Industry
2835 - In Vitro and In Vivo Diagnostic Substances
Biotechnology & Medical Research
Sector Healthcare
Fiscal Year
12/31
http://www.edgar-online.com
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Distribution and use of this document restricted under EDGAR Online, Inc. Terms of Use.
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TABLE
OF
CONTENTS
Table
of
ContentsUNITED
STATES
SECURITIES
AND
EXCHANGE
COMMISSION
Washington,
D.C.
20549FORM
10-KCommission
File
Number
000-15006CELLDEX
THERAPEUTICS,
INC.
(Exact
name
of
registrant
as
specified
in
its
charter)Delaware
13-3191702(State
or
other
jurisdiction
of
incorporation
ororganization)
(I.R.S.
Employer
Identification
No.)Perryville
III
Building,
53
Frontage
Road,
Suite
220,
Hampton,
New
Jersey
08827
(Address
of
principal
executive
offices)
(Zip
Code)Registrant's
telephone
number,
including
area
code:
(908)
200-7500Securities
registered
pursuant
to
Section
12(b)
of
the
Act:Title
of
Class:
Name
of
Each
Exchange
on
WhichRegistered:Common
Stock,
par
value
$.001
NASDAQ
Global
MarketSecurities
registered
pursuant
to
Section
12(g)
of
the
Act:
None
Indicate
by
check
mark
if
the
registrant
is
a
well-known
seasoned
issuer,
as
defined
in
Rule
405
of
the
Securities
Act.
Yes
o
No
ý
Indicate
by
check
mark
if
the
registrant
is
not
required
to
file
reports
pursuant
to
Section
13
or
Section
15(d)
of
the
Act.
Yes
o
No
ý
Indicate
by
check
mark
whether
the
registrant:
(1)
has
filed
all
reports
required
to
be
filed
by
Section
13
or
15(d)
of
the
Securities
Exchange
Act
of
1934during
the
preceding
12
months
(or
for
such
shorter
period
that
the
registrant
was
required
to
file
such
reports),
and
(2)
has
been
subject
to
such
filing
requirementsfor
the
past
90
days.
Yes
ý
No
o
Indicate
by
check
mark
whether
the
registrant
has
submitted
electronically
and
posted
on
its
corporate
Web
site,
if
any,
every
Interactive
Data
File
required
tobe
submitted
and
posted
pursuant
to
Rule
405
of
Regulation
S-T
(§232.405
of
this
chapter)
during
the
preceding
12
months
(or
for
such
shorter
period
that
theregistrant
was
required
to
submit
and
post
such
files).
Yes
ý
No
o
Indicate
by
check
mark
if
disclosure
of
delinquent
filers
pursuant
to
Item
405
of
Regulation
S-K
(§229.405
of
this
Chapter)
is
not
contained
herein,
and
willnot
be
contained,
to
the
best
of
registrant's
knowledge,
in
definitive
proxy
or
information
statements
incorporated
by
reference
in
Part
III
of
this
Form
10-K
or
anyamendment
to
this
Form
10-K.
ý
Indicate
by
check
mark
whether
the
registrant
is
a
large
accelerated
filer,
an
accelerated
filer,
a
non-accelerated
filer
or
a
smaller
reporting
company.
Seedefinitions
of
"large
accelerated
filer,"
"accelerated
filer,"
and
"smaller
reporting
company"
in
Rule
12b-2
of
the
Exchange
Act.
(Check
one):(Mark
one)
ý
ANNUAL
REPORT
PURSUANT
TO
SECTION
13
OR
15(D)
OF
THE
SECURITIES
EXCHANGE
ACT
OF
1934For
the
fiscal
year
ended
December
31,
2016oro
TRANSITION
REPORT
PURSUANT
TO
SECTION
13
OR
15(D)
OF
THE
SECURITIES
EXCHANGE
ACT
OF
1934Large
accelerated
filer
o
Accelerated
filer
ý
Non-accelerated
filer
o
(Do
not
check
if
a
smaller
reporting
company)
Smaller
Reporting
Company
o
Indicate
by
check
mark
whether
the
registrant
is
a
shell
company
(as
defined
in
Rule
12b-2
of
the
Act).
Yes
o
No
ý
The
aggregate
market
value
of
the
registrant's
common
stock
held
by
non-affiliates
as
of
June
30,
2016
was
$435
million.
Exclusion
of
shares
held
by
anyperson
should
not
be
construed
to
indicate
that
such
person
possesses
the
power,
direct
or
indirect,
to
direct
or
cause
the
actions
of
the
management
or
policies
ofthe
registrant,
or
that
such
person
is
controlled
by
or
under
common
control
with
the
registrant.
The
number
of
shares
of
common
stock
outstanding
at
March
6,
2017
was
123,213,438
shares.DOCUMENTS
INCORPORATED
BY
REFERENCE
Portions
of
the
definitive
Proxy
Statement
for
our
2017
Annual
Meeting
of
Stockholders
are
incorporated
by
reference
into
Part
III
of
this
Report.
Table
of
ContentsCELLDEX
THERAPEUTICS,
INC.
ANNUAL
REPORT
ON
FORM
10-K
YEAR
ENDED
DECEMBER
31,
2016
TABLE
OF
CONTENTS
i
Page
Part
I
Item
1.
Business
1
Item
1A.
Risk
Factors
31
Item
1B.
Unresolved
Staff
Comments
58
Item
2.
Properties
58
Item
3.
Legal
Proceedings
58
Item
4.
Mine
Safety
Disclosures
58
Part
II
Item
5.
Market
for
Registrant's
Common
Equity,
Related
Stockholder
Matters
and
Issuer
Purchases
of
EquitySecurities
59
Item
6.
Selected
Financial
Data
60
Item
7.
Management's
Discussion
and
Analysis
of
Financial
Condition
and
Results
of
Operations
62
Item
7A.
Quantitative
and
Qualitative
Disclosures
About
Market
Risk
84
Item
8.
Financial
Statements
and
Supplementary
Data
85
Item
9.
Changes
in
and
Disagreements
With
Accountants
on
Accounting
and
Financial
Disclosure
119
Item
9A.
Controls
and
Procedures
119
Item
9B.
Other
Information
120
Part
III
Item
10.
Directors,
Executive
Officers
and
Corporate
Governance
120
Item
11.
Executive
Compensation
120
Item
12.
Security
Ownership
of
Certain
Beneficial
Owners
and
Management
and
Related
Stockholder
Matters
120
Item
13.
Certain
Relationships
and
Related
Transactions,
and
Director
Independence
120
Item
14.
Principal
Accountant
Fees
and
Services
121
Part
IV
Item
15.
Exhibits,
Financial
Statement
Schedules
122
Item
16.
Form
10-K
Summary
126
Signatures
127
Table
of
Contents Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995:
This
Annual
Report
on
Form
10-K
contains
forward-lookingstatements
made
pursuant
to
the
safe
harbor
provisions
of
the
Private
Securities
Litigation
Reform
Act
of
1995
under
Section
27A
of
the
Securities
Act
of
1933,
asamended,
and
Section
21E
of
the
Securities
Exchange
Act
of
1934,
as
amended.
Forward-looking
statements
include
statements
with
respect
to
our
beliefs,
plans,objectives,
goals,
expectations,
anticipations,
assumptions,
estimates,
intentions
and
future
performance,
and
involve
known
and
unknown
risks,
uncertainties
andother
factors,
which
may
be
beyond
our
control,
and
which
may
cause
our
actual
results,
performance
or
achievements
to
be
materially
different
from
futureresults,
performance
or
achievements
expressed
or
implied
by
such
forward-looking
statements.
All
statements
other
than
statements
of
historical
fact
arestatements
that
could
be
forward-looking
statements.
You
can
identify
these
forward-looking
statements
through
our
use
of
words
such
as
"may,"
"will,"
"can,""anticipate,"
"assume,"
"should,"
"indicate,"
"would,"
"believe,"
"contemplate,"
"expect,"
"seek,"
"estimate,"
"continue,"
"plan,"
"point
to,"
"project,"
"predict,""could,"
"intend,"
"target,"
"potential"
and
other
similar
words
and
expressions
of
the
future.
There
are
a
number
of
important
factors
that
could
cause
the
actual
results
to
differ
materially
from
those
expressed
in
any
forward-looking
statement
made
byus.
These
factors
include,
but
are
not
limited
to:•our
ability
to
successfully
complete
research
and
further
development,
including
animal,
preclinical
and
clinical
studies,
and,
if
we
obtain
regulatoryapproval,
commercialization
of
glembatumumab
vedotin
(also
referred
to
as
CDX-011)
and
other
drug
candidates
and
the
growth
of
the
markets
forthose
drug
candidates;
•our
ability
to
raise
sufficient
capital
to
fund
our
clinical
studies
and
to
meet
our
liquidity
needs,
on
terms
acceptable
to
us,
or
at
all.
If
we
are
unableto
raise
the
funds
necessary
to
meet
our
liquidity
needs,
we
may
have
to
delay
or
discontinue
the
development
of
one
or
more
programs,
discontinueor
delay
ongoing
or
anticipated
clinical
trials,
license
out
programs
earlier
than
expected,
raise
funds
at
significant
discount
or
on
other
unfavorableterms,
if
at
all,
or
sell
all
or
part
of
our
business;
•failure
to
obtain
approval
from
our
stockholders
to
issue
additional
shares
of
our
common
stock
to
Kolltan's
former
stockholders
if
any
contingentmilestones
are
achieved;
•our
ability
to
negotiate
strategic
partnerships,
where
appropriate,
for
our
programs,
which
may
include,
glembatumumab
vedotin;
•our
ability
to
successfully
integrate
our
and
Kolltan's
businesses
and
to
operate
the
combined
business
efficiently;
•our
ability
to
realize
the
anticipated
benefits
from
the
acquisition
of
Kolltan;
•our
ability
to
manage
multiple
clinical
trials
for
a
variety
of
drug
candidates
at
different
stages
of
development;
•the
cost,
timing,
scope
and
results
of
ongoing
safety
and
efficacy
trials
of
glembatumumab
vedotin,
and
other
preclinical
and
clinical
testing;
•the
cost,
timing,
and
uncertainty
of
obtaining
regulatory
approvals
for
our
drug
candidates;
•the
availability,
cost,
delivery
and
quality
of
clinical
management
services
provided
by
our
clinical
research
organization
partners;
•the
availability,
cost,
delivery
and
quality
of
clinical
and
commercial-grade
materials
produced
by
our
own
manufacturing
facility
or
supplied
bycontract
manufacturers,
suppliers
and
partners,
who
may
be
the
sole
source
of
supply;ii Table
of
Contents•our
ability
to
develop
and
commercialize
products
before
competitors
that
are
superior
to
the
alternatives
developed
by
such
competitors;
•our
ability
to
develop
technological
capabilities,
including
identification
of
novel
and
clinically
important
targets,
exploiting
our
existingtechnology
platforms
to
develop
new
drug
candidates
and
expand
our
focus
to
broader
markets
for
our
existing
targeted
immunotherapeutics;
•our
ability
to
adapt
our
proprietary
antibody-targeted
technology,
or
APC
Targeting
Technology™,
to
develop
new,
safe
and
effective
therapeuticsfor
oncology
and
infectious
disease
indications;
•our
ability
to
protect
our
intellectual
property
rights,
including
the
ability
to
successfully
defend
patent
oppositions
filed
against
a
European
patentrelated
to
technology
we
use
in
varlilumab,
and
our
ability
to
avoid
intellectual
property
litigation,
which
can
be
costly
and
divert
management
timeand
attention;
and
•the
factors
listed
under
"Risk
Factors"
in
this
Annual
Report
on
Form
10-K.
All
forward-looking
statements
are
expressly
qualified
in
their
entirety
by
this
cautionary
notice.
You
are
cautioned
not
to
place
undue
reliance
on
anyforward-looking
statements,
which
speak
only
as
of
the
date
of
this
report
or
the
date
of
the
document
incorporated
by
reference
into
this
report.
We
have
noobligation,
and
expressly
disclaim
any
obligation,
to
update,
revise
or
correct
any
of
the
forward-looking
statements,
whether
as
a
result
of
new
information,
futureevents
or
otherwise.
We
have
expressed
our
expectations,
beliefs
and
projections
in
good
faith,
and
we
believe
they
have
a
reasonable
basis.
However,
we
cannotassure
you
that
our
expectations,
beliefs
or
projections
will
result
or
be
achieved
or
accomplished.iii Table
of
ContentsPART
I
Item
1.
BUSINESS
Overview
Celldex
Therapeutics,
Inc.,
which
we
refer
to
as
"Celldex,"
"we,"
"us,"
"our"
or
the
"Company,"
is
a
biopharmaceutical
company
focused
on
the
developmentand
commercialization
of
several
immunotherapy
technologies
and
other
cancer-targeting
biologics.
Our
drug
candidates,
including
antibodies,
antibody-drugconjugates
and
other
protein-based
therapeutics,
are
derived
from
a
broad
set
of
complementary
technologies
which
have
the
ability
to
engage
the
human
immunesystem
and/or
directly
inhibit
tumors
to
treat
specific
types
of
cancer
or
other
diseases.
Our
latest
stage
drug
candidate,
glembatumumab
vedotin
(also
referred
to
as
CDX-011)
is
a
targeted
antibody-drug
conjugate
in
a
randomized,
Phase
2b
studyfor
the
treatment
of
triple
negative
breast
cancer
and
a
Phase
2
study
for
the
treatment
of
metastatic
melanoma.
Varlilumab
(also
referred
to
as
CDX-1127)
is
animmune
modulating
antibody
that
is
designed
to
enhance
a
patient's
immune
response
against
cancer.
We
established
proof
of
principal
in
a
Phase
1
study
withvarlilumab,
which
supported
the
initiation
of
several
combination
studies
in
various
indications.
We
also
have
a
number
of
earlier
stage
drug
candidates
in
clinicaldevelopment,
including
CDX-1401,
a
targeted
immunotherapeutic
aimed
at
antigen
presenting
cells,
or
APCs,
for
cancer
indications;
CDX-301,
an
immune
cellmobilizing
agent
and
dendritic
cell
growth
factor;
and
CDX-014,
an
antibody-drug
conjugate
targeting
renal
and
ovarian
cancers.
In
November
2016,
wecompleted
the
acquisition
of
Kolltan
Pharmaceuticals,
Inc.
(Kolltan),
a
privately
held
company
focused
on
the
discovery
and
development
of
novel,
antibody-baseddrugs
targeting
receptor
tyrosine
kinases
(RTKs).
This
acquisition
added
the
following
drug
candidates
to
our
clinical
pipeline:
CDX-0158
(formerly
KTN0158),
ahumanized
monoclonal
antibody
(mAb)
currently
in
a
Phase
1
dose
escalation
study
in
refractory
gastrointestinal
stromal
tumors
(GIST)
and
other
KIT
positivetumors;
and,
CDX-3379
(formerly
KTN3379;
MEDI3379),
a
human
monoclonal
antibody
which
recently
completed
a
Phase
1b
study
in
patients
with
solid
tumors.We
also
acquired
the
TAM
program,
a
broad
antibody
discovery
effort
to
generate
antibodies
that
modulate
the
TAM
family
of
RTKs,
comprised
of
Tyro3,
AXLand
MerTK,
which
are
expressed
on
tumor-infiltrating
macrophages,
dendritic
cells
and
some
tumors.
Our
drug
candidates
address
market
opportunities
for
whichwe
believe
current
cancer
therapies
are
inadequate
or
non-existent.
We
are
building
a
fully
integrated,
commercial-stage
biopharmaceutical
company
that
develops
important
therapies
for
patients
with
unmet
medical
needs.Our
program
assets
provide
us
with
the
strategic
options
to
either
retain
full
economic
rights
to
our
innovative
therapies
or
seek
favorable
economic
terms
throughadvantageous
commercial
partnerships.
This
approach
allows
us
to
maximize
the
overall
value
of
our
technology
and
product
portfolio
while
best
ensuring
theexpeditious
development
of
each
individual
product.
The
following
table
reflects
Celldex-sponsored
clinical
studies
that
we
are
actively
pursuing
at
this
time.
All
programs
are
currently
fully-owned
by
Celldex.1Product
(generic)
Indication/Field
Status
SponsorGlembatumumab
vedotin
Triple
negative
breast
cancer
Phase
2b
CelldexGlembatumumab
vedotin
Metastatic
melanoma
(with
varlilumab
or
CPI*)
Phase
2
CelldexVarlilumab
Multiple
solid
tumors
(with
nivolumab)
Phase
2
Celldex**CDX-0158
Gastrointestinal
and
other
KIT-postive
tumors
Phase
1
CelldexCDX-3379
Multiple
solid
tumors
(in
combination
regimens)
Phase
1
CelldexCDX-014
Renal
cell
carcinoma
Phase
1
Celldex*checkpoint
inhibitor
**BMS
collaboration Table
of
Contents
We
also
routinely
work
with
external
parties,
such
as
government
agencies,
to
collaboratively
advance
our
drug
candidates.
The
following
pipeline
reflectsclinical
trials
of
our
drug
candidates
being
actively
pursued
by
outside
organizations.
In
addition
to
the
studies
listed
below,
we
also
have
an
Investigator
InitiatedResearch
(IIR)
program
with
seven
studies
ongoing
with
our
drug
candidates
and
additional
studies
currently
under
consideration.
Our
future
success
depends
upon
many
factors,
including
our
ability,
and
that
of
any
licensees
and
collaborators
that
we
may
have,
to
successfully
develop,obtain
regulatory
approval
for
and
commercialize
our
drug
candidates,
as
well
as
any
related
companion
diagnostic
tests.
We
have
had
no
commercial
revenuesfrom
sales
of
our
drug
candidates,
and
we
have
had
a
history
of
operating
losses.
It
is
possible
that
we
may
not
be
able
to
successfully
develop,
obtain
regulatoryapproval
for,
or
commercialize,
our
drug
candidates,
and
we
are
subject
to
a
number
of
risks
that
you
should
be
aware
of
before
investing
in
us.
These
risks
aredescribed
more
fully
in
"Item
1A.
Risk
Factors."Clinical
Development
Programs
As
previously
disclosed,
it
is
our
intention
to
integrate
Kolltan
without
increasing
our
planned
cash
burn
for
2017.
Following
the
addition
of
the
Kolltanprograms,
we
undertook
a
full
review
of
our
pipeline
and
associated
programs
to
identify
priority
areas
that
we
believe
have
the
highest
probability
of
potentiallyimpacting
disease
while
also
identifying
areas
for
improved
efficiency
and
cost
savings.
The
adjustments
are
reflected
in
the
following
clinical
pipeline
programupdate.Glembatumumab Vedotin
Glembatumumab
vedotin
is
an
antibody-drug
conjugate,
or
ADC,
that
consists
of
a
fully
human
monoclonal
antibody,
CR011,
linked
to
a
potent
cell-killingdrug,
monomethyl
auristatin
E,
or
MMAE.
The
CR011
antibody
specifically
targets
glycoprotein
NMB,
referred
to
as
gpNMB
that
is
over-expressed
in
a
variety
ofcancers
including
breast
cancer,
melanoma,
non-small
cell
lung
cancer,
uveal
melanoma
and
osteosarcoma,
among
others.
The
ADC
technology,
comprised
ofMMAE
and
a
stable
linker
system
for
attaching
it
to
CR011,
was
licensed
from
Seattle
Genetics,
Inc.
and
is
the
same
as
that
used
in
the
marketed
productAdcetris®.
The
ADC
is
designed
to
be
stable
in
the
bloodstream.
Following
intravenous
administration,
glembatumumab
vedotin
targets
and
binds
to
gpNMB,
andupon
internalization
into
the
targeted
cell,
glembatumumab
vedotin
is
designed
to
release
MMAE
from
CR011
to
produce
a
cell-killing
effect.
Glembatumumabvedotin
is
being
studied
across
multiple
indications
in
company-sponsored
trials
and
in
collaborative
studies
with
external
parties.
The
Food
and
DrugAdministration,
or
FDA,
has
granted
Fast
Track
designation
to
glembatumumab
vedotin
for
the
treatment
of
advanced,
refractory/resistant
gpNMB-expressingbreast
cancer.
A
companion
diagnostic
is
in
development
for
certain
indications,
and
we
expect
that,
if
necessary,
such
a
companion
diagnostic
must
be
approvedby
the
FDA
or
certain
other
foreign
regulatory
agencies
before
glembatumumab
vedotin
may
be
commercialized
in
those
indications.
Treatment
of
Metastatic
Breast
Cancer:
The
Phase
1/2
study
of
glembatumumab
vedotin
administered
intravenously
once
every
three
weeks
evaluatedpatients
with
locally
advanced
or
metastatic
breast
cancer
(MBC)
who
had
received
prior
therapy
(median
of
seven
prior
regimens).
Results
were
published
in
theJournal of Clinical Oncology in
September
2014.
The
study
began
with
a
bridging
phase
to
confirm
the
maximum
tolerated
dose,
or
MTD,
and
then
expanded
intoa
Phase
2
open-label,
multi-center
study.
The
study
supported
an
acceptable
safety
profile
of
glembatumumab2Product
(generic)
Indication/Field
Status
SponsorGlembatumumab
vedotin
Uveal
melanoma
Phase
2
NCI
(CRADA)Glembatumumab
vedotin
Squamous
cell
lung
cancer
Phase
2
PrECOG,
LLCCDX-1401/CDX-301
Multiple
solid
tumors
Phase
2
CITN Table
of
Contentsvedotin
at
the
pre-defined
maximum
dose
level
(1.88
mg/kg)
in
6
patients.
An
additional
28
patients
with
MBC
were
enrolled
in
an
expanded
Phase
2
cohort
(for
atotal
of
34
treated
patients
at
1.88
mg/kg,
the
Phase
2
dose)
to
evaluate
the
progression-free
survival
(PFS)
rate
at
12
weeks.
The
1.88
mg/kg
dose
exhibited
anacceptable
safety
profile
in
this
patient
population
with
the
most
common
adverse
events
being
rash,
neuropathy
and
fatigue.
The
primary
anti-cancer
activityendpoint,
which
called
for
at
least
5
of
25
(20%)
patients
in
the
Phase
2
study
portion
to
be
progression-free
at
12
weeks,
was
met
as
9
of
27
(33%)
evaluablepatients
were
progression-free
at
12
weeks.
For
all
patients
treated
at
the
Phase
2
dose,
median
PFS
was
9.1
weeks.
A
subset
of
10
patients
had
"triple
negative
disease,"
a
more
aggressive
metastatic
breast
cancer
subtype
that
carries
a
high
risk
of
relapse
and
reducedsurvival
as
well
as
limited
therapeutic
options.
In
these
patients,
the
12-week
PFS
rate
was
60%
(6/10),
and
median
PFS
was
17.9
weeks.
Tumor
samples
from
asubset
of
patients
across
all
dose
groups
were
analyzed
for
gpNMB
expression.
The
tumor
samples
from
most
patients
showed
evidence
of
stromal
and/or
tumorcell
expression
of
gpNMB.
The
subsequent
EMERGE
study
was
a
randomized,
multi-center
Phase
2b
study
of
glembatumumab
vedotin
in
124
patients
with
heavily
pre-treated,advanced,
gpNMB-positive
breast
cancer.
Results
from
EMERGE
were
published
in
the
Journal of Clinical Oncology in
April
2015.
Patients
were
randomized(2:1)
to
receive
either
glembatumumab
vedotin
or
single-agent
Investigator's
Choice
chemotherapy.
Patients
randomized
to
receive
Investigator's
Choice
wereallowed
to
cross
over
to
receive
glembatumumab
vedotin
following
disease
progression.
Activity
endpoints
included
response
rate,
PFS
and
overall
survival
(OS).The
final
study
results,
as
shown
below,
suggested
that
glembatumumab
vedotin
induced
significant
response
rates
compared
to
currently
available
therapies
inpatient
subsets
with
advanced,
refractory
breast
cancers
with
high
gpNMB
expression
(expression
in
at
least
25%
of
tumor
cells)
and
in
patients
with
triplenegative
breast
cancer.
The
OS
and
PFS
of
patients
treated
with
glembatumumab
vedotin
were
also
observed
to
be
greatest
in
patients
with
high
gpNMBexpression
and,
in
particular,
in
patients
with
triple
negative
breast
cancer
who
also
had
high
gpNMB
expression.EMERGE:
Overall
Response
Rate
and
Disease
Control
Data
(Intent-to-Treat
Population)
EMERGE:
Progression
Free
Survival
(PFS)
and
Overall
Survival
(OS)
Data
3
High
gpNMB
Expression
Triple
Negative
and
gpNMB
Over-Expression
Glembatumumab
Vedotin
Investigator's
Choice
Glembatumumab
Vedotin
Investigator's
Choice
(n=23)
(n=11)
(n=10)
(n=6)
Response
Rate
30%
9%
40%
0%Disease
Control
Rate
65%
27%
90%
17%Tumor response assessed by RECIST 1.1, inclusive of response observed at a single time point.
High
gpNMB
Expression
Triple
Negative
and
gpNMB
Over-Expression
Glembatumumab
Vedotin
Investigator's
Choice
Glembatumumab
Vedotin
Investigator's
Choice
Median
PFS
(months)
2.8
1.5
3.5
1.5
p=0.18
p=0.0017
Median
OS
(months)
10.0
5.7
10.0
5.5
p=0.31
p=0.003
Table
of
Contents
In
December
2013,
we
initiated
METRIC,
a
randomized,
controlled
Phase
2b
study
of
glembatumumab
vedotin
in
patients
with
triple
negative
breast
cancerthat
over-expresses
gpNMB.
Clinical
trial
study
sites
are
open
to
enrollment
across
the
U.S.,
Canada,
Australia
and
the
European
Union.
The
METRIC
protocolwas
amended
in
late
2014
based
on
feedback
from
clinical
investigators
conducting
the
study
that
the
eligibility
criteria
for
study
entry
were
limiting
their
ability
toenroll
patients
they
felt
were
clinically
appropriate.
In
addition,
we
had
spoken
to
country-specific
members
of
the
European
Medicines
Agency,
or
EMA,
andbelieved
an
opportunity
existed
to
expand
the
study
into
the
EU.
The
amendment
expanded
patient
entry
criteria
to
position
it
for
the
possibility
of
full
marketingapproval
with
global
regulators,
including
the
EMA,
and
to
support
improved
enrollment
in
the
study.
The
primary
endpoint
of
the
study
is
PFS
as
PFS
is
anestablished
endpoint
for
full
approval
registration
studies
in
this
patient
population
in
both
the
U.S.
and
the
EU.
The
sample
size
(n=300)
and
the
secondaryendpoint
of
OS
remained
unchanged.
Since
implementation
of
these
changes,
both
the
FDA
and
central
European
regulatory
authorities
have
reviewed
the
protocoldesign,
and
we
believe
the
METRIC
study
could
potentially
support
marketing
approval
in
both
the
U.S.
and
Europe
dependent
upon
data
results
and
review.Based
on
consistent
improvements
in
enrollment
trends
to
the
METRIC
study
over
the
last
several
months,
we
anticipate
that
study
enrollment
will
be
completedby
the
end
of
September
2017.
Efforts
to
ensure
delivery
of
manufactured
drug
that
is
ready
for
commercialization
and
a
companion
diagnostic,
includingpartnering
with
a
diagnostic
company,
are
underway.
Treatment
of
Metastatic
Melanoma:
The
Phase
1/2
open-label,
multi-center,
dose
escalation
study
evaluated
the
safety,
tolerability
and
pharmacokineticsof
glembatumumab
vedotin
in
117
patients
with
unresectable
stage
III
or
IV
melanoma
who
had
failed
no
more
than
one
prior
line
of
cytotoxic
therapy.
The
MTDand
resulting
Phase
2
dose
was
determined
to
be
1.88
mg/kg
administered
intravenously
once
every
three
weeks.
The
study
achieved
its
primary
activity
objectivewith
an
overall
response
rate
(ORR)
in
the
Phase
2
cohort
of
15%
(5/34).
Median
PFS
was
3.3
months
for
patients
treated
with
the
Phase
2
dose.
Glembatumumabvedotin
was
generally
well
tolerated,
with
the
most
frequent
treatment-related
adverse
events
being
rash,
fatigue,
alopecia,
pruritus,
diarrhea
and
nausea.
Thedevelopment
of
rash,
which
may
be
associated
with
the
presence
of
gpNMB
in
the
skin,
also
seemed
to
correlate
with
greater
PFS.
In
December
2014,
we
initiated
a
single
arm,
single-agent,
open-label
Phase
2
study
of
glembatumumab
vedotin
in
patients
with
unresectable
stage
III
or
IVmelanoma
(n=60)
and
enrollment
has
been
completed.
In
May
2016,
we
amended
the
protocol
to
add
a
second
cohort
of
patients
to
a
glembatumumab
vedotin
andvarlilumab
combination
arm
to
assess
the
potential
clinical
benefit
of
the
combination
and
to
explore
varlilumab's
potential
biologic
and
immunologic
effect
whencombined
with
an
ADC.
In
November
2016,
we
amended
the
protocol
again
to
add
a
third
cohort
of
patients
evaluating
glembatumumab
vedotin
in
combinationwith
an
approved
checkpoint
inhibitor
(i.e.,
nivolumab
or
pembrolizumab)
following
progression
on
the
checkpoint
inhibitor
alone.
Both
additional
cohorts
areopen
to
enrollment.
The
primary
endpoint
for
each
cohort
is
ORR.
Secondary
endpoints
include
analyses
of
PFS,
duration
of
response,
OS,
retrospectiveinvestigation
of
whether
the
anti-cancer
activity
of
glembatumumab
vedotin
is
dependent
upon
the
degree
of
gpNMB
expression
in
tumor
tissue
and
safety
of
boththe
monotherapy
and
combination
regimens.
We
presented
data
from
the
single-agent
cohort
at
the
European
Society
for
Medical
Oncology
(ESMO)
Congress
in
October
2016.
The
cohort
enrolled
62evaluable
patients
with
unresectable
stage
III
(n=1;
2%)
or
stage
IV
(n=61;
98%)
melanoma.
All
patients
had
progressed
after
checkpoint
inhibitor
therapy,
andalmost
all
patients
had
received
both
ipilimumab
(n=58;
94%)
and
anti-PD-1/anti-PDL-1
(n=58;
94%)
therapy.
Twelve
patients
presented
with
BRAF
mutation,and
eleven
had
prior
treatment
with
BRAF
or
BRAF/MEK
targeted
agents.
The
primary
endpoint
of
the
cohort
(6
or
more
objective
responses
in
the
first
52patients
enrolled)
was
exceeded.
Seven
of
62
(11%)
patients
experienced
a
confirmed
response,
and
an
additional
three
patients
also
experienced4 Table
of
Contentssingle
timepoint
responses.
The
median
duration
of
response
was
6.0
months.
A
52%
disease
control
rate
(patients
without
progression
for
greater
than
threemonths)
was
demonstrated
and
median
PFS
for
all
patients
was
4.4
months.
In
addition,
patients
who
experienced
rash
in
the
first
cycle
of
treatment
had
a
20%confirmed
response
rate
and
a
more
prolonged
PFS
of
5.5
months
[p=0.054;
hazard
rating=0.52
(0.27,
1.02)].
We
also
intend
to
conduct
exploratory
analyses
ofpre-entry
skin
biopsies
in
future
patients
to
investigate
potential
predictors
of
response
to
glembatumumab
vedotin,
given
the
potential
association
of
rash
andoutcome.
Treatment
of
Other
Indications:
We
have
entered
into
a
collaborative
relationship
with
PrECOG,
LLC,
which
represents
a
research
network
establishedby
the
Eastern
Cooperative
Oncology
Group
(ECOG),
under
which
PrECOG,
LLC,
is
conducting
an
open-label
Phase
1/2
study
in
patients
with
unresectablestage
IIIB
or
IV,
gpNMB-expressing,
advanced
or
metastatic
squamous
cell
carcinoma
(SCC)
of
the
lung,
who
have
progressed
on
prior
platinum-basedchemotherapy.
This
study
opened
to
enrollment
in
April
2016.
The
study
includes
a
dose-escalation
phase
followed
by
a
two-stage
Phase
2
portion
(Simon
two-stage
design).
The
Phase
1,
dose-escalation
portion
of
the
study
will
assess
the
safety
and
tolerability
of
glembatumumab
vedotin
at
the
current
dose
of
1.9
mg/kgand
then
2.2
mg/kg
in
order
to
determine
whether
higher
dosing
is
feasible
in
this
population.
The
first
stage
of
the
Phase
2
portion
plans
to
enroll
approximately20
patients,
and
if
at
least
two
patients
achieve
a
partial
response
or
complete
response,
a
second
stage
may
enroll
an
additional
15
patients.
The
primary
objectiveof
the
Phase
2
portion
of
the
study
is
to
assess
the
anti-tumor
activity
of
glembatumumab
vedotin
in
squamous
cell
lung
cancer
as
measured
by
ORR.
Secondaryobjectives
of
the
study
include
analyses
of
safety
and
tolerability
and
further
assessment
of
anti-tumor
activity
across
a
broad
range
of
endpoints.
We
have
also
entered
into
a
Cooperative
Research
and
Development
Agreement,
or
CRADA,
with
the
National
Cancer
Institute,
or
NCI,
under
which
NCI
issponsoring
two
studies
of
glembatumumab
vedotin—one
in
uveal
melanoma
and
one
in
osteosarcoma.
The
uveal
melanoma
study
is
a
single-arm,
open-label
studyin
patients
with
locally
recurrent
or
metastatic
uveal
melanoma
and
is
currently
open
to
enrollment.
The
primary
outcome
measure
is
ORR.
Secondary
outcomemeasures
include
change
in
gpNMB
expression
on
tumor
tissue
via
immunohistochemistry,
safety,
OS
and
PFS.
We
expect
data
from
this
study
will
be
presentedat
a
future
medical
meeting
in
the
first
half
of
2017.
The
osteosarcoma
study
is
a
single-arm,
open-label,
evaluation
of
adolescent
and
adult
patients
with
recurrentor
refractory
osteosarcoma.
The
co-primary
objectives
are
to
determine
whether
glembatumumab
vedotin
therapy
either
increases
the
disease
control
rate
at4
months
in
patients
with
recurrent
measurable
osteosarcoma
as
compared
to
historical
experience
and/or
whether
glembatumumab
vedotin
therapy
produces
anobjective
response
rate
greater
than
20%
in
patients
without
previous
eribulin
(eribulin
mesylate)
treatment.
Secondary
outcome
measures
include
safety,pharmacokinetics
and
the
relation
of
gpNMB
expression
as
measured
by
immunohistochemistry
to
clinical
response.
The
study
had
a
two
stage
design
with
a
pre-specified
activity
threshold
necessary
in
the
first
stage
to
progress
enrollment
to
the
second
stage.
The
study
did
not
meet
the
activity
threshold
for
progressing
tostage
2
and
therefore
no
additional
patients
will
be
enrolled.
We
expect
data
from
this
study
will
be
presented
at
a
future
medical
meeting.Varlilumab
Varlilumab
is
a
fully
human
monoclonal
agonist
antibody
that
binds
to
and
activates
CD27,
a
critical
co-stimulatory
molecule
in
the
immune
activationcascade.
We
believe
varlilumab
works
primarily
by
stimulating
T
cells,
an
important
component
of
a
person's
immune
system,
to
attack
cancer
cells.
Restrictedexpression
and
regulation
of
CD27
enables
varlilumab
specifically
to
activate
T
cells,
resulting
in
an
enhanced
immune
response
with
the
potential
for
a
favorablesafety
profile.
In
preclinical
studies,
varlilumab
has
been
shown
to
directly
kill
or
inhibit
the
growth
of
CD27
expressing
lymphomas
and
leukemias
in
vitro and
invivo models.
We
have
entered
into
license
agreements
with5 Table
of
Contentsthe
University
of
Southampton,
UK
for
intellectual
property
to
use
anti-CD27
antibodies
and
with
Medarex
(acquired
by
Bristol-Myers
Squibb
Company,
or
BMS)for
access
to
the
UltiMab
technology
to
develop
and
commercialize
human
antibodies
to
CD27.
Varlilumab
was
initially
studied
as
a
single-agent
to
establish
asafety
profile
and
assess
immunologic
and
clinical
activity
in
patients
with
cancer,
but
we
believe
the
greatest
opportunity
for
varlilumab
is
as
an
immune
activatorin
combination
with
other
agents.
Currently,
we
are
focusing
our
efforts
on
a
Phase
1/2
clinical
trial
being
conducted
in
collaboration
with
BMS
and
their
PD-1immune
checkpoint
inhibitor,
Opdivo.
Varlilumab
is
also
being
explored
in
combination
studies,
including
with
glembatumumab
vedotin,
and
in
ongoing
andplanned
investigator-sponsored
studies.
Single-Agent
Phase
1
Study:
Data
from
the
completed,
open-label
Phase
1
study
of
varlilumab
in
patients
with
selected
malignant
solid
tumors
orhematologic
cancers
were
presented
in
November
2014.
Varlilumab
to
date
has
shown
an
acceptable
safety
profile
and
induced
immunologic
activity
in
patientsthat
is
consistent
with
both
its
proposed
mechanism
of
action
and
data
in
preclinical
models.
A
total
of
90
patients
were
dosed
in
the
study
at
multiple
clinical
sitesin
the
U.S.
of
which
56
patients
were
dosed
in
dose
escalation
cohorts
(various
solid
and
hematologic
B-cell
tumors),
and
34
patients
were
dosed
in
the
expansioncohorts
(melanoma
and
RCC)
at
3
mg/kg.
In
both
the
solid
tumor
and
hematologic
dose-escalations,
the
pre-specified
maximum
dose
level
(10
mg/kg)
was
reachedwithout
identification
of
a
maximum
tolerated
dose.
The
majority
of
adverse
events,
or
AEs,
related
to
treatment
have
been
mild
to
moderate
(Grade
1/2)
inseverity,
with
only
three
serious
AEs
related
to
treatment
reported.
No
significant
immune-mediated
adverse
events
(colitis,
hepatitis,
etc.)
typically
associated
withcheckpoint
blockade
have
been
observed
to
date.
Two
patients
experienced
significant
objective
responses
including
a
complete
response
in
Hodgkin
lymphoma(continued
at
33.1+
months
as
of
September
2016;
patient
no
longer
on
study)
and
a
partial
response
in
renal
cell
carcinoma
of
27.7+
months
(as
of
September2016).
Thirteen
patients
experienced
stable
disease
with
a
range
of
3-47.3+
months
(as
of
September
2016).
As
of
December
2016,
there
are
two
patientscontinuing
in
long
term
follow-up.
Phase
1/2
Varlilumab/Opdivo®
Combination
Study:
In
May
2014,
we
entered
into
a
clinical
trial
collaboration
with
Bristol-Myers
Squibb
to
evaluatethe
safety,
tolerability
and
preliminary
efficacy
of
varlilumab
and
Opdivo,
Bristol-Myers
Squibb's
PD-1
immune
checkpoint
inhibitor,
in
a
Phase
1/2
study.
Underthe
terms
of
this
clinical
trial
collaboration,
Bristol-Myers
Squibb
made
a
one-time
payment
to
us
of
$5.0
million,
and
the
companies
amended
the
terms
of
ourexisting
license
agreement
with
Medarex
(acquired
by
Bristol-Myers
Squibb)
related
to
our
CD27
program
whereby
certain
future
milestone
payments
werewaived
and
future
royalty
rates
were
reduced
that
may
have
been
due
from
us
to
Medarex.
In
return,
Bristol-Myers
Squibb
was
granted
a
time-limited
right
of
firstnegotiation
if
we
wish
to
out-license
varlilumab.
The
companies
also
agreed
to
work
exclusively
with
each
other
to
explore
anti-PD-1
antagonist
antibody
and
anti-CD27
agonist
antibody
combination
regimens.
The
clinical
trial
collaboration
provides
that
the
companies
will
share
development
costs
and
that
we
will
beresponsible
for
conducting
the
Phase
1/2
study.
The
Phase
1/2
study
was
initiated
in
January
2015
and
is
being
conducted
in
adult
patients
with
multiple
solid
tumors
to
assess
the
safety
and
tolerability
ofvarlilumab
at
varying
doses
when
administered
with
Opdivo
followed
by
a
Phase
2
expansion
to
evaluate
the
activity
of
the
combination
in
disease
specificcohorts.
The
Phase
1
dose
escalation
portion
of
the
study,
conducted
in
patients
with
solid
tumors,
has
completed
enrollment
(n=36)
and
primarily
enrolled
patientswith
colorectal
and
ovarian
cancer.
Data
were
presented
from
the
Phase
1
portion
of
the
varlilumab
and
Opdivo
study
in
a
poster
at
the
American
Association
for
Cancer
Research
(AACR)Annual
Meeting
in
April
2016.
The
primary
objective
of
the
Phase
1
portion
of
the
study
was
to
evaluate
the
safety
and
tolerability
of
the
combination.
Thecombination
showed
acceptable
tolerability
and
safety
across
all
dose
levels
without6 Table
of
Contentsany
evidence
of
increased
autoimmunity
or
inappropriate
immune
activation.
Marked
changes
in
the
tumor
microenvironment
including
increased
infiltratingCD8+
T
cells
and
increased
PD-L1
expression,
which
have
been
shown
to
correlate
with
a
greater
magnitude
of
treatment
effect
from
checkpoint
inhibitors
inother
clinical
studies
were
observed.
Additional
evidence
of
immune
activity,
such
as
increase
in
inflammatory
chemokines
and
decrease
in
T
regulatory
cells,were
also
noted.
In
a
subset
of
patients
(n=17)
on
study
who
had
both
pre-
and
post-tumor
biopsies
available,
preliminary
evidence
suggest
a
correlation
betweenbiomarker
data
and
stable
disease
or
better
in
seven
of
these
patients
(4
ovarian
cancer,
2
colorectal
cancer,
1
squamous
cell
carcinoma
of
the
head
and
neck).
Alldose
levels
of
the
combination
therapy
showed
an
acceptable
tolerability
and
safety
profile,
without
identification
of
a
maximum
tolerated
dose.
In
the
Phase
2portion
of
the
study,
varlilumab
is
administered
at
3
mg/kg
in
the
majority
of
cohorts,
based
upon
cumulative
data
across
multiple
studies.
The
Phase
2
portion
of
the
study
opened
to
enrollment
in
April
2016
and
includes
cohorts
in
colorectal
cancer
(n=18),
ovarian
cancer
(n=54),
head
and
necksquamous
cell
carcinoma
(n=54),
renal
cell
carcinoma
(n=25)
and
glioblastoma
(n=20).
Based
on
a
recent
protocol
amendments,
additional
dosing
schedules
arebeing
explored
in
ovarian
cancer
(versus
renal
cell
carcinoma)
and,
as
previously
disclosed,
in
head
and
neck
squamous
cell
carcinoma,
increasing
the
overall
sizeof
the
study
compared
to
the
original
study
design.
The
primary
objective
of
the
Phase
2
cohorts
is
ORR,
except
glioblastoma,
where
the
primary
objective
is
therate
of
12-month
overall
survival.
Secondary
objectives
include
pharmacokinetics
assessments,
determining
the
immunogenicity
of
varlilumab
when
given
incombination
with
Opdivo
and
further
assessing
the
anti-tumor
activity
of
combination
treatment.
We
plan
to
complete
enrollment
across
all
cohorts
in
the
Phase
2portion
of
the
study
in
the
first
quarter
of
2018
and
will
work
with
BMS
to
present
data
from
the
study
at
a
future
medical
meeting.
Phase
1/2
Varlilumab/Tecentriq®
Combination
Study:
In
March
2015,
we
entered
into
a
clinical
trial
collaboration
with
Roche
to
evaluate
the
safety,tolerability
and
preliminary
efficacy
of
varlilumab
and
Tecentriq
(anti-PDL1),
Roche's
cancer
immunotherapy,
in
a
Phase
1/2
study.
Under
the
terms
of
thisagreement,
Roche
is
providing
study
drug,
and
we
are
responsible
for
conducting
and
funding
the
study.
The
Phase
1
portion
of
the
study
is
being
conducted
inbladder
cancer
and
renal
cell
carcinoma,
and
the
primary
outcome
is
safety
and
tolerability.
The
Phase
1
portion
of
the
study
completed
enrollment
in
the
thirdquarter
of
2016.
Patients
continue
to
be
followed,
and
we
expect
data
from
this
study
will
be
presented
at
a
future
medical
meeting.
Given
the
advancement
ofvarlilumab
into
a
broad
Phase
2
study
in
combination
with
Opdivo
and
our
efforts
to
identify
areas
for
cost-containment,
we
will
not
be
advancing
thevarlilumab/Tecentriq
study
to
Phase
2.
Phase
1/2
Varlilumab/Sutent®
Combination
Study:
In
May
2015,
we
initiated
a
Phase
1/2
safety
and
tolerability
study
examining
the
combination
ofvarlilumab
and
Sutent
in
patients
with
metastatic
clear
cell
renal
cell
carcinoma.
The
Phase
1
portion
of
the
study
assesses
the
safety
and
tolerability
of
varlilumabat
varying
doses
when
administered
with
Sutent.
The
Phase
1
portion
of
the
study
completed
enrollment
in
the
fourth
quarter
of
2016.
Patients
continue
to
befollowed,
and
data
from
this
study
will
be
presented
at
a
future
medical
meeting.
Given
the
advancement
of
varlilumab
into
a
broad
Phase
2
study
in
combinationwith
Opdivo
and
our
efforts
to
identify
areas
for
cost-containment,
we
will
not
be
advancing
the
varlilumab/Sutent
study
to
Phase
2.
Phase
1/2
Varlilumab/Yervoy®
+/-
CDX-1401
Combination
Study:
In
April
2015,
we
initiated
a
Phase
1/2
safety
pilot
and
expansion
study
examiningthe
combination
of
varlilumab
and
Yervoy
in
patients
with
stage
III
or
IV
metastatic
melanoma.
Since
initiating
the
study,
the
standard
of
care
has
evolved,
andthere
has
been
increasing
physician
reluctance
to
use
Yervoy
in
this
setting.
As
such,
given
the
broad
development
strategy
in
place
for
varlilumab,
as
previouslydisclosed,
this
study
was
closed
to
enrollment
in
the
third
quarter
of
2016.7 Table
of
ContentsCDX-0158
CDX-0158
(formerly
KTN0158),
is
a
humanized
monoclonal
antibody
designed
to
inhibit
KIT
activation
in
tumor
cells
and
mast
cells.
KIT
is
expressed
inmany
tumor
types
including
gastrointestinal
stromal
tumors
(or
GIST),
sarcomas,
small
cell
lung
cancer,
melanoma,
acute
myeloid
leukemia
(AML)
and
mast
cellleukemia.
It
has
also
been
implicated
in
asthma
and
neurofibromatosis.
We
are
currently
developing
CDX-0158
for
the
treatment
of
GIST.
Small
molecule
drugscurrently
approved
to
treat
GIST
inhibit
mutant
KIT,
but
acquired
resistance
develops
via
secondary,
drug-resistant
KIT
mutations
in
the
majority
of
patients
overtime.
CDX-0158
is
designed
to
uniquely
prevent
KIT
activation
by
inhibiting
both
receptor
dimerization
and
ligand
binding.
CDX-0158
has
demonstratedpreclinical
activity
versus
the
most
common
c-KIT
mutations
in
human
GIST,
including
treatment
of
mastocytoma
in
a
canine
model.
A
Phase
1
dose
escalation
study
in
patients
with
advanced
refractory
GIST
and
other
KIT
positive
tumors
opened
to
enrollment
in
December
2015
todetermine
the
maximum
tolerated
dose,
recommend
a
dose
for
further
study
and
characterize
the
safety
profile.
Enrollment
is
ongoing.
Upon
completion
of
Phase
1assuming
a
successful
outcome,
we
plan
to
develop
CDX-0158
in
patients
with
refractory
GIST
given
the
significant
unmet
need
for
these
patients.
Preclinical
data
published
in
Molecular Cancer Therapeutics in
January
2017
demonstrate
that
KIT
inhibition
in
certain
immune
cells
with
CDX-0158enhances
the
activity
of
checkpoint
blockade,
providing
additional
opportunities
for
combination
therapy.
This
mechanism
may
also
be
effective
with
otherimmunotherapies,
in
particular
with
our
CD27
agonist,
varlilumab.CDX-3379
CDX-3379
(formerly
KTN3379
and
MEDI3379)
is
a
human
monoclonal
antibody
with
half-life
extension
designed
to
block
the
activity
of
ErbB3
(HER3).We
believe
ErbB3
may
be
an
important
receptor
regulating
cancer
cell
growth
and
survival
as
well
as
resistance
to
targeted
therapies
and
is
expressed
in
manycancers,
including
head
and
neck,
thyroid,
breast,
lung
and
gastric
cancers,
as
well
as
melanoma.
We
believe
the
proposed
mechanism
of
action
for
CDX-3379
setsit
apart
from
other
drugs
in
development
in
this
class
due
to
its
ability
to
block
both
ligand-independent
and
ligand-dependent
ErbB3
signaling
by
binding
to
aunique
epitope.
It
has
a
favorable
pharmacologic
profile,
including
a
longer
half-life
and
slower
clearance
relative
to
other
drug
candidates
in
this
class.
CDX-3379also
has
potential
to
enhance
anti-tumor
activity
and/or
overcome
resistance
in
combination
with
other
targeted
and
cytotoxic
therapies
to
directly
kill
tumor
cells.Tumor
cell
death
and
the
ensuing
release
of
new
tumor
antigens
has
the
potential
to
serve
as
a
focus
for
combination
therapy
with
immuno-oncology
approaches,even
in
refractory
patients.8 Table
of
Contents
A
Phase
1a/1b
study
was
conducted,
including
a
single-agent
dose-escalation
portion
and
combination
expansion
cohorts.
Data
from
the
dose-escalationportion,
which
completed
enrollment
in
September
2015,
and
initial
data
from
the
expansion
cohorts
(enrollment
ongoing
at
the
time)
were
presented
at
theAmerican
Society
of
Clinical
Oncology
Annual
Meeting
in
June
2016.
The
single-agent
dose-escalation
portion
of
the
study
did
not
identify
an
MTD,
and
therewere
no
dose
limiting
toxicities.
The
most
common
adverse
events
included
rash
and
diarrhea
and
were
predominantly
grade
1
or
2.
Four
combination
arms
acrossmultiple
tumor
types
were
added
to
evaluate
CDX-3379
with
several
drugs
that
target
EGFR,
HER2
or
BRAF.
They
include
combinations
with
Erbitux®
(n=16),Tarceva®
(n=8),
Zelboraf®
(n=4)
and
Herceptin®
(n=10).
Patients
had
advanced
disease
and
were
generally
heavily
pretreated.
Across
the
combination
arms,
themost
frequent
adverse
events
were
diarrhea,
nausea,
rash
and
fatigue.
Objective
responses
were
observed
in
the
Erbitux
and
Zelboraf
combination
arms.
In
theErbitux
arm,
there
was
one
complete
response
in
a
patient
with
head
and
neck
cancer,
who
had
been
previously
treated
with
Erbitux
and
was
refractory.
In
theZelboraf
arm,
there
were
two
partial
responses
in
patients
who
had
lung
cancer,
one
of
whom
had
been
previously
treated
with
Tafinlar®
and
was
consideredrefractory.
We
are
currently
exploring
plans
for
advancement
into
Phase
2
study.CDX-1401
CDX-1401,
developed
from
our
APC
Targeting
Technology,
is
an
NY-ESO-1-antibody
fusion
protein
for
immunotherapy
in
multiple
solid
tumors.
CDX-1401,
which
is
administered
with
an
adjuvant,
is
composed
of
the
cancer-specific
antigen
NY-ESO-1
fused
to
a
fully
human
antibody
that
binds
to
DEC-205
forefficient
delivery
to
dendritic
cells.
Delivery
of
tumor-specific
proteins
directly
to
dendritic
cells
in vivo elicits
potent,
broad,
anti-tumor
immune
responses
acrosspopulations
with
different
genetic
backgrounds.
In
humans,
NY-ESO-1
has
been
detected
in
20%
to
30%
of
melanoma,
lung,
esophageal,
liver,
gastric,
ovarian
andbladder
cancers,
and
up
to
70%
of
synovial
sarcomas,
thus
representing
a
broad
opportunity.
We
are
developing
CDX-1401
for
the
treatment
of
malignantmelanoma
and
a
variety
of
solid
tumors
which
express
the
cancer
antigen
NY-ESO-1,
which
we
licensed
from
the
Ludwig
Institute
for
Cancer
Research
in
2006.Preclinical
studies
have
shown
that
CDX-1401
treatment
results
in
activation
of
human
T
cell
responses
against
NY-ESO-1.
We
have
completed
a
Phase
1
study
of
CDX-1401
which
assessed
the
safety,
immunogenicity
and
clinical
activity
of
escalating
doses
of
CDX-1401
with
TLRagonists
(resiquimod
and/or
poly-ICLC)
in
45
patients
with
advanced
malignancies
refractory
to
all
available
therapies.
Results
were
published
in
ScienceTranslational Medicine in
April
2014.
Sixty
percent
of
patients
had
confirmed
NY-ESO
expression
in
archived
tumor
samples.
Thirteen
patients
maintained
stabledisease
for
up
to
13.4
months
with
a
median
of
6.7
months.
Treatment
indicates
an
acceptable
safety
profile
to
date,
and
there
were
no
dose
limiting
toxicities.
Avariety
of
immune
activation
parameters
were
observed.
Humoral
responses
were
elicited
in
both
NY-ESO-1
positive
and
negative
patients.
NY-ESO-1-specific
Tcell
responses
were
absent
or
low
at
baseline,
but
increased
post-vaccination
in
56%
of
evaluable
patients,
including
both
CD4
and/or
CD8
T
cell
responses.Robust
immune
responses
were
observed
with
CDX-1401
with
resiquimod
and
poly-ICLC
alone
and
in
combination.
Long-term
patient
follow
up
suggested
thattreatment
with
CDX-1401
may
predispose
patients
to
better
outcomes
on
subsequent
therapy
with
checkpoint
inhibitors.
Of
the
45
patients
in
the
Phase
1
study,eight
went
on
to
receive
subsequent
therapy
of
either
Yervoy
or
an
investigational
checkpoint
inhibitor,
and
six
of
these
patients
had
objective
tumor
regression.Six
patients
with
melanoma
received
Yervoy
within
three
months
of
treatment
with
CDX-1401,
and
four
(67%)
had
objective
tumor
responses,
including
onecomplete
response,
which
compares
favorably
to
the
overall
response
rate
of
11%
previously
reported
in
metastatic
melanoma
patients
treated
with
single-agentYervoy.
In
addition,
two
patients
with
non-small
cell
lung
cancer
received
an
investigational
checkpoint
blockade
within
two
months
of
completing
treatment
withCDX-1401,
and
both
achieved
partial
responses.
Together
with
Roche,
we
are9 Table
of
Contentssupporting
an
investigator
initiated
study
of
CDX-1401
in
combination
with
Tecentriq®
in
patients
with
lung
cancer.
CDX-1401's
potential
activity
is
being
explored
in
investigator
sponsored
and
collaborative
studies.
A
Phase
2
study
of
CDX-1401
in
combination
with
CDX-301
is
being
conducted
in
metastatic
melanoma
by
the
Cancer
Immunotherapy
Trials
Network
(CITN)
under
a
CRADA
with
the
Cancer
Therapy
EvaluationProgram
of
the
NCI.
This
study
was
designed
to
determine
the
activity
of
CDX-1401
with
or
without
CDX-301
in
melanoma.
The
primary
outcome
measure
of
thestudy
is
immune
response
to
NY-ESO-1.
Secondary
outcome
measures
include
analysis
and
characterization
of
peripheral
blood
mononuclear
cells
(dendritic
cells,T
cells,
natural
killer
cells,
etc.),
additional
immune
monitoring,
safety
and
clinical
outcomes
(survival
and
time
to
tumor
recurrence).
Enrollment
is
complete
andinitial
results
were
presented
in
June
at
the
2016
American
Society
of
Clinical
Oncology
(ASCO)
Annual
Meeting.
The
data
confirmed
that
CDX-1401
is
capableof
driving
NY-ESO-1
immunity
and
further
demonstrated
the
potential
of
CDX-301
as
a
combination
agent
for
enhancing
tumor
specific
immune
responses.
TheNCI
and
CITN
are
planning
to
enroll
additional
cohorts
to
investigate
alternative
regimens
of
CDX-301.
Other
studies
are
being
considered
through
investigator-sponsored
and
collaborative
agreements.CDX-301
CDX-301,
a
recombinant
FMS-like
tyrosine
kinase
3
ligand,
or
Flt3L,
is
a
hematopoietic
cytokine
that
uniquely
expands
dendritic
cells
and
hematopoieticstem
cells
in
combination
with
other
agents
to
potentiate
the
anti-tumor
response.
Depending
on
the
setting,
cells
expanded
by
CDX-301
promote
either
enhancedor
permissive
immunity.
CDX-301
is
in
clinical
development
for
multiple
cancers,
in
combination
with
vaccines,
adjuvants
and
other
treatments
that
release
tumorantigens.
We
licensed
CDX-301
from
Amgen
Inc.
in
March
2009
and
believe
CDX-301
may
hold
significant
opportunity
for
synergistic
development
incombination
with
other
proprietary
molecules
in
our
portfolio.
A
Phase
1
study
of
CDX-301
evaluated
seven
different
dosing
regimens
of
CDX-301
to
determine
the
appropriate
dose
for
further
development
based
onsafety,
tolerability
and
biological
activity.
The
data
from
the
study
were
consistent
with
previous
clinical
experience
and
demonstrated
that
CDX-301
has
anacceptable
safety
profile
to
date
and
can
mobilize
hematopoietic
stem
cell
(HSC)
populations
in
healthy
volunteers.
Based
on
the
safety
profile
and
the
clinical
andpreclinical
data
to
date,
we
initiated
a
pilot
clinical
study
of
CDX-301
for
the
mobilization
and
transplantation
of
allogeneic
hematopoietic
stem
cells
in
patientswith
hematological
malignancies
undergoing
hematopoietic
stem
cell
transplantation.
Preliminary
results
from
this
Phase
2
study
were
presented
at
the
annualmeeting
of
the
American
Society
for
Blood
and
Marrow
Transplantation
in
February
2016.
These
preliminary
data
from
three
donor/patient
pairs
showed
thatCDX-301
given
as
a
single
agent
has
an
acceptable
safety
profile
and
mobilized
hematopoietic
stem
cells
in
healthy
donors.
The
stem
cell
graft
contained
notableincreases
in
naïve
lymphocytes
and
plasmacytoid
dendritic
cells
consistent
with
preclinical
data
suggesting
a
possible
better
outcome.
Recipients
experiencedsuccessful
engraftment
in
an
expected
time
frame.
Given
that
hematopoietic
stem
cell
transplantation
is
outside
of
our
core
focus,
in
an
effort
to
prioritize
humanand
capital
resources,
we
announced
in
May
2016
that
we
decided
not
to
advance
CDX-301
in
this
particular
indication
at
this
time.
In
June,
at
the
2016
ASCO
Annual
Meeting,
initial
results
from
a
Phase
2
study
of
CDX-1401
in
combination
with
CDX-301
in
metastatic
melanoma
werepresented
that
further
demonstrated
the
value
of
CDX-301
as
a
combination
agent
for
enhancing
tumor
specific
immune
responses.
The
Phase
2
study
wasconducted
by
the
Cancer
Immunotherapy
Trials
Network,
or
CITN,
under
a
CRADA
with
the
Cancer
Therapy
Evaluation
Program
of
the
NCI.
Based
on
theseresults
the
CITN
is
planning
to
enroll
additional
cohorts
to
investigate
alternative
regimens
of
CDX-301.
Other
studies
are
being
considered
through
investigator-sponsored
and
collaborative
agreements.10 Table
of
ContentsCDX-014
CDX-014
is
a
human
monoclonal
ADC
that
targets
T
cell
immunoglobulin
and
mucin
domain
1,
or
TIM-1.
TIM-1
expression
is
upregulated
in
severalcancers,
most
notably
renal
cell
and
ovarian
carcinomas,
and
is
associated
with
a
more
malignant
phenotype
of
renal
cell
carcinoma
(RCC)
and
tumor
progression.TIM-1
has
restricted
expression
in
healthy
tissues,
making
it
potentially
amenable
to
an
ADC
approach.
The
TIM-1
antibody
is
linked
to
MMAE
using
SeattleGenetics'
proprietary
technology.
The
ADC
is
designed
to
be
stable
in
the
bloodstream
but
to
release
MMAE
upon
internalization
into
TIM-1-expressing
tumorcells,
resulting
in
a
targeted
cell-killing
effect.
CDX-014
has
shown
anti-tumor
activity
in
preclinical
models
of
ovarian
and
renal
cancer.
In
July
2016,
weannounced
that
enrollment
had
opened
in
a
Phase
1/2
study
of
CDX-014
to
patients
with
both
clear
cell
and
papillary
RCC.
The
Phase
1
dose-escalation
portion
ofthe
study
is
evaluating
cohorts
of
patients
receiving
increasing
doses
of
CDX-014
to
determine
the
maximum
tolerated
dose
and
a
recommended
dose
for
Phase
2study.
We
anticipate
the
Phase
1
dose-escalation
portion
of
the
study
will
complete
enrollment
by
year-end
2017.
The
Phase
2
portion
of
the
study
plans
to
enrollapproximately
25
patients
to
assess
the
anti-tumor
activity
of
CDX-014
at
the
recommended
dose
in
advanced
renal
cell
carcinoma
as
measured
by
objectiveresponse
rate.
Secondary
objectives
include
safety
and
tolerability,
pharmacokinetics,
immunogenicity
and
additional
measures
of
anti-tumor
activity.Rintega
On
March
7,
2016,
we
announced
that
our
Phase
3
study
of
Rintega®
in
patients
with
newly
diagnosed
EGFRvIII-positive
glioblastoma
was
beingdiscontinued.
This
decision
was
made
based
on
the
outcome
of
a
preplanned
interim
analysis
conducted
by
an
independent
Data
Safety
and
Monitoring
Board(DSMB).
The
DSMB
determined
that
continuation
of
the
study
would
not
result
in
reaching
statistical
significance
for
the
primary
endpoint
of
the
study,
overallsurvival
in
patients
with
minimal
residual
disease,
as
both
the
Rintega
arm
and
the
control
arm
were
performing
on
par
with
each
other.
In
the
ACT
IV
study,Rintega
performed
consistently
with
prior
Phase
2
studies
but
the
control
arm
significantly
outperformed
expectations
(Hazard
ratio
=
0.99;
median
OS:
Rintega20.4
months
vs.
control
21.1
months).
Based
on
this
recommendation,
we
discontinued
the
study.
Data
from
the
ACT
IV
study
were
presented
at
the
Society
forNeuro-Oncology
Annual
Meeting
in
November
2016.
All
patients
on
the
Rintega
arm
of
the
ACT
IV
study,
prior
Phase
2
studies
and
existing
compassionate
userecipients
have
been
offered
ongoing
access
to
Rintega
on
a
compassionate
use
basis,
and
we
continue
to
support
new
requests
for
compassionate
use
in
recurrentglioblastoma
on
a
limited
basis.
Study
closure
activities
are
complete,
and
we
continue
to
anticipate
that
we
will
not
incur
substantial
additional
costs
related
toRintega.Development
StrategyImmunotherapy Platform:
We
believe
there
is
untapped
potential
in
immunotherapy
that
can
be
captured
through
the
right
combination
and/or
sequence
of
therapeutic
agents.Immunotherapy
approaches
have
encountered
difficulties
when
following
standard
drug
development.
The
mechanisms
of
action
are
complex;
activity
is
generallynot
dependent
on
highest
tolerated
dose;
and
patient
response
is
highly
variable.
Our
understanding
of
the
immune
system,
cancer's
effect
on
immune
mediatedmechanisms
and
the
impact
of
conventional
therapies
on
the
immune
system
provide
a
new
rationale
for
combining
therapies
that
may
lead
to
significant
clinicalbenefit
for
patients
with
cancer.
Our
intent
is
to
leverage
this
knowledge
and
the
availability
of
good,
tested
products
that
may
not
have
optimal
clinical
activity
as
a
monotherapy,
but
whichwe
believe
may
be
very
effective
in
combination
approaches.
Our
goal
is
to
design
and
develop
targeted
products
that
maximize
the11 Table
of
Contentsefficacy
of
immunotherapy
regimens
through
combinations
of
therapeutic
agents
in
significant
and
growing
markets.
We
establish
governmental
and
corporatealliances
to
fund
development
when
appropriate
and
intend
to
commercialize
our
products
either
through
our
own
direct
selling
efforts
or,
for
products
which
wecannot
develop
ourselves
through
to
commercialization,
through
corporate
partners.
This
approach
allows
us
to
maximize
the
overall
value
of
our
technology
andproduct
portfolios
while
best
ensuring
the
expeditious
development
of
each
individual
product.
Factors
that
may
significantly
harm
our
commercial
success,
and
ultimately
the
market
price
of
our
common
stock,
include
but
are
not
limited
to,announcements
of
technological
innovations
or
new
commercial
products
by
our
competitors,
disclosure
of
unsuccessful
results
of
clinical
testing
or
regulatoryproceedings
and
governmental
approvals,
adverse
developments
in
patent
or
other
proprietary
rights,
public
concern
about
the
safety
of
products
developed
by
usand
general
economic
and
market
conditions.
See
"Item
1A.
Risk
Factors."Partnerships
We
may
enter
into
co-development
and
commercialization
partnerships
for
any
of
our
programs
where
appropriate,
including
glembatumumab
vedotin.
In
thepast,
we
have
entered
into
collaborative
partnership
agreements
with
pharmaceutical
and
other
companies
and
organizations
that
provided
financial
and
otherresources,
including
capabilities
in
research,
development,
manufacturing,
and
sales
and
marketing,
to
support
our
research
and
development
programs
and
mayenter
into
more
of
them
in
the
future.
Partnership
agreements
may
terminate
without
benefit
to
us
if
the
underlying
products
are
not
fully
developed.
If
we
fail
to
meet
our
obligations
under
theseagreements,
they
could
terminate
and
we
might
need
to
enter
into
relationships
with
other
collaborators
and
to
spend
additional
time,
money,
and
other
valuableresources
in
the
process.
We
cannot
predict
whether
our
collaborators
will
continue
their
development
efforts
or,
if
they
do,
whether
their
efforts
will
achievesuccess.
Many
of
our
collaborators
face
the
same
kinds
of
risks
and
uncertainties
in
their
businesses
that
we
face.
A
delay
or
setback
to
a
partner
will,
at
aminimum,
delay
the
commercialization
of
any
affected
drug
candidates,
and
may
ultimately
prevent
it.
Moreover,
any
partner
could
breach
its
agreement
with
us
orotherwise
not
use
best
efforts
to
promote
our
products.
A
partner
may
choose
to
pursue
alternative
technologies
or
products
that
compete
with
our
technologies
ordrug
candidates.
In
either
case,
if
a
partner
failed
to
successfully
develop
one
of
our
drug
candidates,
we
would
need
to
find
another
partner.
Our
ability
to
do
sowould
depend
upon
our
legal
right
to
do
so
at
the
time
and
whether
the
product
remained
commercially
viable.Research
Collaboration
and
License
Agreements
We
have
entered
into
license
agreements
whereby
we
have
received
licenses
or
options
to
license
technology,
specified
patents
and/or
patent
applications.These
license
and
collaboration
agreements
generally
provide
for
royalty
payments
equal
to
specified
percentages
of
product
sales,
annual
license
maintenancefees,
continuing
patent
prosecution
costs
and
potential
future
milestone
payments
to
third
parties
upon
the
achievement
of
certain
development,
regulatory
and/orcommercial
milestones.
Summarized
below
are
our
significant
research
collaboration
and
license
agreements
for
our
later-stage
drug
candidates.Medarex, Inc. (Medarex), which was acquired by Bristol-Myers Squibb Company
We
and
Medarex
have
entered
into
an
assignment
and
license
agreement,
as
amended,
that
provides
for
the
assignment
of
certain
patent
and
other
intellectualproperty
rights
and
a
license
to
certain
Medarex
technology
related
to
the
Company's
APC
Targeting
Technology™
and
an
anti-mannose
receptor
product.
Underthe
terms
of
the
agreement,
we
may
be
required
to
pay
royalties12 Table
of
Contentsin
the
low-single
digits
on
any
net
product
sale
of
a
Licensed
Royalty-Bearing
Product
or
Anti-Mannose
Product
to
Medarex
until
the
later
of
(i)
the
expiration
ofthe
last
to
expire
applicable
patent
and
(ii)
the
tenth
anniversary
of
the
first
commercial
sale
of
such
licensed
product.
We
and
Medarex
have
also
entered
into
a
research
and
commercialization
agreement,
as
amended,
that
provides
that
we
may
be
required
to
pay
Medarexmilestones
of
up
to
$7.0
million
upon
obtaining
first
approval
for
commercial
sale
in
a
first
indication
of
a
product
containing
a
licensed
antibody
and
royaltypayments
in
the
low-to-mid
single
digits
on
any
net
product
sales
with
respect
to
the
development
of
any
products
containing
such
licensed
antibodies
until
thelater
of
(i)
the
expiration
of
the
last
to
expire
applicable
patent
and
(ii)
the
tenth
anniversary
of
the
first
commercial
sale
of
such
licensed
product.
In
September2010,
we
exercised
an
option
under
our
research
and
commercialization
agreement,
whereby
we
licensed
from
Medarex
access
to
the
UltiMab
technology
todevelop
and
commercialize
human
antibodies
to
CD27,
including
varlilumab.
In
connection
with
the
clinical
trial
collaboration
we
entered
into
with
BMS
in
May2014,
we
and
BMS
agreed
to
waive
certain
future
milestone
payments
and
to
reduce
future
royalty
rates
that
we
may
have
owed
Medarex
in
connection
with
anyCD27
program.Rockefeller University (Rockefeller)
In
November
2005,
we
and
Rockefeller
entered
into
a
license
agreement
for
the
exclusive
worldwide
rights
to
human
DEC-205
receptor,
with
the
right
tosublicense
the
technology.
The
license
grant
is
exclusive
except
that
Rockefeller
may
use
and
permit
other
nonprofit
organizations
to
use
the
human
DEC-205receptor
patent
rights
for
educational
and
research
purposes.
We
may
be
required
to
pay
Rockefeller
milestones
of
up
to
$3.8
million
upon
obtaining
first
approvalfor
commercial
sale
in
a
first
indication
of
a
product
targeting
the
licensed
receptor
and
royalty
payments
in
the
low-to-mid
single
digits
on
any
net
product
saleswith
respect
to
development
and
commercialization
of
the
human
DEC-205
receptor.University of Southampton, UK (Southampton)
In
November
2008,
we
entered
into
a
license
agreement
with
Southampton
to
develop
human
antibodies
towards
CD27,
a
potentially
important
target
forimmunotherapy
of
various
cancers.
We
may
be
required
to
pay
Southampton
milestones
of
up
to
approximately
$1.0
million
upon
obtaining
first
approval
forcommercial
sale
in
a
first
indication
and
royalty
payments
in
the
low-single
digits
on
any
net
product
sales
with
respect
to
development
and
commercialization
ofvarlilumab.Amgen Inc. (Amgen)
In
March
2009,
we
entered
into
a
license
agreement
with
Amgen
to
acquire
the
exclusive
rights
to
CDX-301
and
CD40
ligand,
or
CD40L.
CDX-301
andCD40L
are
immune
modulating
molecules
that
increase
the
numbers
and
activity
of
immune
cells
that
control
immune
responses.
We
may
be
required
to
payAmgen
milestones
of
up
to
$0.9
million
upon
obtaining
first
approval
for
commercial
sale
in
a
first
indication
and
royalty
payments
in
the
low-single
digits
on
anynet
product
sales
with
respect
to
development
and
commercialization
of
the
technology
licensed
from
Amgen,
including
CDX-301.Amgen Fremont (formerly Abgenix)
In
connection
with
our
acquisition
of
CuraGen
Corporation
in
2009,
we
assumed
the
license
agreement
between
CuraGen
and
Amgen
Fremont
(successor
in-interest
to
Abgenix)
to
develop
fully-human
monoclonal
antibody
therapeutics.
In
May
2009,
an
amendment
to
the
license
agreement
was
entered
into
related
toCuraGen's
exclusive
rights
to
develop
and
commercialize
glembatumumab
vedotin,
CDX-014
and
antibodies
to
10
other
licensed
antigens.
Under
the
amendment,CuraGen
and13 Table
of
ContentsAmgen
Fremont
agreed
to
modify
the
terms
of
their
existing
cross-license
of
antigens
whereby
our
amended
license
is
fully
paid-up
and
royalty-free.Seattle Genetics, Inc. (Seattle Genetics)
In
connection
with
our
acquisition
of
CuraGen,
we
assumed
the
license
agreement
between
CuraGen
and
Seattle
Genetics
whereby
CuraGen
acquired
therights
to
proprietary
ADC
technology,
with
the
right
to
sublicense,
for
use
with
its
proprietary
antibodies
for
the
potential
treatment
of
cancer.
Under
the
terms
ofthe
agreement,
we
have
the
responsibility
of
using
commercially
reasonable
efforts
to
develop,
commercialize
and
market
such
treatment.
In
furtherance
of
theseresponsibilities,
technical
assistance
from
Seattle
Genetics
is
available
to
us
as
necessary.
We
may
be
required
to
pay
Seattle
Genetics
milestones
of
up
to$5.0
million
and
$8.5
million
for
glembatumumab
vedotin
and
CDX-014,
respectively,
upon
obtaining
first
approval
for
commercial
sale
in
a
first
indication
androyalty
payments
in
the
mid-single
digits
on
any
net
product
sales
with
respect
to
development
and
commercialization
of
these
drug
candidates.
The
term
of
theagreement
varies
country
to
country
and
may
be
until
the
later
of
the
expiration
of
the
last
relevant
patent
or
the
10
th
anniversary
of
the
first
commercial
sale.
Theagreement
allows
us
to
terminate
with
prior
written
notice,
with
both
parties
being
able
to
terminate
the
agreement
for
an
uncured
material
breach
or
insolvency
ofthe
other
party.Competition
The
biotechnology
and
pharmaceutical
industry
is
intensely
competitive
and
subject
to
rapid
and
significant
technological
change.
Many
of
the
products
thatwe
are
attempting
to
develop
and
commercialize
will
be
competing
with
existing
therapies.
Other
companies
are
pursuing
the
development
of
new
therapies
thattarget
the
same
diseases
and
conditions
that
we
are
targeting
and
may
compete
directly
with
our
drug
candidates.
We
face
competition
from
companies,
majoruniversities
and
research
institutions
in
the
United
States
and
abroad,
including
a
number
of
large
pharmaceutical
companies,
as
well
as
firms
specialized
in
thedevelopment
and
production
of
vaccines,
adjuvants
and
immunotherapeutic
delivery
systems.
Some
of
our
competitors
possess
substantially
greater
financial,technical
and
human
resources
than
we
possess.
Competitors
that
we
are
aware
of
that
have
initiated
a
pivotal
study
or
have
obtained
marketing
approval
for
a
potential
competitive
drug/device
forglembatumumab
vedotin
in
the
treatment
of
breast
cancer
include
AbbVie,
Astellas,
AstraZeneca,
Bristol-Myers
Squibb,
Immunomedics,
Merck,
Nektar,
Novartis,Pfizer,
Roche,
and
Tesaro.
Our
competitors
may
utilize
discovery
technologies
and
techniques
or
partner
with
collaborators
in
order
to
develop
products
more
rapidly
or
successfullythan
us
or
our
collaborators
are
able
to.
In
addition,
some
competitors
have
significantly
greater
experience
than
we
have
in
conducting
preclinical
and
nonclinicaltesting
and
human
clinical
trials
of
drug
candidates,
scaling
up
manufacturing
operations
and
obtaining
regulatory
approvals
of
drugs
and
manufacturing
facilities.Accordingly,
our
competitors
may
succeed
in
obtaining
regulatory
approval
for
drugs
more
rapidly
than
we
do.
If
we
obtain
regulatory
approval
and
commencecommercial
sales
of
our
drug
candidates,
we
also
will
compete
with
respect
to
manufacturing
efficiency
and
sales
and
marketing
capabilities,
areas
in
which
wecurrently
have
limited
experience.
In
addition,
academic
institutions,
government
agencies
and
other
public
and
private
organizations
conducting
research
may
seek
patent
protection
withrespect
to
potentially
competitive
products
or
technologies
and
may
establish
exclusive
collaborative
or
licensing
relationships
with
our
competitors.
Moreover,technology
controlled
by
third
parties
that
may
be
advantageous
to
our
business
may
be
acquired
or
licensed
by
our
competitors,
thereby
preventing
us
fromobtaining
technology
on
commercially
reasonable
terms,
if
at
all.
We
will
also
compete
for
the
services
of
third
parties
that
may
have
already
developed
oracquired
internal
biotechnology
capabilities
or
made
commercial14 Table
of
Contentsarrangements
with
other
biopharmaceutical
companies
to
target
the
diseases
on
which
we
have
focused
both
in
the
U.S.
and
outside
of
the
U.S.
We
also
face
competition
in
recruiting
and
retaining
highly
qualified
scientific
personnel
and
consultants
and
in
the
development
and
acquisition
oftechnologies.
Our
competitive
position
will
depend
upon
our
ability
to
attract
and
retain
qualified
personnel,
obtain
patent
protection
or
otherwise
develop
proprietaryproducts
or
processes
and
secure
sufficient
capital
resources
for
the
often
lengthy
period
between
technological
conception
and
commercial
sales.
We
will
requiresubstantial
capital
resources
to
complete
development
of
some
or
all
of
our
drug
candidates,
obtain
the
necessary
regulatory
approvals
and
successfullymanufacture
and
market
our
drug
candidates.
In
order
to
secure
capital
resources,
we
anticipate
having
to
sell
additional
capital
stock,
which
would
dilute
existingstockholders.
We
may
also
attempt
to
obtain
funds
through
research
grants
and
agreements
with
commercial
collaborators.
However,
these
types
of
funding
areuncertain
because
they
are
at
the
discretion
of
the
organizations
and
companies
that
control
the
funds.
As
a
result,
we
may
not
receive
any
funds
from
grants
orcollaborations.
Alternatively,
we
may
borrow
funds
from
commercial
lenders,
likely
at
high
interest
rates,
which
would
increase
the
risk
of
any
investment
in
us.Manufacturing
We
have
limited
experience
in
commercial
manufacturing.
Our
ability
to
conduct
late-stage
clinical
trials,
as
well
as
manufacture
and
commercialize
our
drugcandidates
will
depend
on
the
ability
of
such
third
parties
to
manufacture
our
drug
candidates
on
a
large
scale
at
a
competitive
cost
and
in
accordance
with
currentGood
Manufacturing
Practices,
or
cGMP,
and
U.S.
and
foreign
regulatory
requirements,
if
applicable.
We
rely
on
contract
manufacturing
organizations,
or
CMO,to
manufacture
mAb
intermediate,
drug
substance,
and
drug
candidate
for
our
late-stage
clinical
study
of
glembatumumab
vedotin
as
well
as
for
potential
futurecommercial
supplies.
We
also
rely
on
CMOs
for
packaging,
labeling,
storage
and
shipping
of
drug
product.
In
order
for
us
to
establish
our
own
commercialmanufacturing
facility,
we
would
require
substantial
additional
funds
and
would
need
to
hire
and
retain
significant
additional
personnel
and
comply
with
extensivecGMP
regulations
applicable
to
such
a
facility.
The
commercial
manufacturing
facility
would
also
need
to
be
licensed
for
the
production
of
our
drug
candidates
bythe
FDA.
We
therefore
work
with
CMOs
under
established
manufacturing
arrangements
that
comply
with
the
FDA's
requirements
and
other
regulatory
standards,although
there
is
no
assurance
that
the
manufacturing
will
be
successful.
To
date,
we
have
utilized
CMOs
for
the
manufacture
of
clinical
trial
supplies
of
glembatumumab
vedotin.
In
the
second
half
of
2016,
we
established
arelationship
with
Patheon
Biologics
in
Brisbane,
Australia
to
manufacture
the
glembatumumab
vedotin
mAb
intermediate
due
to
being
informed
by
LonzaBiologics,
our
previous
CMO,
that
the
bioreactors
used
to
manufacture
glembatumumab
vedotin
will
be
decommissioned
and
would
not
be
available
forcommercialization.
We
also
have
a
relationship
with
Piramal
Healthcare
UK
Ltd.
to
manufacture
the
antibody
drug
conjugate
with
the
vcMMAE
linker-toxin.
Thedrug
substance
is
then
filled
and
packaged
at
Piramal
Lexington
or
BSP
Pharma.
We
rely
on
MilliporeSigma
for
supplying
suitable
quantities
of
vcMMAE.
Anymanufacturing
failures
or
delays
by
our
glembatumumab
vedotin
contract
manufacturers
or
suppliers
of
materials
could
cause
delays
in
our
glembatumumabvedotin
clinical
studies,
including
the
METRIC
study
and/or
a
BLA
filing
and,
if
regulatory
approval
is
obtained,
commercial
launch
of
glembatumumab
vedotin.
We
also
utilize
CMOs
for
the
manufacture
of
varlilumab
for
global
clinical
trials
and
potential
commercialization.
We
have
established
relationships
withPatheon
Biologics
in
St.
Louis
for
the
manufacture
of
varlilumab
drug
substance
and
Vetter
Pharma
for
the
manufacture
of
varlilumab
drug
product.
Anymanufacturing
failures
or
delays
by
our
varlilumab
CMOs
could
cause
delays
in
our
varlilumab
clinical
studies.15 Table
of
Contents
We
operate
our
own
cGMP
manufacturing
facility
in
Fall
River,
Massachusetts,
to
produce
drug
substance
for
our
current
and
planned
early-stage
clinicaltrials.
Our
Fall
River
manufacturing
facility
has
250L
and
1000L
bioreactor
capacity
and
is
able
to
manufacture
in
compliance
with
FDA
regulations,
allowing
usto
distribute
potential
products
to
clinical
sites
in
the
U.S.
for
early-stage
clinical
trials.
We
currently
manufacture
CDX-1401,
CDX-301
and
CDX-1140
drugsubstance
and
CDX-014
mAb
intermediate
in
our
Fall
River
facility
for
our
current
and
planned
Phase
1
and
Phase
2
clinical
trials.
CDX-014,
an
antibody-drugconjugate,
is
then
manufactured
by
Lonza
(Visp).
We
expect
that
our
existing
clinical
supplies
of
CDX-3379
and
CDX-0158
will
be
sufficient
to
carry
out
ourcurrent
planned
clinical
development.
Additional
manufacturing
is
under
review
and
may
involve
utilization
of
the
Fall
River
facility
and/or
a
CMO.
All
productsare
then
filled
and
packaged
at
contract
manufacturers.
Any
manufacturing
failures
or
compliance
issues
at
contract
manufacturers
could
cause
delays
in
ourPhase
1
and
Phase
2
clinical
studies
for
these
drug
candidates.
The
manufacturing
processes
for
our
drug
candidates
and
immunotherapeutic
delivery
systems
utilize
known
technologies.
We
believe
that
the
drugcandidates
we
currently
have
under
development
can
be
scaled
up
to
permit
manufacture
in
commercial
quantities.
However,
there
can
be
no
assurance
that
we
willnot
encounter
difficulties
in
scaling
up
the
manufacturing
processes.
While
we
believe
that
there
is
currently
sufficient
capacity
worldwide
for
the
production
of
our
potential
products
through
CMOs,
establishing
long-termrelationships
with
contract
manufacturers
and
securing
multiple
sources
for
the
necessary
quantities
of
clinical
and
commercial
materials
required
can
be
achallenge
due
to
increasing
industry
demand
for
CMO
services.
Qualifying
the
initial
source
of
clinical
and
ultimately
commercial
material
is
a
time
consumingand
expensive
process
due
to
the
highly
regulated
nature
of
the
pharmaceutical/biotech
industry.
These
costs
may
be
mitigated
by
the
economies
of
scale
realizedin
commercial
manufacture
and
product
sales.
The
key
difficulty
in
qualifying
more
than
one
source
for
each
product
is
the
duplicated
time
and
expense
in
doingso
without
the
potential
to
mitigate
these
costs
if
the
secondary
source
is
never
utilized.
We
currently
rely
on
sole
suppliers
for
key
components
of
our
drug
candidates,
including
vcMMAE
for
glembatumumab
vedotin
and
Hiltonol®
for
CDX-1401.
While
we
work
with
the
suppliers
of
these
key
components
to
ensure
continuity
of
supply,
no
assurance
can
be
given
that
these
efforts
will
be
successful.
Inaddition,
due
to
regulatory
requirements
relating
to
the
qualification
of
suppliers,
we
may
not
be
able
to
establish
additional
or
replacement
sources
on
a
timelybasis
or
without
excessive
cost.
If
our
suppliers
were
to
terminate
our
arrangements
or
fail
to
meet
our
supply
needs
we
might
be
forced
to
delay
our
developmentprograms
or
we
could
face
disruptions
in
the
distribution
and
sale
of
any
drugs
for
which
we
obtain
regulatory
approval.
Use
of
third
party
manufacturers
limits
our
control
over
and
ability
to
monitor
the
manufacturing
process.
As
a
result,
we
may
not
be
able
to
detect
a
variety
ofproblems
that
may
arise
and
may
face
additional
costs
in
the
process
of
interfacing
with
and
monitoring
the
progress
of
our
contract
manufacturers.
If
third
partymanufacturers
fail
to
meet
our
manufacturing
needs
in
an
acceptable
manner,
we
would
face
delays
and
additional
costs
while
we
develop
internal
manufacturingcapabilities
or
find
alternate
third
party
manufacturers.
It
may
not
be
possible
to
have
multiple
third
party
manufacturers
ready
to
supply
us
with
needed
material
atall
or
without
incurring
significant
costs.Commercial
Organization
We
have
a
focused
commercial
team
with
broad
experience
in
marketing,
sales,
distribution
and
product
reimbursement.
We
have
also
developed
thecapability
to
provide
current
and
future
market
insights
to
our
research
and
development
organization
regarding
glembatumumab
vedotin
and
our
earlier-stage
drugcandidates.
In
the
future,
we
may
choose
to
expand
our
commercial
team
and
build
a
full-scale
commercial
organization
which
we
believe
could
provide
us
theopportunity
to
retain
marketing
rights
to
our
drug
candidates
and
commercialize
such
products
ourselves
where
we
deem16 Table
of
Contentsappropriate
or
pursue
strategic
partnerships
to
develop,
sell,
market
and
distribute
our
drug
candidates
where
we
deem
appropriate.
We
may
also
choose
to
enterinto
strategic
partnerships
to
develop,
sell,
market
and
distribute
our
other
drug
candidates,
including
glembatumumab
vedotin.Patents,
Licenses
and
Proprietary
Rights
In
general,
our
intellectual
property
strategy
is
to
protect
our
technology
by
filing
patent
applications
and
obtaining
patent
rights
covering
our
own
technology,both
in
the
United
States
and
in
foreign
countries
that
we
consider
important
to
our
business.
In
addition,
we
have
acquired
and
will
seek
to
acquire
as
needed
ordesired,
exclusive
rights
of
others
through
assignment
or
license
to
complement
our
portfolio
of
patent
rights.
We
also
rely
on
trade
secrets,
unpatented
know-howand
technological
expertise
and
innovation
to
develop
and
maintain
our
competitive
position.Patents
The
successful
development
and
marketing
of
products
by
us
will
depend
in
part
on
our
ability
to
create
and
maintain
intellectual
property,
including
patentrights.
We
are
the
owner
or
exclusive
licensee
to
proprietary
patent
positions
in
the
areas
of
immunotherapy
technologies,
vaccine
technologies,
antibodytechnologies
and
complement
inhibitor
technology.
Although
we
continue
to
pursue
patent
protection
for
our
products,
no
assurance
can
be
given
that
any
pendingapplication
will
issue
as
a
patent,
that
any
issued
patent
will
have
a
scope
that
will
be
of
commercial
benefit
or
that
we
will
be
able
to
successfully
enforce
ourpatent
position
against
infringers.
We
routinely
review
our
patent
portfolio
and
adjust
our
strategies
for
prosecution
and
maintenance
of
individual
cases
accordingto
a
number
of
factors
including
program
priorities,
stage
of
development
and
patent
term.
We
own
or
license
rights
under
more
than
300
granted
patents
and
national
and
regional
patent
applications
in
the
U.S.
and
in
major
international
territoriescovering
inventions
relating
to
our
business.
The
key
patents
and
patent
applications
owned
by
us
or
licensed
to
us
that
we
consider
important
to
our
businessinclude
the
following
(the
indicated
and
estimated
patent
expiry
dates
do
not
include
any
possible
Patent
Term
Extensions
(PTEs)
or
Supplementary
ProtectionCertificates
(SPCs),
if
these
may
be
secured
in
due
course):•Our
patent
portfolio
for
glembatumumab
vedotin
includes
issued
patents
in
the
U.S.,
Europe,
Japan,
Australia
and
Canada.
If
maintained
to
fullterm
in
due
course,
these
would
have
estimated
patent
expiry
dates
in
2025.
In
addition,
patent
rights
relating
to
the
toxin
and
conjugationtechnology
used
in
glembatumumab
vedotin
have
been
licensed
from
Seattle
Genetics.
The
patent
rights
from
Seattle
Genetics
include
issuedpatents
and
pending
applications
in
Australia,
Canada,
Europe,
the
U.S.
and
Japan
which
include
composition
of
matter
claims
relating
to
the
toxinand
conjugation
technology.
If
maintained
to
full
term
in
due
course,
the
main
Seattle
Genetics
patent
rights
would
have
estimated
patent
expirydates
ranging
from
2023
in
Europe
to
2026
in
the
U.S.
•We
have
licensed
rights
from
the
University
of
Southampton
under
issued
U.S.,
European
and
Japanese
patents
and
under
a
pending
patentapplication
in
Canada
relating
to
the
technology
used
in
varlilumab.
Further
patent
applications
are
also
pending
in
the
U.S.,
Europe
and
Japan.
Ifand
where
issued
and
maintained
to
full
term
in
due
course,
these
would
have
estimated
patent
expiry
dates
in
2027.
In
July
2013,
the
United
StatesPatent
and
Trademark
Office
issued
a
patent
to
the
University
of
Southampton,
that
we
have
exclusive
license
to
under
our
license
agreement,which
broadly
supports
varlilumab.
The
patent
includes
18
claims
covering
various
methods
of
treating
cancer
using
agonistic
anti-human
CD27antibodies
and
relates,
among
other
things,
directly
to
our
CD27
antibody
program
and
therapeutic
uses
of
varlilumab.
In
September
2014,
twoEuropean
patent
oppositions
were
filed
against
the
University
of
Southampton
European
patent
and
at
a
hearing
on
November
23,
2016
theEuropean
Patent17 Table
of
ContentsOffice
(EPO)
revoked
the
European
patent
on
the
ground
of
lack
of
inventive
step.
We
intend
to
appeal
this
decision
and
to
defend
the
Europeanpatent
vigorously
in
cooperation
with
the
University
of
Southampton.
This
EPO
decision
does
not
affect
the
later
filed
Celldex
patents
andapplications
for
varlilumab.
We
also
have
an
issued
U.S.
patent
which
covers
varlilumab
as
a
composition
of
matter.
If
maintained
to
full
term
thispatent
would
have
an
estimated
patent
expiry
date
in
2034
(including
additional
term
due
to
Patent
Term
Adjustment).
We
also
have
correspondingpatent
applications
in
the
major
international
territories
which,
if
issued
and
maintained
to
full
term
in
due
course,
would
have
estimated
patentexpiry
dates
in
2031.•We
have
issued
U.S.
patents
relating
to
the
technology
used
in
CDX-1401
which
have
estimated
patent
expiry
dates
in
at
least
2028
(not
includingincreases
of
term
due
to
Patent
Term
Adjustment).
We
have
a
corresponding
issued
European
patent
and
further
patents
and
pending
patentapplications
in
other
international
territories
(including
Japan,
Australia,
Canada,
China,
India,
Republic
of
Korea
and
certain
other
countries)relating
to
the
technology
used
in
CDX-1401
which,
if
and
where
issued
and
maintained
to
full
term
in
due
course,
would
have
estimated
patentexpiry
dates
in
2028.
•The
U.S.
patent
for
the
technology
used
in
CDX-301
has
an
estimated
expiration
date
in
2020.
•Our
patent
portfolio
for
CDX-014
includes
rights
under
issued
U.S.,
European
and
Canadian
patents
and
pending
patent
applications
in
Australiaand
Japan.
If
and
where
issued
and
maintained
to
full
term
in
due
course,
these
filings
would
have
estimated
patent
expiry
dates
in
at
least
2024
(notincluding
increases
of
term
due
to
Patent
Term
Adjustment
in
the
U.S.).
In
addition,
patent
rights
relating
to
toxin
and
conjugation
technology
havebeen
licensed
from
Seattle
Genetics.
The
patent
rights
from
Seattle
Genetics
include
issued
patents
and
pending
patent
applications
in
Australia,Canada,
Europe,
the
U.S.
and
Japan
which
include
composition
of
matter
claims
relating
to
the
toxin
and
conjugation
technology.
If
maintained
tofull
term
in
due
course,
the
main
Seattle
Genetics
patent
rights
would
have
estimated
patent
expiry
dates
ranging
from
2023
in
Europe
to
2026
inthe
U.S.
•We
have
exclusively
licensed
a
portfolio
of
patent
applications
relating
to
particular
ErbB3
inhibitors
from
MedImmune.
These
patent
applicationsinclude
claims
directed
to
particular
anti-ErbB3
antibody
compositions
of
matter,
including
CDX-3379
compositions
of
matter,
and
methods
ofusing
such
antibodies.
A
U.S.
Patent
has
been
issued
which
has
an
estimated
patent
expiry
date
in
2032.
Patent
applications
in
this
portfolio
arepending
in
Europe,
Japan,
Australia,
Canada,
China,
India,
Republic
of
Korea
and
certain
other
countries,
and
any
patents
that
may
issue
from
theseapplications
would
also
have
estimated
patent
expiry
dates
in
2032.
These
are
the
estimated
expirations
if
we
continue
to
pay
the
maintenance
feesand
annuities
when
due,
and
do
not
include
any
possible
additional
terms
for
Patent
Term
Adjustments,
Patent
Term
Extensions
or
SPCs
if
thesemay
be
secured
in
due
course.
•We
own
a
family
of
patents
and
patent
applications
directed
to
anti-KIT
receptor
antibody
compositions
of
matter,
including
CDX-0158compositions
of
matter,
and
methods
of
using
such
antibodies.
U.S.
patents
have
been
issued
and
foreign
counterparts
to
patent
applications
in
thisfamily
are
pending
in
Europe,
Japan,
Australia,
Canada,
China,
India,
Republic
of
Korea
and
certain
other
countries.
If
and
where
issued
theforegoing
would
have
estimated
patent
expiry
dates
ranging
from
at
least
2032
to
2033.
We
also
have
pending
U.S.
and
European
patentapplications
directed
to
use
of
anti-KIT
receptor
antibodies,
including
CDX-0158
antibodies,
for
treatment
of
particular
eosinophil
or
mast
cellrelated
disorders,
including
neurofibromatosis.
Any
patents
that
issue
based
on
these
patent
applications
would
have
estimated
patent
expiry
datesin
2035.
These
are
the
estimated
expirations
if
we
continue
to
pay
the
maintenance
fees
and
annuities
when
due,
and
do
not
include
any
possibleadditional
terms
for
Patent
Term
Adjustments,
Patent
Term
Extensions
or
SPCs
if
these
may
be
secured
in
due
course.18 Table
of
Contents•We
acquired
rights
to
a
portfolio
of
patents
and
patent
applications
related
to
the
"TAM
family"
of
RTKs
(comprised
of
Tyro3,
AXL
and
MerTK)receptors
which
are
in-licensed
from,
or
co-owned
with,
the
Salk
Institute
for
Biological
Studies.
For
example,
we
have
an
exclusive
license
to
twoissued
U.S.
patents
directed
to
TAM
receptor
inhibition
to
treat
infections,
and
to
a
U.S.
patent
application
directed
to
methods
for
the
modulationof
the
immune
response
via
targeting
TAM
receptors.
Foreign
counterparts
to
these
patents
and
this
patent
application
are
pending
in
Europe
andCanada.
If
and
where
issued
the
foregoing
would
have
estimated
patent
expiry
dates
in
2028.
These
are
the
estimated
expirations
if
we
continue
topay
the
maintenance
fees
and
annuities
when
due,
and
do
not
include
any
possible
additional
terms
for
Patent
Term
Adjustments,
Patent
TermExtensions
or
SPCs
if
these
may
be
secured
in
due
course.
There
can
be
no
assurance
that
patent
applications
owned
by
or
licensed
to
us
will
result
in
granted
patents
or
that,
if
granted,
the
resultant
patents
will
affordprotection
against
competitors
with
similar
technology.
It
is
also
possible
that
third
parties
may
obtain
patents
or
other
proprietary
rights
that
may
be
necessary
oruseful
to
us.
In
cases
where
third
parties
are
first
to
invent
a
particular
product
or
technology,
it
is
possible
that
those
parties
will
obtain
patents
that
will
besufficiently
broad
to
prevent
us
from
using
important
technology
or
from
further
developing
or
commercializing
important
drug
candidates
and
immunotherapeuticsystems.
If
licenses
from
third
parties
are
necessary
but
cannot
be
obtained,
commercialization
of
the
covered
products
might
be
delayed
or
prevented.
Even
ifthese
licenses
can
be
obtained,
they
would
probably
require
us
to
pay
ongoing
royalties
and
other
costs,
which
could
be
substantial.
Although
a
patent
has
a
statutory
presumption
of
validity
in
the
United
States,
the
issuance
of
a
patent
is
not
conclusive
as
to
validity
or
as
to
the
enforceablescope
of
the
patent
claims.
The
validity
or
enforceability
of
a
patent
after
its
issuance
by
the
Patent
and
Trademark
Office
can
be
challenged
in
litigation.
As
abusiness
that
uses
a
substantial
amount
of
intellectual
property,
we
face
a
heightened
risk
of
intellectual
property
litigation.
If
the
outcome
of
the
litigation
isadverse
to
the
owner
of
the
patent,
third
parties
may
then
be
able
to
use
the
invention
covered
by
the
patent
without
authorization
or
payment.
There
can
be
noassurance
that
our
issued
patents
or
any
patents
subsequently
issued
to
or
licensed
by
us
will
not
be
successfully
challenged
in
the
future.
In
addition,
there
can
beno
assurance
that
our
patents
will
not
be
infringed
or
that
the
coverage
of
our
patents
will
not
be
successfully
avoided
by
competitors
through
design
innovation.
We
are
aware
that
others,
including
universities
and
companies,
have
filed
patent
applications
and
have
been
granted
patents
in
the
United
States
and
othercountries
which
claim
subject
matter
potentially
useful
or
necessary
to
the
commercialization
of
our
products.
The
ultimate
scope
and
validity
of
existing
or
futurepatents
which
have
been
or
may
be
granted
to
third
parties,
and
the
availability
and
cost
of
acquiring
rights
in
those
patents
necessary
to
the
manufacture,
use
orsale
of
our
products
presently
cannot
be
determined
by
us.
Third
parties
may
have
or
may
obtain
valid
and
enforceable
patents
or
proprietary
rights
that
could
block
us
from
developing
products
using
our
technology,including:•certain
patents
and
applications
in
the
United
States
and
foreign
countries
covering
particular
antigens
and
antigenic
fragments
targeted
by
ourcurrent
drug
candidates,
including
CDX-1401;
•certain
patents
and
pending
applications
related
to
particular
receptors
and
other
molecules
on
dendritic
cells
and
macrophages
that
may
be
usefulfor
generating
monoclonal
antibodies
and
can
be
employed
in
our
APC
Targeting
Technology;
•a
United
States
patent
owned
by
Genentech,
Inc.,
relating
to
the
production
of
recombinant
antibodies
in
host
cells;
•certain
patents
held
by
third
parties
relating
to
antibody
expression
in
particular
types
of
host
cells;
and19 Table
of
Contents•a
United
States
patent
and
certain
pending
applications
assigned
to
Aduro
Biotech
Holdings
relating
to
anti-CD27
antibodies.
•We
are
also
aware
of
a
third
party
European
patent
that
relates
to
use
of
ErbB3
antibodies
for
treatment
of
hyperproliferative
disorders,
includingcancer.
Counterparts
of
this
patent
have
also
issued
in
Australia
and
Japan.
As
a
result
of
an
opposition
proceeding,
the
European
patent
wasrevoked
in
its
entirety.
The
owner
of
the
European
patent
has
appealed
the
decision
in
the
opposition
proceeding.
We
do
not
know
if
the
appeal
willsucceed,
or,
if
successful,
whether
the
scope
of
claims,
post-appeal,
would
be
relevant
to
our
activities.
Should
the
appeal
be
successful
and
alicense
be
necessary
for
our
program
that
targets
ErbB3,
we
cannot
predict
whether
we
would
be
able
to
obtain
such
a
license,
or,
if
a
license
wereavailable,
whether
it
would
be
available
on
commercially
reasonable
terms.
If
the
appeal
results
in
patents
having
a
valid
claim
relevant
to
our
useof
ErbB3
antibodies
and
a
license
under
the
patents
is
unavailable
on
commercially
relevant
terms,
or
at
all,
our
ability
to
commercialize
CDX-3379in
Europe
may
be
impaired
or
delayed.
We
would
vigorously
defend
ourselves,
but
we
cannot
predict
whether
the
patents
would
be
found
valid,enforceable
or
infringed.
We
also
continue
to
monitor
counterparts
in
other
jurisdictions
which
may
entail
comparable
risks
to
us
in
these
otherjurisdictions.
In
addition
to
the
patents
referred
to
in
the
previous
paragraphs,
there
may
be
other
patent
applications
and
issued
patents
belonging
to
competitors
that
mayrequire
us
to
alter
our
drug
candidates
and
immunotherapeutic
delivery
systems,
pay
licensing
fees
or
cease
some
of
our
activities.
If
our
drug
candidates
conflictwith
patents
that
have
been
or
may
be
granted
to
competitors,
universities
or
others,
the
patent
owners
could
bring
legal
action
against
us
claiming
damages
andseeking
to
enjoin
manufacturing
and
marketing
of
the
patented
products.
If
any
of
these
actions
is
successful,
in
addition
to
any
potential
liability
for
damages,
wecould
be
required
to
obtain
a
license
in
order
to
continue
to
manufacture
or
market
the
affected
products.
There
can
be
no
assurance
that
we
would
prevail
in
anysuch
action
or
that
any
license
required
under
any
such
third
party
patent
would
be
made
available
on
acceptable
terms
or
at
all.
We
believe
that
there
may
besignificant
litigation
in
the
biotechnology
industry
regarding
patent
and
other
intellectual
property
rights.
If
we
become
involved
in
that
litigation,
we
couldconsume
substantial
resources.Licenses
We
have
entered
into
several
significant
license
agreements
relating
to
technologies
that
are
being
developed
by
us.
In
general,
these
institutions
have
grantedus
an
exclusive
worldwide
license
(with
right
to
sublicense)
to
make,
use
and
sell
products
embodying
the
licensed
technology,
subject
to
the
reservation
by
thelicensor
of
a
non-exclusive
right
to
use
the
technologies
for
non-commercial
research
purposes.
Generally,
the
term
of
each
license
is
through
the
expiration
of
thelast
of
the
patents
issued
with
respect
to
the
technologies
covered
by
the
license.
We
have
generally
agreed
to
use
reasonable
efforts
to
develop
and
commercializelicensed
products
and
to
achieve
specified
milestones
and
pay
license
fees,
milestone
payments
and
royalties
based
on
the
net
sales
of
the
licensed
products
or
topay
a
percentage
of
sublicense
income.
If
we
breach
our
obligations,
the
licensor
has
the
right
to
terminate
the
license,
and,
in
some
cases,
convert
the
license
to
anon-exclusive
license.
Generally,
we
control
and
are
responsible
for
the
cost
of
defending
the
patent
rights
of
the
technologies
that
we
license.Proprietary Rights
We
also
rely
on
unpatented
technology,
trade
secrets
and
confidential
information,
and
no
assurance
can
be
given
that
others
will
not
independently
developsubstantially
equivalent
information
and
techniques
or
otherwise
gain
access
to
our
know-how
and
information,
or
that
we
can
meaningfully
protect
our
rights
insuch
unpatented
technology,
trade
secrets
and
information.
We
require
each
of
our
employees,
consultants
and
advisors
to
execute
a
confidentiality
agreement
atthe
commencement20 Table
of
Contentsof
an
employment
or
consulting
relationship
with
us.
The
agreements
generally
provide
that
all
inventions
conceived
by
the
individual
in
the
course
of
employmentor
in
providing
services
to
us
and
all
confidential
information
developed
by,
or
made
known
to,
the
individual
during
the
term
of
the
relationship
shall
be
theexclusive
property
of
us
and
shall
be
kept
confidential
and
not
disclosed
to
third
parties
except
in
limited
specified
circumstances.
There
can
be
no
assurance,however,
that
these
agreements
will
provide
meaningful
protection
for
our
information
in
the
event
of
unauthorized
use
or
disclosure
of
such
confidentialinformation.Government
Regulation
Our
activities
and
products
are
significantly
regulated
by
a
number
of
governmental
entities,
including
the
FDA
in
the
United
States
and
by
comparableauthorities
in
other
countries.
These
entities
regulate,
among
other
things,
the
manufacture,
testing,
safety,
effectiveness,
labeling,
documentation,
advertising
andsale
of
our
products.
We
must
obtain
regulatory
approval
from
FDA
and
comparable
authorities
in
other
countries,
as
applicable,
for
our
drug
candidates
before
wecan
commercialize
such
drugs
in
the
U.S.
and
foreign
jurisdictions.
Product
development
within
this
regulatory
framework
takes
a
number
of
years
and
involvesthe
expenditure
of
substantial
resources.
Many
drug
candidates
that
initially
appear
promising
ultimately
do
not
reach
the
market
because
they
are
found
to
beunsafe
or
ineffective
when
tested.
Our
inability
to
commercialize
a
product
would
impair
our
ability
to
earn
future
revenues.FDA Approval Process
In
the
United
States,
the
FDA
regulates
drugs
and
biological
products
under
the
Federal
Food,
Drug,
and
Cosmetic
Act,
or
FDCA,
the
Public
Health
ServiceAct,
or
PHSA,
and
implementing
regulations.
The
process
of
obtaining
regulatory
approvals
and
the
subsequent
compliance
with
appropriate
federal,
state,
localand
foreign
statutes
and
regulations
requires
the
expenditure
of
substantial
time
and
financial
resources.
Failure
to
comply
with
the
applicable
United
Statesrequirements
at
any
time
during
the
product
development
process,
approval
process
or
after
approval
may
subject
an
applicant
to
a
variety
of
administrative
orjudicial
sanctions,
such
as
the
FDA's
refusal
to
approve
pending
applications,
withdrawal
of
an
approval,
imposition
of
a
clinical
hold,
issuance
of
untitled
orwarning
letters,
product
recalls,
product
seizures,
total
or
partial
suspension
of
production
or
distribution
injunctions,
fines,
refusals
of
government
contracts,restitution,
disgorgement
of
profits,
civil
penalties
and
criminal
prosecution.
The
process
required
by
the
FDA
before
a
drug
or
biological
product
may
be
marketed
in
the
United
States
generally
involves
the
following:•completion
of
preclinical
laboratory
tests,
animal
studies
and
formulation
studies
in
compliance
with
the
FDA's
good
laboratory
practice,
or
GLP,regulations;
•submission
to
the
FDA
of
an
investigational
new
drug,
or
IND,
application
which
must
become
effective
before
human
clinical
trials
may
begin;
•approval
by
an
independent
institutional
review
board,
or
IRB,
at
each
clinical
site
before
each
trial
may
be
initiated;
•performance
of
adequate
and
well-controlled
human
clinical
trials
in
accordance
with
good
clinical
practices,
or
GCP,
to
establish
the
safety
andefficacy
of
the
proposed
drug
or
biological
product
for
each
indication;
•submission
to
the
FDA
of
a
new
drug
application,
or
NDA,
or
a
biologics
license
application,
or
BLA,
as
applicable;
•satisfactory
completion
of
an
FDA
advisory
committee
review,
if
applicable;21 Table
of
Contents•satisfactory
completion
of
an
FDA
inspection
of
the
manufacturing
facility
or
facilities
at
which
the
product
is
produced
to
assess
compliance
withcGMP
requirements
and
to
assure
that
the
facilities,
methods
and
controls
are
adequate
to
preserve
the
drug's
identity,
strength,
quality
and
purity;and
•FDA
review
and
approval
of
the
NDA
or
BLA.
We
expect
that
all
of
our
clinical
drug
candidates
will
be
subject
to
review
as
biological
products
under
BLA
standards.
Data
obtained
at
any
stage
of
testing
is
susceptible
to
varying
interpretations,
which
could
delay,
limit
or
prevent
regulatory
approval.
Moreover,
during
theregulatory
process,
new
or
changed
drug
approval
policies
may
cause
unanticipated
delays
or
rejection
of
our
product.
We
may
not
obtain
necessary
regulatoryapprovals
within
a
reasonable
period
of
time,
if
at
all,
or
avoid
delays
or
other
problems
in
testing
our
products.
Moreover,
even
if
we
received
regulatory
approvalfor
a
product,
the
approval
may
require
limitations
on
use,
which
could
restrict
the
size
of
the
potential
market
for
the
product.Clinical Trials
The
FDA
provides
that
human
clinical
trials
may
begin
30
days
after
receipt
and
review
of
an
IND
application,
unless
the
FDA
requests
additionalinformation
or
changes
to
the
study
protocol
within
that
period.
An
IND
must
be
sponsored
and
filed
for
each
of
our
proposed
drug
candidates.
Authorization
toconduct
a
clinical
trial
in
no
way
assures
that
the
FDA
will
ultimately
approve
the
product.
Clinical
trials
are
generally
conducted
in
three
sequential
phases.
In
aPhase
1
trial,
the
product
is
given
to
a
small
number
of
patients
to
test
for
safety
(adverse
effects),
determine
a
recommended
Phase
2
dose(s)
and
evaluate
anysignals
of
efficacy.
Phase
2
trials
are
conducted
on
a
limited
group
of
the
target
patient
population;
safety,
optimal
dosage
and
efficacy
are
studied.
A
Phase
3
trialis
performed
in
a
large
patient
population,
generally
over
a
wide
geographic
area
to
provide
evidence
for
the
safety
and
efficacy
of
the
product.
A
product's
safety
and
effectiveness
in
one
clinical
trial
is
not
necessarily
indicative
of
its
safety
and
effectiveness
in
another
clinical
trial.
Moreover,
we
maynot
discover
all
potential
problems
with
a
product
even
after
completing
clinical
trials
on
it.
Some
of
our
products
and
technologies
have
undergone
onlypreclinical
testing.
As
a
result,
we
do
not
know
whether
they
are
safe
or
effective
for
humans.
Also,
regulatory
authorities
may
decide,
contrary
to
our
findings,
thata
product
is
unsafe
or
not
as
effective
in
actual
use
as
its
clinical
trial
results
indicated.
This
could
prevent
the
product's
widespread
use,
require
its
withdrawal
fromthe
market
or
expose
us
to
liability.
The
FDA
or
the
sponsor
may
suspend
or
terminate
a
clinical
trial
at
any
time
on
various
grounds,
including
a
finding
that
thepatients
are
being
exposed
to
an
unacceptable
health
risk.
Similarly,
an
IRB
can
suspend
or
terminate
approval
of
a
clinical
trial
at
its
institution
if
the
clinical
trialis
not
being
conducted
in
accordance
with
the
IRB's
requirements
or
if
the
drug
has
been
associated
with
unexpected
serious
harm
to
patients.
Any
such
actioncould
materially
harm
us.
Clinical
trials
are
critical
to
the
success
of
our
products
but
are
subject
to
unforeseen
and
uncontrollable
delay,
including
delay
inenrollment
of
patients.
Any
delay
in
clinical
trials
could
delay
our
commercialization
of
a
product.Marketing Approval
Assuming
successful
completion
of
the
required
clinical
testing,
the
results
of
the
preclinical
and
clinical
studies,
together
with
detailed
information
relating
tothe
product's
pharmacology,
chemistry,
manufacture,
controls
and
proposed
labeling,
among
other
things,
are
submitted
to
the
FDA
as
part
of
an
NDA
or
BLArequesting
approval
to
market
the
product
for
one
or
more
indications.
FDA
approval
of
the
NDA
or
BLA
is
required
before
marketing
of
the
product
may
begin
inthe
United
States.
Under
federal
law,
the
submission
of
most
NDAs
and
BLAs
is
additionally
subject
to
a
substantial22 Table
of
Contentsapplication
user
fee
and
the
sponsor
of
an
approved
NDA
or
BLA
is
also
subject
to
annual
product
and
establishment
user
fees.
The
FDA
conducts
a
preliminary
review
of
all
NDAs
and
BLAs
within
the
first
60
days
after
receipt
before
accepting
them
for
filing
based
on
the
agency'sthreshold
determination
that
they
are
sufficiently
complete
to
permit
substantive
review.
The
FDA
may
request
additional
information
rather
than
accept
an
NDAor
BLA
for
filing.
In
this
event,
the
application
must
be
resubmitted
with
the
additional
information.
The
resubmitted
application
is
also
subject
to
review
beforethe
FDA
accepts
it
for
filing.
Once
the
submission
is
accepted
for
filing,
the
FDA
begins
an
in-depth
substantive
review.
The
FDA
has
agreed
to
specifiedperformance
goals
in
the
review
of
NDAs
and
BLAs.
Most
such
applications
for
non-priority
products
are
reviewed
within
ten
to
twelve
months
after
filing,
andmost
applications
for
priority
review
products,
that
is,
drugs
and
biologics
that
the
FDA
determines
represent
a
significant
improvement
over
existing
therapy,
arereviewed
in
six
to
eight
months
after
filing.
The
review
process
may
be
extended
by
the
FDA
for
three
additional
months
to
consider
certain
late-submittedinformation
or
clarification
regarding
information
already
provided
in
the
submission.
The
FDA
may
also
refer
applications
for
novel
drugs
or
biological
productsor
products
that
present
difficult
questions
of
safety
or
efficacy
to
an
advisory
committee,
typically
a
panel
that
includes
clinicians
and
other
experts,
for
review,evaluation
and
a
recommendation
as
to
whether
the
application
should
be
approved.
The
FDA
is
not
bound
by
the
recommendations
of
an
advisory
committee,
butit
considers
such
recommendations
carefully
when
making
decisions.
Before
approving
an
NDA
or
BLA,
the
FDA
typically
will
inspect
the
facility
or
facilities
where
the
product
is
manufactured.
The
FDA
will
not
approve
anapplication
unless
it
determines
that
the
manufacturing
processes
and
facilities
are
in
compliance
with
cGMP
requirements
and
adequate
to
assure
consistentproduction
of
the
product
within
required
specifications.
In
addition,
before
approving
an
NDA
or
BLA,
the
FDA
will
typically
inspect
one
or
more
clinical
sites
toassure
compliance
with
GCP
and
integrity
of
the
clinical
data
submitted.
The
testing
and
approval
process
requires
substantial
time,
effort
and
financial
resources,
and
each
may
take
many
years
to
complete.
Data
obtained
fromclinical
activities
are
not
always
conclusive
and
may
be
susceptible
to
varying
interpretations,
which
could
delay,
limit
or
prevent
regulatory
approval.
The
FDAmay
not
grant
approval
on
a
timely
basis,
or
at
all.
We
may
encounter
difficulties
or
unanticipated
costs
in
our
efforts
to
develop
our
drug
candidates
and
securenecessary
governmental
approvals,
which
could
delay
or
preclude
us
from
marketing
our
products.
After
the
FDA's
evaluation
of
the
NDA
or
BLA
and
inspection
of
the
manufacturing
facilities,
the
FDA
may
issue
an
approval
letter
or
a
complete
responseletter.
An
approval
letter
authorizes
commercial
marketing
of
the
drug
or
biological
product
with
specific
prescribing
information
for
specific
indications.
Acomplete
response
letter
generally
outlines
the
deficiencies
in
the
submission
and
may
require
substantial
additional
testing
or
information
in
order
for
the
FDA
toreconsider
the
application.
If
and
when
those
deficiencies
have
been
addressed
to
the
FDA's
satisfaction
in
a
resubmission
of
the
NDA,
the
FDA
will
issue
anapproval
letter.
The
FDA
has
committed
to
reviewing
such
resubmissions
in
two
or
six
months
depending
on
the
type
of
information
included.
Even
withsubmission
of
this
additional
information,
the
FDA
ultimately
may
decide
that
the
application
does
not
satisfy
the
regulatory
criteria
for
approval.
Even
if
the
FDA
approves
a
product,
it
may
limit
the
approved
indications
for
use
for
the
product,
require
that
contraindications,
warnings
or
precautions
beincluded
in
the
product
labeling,
require
that
post-approval
studies,
including
Phase
4
clinical
trials,
be
conducted
to
further
assess
a
drug's
safety
after
approval,require
testing
and
surveillance
programs
to
monitor
the
product
after
commercialization,
or
impose
other
conditions,
including
distribution
restrictions
or
otherrisk
management
mechanisms,
which
can
materially
affect
the
potential
market
and
profitability
of
the
product.
The
FDA
may
prevent
or
limit
further
marketing
ofa
product
based
on
the
results
of23 Table
of
Contentspost-market
studies
or
surveillance
programs.
After
approval,
some
types
of
changes
to
the
approved
product,
such
as
changes
in
indications,
manufacturingchanges
and
labeling,
are
subject
to
further
testing
requirements
and
FDA
review
and
approval.Special Regulatory Procedures Fast track designation —The
FDA
is
required
to
facilitate
the
development
and
expedite
the
review
of
drugs
and
biologics
that
are
intended
for
the
treatmentof
a
serious
or
life-threatening
disease
or
condition
and
which
demonstrate
the
potential
to
address
unmet
medical
needs
for
the
condition.
Under
the
fast
trackprogram,
the
sponsor
of
a
new
drug
or
biologic
candidate
may
request
the
FDA
to
designate
the
product
for
a
specific
indication
as
a
fast
track
product
concurrentwith
or
after
the
filing
of
the
IND
for
the
drug
candidate.
A
drug
that
receives
Fast
Track
designation
is
eligible
for
some
or
all
of
the
following:
(i)
more
frequentmeetings
with
FDA
to
discuss
the
drug's
development
plan
and
ensure
collection
of
appropriate
data
needed
to
support
drug
approval;
(ii)
more
frequent
writtencommunication
from
FDA
about
such
things
as
the
design
of
the
proposed
clinical
trials
and
use
of
biomarkers;
(iii)
eligibility
for
Accelerated
Approval
andPriority
Review,
if
relevant
criteria
are
met;
and
(iv)
Rolling
Review,
which
means
that
a
drug
company
can
submit
completed
sections
of
its
BLA
or
NDA
forreview
by
FDA,
rather
than
waiting
until
every
section
of
the
NDA
or
BLA
is
completed
before
the
entire
application
can
be
reviewed.
This
rolling
review
isavailable
if
the
applicant
provides
and
the
FDA
approves
a
schedule
for
the
submission
of
the
remaining
information
and
the
applicant
pays
applicable
user
fees.However,
the
FDA's
time
period
goal
for
reviewing
a
fast
track
application
does
not
begin
until
the
last
section
of
the
NDA
or
BLA
is
submitted.
In
addition,
thefast
track
designation
may
be
withdrawn
by
the
FDA
if
the
FDA
believes
that
the
designation
is
no
longer
supported
by
data
emerging
in
the
clinical
trial
process. Priority review —Under
FDA
policies,
a
drug
candidate
may
be
eligible
for
priority
review,
or
review
within
a
six
to
eight
month
time
frame
from
the
time
acomplete
application
is
accepted
for
filing.
Products
regulated
by
the
FDA's
Center
for
Drug
Evaluation
and
Research,
or
CDER,
are
eligible
for
priority
review
ifthey
provide
a
significant
improvement
compared
to
marketed
products
in
the
treatment,
diagnosis
or
prevention
of
a
disease.
Products
regulated
by
the
FDA'sCenter
for
Biologics
Evaluation
and
Research,
or
CBER,
are
eligible
for
priority
review
if
they
provide
a
significant
improvement
in
the
safety
or
effectiveness
ofthe
treatment,
diagnosis
or
prevention
of
a
serious
or
life-threatening
disease.
A
fast
track
designated
drug
candidate
could
be
eligible
for
priority
review
ifsupported
by
clinical
data
at
the
time
of
the
BLA
or
NDA
submission. Accelerated approval —Under
the
FDA's
accelerated
approval
regulations,
the
FDA
may
approve
a
drug
or
biologic
for
a
serious
or
life-threatening
illnessthat
provides
meaningful
therapeutic
benefit
to
patients
over
existing
treatments
based
on
a
surrogate
endpoint
that
is
reasonably
likely
to
predict
clinical
benefit.Surrogate
endpoints
can
often
be
measured
more
easily
or
more
rapidly
than
clinical
endpoints.
A
drug
candidate
approved
on
this
basis
is
subject
to
rigorous
post-marketing
compliance
requirements,
including
the
completion
of
Phase
4
or
post-approval
clinical
trials
to
confirm
the
effect
on
the
clinical
endpoint.
Failure
toconduct
required
post-approval
studies,
or
confirm
a
clinical
benefit
during
post-marketing
studies,
would
allow
the
FDA
to
withdraw
the
drug
from
the
market
onan
expedited
basis.
All
promotional
materials
for
drug
candidates
approved
under
accelerated
regulations
are
subject
to
prior
review
by
the
FDA. Breakthrough therapy designation —The
FDA
is
also
required
to
expedite
the
development
and
review
of
the
application
for
approval
of
drugs
that
areintended
to
treat
a
serious
or
life-threatening
disease
or
condition
where
preliminary
clinical
evidence
indicates
that
the
drug
candidate
may
demonstrate
substantialimprovement
over
existing
therapies
on
one
or
more
clinically
significant
endpoints.
Under
the
breakthrough
therapy
program,
the
sponsor
of
a
new
drug
candidatemay
request24 Table
of
Contentsthat
the
FDA
designate
the
drug
candidate
for
a
specific
indication
as
a
breakthrough
therapy
concurrent
with,
or
after,
the
filing
of
the
IND
for
the
drug
candidate. Orphan drug designation —Under
the
Orphan
Drug
Act,
the
FDA
may
grant
orphan
drug
designation
to
drugs
or
biologics
intended
to
treat
a
rare
disease
orcondition,
which
is
generally
defined
as
a
disease
or
condition
that
affects
fewer
than
200,000
individuals
in
the
United
States.
Orphan
drug
designation
does
notconvey
any
advantage
in,
or
shorten
the
duration
of,
the
regulatory
review
and
approval
process.
The
first
NDA
or
BLA
applicant
to
receive
FDA
approval
for
aparticular
active
ingredient
to
treat
a
particular
disease
with
FDA
orphan
drug
designation
is
entitled
to
a
seven-year
exclusive
marketing
period
in
the
UnitedStates
for
that
product,
for
that
indication.
During
the
seven-year
exclusivity
period,
the
FDA
may
not
approve
any
other
applications
to
market
the
same
drug
orbiologic
for
the
same
orphan
indication,
except
in
limited
circumstances.
Among
the
other
benefits
of
orphan
drug
designation
are
tax
credits
for
certain
researchand
a
waiver
of
the
NDA
or
BLA
application
user
fee.Pediatric information
Under
the
Pediatric
Research
Equity
Act
of
2003,
an
NDA,
BLA
or
supplement
to
an
NDA
or
BLA
must
contain
data
that
are
adequate
to
assess
the
safetyand
effectiveness
of
the
drug
or
biological
product
for
the
claimed
indications
in
all
relevant
pediatric
subpopulations,
and
to
support
dosing
and
administration
foreach
pediatric
subpopulation
for
which
the
product
is
safe
and
effective.
The
FDA
may,
on
its
own
initiative
or
at
the
request
of
the
applicant,
grant
deferrals
forsubmission
of
some
or
all
pediatric
data
until
after
approval
of
the
product
for
use
in
adults,
or
full
or
partial
waivers
from
the
pediatric
data
requirements.
Underthe
Food
and
Drug
Administration
Safety
and
Innovation
Act,
or
FDASIA,
the
FDA
has
additional
authority
to
take
action
against
manufacturers
not
adhering
topediatric
study
requirements.
Unless
otherwise
required
by
regulation,
the
pediatric
data
requirements
do
not
apply
to
products
with
orphan
drug
designation.Post Approval
Any
drug
or
biological
products
manufactured
or
distributed
by
us
pursuant
to
FDA
approvals
are
subject
to
pervasive
and
continuing
regulation
by
the
FDA,including,
among
other
things,
requirements
relating
to
recordkeeping,
periodic
reporting,
product
sampling
and
distribution,
advertising
and
promotion
andreporting
of
adverse
experiences
with
the
product.
After
approval,
most
changes
to
the
approved
product,
such
as
adding
new
indications
or
other
labeling
claimsare
subject
to
prior
FDA
review
and
approval.
The
FDA
may
impose
a
number
of
post-approval
requirements
as
a
condition
of
approval
of
an
NDA
or
BLA.
For
example,
the
FDA
may
require
post-marketing
testing,
including
Phase
4
clinical
trials,
and
surveillance
to
further
assess
and
monitor
the
product's
safety
and
effectiveness
after
commercialization.Regulatory
approval
of
oncology
products
often
requires
that
patients
in
clinical
trials
be
followed
for
long
periods
to
determine
the
overall
survival
benefit
of
thedrug
or
biologic.
In
addition,
drug
and
biologic
manufacturers
and
other
entities
involved
in
the
manufacture
and
distribution
of
approved
drugs
and
biological
products
arerequired
to
register
their
establishments
with
the
FDA
and
state
agencies
and
are
subject
to
periodic
unannounced
inspections
by
the
FDA
and
these
state
agenciesfor
compliance
with
cGMP
requirements.
The
FDA
was
also
granted
new
inspection
authorities
under
FDASIA.
Changes
to
the
manufacturing
process
are
strictlyregulated
and
often
require
prior
FDA
approval
before
being
implemented.
FDA
regulations
also
require
investigation
and
correction
of
any
deviations
from
cGMPand
impose
reporting
and
documentation
requirements
upon
us
and
any
third-party
manufacturers
that
we
may
decide
to
use.
Accordingly,
manufacturers
mustcontinue
to
expend
time,
money
and
effort
in
the
areas
of
production
and
quality
control
to
maintain
cGMP
compliance.25 Table
of
Contents
Once
an
approval
is
granted,
the
FDA
may
withdraw
the
approval
if
compliance
with
regulatory
requirements
and
standards
is
not
maintained
or
if
problemsoccur
after
the
product
reaches
the
market.
Later
discovery
of
previously
unknown
problems
with
a
product,
including
adverse
events
of
unanticipated
severity
orfrequency,
or
with
manufacturing
processes,
or
failure
to
comply
with
regulatory
requirements,
may
result
in
revisions
to
the
approved
labeling
to
add
new
safetyinformation,
imposition
of
post-market
studies
or
clinical
trials
to
assess
new
safety
risks
or
imposition
of
distribution
or
other
restrictions
under
a
Risk
Evaluationand
Mitigation
Strategy
program.
Other
potential
consequences
include,
among
other
things:•restrictions
on
the
marketing
or
manufacturing
of
the
product,
complete
withdrawal
of
the
product
from
the
market
or
product
recalls;
•fines,
untitled
and
warning
letters
or
holds
on
post-approval
clinical
trials;
•refusal
of
the
FDA
to
approve
pending
applications
or
supplements
to
approved
applications,
or
suspension
or
revocation
of
product
licenseapprovals;
•product
seizure
or
detention,
or
refusal
to
permit
the
import
or
export
of
products;
or
•consent
decrees,
injunctions
or
the
imposition
of
civil
or
criminal
prosecution.
The
FDA
strictly
regulates
marketing,
labeling,
advertising
and
promotion
of
products
that
are
placed
on
the
market.
Drugs
and
biologics
may
be
promotedonly
for
the
approved
indications
and
in
accordance
with
the
provisions
of
the
approved
label.
The
FDA
and
other
agencies
actively
enforce
the
laws
andregulations
prohibiting
the
promotion
of
off
label
uses,
and
a
company
that
is
found
to
have
improperly
promoted
off
label
uses
may
be
subject
to
significantliability.Biosimilars Law
The
Biologics
Price
Competition
and
Innovation
Act
of
2009,
or
BPCIA,
amended
the
PHSA
to
provide
for
an
abbreviated
approval
pathway
for
biologicalproducts
that
demonstrate
biosimilarity
to
a
previously-approved
biological
product.
The
BPCI
Act
establishes
criteria
for
determining
that
a
product
is
biosimilarto
an
already-licensed
biologic,
or
reference
product,
and
establishes
a
process
by
which
an
abbreviated
BLA
for
a
biosimilar
product
is
submitted,
reviewed
andapproved.
The
BPCI
Act
provides
periods
of
exclusivity
that
protect
a
reference
product
from
biosimilars
competition.
Under
the
BPCI
Act,
the
FDA
may
notaccept
a
biosimilar
application
for
review
until
four
years
after
the
date
of
first
licensure
of
the
reference
product,
and
the
biosimilar
may
not
be
licensed
until12
years
after
the
reference
product's
approval.
Additionally,
the
BPCI
Act
establishes
procedures
by
which
the
biosimilar
applicant
must
provide
informationabout
its
application
and
product
to
the
reference
product
sponsor,
and
by
which
information
about
potentially
relevant
patents
is
shared
and
litigation
over
patentsmay
proceed
in
advance
of
approval.
The
BPCI
Act
also
provides
a
period
of
exclusivity
for
the
first
biosimilar
to
be
determined
by
the
FDA
to
be
interchangeablewith
the
reference
product.
The
BPCIA
may
be
applied
to
our
drug
candidates
in
the
future
and
could
be
applied
to
allow
approval
of
biosimilars
to
our
products.
The
FDA
has
not
yet
issued
proposed
regulations
setting
forth
its
interpretation
of
the
BPCIA's
provisions
but
has
issued
guidance
documents
related
toBPCIA
implementation.
Because
the
BPCI
Act
is
a
relatively
new
law,
we
anticipate
that
its
contours
will
be
defined
as
the
statute
is
implemented
over
a
period
ofyears.
This
likely
will
be
accomplished
by
a
variety
of
means,
including
FDA
issuance
of
guidance
documents,
proposed
regulations
and
decisions
in
the
course
ofconsidering
specific
applications.
Such
evolution
may
significantly
affect
the
impact
of
the
BPCI
Act
on
both
reference
product
and
biosimilar
sponsors.26 Table
of
Contents21st Century Cures Act
On
December
13,
2016,
Congress
passed
the
21st
Century
Cures
Act,
or
the
Cures
Act.
The
Cures
Act
is
designed
to
modernize
and
personalize
healthcare,spur
innovation
and
research,
and
streamline
the
discovery
and
development
of
new
therapies
through
increased
federal
funding
of
particular
programs.
Itauthorizes
increased
funding
for
FDA
to
spend
on
innovation
projects,
including
for
certain
oncology-directed
research.
The
new
law
also
amends
the
PublicHealth
Service
Act
to
reauthorize
and
expand
funding
for
the
National
Institutes
of
Health.
Because
the
Cures
Act
has
only
recently
been
enacted,
its
potential
effect
on
our
business
remains
unclear
with
the
exception
of
a
provision
requiring
that
wepost
our
policies
on
the
availability
of
expanded
access
programs
for
individuals.
In
addition,
the
Cures
Act
includes
provisions
that
may
be
beneficial
to
us
in
thefuture,
including
a
requirement
that
the
FDA
assess
and
publish
guidance
on
the
use
of
novel
clinical
trial
designs,
the
use
of
real
world
evidence
in
applications,the
availability
of
summary
level
review
for
supplemental
applications
for
certain
indications,
and
the
qualification
of
drug
development
tools.
Because
theseprovisions
allow
FDA
several
years
to
develop
these
policies,
their
effects
on
us,
if
any,
could
be
delayed.
The
Cures
Act
also
authorizes
funding
for
the
"Cancer
Moonshot"
initiative.
The
Cancer
Moonshot
initiative's
strategic
goals
encourage
inter-agencycooperation
and
fund
research
and
innovation
to
catalyze
new
scientific
breakthroughs,
bring
new
therapies
to
patients,
and
strengthen
prevention
and
diagnosis.This
initiative
aims
to
stimulate
drug
development
through
the
creation
of
a
public-private
partnership
with
20
to
30
pharmaceutical
and
biotechnology
companiesto
expedite
cancer
researchers'
access
to
investigational
agents
and
approved
drugs.
This
partnership
is
designed
to
permit
researchers
to
obtain
drugs
and
othertechnologies
from
a
preapproved
"formulary"
list
without
having
to
negotiate
with
each
company
for
individual
research
projects.
We
will
continue
to
monitorthese
developments
to
assess
their
potential
impacts
on
our
business.Companion Diagnostic Review and Approval
We
expect
that
some
of
our
drug
candidates,
including
glembatumumab
vedotin,
will
rely
on
the
use
of
a
companion
diagnostic.
Companion
diagnostics
aresubject
to
regulation
by
the
FDA
and
comparable
foreign
regulatory
authorities
as
medical
devices
and
require
separate
clearance
or
approval
prior
to
theircommercialization.
Based
on
recent
FDA
guidance
documents
and
the
FDA's
past
treatment
of
companion
diagnostics,
we
believe
that
the
FDA
will
likely
requireone
or
more
of
our
in vitro companion
diagnostics
to
obtain
Premarket
Approval
Application,
or
PMA,
in
conjunction
with
approval
of
the
related
drug
candidate.The
receipt
and
timing
of
PMA
approval
may
have
a
significant
effect
on
the
receipt
and
timing
of
commercial
approval
for
such
drug
candidates.
Currently
werely
on
third
party
collaborators
to
develop
companion
diagnostics
for
our
drug
candidates.
The
PMA
process
is
costly,
lengthy
and
uncertain.
PMA
applications
must
be
supported
by
valid
scientific
evidence,
which
typically
requires
extensive
data,including
technical,
preclinical,
clinical
and
manufacturing
data,
to
demonstrate
to
the
FDA's
satisfaction
the
safety
and
effectiveness
of
the
device.
For
diagnostictests,
a
PMA
application
typically
includes
data
regarding
analytical
and
clinical
validation
studies.
As
part
of
its
review
of
the
PMA,
the
FDA
will
conduct
a
pre-approval
inspection
of
the
manufacturing
facility
or
facilities
to
ensure
compliance
with
the
Quality
System
Regulation,
or
QSR,
which
requires
manufacturers
tofollow
design,
testing,
control,
documentation
and
other
quality
assurance
procedures.
If
the
FDA
evaluations
of
both
the
PMA
application
and
the
manufacturingfacilities
are
favorable,
the
FDA
will
either
issue
an
approval
letter
or
an
approvable
letter,
which
usually
contains
a
number
of
conditions
that
must
be
met
in
orderto
secure
the
final
approval
of
the
PMA.
If
the
FDA's
evaluation
of
the
PMA
or
manufacturing
facilities
is
not
favorable,
the
FDA
will
deny
approval
of
the
PMAor
issue
a
not
approvable
letter.
A
not
approvable
letter
will
outline
the
deficiencies
in
the
application
and,
where
practical,
will
identify
what
is
necessary
to
makethe
PMA27 Table
of
Contentsapprovable.
The
FDA
may
also
determine
that
additional
clinical
trials
are
necessary,
in
which
case
the
PMA
approval
may
be
delayed
while
the
trials
areconducted
and
then
the
data
submitted
in
an
amendment
to
the
PMA.
Furthermore,
even
after
PMA
approval
is
obtained,
numerous
regulatory
requirements
apply
to
the
manufacturer
of
the
companion
diagnostic.
The
FDAenforces
these
requirements
by
inspection
and
market
surveillance.
These
requirements
include:
the
QSR,
labeling
regulations,
the
FDA's
general
prohibitionagainst
promoting
products
for
unapproved
or
"off
label"
uses,
the
medical
device
reporting
regulation,
and
the
reports
of
corrections
and
removals
regulation.
Ifthe
FDA
finds
a
violation,
it
can
institute
a
wide
variety
of
enforcement
actions,
ranging
from
a
public
warning
letter
to
more
severe
sanctions
such
as:
fines,injunctions
and
civil
penalties;
recall
or
seizure
of
products;
operating
restrictions,
partial
suspension
or
total
shutdown
of
production;
refusing
requests
for
PMA
ofnew
products;
and
withdrawing
PMAs
already
granted.Federal and State Fraud and Abuse, Data Privacy and Security and Transparency Laws
In
addition
to
FDA
restrictions
on
marketing
and
promotion
of
pharmaceutical
products,
several
other
types
of
federal
and
state
laws
have
been
applied
torestrict
certain
marketing
business
practices
in
the
biopharmaceutical
and
medical
device
industries
in
recent
years.
These
laws
include,
without
limitation,
stateand
federal
anti-kickback
statutes
and
false
claims
statutes
and
false
claims
laws,
data
privacy
and
security
laws,
as
well
as
transparency
laws
regarding
paymentsor
other
items
of
value
provided
to
healthcare
providers.
Applicable
state
law
may
be
broader
in
scope
than
federal
law
and
may
apply
regardless
of
payor,
inaddition
to
items
and
services
reimbursed
under
Medicaid
and
other
state
programs.
If
our
operations
are
found
to
be
in
violation
of
any
of
the
health
regulatorylaws
described
above
or
any
other
laws
that
apply
to
us,
we
may
be
subject
to
penalties,
including
potentially
significant
criminal
and
civil
and/or
administrativepenalties,
damages,
fines,
disgorgement,
imprisonment,
exclusion
from
participation
in
government
healthcare
programs,
contractual
damages,
reputational
harm,administrative
burdens,
diminished
profits
and
future
earnings,
and
the
curtailment
or
restructuring
of
our
operations,
any
of
which
could
adversely
affect
ourability
to
operate
our
business
and
our
results
of
operations.
To
the
extent
that
any
of
our
products
are
sold
in
a
foreign
country,
we
may
be
subject
to
similarforeign
laws,
which
may
include,
for
instance,
applicable
post-marketing
requirements,
including
safety
surveillance,
anti-fraud
and
abuse
laws
andimplementation
of
corporate
compliance
programs
and
reporting
of
payments
or
transfers
of
value
to
healthcare
professionals.
In
addition,
the
United
States
Foreign
Corrupt
Practices
Act,
or
FCPA,
prohibits
corporations
and
individuals
from
engaging
in
certain
activities
to
obtain
orretain
business
or
to
influence
a
person
working
in
an
official
capacity.
It
is
illegal
to
pay,
offer
to
pay
or
authorize
the
payment
of
anything
of
value
to
any
officialof
another
country,
government
staff
member,
political
party
or
political
candidate
in
an
attempt
to
obtain
or
retain
business
or
to
otherwise
influence
a
personworking
in
that
capacity.
In
many
countries,
the
healthcare
professionals
we
may
interact
with
may
meet
the
FCPA's
definition
of
a
foreign
government
official.Foreign Regulation
In
order
to
market
any
therapeutic
or
diagnostic
product
outside
of
the
United
States,
we
need
to
comply
with
numerous
and
varying
regulatory
requirementsof
other
countries
regarding
safety
and
efficacy
and
governing,
among
other
things,
clinical
trials,
marketing
authorization,
commercial
sales
and
distribution
ofour
products.
Whether
or
not
we
obtain
FDA
approval
for
a
product,
we
need
to
obtain
the
necessary
approvals
by
the
comparable
regulatory
authorities
of
foreigncountries
before
we
can
commence
clinical
trials
or
marketing
of
the
product
in
those
countries.
The
approval
process
varies
from
country
to
country
and
caninvolve
additional
product
testing
and
additional
administrative
review
periods.
The
time
required
to
obtain
approval
in
other
countries
might
differ
from
and
be28 Table
of
Contentslonger
than
that
required
to
obtain
FDA
approval.
Regulatory
approval
in
one
country
does
not
ensure
regulatory
approval
in
another,
but
a
failure
or
delay
inobtaining
regulatory
approval
in
one
country
may
negatively
impact
the
regulatory
process
in
others.
Under
the
EU
regulatory
system,
we
will
submit
most
of
our
marketing
authorization
applications
under
the
centralized
procedure.
The
centralized
procedureis
compulsory
for
medicines
produced
by
biotechnology,
or
are
for
the
treatment
of
cancer,
or
officially
designated
as
'orphan
medicines'.
The
centralizedprocedure
provides
for
the
grant
of
a
single
marketing
authorization
that
is
valid
for
all
EU
member
states.
As
in
the
United
States,
we
may
apply
for
designation
ofour
products
as
orphan
drug
for
the
treatment
of
a
specific
indication
in
the
EU
before
the
application
for
marketing
authorization
is
made.
The
EMA
grants
orphanmedicinal
product
designation
to
promote
the
development
of
products
that
may
offer
therapeutic
benefits
for
life-threatening
or
chronically
debilitating
conditionsaffecting
not
more
than
five
in
10,000
people
in
the
EU.
Orphan
drugs
in
Europe
enjoy
economic
and
marketing
benefits,
including
a
10-year
market
exclusivityperiod
for
the
approved
indication,
but
not
for
the
same
product,
unless
another
applicant
can
show
that
its
product
is
safer,
more
effective
or
otherwise
clinicallysuperior
to
the
orphan-designated
product.Other Regulatory Processes
From
time
to
time,
legislation
is
drafted,
introduced
and
passed
in
Congress
that
could
significantly
change
the
statutory
provisions
governing
the
testing,approval,
manufacturing
and
marketing
of
products
regulated
by
the
FDA.
In
addition
to
new
legislation,
FDA
regulations
and
policies
are
often
revised
or
interpreted
by
the
agency
in
ways
that
may
significantly
affect
our
businessand
our
products.
It
is
impossible
to
predict
whether
further
legislative
changes
will
be
enacted
or
whether
FDA
regulations,
guidance,
policies
or
interpretationswill
change
or
what
the
effect
of
such
changes,
if
any,
may
be.Third-Party
Payor
Coverage
and
Reimbursement
Significant
uncertainty
exists
as
to
the
coverage
and
reimbursement
status
of
any
drug
products
for
which
we
obtain
regulatory
approval.
Sales
of
any
of
ourdrug
candidates,
if
approved,
will
depend,
in
part,
on
the
extent
to
which
the
costs
of
the
drugs
will
be
covered
by
third-party
payors,
including
government
healthprograms
such
as
Medicare
and
Medicaid,
as
well
as
commercial
health
insurers,
such
as
managed
care
organizations.
The
process
for
determining
reimbursementrates
is
separate
from
the
payor
coverage
decision.
Therefore,
despite
obtaining
coverage,
reimbursement
rates
may
be
lower
than
expected,
which
can
result
inlarger
out-of-pocket
payments
for
the
patient.
In
order
to
secure
coverage
and
reimbursement
for
any
drug
that
might
be
approved
for
sale,
we
need
to
conduct
analyses
and
pharmaco-economic
studies
inorder
to
demonstrate
the
incremental
medical
benefit
over
and
above
the
generally-accepted
standard
of
care
and
cost-effectiveness
of
the
drug.
Our
drugcandidates
may
not
be
considered
medically
necessary,
provide
insufficient
incremental
medical
benefit,
or
may
not
be
deemed
cost-effective.
A
payor's
decisionto
provide
coverage
for
a
drug
product
does
not
imply
that
an
adequate
reimbursement
rate
will
be
approved.
The
containment
of
healthcare
costs
has
become
a
priority
of
federal,
state
and
foreign
governments,
and
the
prices
of
drugs
have
been
a
focus
in
this
effort.Third-party
payors
are
increasingly
challenging
the
prices
charged
for
medical
products
and
services
and
examining
the
medical
necessity
and
cost-effectiveness
ofmedical
products
and
services,
in
addition
to
their
safety
and
efficacy.
If
these
third-party
payors
do
not
consider
our
drugs
to
be
cost-effective
compared
to
otheravailable
therapies,
they
may
not
cover
our
drugs
after
approval
as
a
benefit
under
their
plans
or,
if
they
do,
the
level
of
reimbursement
and/or
restrictions
informulary
placement
may
be
such
that
they
would
significantly
limit
projected
sales
volumes.
In
addition
to
third
party
payors,
we
will
also
need
to
negotiateformulary
placement
with
hospitals,
health
systems
and
certain
independent
delivery29 Table
of
Contentsnetworks.
Such
negotiations
may
be
more
protracted
than
anticipated
and
may
be
compromised
because
of
similar
considerations,
relating
to
insufficientincremental
medical
benefit
and/or
cost-effectiveness.
Pricing
and
reimbursement
schemes
vary
widely
from
country
to
country.
For
example,
certain
EU
member
states
may
approve
a
specific
price
and
volumefor
a
drug
product
after
which
incremental
revenues
or
profits
need
to
be
paid
back
by
way
of
rebates.
They
may
also
institutionalize
utilization
restrictions,
curbphysicians'
drug
budgets,
provide
conditional
reimbursement
schemes
that
require
additional
evidence
to
be
generated
post-marketing
authorization,
etc.
Thedownward
pressure
on
healthcare
costs
in
general,
particularly
prescription
drugs,
has
been
particularly
evident
in
EU
markets,
for
some
time,
with
evidencepointing
to
increasing
pressures
on
the
horizon.
As
a
result,
increasingly
high
barriers
are
being
erected
to
the
pricing
and
reimbursement
of
new
drugs,
despiteregulatory
efforts
to
bring
drugs
to
market
sooner.
In
addition,
cross-border
trade
has
existed
for
some
time
in
the
EU,
allowing
pharmacies
in
one
country
toimport,
at
a
lower
price,
drug
from
another
country,
further
exerting
pricing
pressures
across
the
EU.
There
can
be
no
assurance
that
any
country
that
has
pricecontrols
or
reimbursement
limitations
for
drug
products
will
allow
favorable
reimbursement
and
pricing
arrangements
for
any
of
our
drugs.
The
marketability
of
any
drugs
for
which
we
receive
regulatory
approval
for
commercial
sale
may
suffer
if
third-party
payors
and/or
hospital
administratorsfail
to
provide
adequate
coverage,
reimbursement
or
formulary
placement.
Coverage
policies,
third-party
reimbursement
rates
and
drug
pricing
regulations
maychange
in
the
future.
In
particular,
uncertainty
within,
and
over
the
long-term,
of
the
Patient
Protection
and
Affordable
Care
Act,
or
PPACA,
in
the
U.S.,
may
meanthat
coverage,
reimbursement
and
pricing
structures
available
today
may
be
different
in
the
future.
In
addition,
the
States
may
continue
to
consider
legislation
oftheir
own
which
could
further
restrict
the
ability
to
freely
price
drugs
and/or
curb
utilization
in
the
U.S.
Even
if
favorable
coverage
and
reimbursement
status
isattained
for
one
or
more
drugs
for
which
we
receive
regulatory
approval,
less
favorable
coverage
policies
and
reimbursement
rates
may
be
implemented
in
thefuture.Employees
As
of
December
31,
2016,
we
employed
210
employees
(205
full-time,
2
part-time
and
3
interns),
40
of
whom
have
Ph.D.
and/or
M.D.
degrees.
Of
theseemployees,
177
were
engaged
in
or
directly
support
research
and
development
activities.
We
believe
that
our
employee
relations
are
good.
We
believe
that
ourfuture
success
will
depend
in
large
part
on
our
ability
to
attract
and
retain
experienced
and
skilled
employees.Research
and
Development
We
have
dedicated
a
significant
portion
of
our
resources
to
our
efforts
to
develop
our
drug
candidates.
We
incurred
research
and
development
expenses
of$102.7
million,
$100.2
million
and
$104.4
million
during
the
years
ended
December
31,
2016,
2015
and
2014,
respectively.
We
anticipate
that
a
significant
portionof
our
operating
expenses
will
continue
to
be
related
to
research
and
development
in
2017
as
we
continue
to
advance
our
drug
candidates
through
clinicaldevelopment.Corporate
and
Available
Information
We
are
incorporated
in
Delaware.
In
February
2016,
we
formed
a
wholly-owned
subsidiary,
Celldex
Therapeutics
Europe
GmbH,
in
Zug,
Switzerland.
We
arein
the
process
of
liquidating
Celldex
Therapeutics
Europe
GmbH.
In
July
2016,
we
formed
a
wholly-owned
subsidiary,
Celldex
Australia
Pty
Ltd
in
Brisbane,Australia.30 Table
of
Contents
Our
website
is
located
at
http://www.celldex.com. On
our
website,
investors
can
obtain,
free
of
charge,
a
copy
of
our
Annual
Report
on
Form
10-K,
QuarterlyReports
on
Form
10-Q,
Current
Reports
on
Form
8-K,
other
reports
and
any
amendments
thereto
filed
or
furnished
pursuant
to
Section
13(a)
or
15(d)
of
theExchange
Act
of
1934,
as
amended,
as
soon
as
reasonably
practicable
after
we
file
such
material
electronically
with,
or
furnish
it
to,
the
Securities
and
ExchangeCommission,
or
SEC.
None
of
the
information
posted
on
our
website
is
incorporated
by
reference
into
this
Annual
Report.Item
1A.
RISK
FACTORS
You
should
consider
carefully
these
risk
factors
together
with
all
of
the
information
included
or
incorporated
by
reference
in
this
Annual
Report
in
addition
toour
financial
statements
and
the
notes
to
our
financial
statements.
This
section
includes
forward-looking
statements.
The
following
is
a
discussion
of
the
risk
factors
that
we
believe
are
material
to
us
at
this
time.
These
risks
and
uncertainties
are
not
the
only
ones
facing
us
andthere
may
be
additional
matters
that
we
are
unaware
of
or
that
we
currently
consider
immaterial.
All
of
these
could
adversely
affect
our
business,
results
ofoperations,
financial
condition
and
cash
flows.Risks
Related
to
our
Financial
Condition
and
Capital
RequirementsWe currently have no product revenue and will need to raise capital to operate our business.
To
date,
we
have
generated
no
product
revenue
and
cannot
predict
when
and
if
we
will
generate
product
revenue.
We
had
an
accumulated
deficit
of$719.5
million
as
of
December
31,
2016.
Until,
and
unless,
we
complete
clinical
trials
and
further
development,
and
receive
approval
from
the
FDA
and
otherregulatory
authorities,
for
our
drug
candidates,
we
cannot
sell
our
drugs
and
will
not
have
product
revenue.
We
expect
to
spend
substantial
funds
to
continue
theresearch,
development
and
testing
of
our
products
that
are
in
the
preclinical
and
clinical
testing
stages
of
development
and
to
prepare
to
commercialize
products
inanticipation
of
FDA
approval.
Therefore,
for
the
foreseeable
future,
we
will
have
to
fund
all
of
our
operations
and
development
expenditures
from
cash
on
hand,equity
or
debt
financings,
licensing
fees
and
grants.
Additional
financing
will
be
required
to
meet
our
liquidity
needs.
If
we
do
not
succeed
in
raising
additionalfunds
on
acceptable
terms,
we
might
not
be
able
to
complete
planned
preclinical
and
clinical
trials
or
obtain
approval
of
any
drug
candidates
from
the
FDA
andother
regulatory
authorities.
In
addition,
we
could
be
forced
to
discontinue
product
development,
reduce
or
forego
sales
and
marketing
efforts,
forego
attractivebusiness
opportunities
or
curtail
operations.
Any
additional
sources
of
financing
could
involve
the
issuance
of
our
equity
securities,
which
would
have
a
dilutiveeffect
on
our
stockholders.
No
assurance
can
be
given
that
additional
financing
will
be
available
to
us
when
needed
on
acceptable
terms,
or
at
all.
We
cannot
be
certain
that
we
will
achieve
or
sustain
profitability
in
the
future.
Failure
to
achieve
profitability
could
diminish
our
ability
to
sustain
operations,pay
dividends
on
our
common
stock,
obtain
additional
required
funds
and
make
required
payments
on
our
present
or
future
indebtedness.We expect to incur future losses and we may never become profitable.
We
have
incurred
operating
losses
of
$132.9
million,
$129.5
million
and
$122.4
million
during
2016,
2015
and
2014,
respectively,
and
expect
to
incur
anoperating
loss
in
2017
and
beyond.
We
believe
that
operating
losses
will
continue
in
2017
and
beyond
because
we
are
planning
to
incur
significant
costs
associatedwith
the
clinical
development
of
our
drug
candidates
and
manufacturing
of
commercial
supply
to
prepare
for
the
potential
commercial
launch
of
glembatumumabvedotin
if
regulatory
approval
is
obtained.
During
the
years
ended
December
31,
2016,
2015
and
2014,
we
incurred
$24.9
million,
$36.3
million,
and
$45.6
millionin
clinical
trial
expense
and
$18.3
million,
$14.8
million,
and
$21.2
million
in
contract
manufacturing
expense.
We
anticipate
clinical
trial
expense
to
remain31 Table
of
Contentsrelatively
consistent
over
the
next
twelve
months
as
decreases
in
Rintega
costs
are
offset
by
increases
in
the
CDX-0158
and
CDX-3379
programs,
although
theremay
be
fluctuations
on
a
quarterly
basis.
We
anticipate
contract
manufacturing
expense
to
decrease
over
the
next
twelve
months
as
decreases
in
Rintega
costs
areonly
partially
offset
by
increases
in
the
CDX-0158
and
CDX-3379
programs.
Our
net
losses
have
had
and
will
continue
to
have
an
adverse
effect
on,
among
otherthings,
our
stockholders'
equity,
total
assets
and
working
capital.
We
expect
that
losses
will
fluctuate
from
quarter
to
quarter
and
year
to
year,
and
that
suchfluctuations
may
be
substantial.
We
cannot
predict
when
we
will
become
profitable,
if
at
all.We will need additional capital to fund our operations, including the development, manufacture and potential commercialization of our drug candidates. If wedo not have or cannot raise additional capital when needed, we may be unable to develop and ultimately commercialize our drug candidates successfully.
We
expect
to
incur
significant
costs
as
we
develop
our
drug
candidates.
In
particular,
the
continuing
development
and
commercialization
of
glembatumumabvedotin,
varlilumab,
CDX-0158,
CDX-3379
and
our
other
drug
candidates
requires
additional
capital
beyond
our
current
resources.
As
of
December
31,
2016,
wehad
cash,
cash
equivalents
and
marketable
securities
of
$189.8
million.
During
the
next
twelve
months
and
beyond,
we
will
take
further
steps
to
raise
additionalcapital
to
fund
our
liquidity
needs.
Our
capital
raising
activities
may
include,
but
may
not
be
limited
to,
one
or
more
of
the
following:•licensing
of
drug
candidates
with
existing
or
new
collaborative
partners;
•possible
business
combinations;
•issuance
of
debt;
or
•issuance
of
common
stock
or
other
securities
via
private
placements
or
public
offerings.
While
we
may
seek
capital
through
a
number
of
means,
there
can
be
no
assurance
that
additional
financing
will
be
available
on
acceptable
terms,
if
at
all,
andour
negotiating
position
in
capital-raising
efforts
may
worsen
as
existing
resources
are
used.
There
is
also
no
assurance
that
we
will
be
able
to
enter
into
furthercollaborative
relationships.
Additional
equity
financing
may
be
dilutive
to
our
stockholders;
debt
financing,
if
available,
may
involve
significant
cash
paymentobligations
and
covenants
that
restrict
our
ability
to
operate
as
a
business;
and
licensing
or
strategic
collaborations
may
result
in
royalties
or
other
terms
whichreduce
our
economic
potential
from
products
under
development.
If
we
are
unable
to
raise
the
funds
necessary
to
meet
our
long-term
liquidity
needs,
we
may
haveto
delay
or
discontinue
the
development
of
one
or
more
programs,
discontinue
or
delay
the
build-out
of
our
commercial
infrastructure
and
our
commercial
planningand
preparation
activities,
discontinue
or
delay
ongoing
or
anticipated
clinical
trials,
license
out
programs
earlier
than
expected,
raise
funds
at
significant
discountor
on
other
unfavorable
terms,
if
at
all,
or
sell
all
or
part
of
our
business.We may pay future milestone consideration to the former Kolltan stockholders. If we are unsuccessful in obtaining stockholder approval for the issuance ofcommon stock, we would pay the milestone consideration to former Kolltan stockholders in cash, in which case we may need to raise additional capital.
The
merger
agreement
between
us
and
Kolltan
provides
that
in
the
event
that
certain
specified
preclinical
and
clinical
development
milestones
related
toKolltan's
development
programs
and/or
Celldex's
development
programs
and
certain
commercial
milestones
related
to
Kolltan's
drug
candidates
are
achieved,
wewill
be
required
to
pay
Kolltan's
former
stockholders
milestone
payments
of
up
to
$172.5
million,
which
milestone
payments
may
be
made,
at
our
sole
election,
incash,
in
shares
of
our
common
stock
or
a
combination
of
both
(except
with
respect
to
non-accredited
former
shareholders
of
Kolltan
to
whom
we
will
pay
cash).Pursuant
to
applicable
NASDAQ
listing
rules,
we
are
required
to32 Table
of
Contentsobtain
stockholder
approval
of
such
issuances
of
our
common
stock
to
the
extent
that
such
issuances
exceed
19.9%
of
our
common
stock
outstanding
prior
to
themerger.
We
plan
to
seek
stockholder
approval
of
such
common
stock
issuances
at
our
2017
annual
meeting.
If
we
do
not
obtain
stockholder
approval
of
suchcommon
stock
issuances,
we
may
elect
to
pay
the
milestone
consideration
in
cash
to
maintain
compliance
with
applicable
NASDAQ
listing
standards.
We
may
stilldecide
to
pay
cash
even
if
we
obtain
stockholder
approval
although
it
is
required
to
maintain
a
certain
percentage
of
the
overall
consideration
paid
in
Celldexcommon
stock
to
satisfy
certain
tax
requirements
under
the
Merger
Agreement.
We
may
require
additional
capital
to
fund
any
milestone
payments
in
cash,depending
on
the
facts
and
circumstances
at
the
time
such
payments
become
due.Risks
Related
to
Development
and
Regulatory
Approval
of
Drug
CandidatesOur long term success depends heavily on our ability to fund and complete the research and development activities and obtain regulatory approval for ourprogram assets, including our lead drug candidate, glembatumumab vedotin.
We
are
particularly
dependent
on
the
future
success
of
glembatumumab
vedotin
because
it
is
our
most
advanced
drug
candidate.
Only
a
small
minority
of
allresearch
and
development
programs
ultimately
result
in
commercially
successful
drugs.
Clinical
failure
can
occur
at
any
stage
of
clinical
development.
Forexample,
in
March
2016,
we
decided
to
discontinue
ACT
IV,
a
randomized
Phase
3
clinical
study
of
Rintega
in
patients
with
newly
diagnosed
EGFRvIII-positiveglioblastoma,
based
on
the
determination
by
the
independent
Data
Safety
and
Monitoring
Board
that
continuation
of
the
ACT
IV
study
would
not
reach
statisticalsignificance
for
overall
survival
in
patients
with
minimal
residual
disease,
the
primary
endpoint
of
the
study,
because
both
the
Rintega
arm
and
the
control
armwere
performing
on
par
with
each
other.
Clinical
trials
may
produce
negative
or
inconclusive
results,
and
we
may
decide,
or
regulators
may
require
us,
to
conductadditional
clinical
or
preclinical
trials.
In
addition,
data
obtained
from
trials
are
susceptible
to
varying
interpretations,
and
regulators
may
not
interpret
our
data
asfavorably
as
we
do,
which
may
delay,
limit
or
prevent
regulatory
approval.
Success
in
preclinical
testing
and
early
clinical
trials
does
not
ensure
that
later
clinicaltrials
will
generate
the
same
results
or
otherwise
provide
adequate
data
to
demonstrate
the
efficacy
and
safety
of
a
drug
candidate.
We
will
need
substantial
additional
financing
to
complete
the
development
of
glembatumumab
vedotin,
varlilumab,
CDX-0158,
CDX-3379
and
our
otherdrug
candidates.
Further,
even
if
we
complete
the
development
of
glembatumumab
vedotin
or
any
of
our
other
drug
candidates
and
gain
marketing
approvals
fromthe
FDA
and
comparable
foreign
regulatory
authorities
in
a
timely
manner,
we
cannot
be
sure
that
such
drug
candidate
will
be
commercially
successful
in
thepharmaceutical
market.
If
the
results
of
clinical
trials,
the
anticipated
or
actual
timing
of
marketing
approvals,
or
the
market
acceptance
of
glembatumumab
vedotinor
any
other
drug
candidate,
if
approved,
do
not
meet
the
expectations
of
investors
or
public
market
analysts,
the
market
price
of
our
common
stock
would
likelydecline.We may enter into collaboration agreements for the licensing, development and ultimate commercialization of some of our drug candidates including, whereappropriate, for our lead drug candidates. In such cases, we will depend greatly on our third-party collaborators to license, develop and commercialize suchdrug candidates, and they may not meet our expectations.
We
may
enter
into
co-development
and
commercialization
partnerships
for
our
drug
candidates
where
appropriate,
including
glembatumumab
vedotin.
Theprocess
of
identifying
collaborators
and
negotiating
collaboration
agreements
for
the
licensing,
development
and
ultimate
commercialization
of
some
of
our
drugcandidates
may
cause
delays
and
increased
costs.
We
may
not
be
able
to
enter
into
collaboration
agreements
on
terms
favorable
to
us
or
at
all.
Furthermore
some
ofthose
agreements
may
give
substantial
responsibility
over
our
drug
candidates
to
the
collaborator.
Some
collaborators
may
be
unable
or
unwilling
to
devotesufficient
resources
to
develop
our
drug
candidates
as
their33 Table
of
Contentsagreements
require.
They
often
face
business
risks
similar
to
ours,
and
this
could
interfere
with
their
efforts.
Also,
collaborators
may
choose
to
devote
theirresources
to
products
that
compete
with
ours.
If
a
collaborator
does
not
successfully
develop
any
one
of
our
products,
we
will
need
to
find
another
collaborator
todo
so.
The
success
of
our
search
for
a
new
collaborator
will
depend
on
our
legal
right
to
do
so
at
the
time
and
whether
the
product
remains
commercially
viable.
If
we
enter
into
collaboration
agreements
for
one
or
more
of
our
lead
drug
candidates,
the
success
of
such
drug
candidates
will
depend
in
great
part
upon
ourand
our
collaborators'
success
in
promoting
them
as
superior
to
other
treatment
alternatives.
We
believe
that
our
drug
candidates
can
be
proven
to
offer
diseaseprevention
and
treatment
with
notable
advantages
over
drugs
in
terms
of
patient
compliance
and
effectiveness.
However,
there
can
be
no
assurance
that
we
will
beable
to
prove
these
advantages
or
that
the
advantages
will
be
sufficient
to
support
the
successful
commercialization
of
our
drug
candidates.Our drug candidates are subject to extensive regulatory scrutiny.
All
of
our
drug
candidates
are
at
various
stages
of
development
and
our
activities
and
drug
candidates
are
significantly
regulated
by
a
number
of
governmentalentities,
including
the
FDA
in
the
United
States
and
by
comparable
authorities
in
other
countries.
These
entities
regulate,
among
other
things,
the
manufacture,testing,
safety,
effectiveness,
labeling,
documentation,
advertising
and
sale
of
drugs
and
drug
candidates.
We
or
our
partners
must
obtain
regulatory
approval
for
adrug
candidate
in
all
of
these
areas
before
we
can
commercialize
any
of
our
drug
candidates.
Product
development
within
this
regulatory
framework
takes
anumber
of
years
and
involves
the
expenditure
of
substantial
resources.
This
process
typically
requires
extensive
preclinical
and
clinical
testing,
which
may
takelonger
or
cost
more
than
we
anticipate,
and
may
prove
unsuccessful
due
to
numerous
factors.
Many
drug
candidates
that
initially
appear
promising
ultimately
donot
reach
the
market
because
they
are
found
to
be
unsafe
or
ineffective
when
tested.
Companies
in
the
pharmaceutical,
biotechnology
and
immunotherapeutic
drugindustries
have
suffered
significant
setbacks
in
advanced
clinical
trials,
even
after
obtaining
promising
results
in
earlier
trials.
Our
inability
to
commercialize
a
drugcandidate
would
impair
our
ability
to
earn
future
revenues.If our drug candidates do not pass required tests for safety and effectiveness, we will not be able to obtain regulatory approval and derive commercial revenuefrom them.
In
order
to
succeed,
we
will
need
to
obtain
regulatory
approval
for
our
drug
candidates.
The
FDA
has
not
approved
any
of
our
drug
candidates
for
sale
to
date.Our
drug
candidates
are
in
various
stages
of
preclinical
and
clinical
testing.
Preclinical
tests
are
performed
at
an
early
stage
of
a
product's
development
and
provideinformation
about
a
product's
safety
and
effectiveness
on
laboratory
animals.
Preclinical
tests
can
last
years.
If
a
product
passes
its
preclinical
tests
satisfactorily,and
we
determine
that
further
development
is
warranted,
we
would
file
an
IND
application
for
the
product
with
the
FDA,
and
if
the
FDA
gives
its
approval
wewould
begin
Phase
1
clinical
tests.
Phase
1
testing
generally
lasts
between
6
and
24
months.
If
Phase
1
test
results
are
satisfactory
and
the
FDA
gives
its
approval,we
can
begin
Phase
2
clinical
tests.
Phase
2
testing
generally
lasts
between
6
and
36
months.
If
Phase
2
test
results
are
satisfactory
and
the
FDA
gives
its
approval,we
can
begin
Phase
3
pivotal
studies.
Phase
3
studies
generally
last
between
12
and
48
months.
Once
clinical
testing
is
completed
and
a
BLA
or
NDA
is
filed
withthe
FDA,
it
may
take
more
than
a
year
to
receive
FDA
approval.
In
all
cases
we
must
show
that
a
drug
candidate
is
both
safe
and
effective
before
the
FDA,
or
drug
approval
agencies
of
other
countries
where
we
intend
to
sellthe
product,
will
approve
it
for
sale.
Our
research
and
testing
programs
must
comply
with
drug
approval
requirements
both
in
the
United
States
and
in
othercountries,
since
we
are
developing
our
lead
products
with
the
intention
to,
or
could
later
decide
to,
commercialize
them
both
in
the
U.S.
and
abroad.
A
product
mayfail
for
safety
or
effectiveness
at
any
stage
of
the
testing
process.
A
major
risk
we
face
is
the
possibility
that
none
of
our34 Table
of
Contentsproducts
under
development
will
come
through
the
testing
process
to
final
approval
for
sale,
with
the
result
that
we
cannot
derive
any
commercial
revenue
fromthem
after
investing
significant
amounts
of
capital
in
multiple
stages
of
preclinical
and
clinical
testing.We may be unable to manage multiple late stage clinical trials for a variety of drug candidates simultaneously.
As
our
current
clinical
trials
progress,
we
may
need
to
manage
multiple
late
stage
clinical
trials
simultaneously
in
order
to
continue
developing
all
of
ourcurrent
products.
The
management
of
late
stage
clinical
trials
is
more
complex
and
time
consuming
than
early
stage
trials.
Typically,
early
stage
trials
involveseveral
hundred
patients
in
no
more
than
10
to
30
clinical
sites.
Late
stage
(Phase
3)
trials
may
involve
up
to
several
thousand
patients
in
up
to
several
hundredclinical
sites
and
may
require
facilities
in
several
countries.
Therefore,
the
project
management
required
to
supervise
and
control
such
an
extensive
program
issubstantially
larger
than
early
stage
programs.
As
the
need
for
these
resources
is
not
known
until
some
months
before
the
trials
begin,
it
is
necessary
to
recruit
largenumbers
of
experienced
and
talented
individuals
very
quickly.
If
the
labor
market
does
not
allow
this
team
to
be
recruited
quickly,
the
sponsor
is
faced
with
adecision
to
delay
the
program
or
to
initiate
it
with
inadequate
management
resources.
This
may
result
in
recruitment
of
inappropriate
patients,
inadequatemonitoring
of
clinical
investigators
and
inappropriate
handling
of
data
or
data
analysis.
Consequently
it
is
possible
that
conclusions
of
efficacy
or
safety
may
not
beacceptable
to
permit
filing
of
a
BLA
or
NDA
for
any
one
of
the
above
reasons
or
a
combination
of
several.Product testing is critical to the success of our products but subject to delay or cancellation if we have difficulty enrolling patients.
As
our
portfolio
of
drug
candidates
moves
from
preclinical
testing
to
clinical
testing,
and
then
through
progressively
larger
and
more
complex
clinical
trials,we
will
need
to
enroll
an
increasing
number
of
patients
with
the
appropriate
characteristics.
At
times
we
have
experienced
difficulty
enrolling
patients
and
we
mayexperience
more
difficulty
as
the
scale
of
our
clinical
testing
program
increases.
The
factors
that
affect
our
ability
to
enroll
patients
are
largely
uncontrollable
andinclude
principally
the
following:•the
nature
of
the
clinical
test;
•the
size
of
the
patient
population;
•patients'
willingness
to
receive
a
placebo
or
less
effective
treatment
on
the
control
arm
of
a
clinical
study;
•the
distance
between
patients
and
clinical
test
sites;
and
•the
eligibility
criteria
for
the
trial.
If
we
cannot
enroll
patients
as
needed,
our
costs
may
increase
or
we
may
be
forced
to
delay
or
terminate
testing
for
a
product.We may have delays in completing our clinical trials and we may not complete them at all.
We
have
not
completed
the
clinical
trials
necessary
to
obtain
FDA
approval
to
market
glembatumumab
vedotin
or
any
of
our
other
drug
candidates
indevelopment.
Clinical
trials
for
glembatumumab
vedotin
or
any
of
our
other
products
in
development
may
be
delayed
or
terminated
as
a
result
of
many
factors,including
the
following:•difficulty
in
enrolling
patients
in
our
clinical
trials;
•patients
failing
to
complete
clinical
trials
due
to
dissatisfaction
with
the
treatment,
side
effects
or
other
reasons;35 Table
of
Contents•failure
by
regulators
to
authorize
us
to
commence
a
clinical
trial;
•suspension
or
termination
by
regulators
of
clinical
research
for
many
reasons,
including
concerns
about
patient
safety
or
failure
of
our
contractmanufacturers
to
comply
with
cGMP
requirements;
•delays
or
failure
to
obtain
clinical
supply
for
our
products
necessary
to
conduct
clinical
trials
from
contract
manufacturers,
including
commercialgrade
clinical
supply
for
our
Phase
3
clinical
trials;
•treatment
candidates
demonstrating
a
lack
of
efficacy
during
clinical
trials;
•inability
to
continue
to
fund
clinical
trials
or
to
find
a
partner
to
fund
the
clinical
trials;
•competition
with
ongoing
clinical
trials
and
scheduling
conflicts
with
participating
clinicians;
and
•delays
in
completing
data
collection
and
analysis
for
clinical
trials.
Any
delay
or
failure
to
complete
clinical
trials
and
obtain
FDA
approval
for
our
drug
candidates
could
have
a
material
adverse
effect
on
our
cost
to
developand
commercialize,
and
our
ability
to
generate
revenue
from,
a
particular
drug
candidate.If serious adverse or unacceptable side effects are identified during the development of our drug candidates, we may need to abandon or limit our developmentof some of our drug candidates.
If
our
drug
candidates
are
associated
with
serious
adverse
events
or
undesirable
side
effects
in
clinical
trials
or
have
characteristics
that
are
unexpected,
wemay
need
to
abandon
their
development
or
limit
development
to
more
narrow
uses
or
subpopulations
in
which
the
serious
adverse
events,
undesirable
side
effectsor
other
characteristics
are
less
prevalent,
less
severe
or
more
acceptable
from
a
risk-benefit
perspective.
In
pharmaceutical
development,
many
drugs
that
initiallyshow
promise
in
early
stage
testing
for
treating
cancer
are
later
found
to
cause
side
effects
that
prevent
further
development
of
the
drug.
Currently
marketedtherapies
for
the
treatment
of
cancer
are
generally
limited
to
some
extent
by
their
toxicity.
In
addition
some
of
our
drug
candidates
would
be
chronic
therapies
or
beused
in
pediatric
populations,
for
which
safety
concerns
may
be
particularly
important.
Use
of
our
drug
candidates
as
monotherapies
may
also
result
in
adverseevents
consistent
in
nature
with
other
marketed
therapies.
In
addition,
when
used
in
combination
with
other
marketed
therapies,
our
drug
candidates
mayexacerbate
adverse
events
associated
with
the
marketed
therapy.Failure to successfully validate, develop and obtain regulatory approval for companion diagnostics for certain of our drug candidates, including our lead drugcandidate glembatumumab vedotin, could harm our drug development strategy and operational results.
As
an
element
of
our
clinical
development
approach,
we
may
seek
to
screen
and
identify
subsets
of
patients
that
express
a
certain
biomarker
or
that
have
acertain
genetic
alteration
who
may
derive
meaningful
benefit
from
our
development
drug
candidates.
To
achieve
this,
one
or
more
of
our
drug
developmentprograms
may
be
dependent
on
the
development
and
commercialization
of
a
companion
diagnostic
by
us
or
by
third
party
collaborators.
For
example,
we
haveengaged
third
party
collaborators
to
develop
a
commercially
suitable
companion
diagnostic
test
to
identify
patients
that
over
express
gpNMB
for
use
in
certainindications
with
glembatumumab
vedotin
and
such
companion
diagnostic
may
encounter
technical
hurdles
to
development
and
would
require
separate
approval
bythe
FDA,
for
which
we
must
rely
on
our
third
party
collaborator
to
obtain.
Companion
diagnostics
are
developed
in
conjunction
with
clinical
programs
for
theassociated
drug
candidate.
Companion
diagnostics
are
subject
to
regulation
as
medical
devices
and
must
themselves
be
approved
for
marketing
by
the
FDA
orcertain
other
foreign
regulatory
agencies
before
the
related
drug
candidate
may
be
commercialized.
The
approval
of
a
companion
diagnostic
as
part
of
the
productlabel
will
limit
the
use
of
the
drug
candidate36 Table
of
Contentsto
only
those
patients
who
express
the
specific
biomarker
it
was
developed
to
detect.
We
or
our
third
party
collaborators
may
also
experience
delays
in
developinga
sustainable,
reproducible
and
scalable
manufacturing
process
or
transferring
that
process
to
commercial
partners
or
negotiating
insurance
reimbursement
for
suchcompanion
diagnostic,
all
of
which
may
prevent
us
from
completing
our
clinical
trials
or
commercializing
our
drugs
on
a
timely
or
profitable
basis,
if
at
all.
To
date,
the
FDA
has
required
premarket
approval
of
all
companion
diagnostics
for
cancer
therapies.
We
and
our
third-party
collaborators
may
encounterdifficulties
in
developing
and
obtaining
approval
for
these
companion
diagnostics.
Any
delay
or
failure
by
us
or
third-party
collaborators
to
develop
or
obtainregulatory
approval
of
a
companion
diagnostic
could
delay
or
prevent
approval
of
our
related
drug
candidates
or,
if
regulatory
approval
is
obtained,
delay
or
limitour
ability
to
commercialize
our
related
drug
candidates.Any delay in obtaining regulatory approval would have an adverse impact on our ability to earn future revenues.
It
is
possible
that
none
of
the
drug
candidates
that
we
develop
will
obtain
the
regulatory
approvals
necessary
for
us
to
begin
commercializing
them.
The
timerequired
to
obtain
FDA
and
other
approvals
is
unpredictable
but
often
can
take
years
following
the
commencement
of
clinical
trials,
depending
upon
the
nature
ofthe
drug
candidate.
Any
analysis
we
perform
of
data
from
clinical
activities
is
subject
to
confirmation
and
interpretation
by
regulatory
authorities,
which
coulddelay,
limit
or
prevent
regulatory
approval.
Glembatumumab
vedotin
has
been
granted
Fast
Track
designation
by
the
FDA.
Fast
Track
designation
does
not
changethe
standards
for
approval,
guarantee
a
faster
review
time
as
compared
to
other
drugs
or
ensure
that
the
drug
will
ultimately
obtain
marketing
approval.
In
addition,the
FDA
may
withdraw
these
designations
at
any
time.
Any
delay
or
failure
in
obtaining
required
approvals
could
have
a
material
adverse
effect
on
our
ability
togenerate
revenues
from
the
particular
drug
candidate
including,
but
not
limited
to,
loss
of
patent
term
during
the
approval
period.
Furthermore,
if
we,
or
ourpartners,
do
not
reach
the
market
with
our
products
before
our
competitors
offer
products
for
the
same
or
similar
uses,
or
if
we,
or
our
partners,
are
not
effective
inmarketing
our
products,
our
revenues
from
product
sales,
if
any,
will
be
reduced.
We
face
intense
competition
in
our
development
activities.
We
face
competition
from
many
companies
in
the
United
States
and
abroad,
including
a
number
oflarge
pharmaceutical
companies,
firms
specialized
in
the
development
and
production
of
vaccines,
adjuvants
and
vaccine
and
immunotherapeutic
delivery
systemsand
major
universities
and
research
institutions.
Competitors
that
we
are
aware
of
that
have
initiated
a
pivotal
study
or
have
obtained
marketing
approval
for
apotential
competitive
drug/device
for
glembatumumab
vedotin
in
the
treatment
of
breast
cancer
include
AbbVie,
Astellas,
AstraZeneca,
Bristol-Myers
Squibb,Immunomedics,
Merck,
Nektar,
Novartis,
Pfizer,
Roche,
and
Tesaro.
Most
of
our
competitors
have
substantially
greater
resources,
more
extensive
experience
in
conducting
preclinical
studies
and
clinical
testing
and
obtainingregulatory
approvals
for
their
products,
greater
operating
experience,
greater
research
and
development
and
marketing
capabilities
and
greater
productioncapabilities
than
those
of
ours.
These
companies
might
succeed
in
obtaining
regulatory
approval
for
competitive
products
more
rapidly
than
we
can
for
ourproducts,
especially
if
we
experience
any
delay
in
obtaining
required
regulatory
approvals.A fast track designation or grant of priority review status by the FDA may not actually lead to a faster development or regulatory review or approval process.
In
the
United
States,
glembatumumab
vedotin
has
received
fast
track
designation
and
may
be
eligible
for
priority
review
status.
If
a
drug
is
intended
for
thetreatment
of
a
serious
or
life-threatening
disease
or
condition
and
the
drug
demonstrates
the
potential
to
address
unmet
medical
needs
for
this37 Table
of
Contentsdisease
or
condition,
the
drug
sponsor
may
apply
for
FDA
fast
track
designation.
If
a
drug
offers
major
advances
in
treatment,
the
drug
sponsor
may
apply
for
FDApriority
review
status.
The
FDA
has
broad
discretion
whether
or
not
to
grant
fast
track
designation
or
priority
review
status,
so
even
if
we
believe
a
particular
drugcandidate
is
eligible
for
such
designation
or
status,
the
FDA
could
decide
not
to
grant
it.
Even
though
glembatumumab
vedotin
has
received
fast
track
designationand
may
be
eligible
for
priority
review
status,
we
may
not
experience
a
faster
development
process,
review
or
approval
compared
to
conventional
FDA
procedures.Furthermore,
the
FDA
may
withdraw
fast
track
designation
if
it
believes
that
the
designation
is
no
longer
supported
by
data
from
our
clinical
developmentprogram.We have many competitors in our field and they may develop technologies that make ours obsolete.
Biotechnology,
pharmaceuticals
and
therapeutics
are
rapidly
evolving
fields
in
which
scientific
and
technological
developments
are
expected
to
continue
at
arapid
pace.
We
have
many
competitors
in
the
U.S.
and
abroad.
Competitors
that
we
are
aware
of
that
have
initiated
a
pivotal
study
or
have
obtained
marketingapproval
for
a
potential
competitive
drug/device
for
glembatumumab
vedotin
in
the
treatment
of
breast
cancer
include
AbbVie,
Astellas,
AstraZeneca,
Bristol-Myers
Squibb,
Immunomedics,
Merck,
Nektar,
Novartis,
Pfizer,
Roche,
and
Tesaro.
Our
success
depends
upon
our
ability
to
develop
and
maintain
a
competitiveposition
in
the
product
categories
and
technologies
on
which
we
focus.
Many
of
our
competitors
have
greater
capabilities,
experience
and
financial
resources
thanwe
do.
Competition
is
intense
and
is
expected
to
increase
as
new
products
enter
the
market
and
new
technologies
become
available.
Our
competitors
may:•develop
technologies
and
products
that
are
more
effective
than
ours,
making
ours
obsolete
or
otherwise
noncompetitive;
•obtain
regulatory
approval
for
products
more
rapidly
or
effectively
than
us;
and
•obtain
patent
protection
or
other
intellectual
property
rights
that
would
block
our
ability
to
develop
competitive
products.Risks
Related
to
Commercialization
of
Our
Drug
CandidatesWe may face delays, difficulties or unanticipated costs in establishing sales, marketing and distribution capabilities or seeking a partnership for thecommercialization of our drug candidates, even if regulatory approval is obtained.
We
may
choose
to
build
a
commercial
organization
which
we
believe
could
provide
us
with
the
strategic
options
to
either
retain
full
economic
rights
to
ourdrug
candidates
or
seek
favorable
economic
terms
through
advantageous
commercial
partnerships.
As
a
result,
we
may
have
full
responsibility
forcommercialization
of
one
or
more
of
our
drug
candidates
if
and
when
they
are
approved
for
sale.
We
currently
lack
sufficient
marketing,
sales
and
distributioncapabilities
to
carry
out
this
strategy.
If
any
of
our
drug
candidates
are
approved
by
the
FDA,
we
will
need
a
drug
sales
force
with
technical
expertise
prior
to
thecommercialization
of
any
of
our
drug
candidates.
We
may
not
succeed
in
developing
such
sales
and
distribution
capabilities,
the
cost
of
establishing
such
sales
anddistribution
capabilities
may
exceed
any
product
revenue,
or
our
direct
marketing
and
sales
efforts
may
be
unsuccessful.
We
may
find
it
necessary
to
enter
intostrategic
partnerships,
co-promotion
or
other
licensing
arrangements
and
to
the
extent
we
enter
into
such
strategic
partnerships,
co-promotion
or
other
licensingarrangements,
our
product
revenues
are
likely
to
be
lower
than
if
we
directly
marketed
and
sold
such
drugs,
and
some
or
all
of
the
revenues
we
receive
will
dependupon
the
efforts
of
third
parties,
which
may
not
be
successful
and
may
not
be
within
our
control.
If
we
are
unable
to
enter
into
such
strategic
partnerships,
co-promotion
or
other
licensing
arrangements
on
acceptable
terms
or
at
all,
we
may
not
be
able
to
successfully
commercialize
our
existing
and
future
drug
candidates.If
we
are
not
successful
in
commercializing
any
drug
candidates,
for
which
we
obtain
regulatory
approval,
either
on38 Table
of
Contentsour
own
or
through
collaborations
with
one
or
more
third
parties,
our
future
product
revenue
will
suffer
and
we
may
never
achieve
profitability
or
become
unableto
continue
the
operation
of
our
business.If our drug candidates for which we obtain regulatory approval do not achieve broad acceptance from physicians, patients and third-party payors, we may beunable to generate significant revenues, if any.
Even
if
we
obtain
regulatory
approval
for
our
drug
candidates,
our
approved
drugs
may
not
gain
market
acceptance
among
physicians
and
patients.
Webelieve
that
effectively
marketing
our
drug
candidates,
if
any
of
them
are
approved,
will
require
substantial
efforts,
both
prior
to
commercial
launch
and
afterapproval.
Physicians
may
elect
not
to
prescribe
our
drugs,
and
patients
may
elect
not
to
request
or
take
them,
for
a
variety
of
reasons
including:•limitations
or
warnings
contained
in
a
drug's
FDA-approved
labeling;
•changes
in
the
standard
of
care
or
the
availability
of
alternative
drugs
for
the
targeted
indications
for
any
of
our
drug
candidates;
•limitations
in
the
approved
indications
for
our
drug
candidates;
•the
approval,
availability,
market
acceptance
and
reimbursement
for
the
companion
diagnostic,
where
applicable;
•demonstrated
clinical
safety
and
efficacy
compared
to
other
drugs;
•significant
adverse
side
effects;
•effectiveness
of
education,
sales,
marketing
and
distribution
support;
•timing
of
market
introduction
and
perceived
effectiveness
of
competitive
drugs;
•cost-effectiveness;
•adverse
publicity
about
our
drug
candidates
or
favorable
publicity
about
competitive
drugs;
•convenience
and
ease
of
administration
of
our
drug
candidates;
and
•willingness
of
third-party
payors
to
reimburse
for
the
cost
of
our
drug
candidates.
If
our
future
drugs
fail
to
achieve
market
acceptance,
we
will
not
be
able
to
generate
significant
revenues
and
may
never
achieve
profitability.Even if any of our drug candidates receive FDA approval, the terms of the approval may limit such drug's commercial potential. Additionally, even afterreceipt of FDA approval, such drug would be subject to substantial, ongoing regulatory requirements.
The
FDA
has
complete
discretion
over
the
approval
of
our
drug
candidates.
If
the
FDA
grants
approval,
the
scope
of
the
approval
may
limit
our
ability
tocommercialize
such
drug,
and
in
turn,
limit
our
ability
to
generate
substantial
product
revenue.
For
example,
the
FDA
may
grant
approval
contingent
on
theperformance
of
costly
post-approval
clinical
trials
or
subject
to
warnings
or
contraindications.
Additionally,
even
after
granting
approval,
the
manufacturingprocesses,
labeling,
packaging,
distribution,
adverse
event
reporting,
storage,
advertising,
promotion
and
recordkeeping
for
such
drug
will
be
subject
to
extensiveand
ongoing
regulatory
requirements.
In
addition,
manufacturers
of
our
drug
candidates
are
required
to
comply
with
cGMP
regulations,
which
includerequirements
related
to
quality
control
and
quality
assurance
as
well
as
the
corresponding
maintenance
of
records
and
documentation.
Further,
regulatoryauthorities
must
inspect
and
approve
these
manufacturing
facilities
before
they
can
be
used
to
manufacture
our
drug
candidates,
and
these
facilities
are
subject
tocontinual
review
and
periodic
inspections
by
the
FDA
and
other
regulatory
authorities
for
compliance39 Table
of
Contentswith
cGMP
regulations.
If
we
or
a
third
party
discover
previously
unknown
problems
with
a
drug,
such
as
adverse
events
of
unanticipated
severity
or
frequency,
orproblems
with
the
facility
where
the
drug
is
manufactured,
a
regulatory
authority
may
impose
restrictions
on
that
product,
the
manufacturer
or
us,
includingrequiring
withdrawal
of
the
drug
from
the
market
or
suspension
of
manufacturing.
If
we,
our
drug
candidates
or
the
manufacturing
facilities
for
our
drug
candidatesfail
to
comply
with
regulatory
requirements
of
the
FDA
and/or
other
non-U.S.
regulatory
authorities,
we
could
be
subject
to
administrative
or
judicially
imposedsanctions,
including
the
following:•warning
letters;
•civil
or
criminal
penalties
and
fines;
•injunctions;
•consent
decrees;
•suspension
or
withdrawal
of
regulatory
approval;
•suspension
of
any
ongoing
clinical
studies;
•voluntary
or
mandatory
product
recalls
and
publicity
requirements;
•refusal
to
accept
or
approve
applications
for
marketing
approval
of
new
drugs;
•restrictions
on
operations,
including
costly
new
manufacturing
requirements;
or
•seizure
or
detention
of
drugs
or
import
bans.
The
regulatory
requirements
and
policies
may
change
and
additional
government
regulations
may
be
enacted
for
which
we
may
also
be
required
to
comply.We
cannot
predict
the
likelihood,
nature
or
extent
of
government
regulation
that
may
arise
from
future
legislation
or
administrative
action,
either
in
the
UnitedStates
or
in
other
countries.
If
we
are
not
able
to
maintain
regulatory
compliance,
we
may
not
be
permitted
to
market
our
future
products
and
our
business
maysuffer.Reimbursement decisions by third-party payors may have an adverse effect on pricing and market acceptance of any of our drug candidates. If there is notsufficient reimbursement for our future drugs, it is less likely that such drugs will be widely used.
Market
acceptance
and
sales
of
any
of
our
drug
candidates
for
which
we
obtain
regulatory
approval
will
depend
on
reimbursement
policies
and
may
beaffected
by
future
healthcare
reform
measures
in
both
the
United
States
and
foreign
jurisdictions.
Government
authorities
and
third-party
payors,
such
as
privatehealth
insurers
and
health
maintenance
organizations,
decide
which
drugs
they
will
cover
and
establish
payment
levels.
In
addition,
government
authorities
andthese
third-party
payors
are
increasingly
attempting
to
contain
health
care
costs
by
demanding
price
discounts
or
rebates
and
limiting
both
the
types
and
variety
ofdrugs
that
they
will
cover
and
the
amounts
that
they
will
pay
for
these
drugs.
In
addition,
we
might
need
to
conduct
post-marketing
studies
in
order
to
demonstratethe
cost-effectiveness
of
any
future
drugs
to
such
payors'
satisfaction.
Such
studies
might
require
us
to
commit
a
significant
amount
of
management
time
andfinancial
and
other
resources.
Reimbursement
rates
may
vary
according
to
the
use
of
the
drug
and
the
clinical
setting
in
which
it
is
used,
may
be
based
on
payments
allowed
for
lower-costproducts
that
are
already
reimbursed,
may
be
incorporated
into
existing
payments
for
other
products
or
services,
and
may
reflect
budgetary
constraints
and/orimperfections
in
Medicare
or
Medicaid
data
used
to
calculate
these
rates.
Net
prices
for
drugs
may
be
reduced
by
mandatory
discounts
or
rebates
required
bygovernment
health
care
programs.
Such
legislation,
or
similar
regulatory
changes
or
relaxation
of
laws
that
restrict
imports
of
drugs
from
other
countries,
couldreduce
the
net
price
we
receive
for
any
future
marketed
drugs.
As
a
result,
our
future
drugs
might
not
ultimately
be
considered
cost-effective.40 Table
of
Contents
We
cannot
be
certain
that
reimbursement
will
be
available
for
any
drug
candidates
that
we
develop.
Also,
we
cannot
be
certain
that
reimbursement
policieswill
not
reduce
the
demand
for,
or
the
price
paid
for,
any
future
drugs.
If
reimbursement
is
not
available
or
is
available
on
a
limited
basis,
we
may
not
be
able
tosuccessfully
commercialize
any
drug
candidates
that
we
develop.Other factors could affect the demand for and sales and profitability of any drug candidates that we may commercialize in the future.
In
general,
other
factors
that
could
affect
the
demand
for
and
sales
and
profitability
of
our
future
drugs
include,
but
are
not
limited
to:•the
timing
of
regulatory
approval,
if
any,
of
competitive
drugs;
•our
or
any
other
of
our
partners'
pricing
decisions,
as
applicable,
including
a
decision
to
increase
or
decrease
the
price
of
a
drug,
and
the
pricingdecisions
of
our
competitors;
•government
and
third-party
payor
reimbursement
and
coverage
decisions
that
affect
the
utilization
of
our
future
drugs
and
competing
drugs;
•negative
safety
or
efficacy
data
from
new
clinical
studies
conducted
either
in
the
U.S.
or
internationally
by
any
party
could
cause
the
sales
of
ourfuture
drugs
to
decrease
or
a
future
drug
to
be
recalled;
•the
degree
of
patent
protection
afforded
our
future
drugs
by
patents
granted
to
or
licensed
by
us
and
by
the
outcome
of
litigation
involving
our
orany
of
our
licensor's
patents;
•the
outcome
of
litigation
involving
patents
of
other
companies
concerning
our
future
drugs
or
processes
related
to
production
and
formulation
ofthose
drugs
or
uses
of
those
drugs;
•the
increasing
use
and
development
of
alternate
therapies;
•the
rate
of
market
penetration
by
competing
drugs;
and
•the
termination
of,
or
change
in,
existing
arrangements
with
our
partners.
Any
of
these
factors
could
have
a
material
adverse
effect
on
the
sales
of
any
drug
candidates
that
we
may
commercialize
in
the
future.Failure to obtain regulatory approvals in foreign jurisdictions will prevent us from marketing our products internationally.
We
plan
to
seek
approval
for
glembatumumab
vedotin
in
Europe
and
may
seek
approval
of
our
other
drug
candidates
outside
the
United
States
and
maymarket
future
products
in
international
markets.
In
order
to
market
our
future
products
in
the
European
Economic
Area,
or
EEA,
and
many
other
foreignjurisdictions,
we
must
obtain
separate
regulatory
approvals.
Specifically,
in
the
EEA,
medicinal
products
can
only
be
commercialized
after
obtaining
a
MarketingAuthorization,
or
MA.
Before
granting
the
MA,
the
European
Medicines
Agency
or
the
competent
authorities
of
the
member
states
of
the
EEA
make
an
assessment
of
the
risk-benefit
balance
of
the
product
on
the
basis
of
scientific
criteria
concerning
its
quality,
safety
and
efficacy.
The
approval
procedures
vary
among
countries
and
can
involve
additional
clinical
testing,
and
the
time
required
to
obtain
approval
may
differ
from
thatrequired
to
obtain
FDA
approval.
Clinical
studies
conducted
in
one
country
may
not
be
accepted
by
regulatory
authorities
in
other
countries.
Approval
by
the
FDAdoes
not
ensure
approval
by
regulatory
authorities
in
other
countries,
and
approval
by
one
or
more
foreign
regulatory
authorities
does
not
ensure
approval
byregulatory
authorities
in
other
foreign
countries
or
by
the
FDA.
However,
a
failure
or
delay
in
obtaining
regulatory
approval
in
one
country
may
have
a
negativeeffect
on
the
regulatory
process
in
others.
The41 Table
of
Contentsforeign
regulatory
approval
process
may
include
all
of
the
risks
associated
with
obtaining
FDA
approval.
We
may
not
obtain
foreign
regulatory
approvals
on
atimely
basis,
if
at
all.
We
may
not
be
able
to
file
for
regulatory
approvals
and
even
if
we
file
we
may
not
receive
necessary
approvals
to
commercialize
ourproducts
in
any
market.If we obtain approval to commercialize any approved products outside of the United States, a variety of risks associated with international operations couldmaterially adversely affect our business.
If
our
drug
candidates
are
approved
for
commercialization
outside
of
the
United
States,
we
expect
that
we
will
be
subject
to
additional
risks
related
tointernational
operations
and
entering
into
international
business
relationships,
including:•different
regulatory
requirements
for
drug
approvals;
•reduced
protection
for
intellectual
property
rights,
including
trade
secret
and
patent
rights;
•unexpected
changes
in
tariffs,
trade
barriers
and
regulatory
requirements;
•economic
weakness,
including
inflation,
or
political
instability
in
particular
foreign
economies
and
markets;
•compliance
with
tax,
employment,
immigration
and
labor
laws
for
employees
living
or
traveling
abroad;
•foreign
taxes,
including
withholding
of
payroll
taxes;
•foreign
currency
fluctuations,
which
could
result
in
increased
operating
expenses
and
reduced
revenues,
and
other
obligations
incident
to
doingbusiness
in
another
country;
•workforce
uncertainty
in
countries
where
employment
regulations
are
different
than,
and
labor
unrest
is
more
common
than,
in
the
United
States;
•production
shortages
resulting
from
any
events
affecting
raw
material
supply
or
manufacturing
capabilities
abroad;
•business
interruptions
resulting
from
geopolitical
actions,
including
war
and
terrorism,
or
natural
disasters
including
earthquakes,
hurricanes,
floodsand
fires;
and
•difficulty
in
importing
and
exporting
clinical
trial
materials
and
study
samples.Risks
Related
to
Reliance
on
Third
PartiesWe rely on third parties to plan, conduct and monitor our clinical tests, and their failure to perform as required would interfere with our product development.
We
rely
on
third
parties
to
conduct
a
significant
portion
of
our
clinical
development
activities.
These
activities
include
clinical
patient
recruitment
andobservation,
clinical
trial
monitoring,
clinical
data
management
and
analysis,
safety
monitoring
and
project
management.
We
conduct
project
management
andmedical
and
safety
monitoring
in-house
for
some
of
our
programs
and
rely
on
third
parties
for
the
remainder
of
our
clinical
development
activities.
The
significant
third
parties
who
we
currently
rely
on
for
clinical
development
activities
include
PPD
Development,
LLC
for
clinical
studies
including
ourMETRIC
study.
If
any
of
these
third
parties,
including
PPD
Development,
is
unable
to
perform
in
a
quality
and
timely
manner,
and
at
a
feasible
cost,
our
clinicalstudies
will
face
delays.
Further,
if
any
of
these
third
parties
fails
to
perform
as
we
expect
or
if
their
work
fails
to
meet
regulatory
standards,
our
testing
could
bedelayed,
cancelled
or
rendered
ineffective.42 Table
of
ContentsWe rely on contract manufacturers over whom we have limited control. Should the cost, delivery and quality of clinical and commercial grade materialsmanufactured by us in our Fall River facility or supplied by contract manufacturers vary to our disadvantage, our business operations could suffer significantharm.
We
have
limited
experience
in
commercial
manufacturing.
We
rely
on
CMOs,
to
manufacture
drug
substance
and
drug
product
for
our
late-stage
clinicalstudies
of
glembatumumab
vedotin
as
well
as
for
future
commercial
supplies.
Our
ability
to
conduct
late-stage
clinical
trials,
manufacture
and
commercialize
ourdrug
candidates,
if
regulatory
approval
is
obtained,
depends
on
the
ability
of
such
third
parties
to
manufacture
our
drug
candidates
on
a
large
scale
at
a
competitivecost
and
in
accordance
with
cGMP
and
foreign
regulatory
requirements,
if
applicable.
We
also
rely
on
CMOs
for
filling,
packaging,
storage
and
shipping
of
drugproduct.
In
order
for
us
to
establish
our
own
commercial
manufacturing
facility,
we
would
require
substantial
additional
funds
and
would
need
to
hire
and
retainsignificant
additional
personnel
and
comply
with
extensive
cGMP
regulations
applicable
to
such
a
facility.
The
commercial
manufacturing
facility
would
also
needto
be
licensed
for
the
production
of
our
drug
candidates
by
the
FDA.
For
our
most
advanced
programs,
we
are
working
with
CMOs
under
established
manufacturing
arrangements
that
comply
with
the
FDA's
requirements
andother
regulatory
standards,
although
there
is
no
assurance
that
the
manufacturing
will
be
successful.
Prior
to
approval
of
any
drug
candidate,
the
FDA
must
reviewand
approve
validation
studies
for
drug
product.
The
manufacturing
processes
for
our
drug
candidates
and
immunotherapeutic
delivery
systems
utilize
knowntechnologies.
We
believe
that
the
products
we
currently
have
under
development
can
be
scaled
up
to
permit
manufacture
in
commercial
quantities.
However,
therecan
be
no
assurance
that
we
will
not
encounter
difficulties
in
scaling
up
the
manufacturing
processes.
Significant
scale-up
of
manufacturing
may
result
inunanticipated
technical
challenges
and
may
require
additional
validation
studies
that
the
FDA
must
review
and
approve.
CMOs
may
encounter
difficulties
inscaling
up
production,
including
problems
involving
raw
material
suppliers,
production
yields,
technical
difficulties,
scaled-up
product
characteristics,
qualitycontrol
and
assurance,
shortage
of
qualified
personnel,
capacity
constraints,
changing
priorities
within
the
CMOs,
compliance
with
FDA
and
foreign
regulations,environmental
compliance,
production
costs
and
development
of
advanced
manufacturing
techniques
and
process
controls.
Any
of
these
difficulties,
if
they
occur,and
are
not
overcome
to
the
satisfaction
of
the
FDA
or
other
regulatory
agency,
could
lead
to
significant
delays
and
possibly
the
termination
of
the
developmentprogram
for
such
drug
candidate.
These
risks
become
more
acute
as
we
scale
up
for
commercial
quantities,
where
a
reliable
source
of
drug
product
becomescritical
to
commercial
success.
The
commercial
viability
of
any
of
our
drug
candidates,
if
approved,
will
depend
on
the
ability
of
our
contract
manufacturers
toproduce
drug
product
on
a
large
scale.
Failure
to
achieve
this
level
of
supply
can
jeopardize
and
prevent
the
successful
commercialization
of
the
drug.
To
date,
we
have
utilized
CMOs
for
the
manufacture
of
clinical
trial
supplies
of
glembatumumab
vedotin.
In
the
second
half
of
2016,
we
established
arelationship
with
Patheon
Biologics
in
Brisbane
to
manufacture
the
glembatumumab
vedotin
mAb
intermediate
due
to
being
informed
by
Lonza
Biologics,
ourprevious
CMO,
that
the
bioreactors
used
to
manufacture
glembatumumab
vedotin
will
be
decommissioned
and
would
not
be
available
for
commercialization.
Wealso
have
a
relationship
with
Piramal
Healthcare
UK
Ltd.
to
manufacture
the
antibody
drug
conjugate
with
the
vcMMAE
linker-toxin.
The
drug
substance
is
thenfilled
and
packaged
at
Piramal
Lexington
or
BSP
Pharma.
We
rely
on
MilliporeSigma
for
supplying
suitable
quantities
of
vcMMAE.
Any
manufacturing
failuresor
delays
by
our
glembatumumab
vedotin
contract
manufacturers
or
suppliers
of
materials
could
cause
delays
in
our
glembatumumab
vedotin
clinical
studiesincluding
the
METRIC
study
and/or
a
BLA
filing
and,
if
regulatory
approval
is
obtained,
commercial
launch
of
glembatumumab
vedotin.
We
also
utilize
CMOs
for
the
manufacture
of
varlilumab
for
global
clinical
trials
and
potential
commercialization.
We
have
established
relationships
withPatheon
Biologics
in
St.
Louis
for
the
manufacture
of
varlilumab
drug
substance
and
Vetter
Pharma
for
the
manufacture
of
varlilumab
drug43 Table
of
Contentsproduct.
Any
manufacturing
failures
or
delays
by
our
varlilumab
CMOs
could
cause
delays
in
our
varlilumab
clinical
studies.
We
operate
our
own
cGMP
manufacturing
facility
in
Fall
River,
Massachusetts,
to
produce
drug
substance
for
our
current
and
planned
early-stage
clinicaltrials.
Our
Fall
River
manufacturing
facility
has
250L
and
1000L
bioreactor
capacity
and
is
able
to
manufacture
in
compliance
with
FDA
regulations,
allowing
usto
distribute
potential
products
to
clinical
sites
in
the
U.S.
for
early
clinical
trials.
We
currently
manufacture
CDX-1401,
CDX-301,
and
CDX-1140
drug
substanceand
CDX-014
mAb
intermediate
in
our
Fall
River
facility
for
our
current
and
planned
Phase
1
and
Phase
2
clinical
trials.
CDX-014,
an
antibody-drug
conjugate,
isthen
manufactured
by
Lonza
(Visp).
We
expect
our
existing
clinical
supplies
of
CDX-3379
and
CDX-0158
will
be
sufficient
to
carry
out
our
current
plannedclinical
development.
Additional
manufacturing
is
under
review
and
may
involve
utilization
of
the
Fall
River
facility
and/or
a
CMO.
All
products
are
then
filledand
packaged
at
contract
manufacturers.
Any
manufacturing
failures
or
compliance
issues
at
contract
manufacturers
could
cause
delays
in
our
Phase
1
and
Phase
2clinical
studies
for
these
drug
candidates.
Our
leading
drug
candidates
require
specialized
manufacturing
capabilities
and
processes.
We
may
face
difficulty
in
securing
commitments
from
U.S.
andforeign
contract
manufacturers
as
these
manufacturers
could
be
unwilling
or
unable
to
accommodate
our
needs.
Relying
on
foreign
manufacturers
involves
peculiarand
increased
risks,
including
the
risk
relating
to
the
difficulty
foreign
manufacturers
may
face
in
complying
with
cGMP
requirements
as
a
result
of
languagebarriers,
lack
of
familiarity
with
cGMP
or
the
FDA
regulatory
process
or
other
causes,
economic
or
political
instability
in
or
affecting
the
home
countries
of
ourforeign
manufacturers,
shipping
delays,
potential
changes
in
foreign
regulatory
laws
governing
the
sales
of
our
product
supplies,
fluctuations
in
foreign
currencyexchange
rates
and
the
imposition
or
application
of
trade
restrictions.
There
can
be
no
assurances
that
contract
manufacturers
will
be
able
to
meet
our
timetable
and
requirements.
Further,
contract
manufacturers
must
operate
incompliance
with
cGMP
and
failure
to
do
so
could
result
in,
among
other
things,
the
disruption
of
product
supplies.
As
noted
above,
non-U.S.
contractmanufacturers
may
face
special
challenges
in
complying
with
cGMP
requirements,
and
although
we
are
not
currently
dependent
on
non-U.S.
collaborators
orcontract
manufacturers,
we
may
choose
or
be
required
to
rely
on
non-U.S.
sources
in
the
future
as
we
seek
to
develop
stable
supplies
of
increasing
quantities
ofmaterials
for
ongoing
clinical
trials
of
larger
scale.
Our
dependence
upon
third
parties
for
the
manufacture
of
our
products
may
adversely
affect
our
profit
marginsand
our
ability
to
develop,
manufacture,
sell
and
deliver
products
on
a
timely
and
competitive
basis.We currently rely on sole suppliers for key components of our drug candidates. Any production problems with our suppliers or other disruptions in the supplyof such components could adversely affect us
We
currently
rely
on
sole
suppliers
for
key
components
of
our
drug
candidates,
including
vcMMAE
for
glembatumumab
vedotin
and
Hiltonol
for
CDX-1401.While
we
work
with
the
suppliers
of
these
key
components
to
ensure
continuity
of
supply,
no
assurance
can
be
given
that
these
efforts
will
be
successful.
Inaddition,
due
to
regulatory
requirements
relating
to
the
qualification
of
suppliers,
we
may
not
be
able
to
establish
additional
or
replacement
sources
on
a
timelybasis
or
without
excessive
cost.
If
our
suppliers
were
to
terminate
our
arrangements
or
fail
to
meet
our
supply
needs
we
might
be
forced
to
delay
our
developmentprograms
or
we
could
face
disruptions
in
the
distribution
and
sale
of
any
drugs
for
which
we
obtain
regulatory
approval.We currently rely on third party collaborators to develop and commercialize companion diagnostic tests for certain of our drug candidates, including our leaddrug candidate glembatumumab vedotin.
We
do
not
have
experience
or
capabilities
in
developing,
administering,
obtaining
regulatory
approval
for,
or
commercializing
companion
diagnostic
tests
andwill
need
to
rely
in
large
part
on
third44 Table
of
Contentsparty
collaborators
to
perform
these
functions.
Companion
diagnostic
tests
are
subject
to
regulation
by
the
FDA
and
similar
regulatory
authorities
outside
of
theUnited
States
as
medical
devices
and
require
separate
regulatory
approval
prior
to
commercialization.
We
are
dependent
on
such
third
party
collaborators
to
obtainregulatory
approval
and
commercialize
such
companion
diagnostic
tests.
Such
third
party
collaborators:•may
not
perform
its
obligations
as
expected
or
as
required
under
our
collaboration
agreement;
•may
encounter
production
difficulties
that
could
constrain
the
supply
of
the
companion
diagnostic
test;
•may
have
difficulties
gaining
acceptance
of
the
use
of
the
companion
diagnostic
test
in
the
clinical
community;
•may
not
pursue
commercialization
of
the
companion
diagnostic
test
even
if
they
receive
any
required
regulatory
approvals;
•may
elect
not
to
continue
the
development
or
commercialization
of
the
companion
diagnostic
test
based
on
changes
in
the
third
parties'
strategicfocus
or
available
funding,
or
external
factors
such
as
an
acquisition,
that
divert
resources
or
create
competing
priorities;
•may
not
commit
sufficient
resources
to
the
marketing
and
distribution
of
the
companion
diagnostic
test;
and
•may
terminate
their
relationship
with
us.
If
such
third
party
collaborators
fail
to
develop,
obtain
regulatory
approval
or
commercialize
the
companion
diagnostic
test,
we
may
not
be
able
to
enter
intoarrangements
with
another
diagnostic
company
to
obtain
supplies
of
an
alternative
diagnostic
test
for
use
in
connection
with
the
development
andcommercialization
of
our
product
candidates
or
do
so
on
commercially
reasonable
terms,
which
could
adversely
affect
and/or
delay
the
development
orcommercialization
of
our
drug
candidates.Our reliance on third parties requires us to share our trade secrets, which increases the possibility that a competitor will discover them.
Because
we
rely
on
third
parties
to
develop
our
products,
we
must
share
trade
secrets
with
them.
We
seek
to
protect
our
proprietary
technology
in
part
byentering
into
confidentiality
agreements
and,
if
applicable,
material
transfer
agreements,
collaborative
research
agreements,
consulting
agreements
or
other
similaragreements
with
our
collaborators,
advisors,
employees
and
consultants
prior
to
beginning
research
or
disclosing
proprietary
information.
These
agreementstypically
restrict
the
ability
of
our
collaborators,
advisors,
employees
and
consultants
to
publish
data
potentially
relating
to
our
trade
secrets.
Our
academiccollaborators
typically
have
rights
to
publish
data,
provided
that
we
are
notified
in
advance
and
may
delay
publication
for
a
specified
time
in
order
to
secure
ourintellectual
property
rights
arising
from
the
collaboration.
In
other
cases,
publication
rights
are
controlled
exclusively
by
us,
although
in
some
cases
we
may
sharethese
rights
with
other
parties.
We
also
conduct
joint
research
and
development
programs
which
may
require
us
to
share
trade
secrets
under
the
terms
of
researchand
development
partnership
or
similar
agreements.
Despite
our
efforts
to
protect
our
trade
secrets,
our
competitors
may
discover
our
trade
secrets,
either
throughbreach
of
these
agreements,
independent
development
or
publication
of
information
including
our
trade
secrets
in
cases
where
we
do
not
have
proprietary
orotherwise
protected
rights
at
the
time
of
publication.
A
competitor's
discovery
of
our
trade
secrets
would
impair
our
competitive
position.45 Table
of
ContentsRisks
Related
to
Business
OperationsWe depend greatly on the intellectual capabilities and experience of our key executives, commercial personnel and scientists and the loss of any of them couldaffect our ability to develop our products.
The
loss
of
Anthony
S.
Marucci,
our
President
and
Chief
Executive
Officer,
or
other
executive
officers
or
key
members
of
our
staff,
including
Avery
W.Catlin,
our
Chief
Financial
Officer,
Dr.
Thomas
Davis,
our
Chief
Medical
Officer,
Dr.
Tibor
Keler,
our
Chief
Scientific
Officer,
Dr.
Ronald
Pepin,
our
ChiefBusiness
Officer,
Dr.
Richard
Wright,
our
Chief
Commercial
Officer,
Elizabeth
Crowley,
our
Chief
Product
Development
Officer
and
Theresa
LaVallee,
ourSenior
Vice
President,
Regulatory
and
Precision
Medicine,
could
harm
us.
We
entered
into
employment
agreements
with
Mr.
Marucci
and
each
of
our
executiveofficers
although
an
employment
agreement
as
a
practical
matter
does
not
guarantee
retention
of
an
employee.
We
also
depend
on
our
scientific
and
clinicalcollaborators
and
advisors,
all
of
whom
have
outside
commitments
that
may
limit
their
availability
to
us.
In
addition,
we
believe
that
our
future
success
will
dependin
large
part
upon
our
ability
to
attract
and
retain
highly
skilled
scientific,
managerial
and
marketing
personnel,
particularly
as
we
expand
our
activities
in
clinicaltrials,
the
regulatory
approval
process
and
sales
and
manufacturing.
We
routinely
enter
into
consulting
agreements
with
our
scientific
and
clinical
collaborators
andadvisors,
key
opinion
leaders
and
heads
of
academic
departments
in
the
ordinary
course
of
our
business.
We
also
enter
into
contractual
agreements
with
physiciansand
institutions
who
recruit
patients
into
our
clinical
trials
on
our
behalf
in
the
ordinary
course
of
our
business.
Notwithstanding
these
arrangements,
we
facesignificant
competition
for
this
type
of
personnel
from
other
companies,
research
and
academic
institutions,
government
entities
and
other
organizations.
Wecannot
predict
our
success
in
hiring
or
retaining
the
personnel
we
require
for
continued
growth.We may expand our clinical development, regulatory and sales and marketing capabilities, and as a result, we may encounter difficulties in managing ourgrowth, which could disrupt our operations.
We
expect
that
if
our
drug
candidates
continue
to
progress
in
development,
we
may
require
significant
additional
investment
in
personnel,
managementsystems
and
resources,
particularly
in
the
build
out
of
our
commercial
capabilities.
To
date
we
have
hired
a
core
commercial
team
to
plan
for
potential
commerciallaunches
if
any
of
our
drug
candidates
are
approved.
Over
the
next
several
years,
we
may
experience
significant
growth
in
the
number
of
our
employees
and
thescope
of
our
operations,
particularly
in
the
areas
of
drug
development,
regulatory
affairs
and
sales
and
marketing.
To
manage
this
potential
future
growth,
we
maycontinue
to
implement
and
improve
our
managerial,
operational
and
financial
systems,
expand
our
facilities
and
continue
to
recruit
and
train
additional
qualifiedpersonnel.
Due
to
our
limited
financial
resources
and
the
limited
experience
of
our
management
team
in
managing
a
company
with
such
anticipated
growth,
wemay
not
be
able
to
effectively
manage
the
expansion
of
our
operations
or
recruit
and
train
additional
qualified
personnel.
The
physical
expansion
of
our
operationsmay
lead
to
significant
costs
and
may
divert
our
management
and
business
development
resources.
Any
inability
to
manage
growth
could
delay
the
execution
ofour
business
plans
or
disrupt
our
operations.Integrating Kolltan's organization is expected to be costly and may divert management's attention away from our operations.
We
are
in
the
process
of
integrating
Kolltan's
organization
and
while
we
plan
such
integration
to
be
cash
neutral,
we
expect
to
incur
significant
costsintegrating
Kolltan's
operations,
facility,
products
and
personnel.
Furthermore,
successful
integration
of
Kolltan's
preclinical
and
clinical
programs,
operations,
andpersonnel
may
place
a
significant
burden
on
our
management
and
internal
resources.
The
costs
of
integrating
Kolltan's
operations
with
ours
and
the
diversion
ofmanagement's
attention
and
any
difficulties
encountered
in
the
transition
and
integration
process
could
result
in
delays
in
the46 Table
of
Contentspreclinical
and
clinical
trial
programs
of
Kolltan
and/or
Celldex
and
could
otherwise
harm
our
business,
financial
condition
and
operating
results.If we are unable to successfully integrate Kolltan's organization, we may not operate efficiently or realize the anticipated benefits of our acquisition of Kolltan.
The
success
of
the
merger
will
depend
on,
among
other
things,
the
combined
company's
ability
to
operate
efficiently
and
to
achieve
its
business
objectives,including
the
successful
development
of
its
drug
candidates.
Achieving
the
benefits
of
the
merger
will
depend
in
part
on
the
successful
integration
of
Kolltan'spreclinical
and
clinical
programs,
operations
and
personnel
in
a
timely
and
efficient
manner.
If
we
cannot
successfully
integrate
Kolltan's
preclinical
and
clinicalprograms,
operations
and
personnel,
we
may
not
realize
the
expected
benefits
of
the
merger.
The
integration
process
may
result
in
the
disruption
of
each
company'songoing
business,
an
adverse
impact
on
the
value
of
our
assets,
or
inconsistencies
in
standards,
controls,
procedures
or
policies
that
could
adversely
affect
ourability
to
comply
with
reporting
obligations
as
a
public
company,
to
satisfy
our
obligations
to
third
parties
or
to
achieve
the
anticipated
benefits
of
the
merger.
Any
delays
in
the
integration
process
or
inability
to
operate
efficiently
or
to
realize
the
full
extent
of
the
anticipated
benefits
of
the
merger
could
have
anadverse
effect
on
our
business
prospects
and
results
of
operations.Our employees may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements, which couldhave a material adverse effect on our business.
We
are
exposed
to
the
risk
of
employee
fraud
or
other
misconduct.
Misconduct
by
employees
could
include
intentional
failures
to
comply
with
FDAregulations,
provide
accurate
information
to
the
FDA,
comply
with
applicable
privacy
laws,
comply
with
manufacturing
standards
we
have
established,
complywith
federal
and
state
health-care
fraud
and
abuse
laws
and
regulations,
report
financial
information
or
data
accurately
or
disclose
unauthorized
activities
to
us.
Inparticular,
sales,
marketing
and
business
arrangements
in
the
healthcare
industry
are
subject
to
extensive
laws
and
regulations
intended
to
prevent
fraud,
kickbacks,self-dealing
and
other
abusive
practices.
These
laws
and
regulations
may
restrict
or
prohibit
a
wide
range
of
pricing,
discounting,
marketing
and
promotion,
salescommission,
customer
incentive
programs
and
other
business
arrangements.
Employee
misconduct
could
also
involve
the
improper
use
of
information
obtained
inthe
course
of
clinical
trials,
which
could
result
in
regulatory
sanctions
and
serious
harm
to
our
reputation.
We
have
adopted
a
Code
of
Business
Conduct
and
Ethicsand
launched
a
Health
Care
Compliance
program,
but
it
is
not
always
possible
to
identify
and
deter
employee
misconduct.
The
precautions
we
take
to
detect
andprevent
this
activity
may
not
be
effective
in
controlling
unknown
or
unmanaged
risks
or
losses
or
in
protecting
us
from
governmental
investigations
or
otheractions
or
lawsuits
stemming
from
a
failure
to
be
in
compliance
with
such
laws
or
regulations.
If
any
such
actions
are
instituted
against
us,
and
we
are
notsuccessful
in
defending
ourselves
or
asserting
our
rights,
those
actions
could
have
a
significant
effect
on
our
business
and
results
of
operations,
including
theimposition
of
significant
fines
or
other
sanctions.We may engage in strategic transactions that could impact our liquidity, increase our expenses and present significant distractions to our management.
From
time
to
time
we
may
consider
strategic
transactions,
including
acquisitions
of
companies,
such
as
our
acquisition
of
Kolltan
in
the
fourth
quarter
of2016,
asset
purchases
and
out-licensing
or
in-licensing
of
products,
drug
candidates
or
technologies.
Additional
potential
transactions
that
we
may
consider
includea
variety
of
different
business
arrangements,
including
spin-offs,
strategic
partnerships,
joint
ventures,
restructurings,
divestitures,
business
combinations
andinvestments.
Any
such
transaction
may
require
us
to
incur
non-recurring
or
other
charges,
may
increase
our
near
and
long-term
expenditures
and
may
posesignificant
integration
challenges
or
disrupt
our
management
or
business,47 Table
of
Contentswhich
could
adversely
affect
our
operations
and
financial
results.
For
example,
these
transactions
may
entail
numerous
operational
and
financial
risks,
including:•exposure
to
unknown
liabilities;
•disruption
of
our
business
and
diversion
of
our
management's
time
and
attention
in
order
to
develop
acquired
products,
drug
candidates
ortechnologies;
•incurrence
of
substantial
debt
or
dilutive
issuances
of
equity
securities
to
pay
for
acquisitions;
•higher
than
expected
acquisition
and
integration
costs;
•write-downs
of
assets
or
goodwill
or
impairment
charges;
•increased
amortization
expenses;
•difficulty
and
cost
in
combining
the
operations
and
personnel
of
any
acquired
businesses
with
our
operations
and
personnel;
•impairment
of
relationships
with
key
suppliers
or
customers
of
any
acquired
businesses
due
to
changes
in
management
and
ownership;
and
•inability
to
retain
key
employees
of
any
acquired
businesses.
Accordingly,
although
there
can
be
no
assurance
that
we
will
undertake
or
successfully
complete
any
transactions
of
the
nature
described
above,
anytransactions
that
we
do
complete
could
have
a
material
adverse
effect
on
our
business,
results
of
operations,
financial
condition
and
prospects.We may not be able to successfully integrate our existing technology or to modify our technologies to create new immunotherapeutic drugs.
If
we
are
able
to
integrate
our
acquired
assets,
such
as
Kolltan's
drug
development
programs
and
TAM
technology,
and
licensed
assets
with
ourimmunotherapy
technologies,
we
believe
these
assets
will
give
our
immunotherapeutic
drugs
a
competitive
advantage.
However,
if
we
are
unable
to
successfullyintegrate
licensed
assets,
or
other
technologies
which
we
have
acquired
or
may
acquire
in
the
future,
with
our
existing
technologies
and
potential
products
currentlyunder
development,
we
may
be
unable
to
realize
any
benefit
from
our
acquisition
of
these
assets,
or
other
technologies
which
we
have
acquired
or
may
acquire
inthe
future
and
may
face
the
loss
of
our
investment
of
financial
resources
and
time
in
the
integration
process.
We
believe
that
our
immunotherapy
technology
portfolio
may
offer
opportunities
to
develop
immunotherapeutic
drugs
that
treat
a
variety
of
oncology,inflammatory
and
infectious
diseases
by
stimulating
a
patient's
immune
system
against
those
disease
organisms.
If
our
immunotherapy
technology
portfolio
cannotbe
used
to
create
effective
immunotherapeutic
drugs
against
a
variety
of
disease
organisms,
we
may
lose
all
or
portions
of
our
investment
in
development
effortsfor
new
drug
candidates.Our internal computer systems, or those of our CROs, CMOs, or other contractors or consultants, may fail or suffer security breaches, which could result in amaterial disruption of our drug development programs.
Despite
the
implementation
of
security
measures,
our
internal
computer
systems
and
those
of
our
CROs,
CMOs
and
other
contractors
and
consultants
arevulnerable
to
damage
from
cyberattacks,
malicious
intrusion,
computer
viruses,
unauthorized
access,
loss
of
data
privacy,
natural
disasters,
terrorism,
war
andtelecommunication,
electrical
failures
or
other
significant
disruption.
If
such
an
event
were
to
occur
and
cause
interruptions
in
our
operations,
it
could
result
in
amaterial
disruption
of
our
drug
development
programs
and
commercialization
efforts.
For
example,
the
loss
of
clinical
study
data
from
completed
or
ongoingclinical
studies
for
any
of
our
drug
candidates
could
result
in48 Table
of
Contentsdelays
in
our
regulatory
approval
efforts
and
significantly
increase
our
costs
to
recover
or
reproduce
the
data.
To
the
extent
that
any
disruption
or
security
breachwere
to
result
in
a
loss
of
or
damage
to
our
data
or
applications,
or
inappropriate
disclosure
of
confidential
or
proprietary
information,
we
could
incur
liability
andthe
further
development
or
commercialization
of
our
drug
candidates
could
be
delayed.Our business requires us to use hazardous materials, which increases our exposure to dangerous and costly accidents.
Our
research
and
development
activities
involve
the
use
of
hazardous
chemicals,
biological
materials
and
radioactive
compounds.
Although
we
believe
thatour
safety
procedures
for
handling
and
disposing
of
hazardous
materials
comply
with
the
standards
prescribed
by
applicable
laws
and
regulations,
we
cannotcompletely
eliminate
the
risk
of
accidental
contamination
or
injury
from
these
materials.
In
the
event
of
an
accident,
an
injured
party
will
likely
sue
us
for
anyresulting
damages
with
potentially
significant
liability.
The
ongoing
cost
of
complying
with
environmental
laws
and
regulations
is
significant
and
may
increase
inthe
future.We face the risk of product liability claims, which could exceed our insurance coverage, and produce recalls, each of which could deplete our cash resources.
As
a
participant
in
the
pharmaceutical,
biotechnology
and
immunotherapeutic
drug
industries,
we
are
exposed
to
the
risk
of
product
liability
claims
allegingthat
use
of
our
drug
candidates
caused
an
injury
or
harm.
These
claims
can
arise
at
any
point
in
the
development,
testing,
manufacture,
marketing
or
sale
of
ourdrug
candidates
and
may
be
made
directly
by
patients
involved
in
clinical
trials
of
our
products,
by
consumers
or
healthcare
providers
or
by
individuals,organizations
or
companies
selling
our
products.
Product
liability
claims
can
be
expensive
to
defend,
even
if
the
drug
or
drug
candidate
did
not
actually
cause
thealleged
injury
or
harm.
Insurance
covering
product
liability
claims
becomes
increasingly
expensive
as
a
drug
candidate
moves
through
the
development
pipeline
tocommercialization.
Under
our
license
agreements,
we
are
required
to
maintain
clinical
trial
liability
insurance
coverage
up
to
$15
million.
However,
there
can
beno
assurance
that
such
insurance
coverage
is
or
will
continue
to
be
adequate
or
available
to
us
at
a
cost
acceptable
to
us
or
at
all.
We
may
choose
or
find
itnecessary
under
our
collaborative
agreements
to
increase
our
insurance
coverage
in
the
future.
We
may
not
be
able
to
secure
greater
or
broader
product
liabilityinsurance
coverage
on
acceptable
terms
or
at
reasonable
costs
when
needed.
Any
liability
for
damages
resulting
from
a
product
liability
claim
could
exceed
theamount
of
our
coverage,
require
us
to
pay
a
substantial
monetary
award
from
our
own
cash
resources
and
have
a
material
adverse
effect
on
our
business,
financialcondition
and
results
of
operations.
Moreover,
a
product
recall,
if
required,
could
generate
substantial
negative
publicity
about
our
products
and
business
andinhibit
or
prevent
development
of
our
drug
candidates
and,
if
approval
is
obtained,
commercialization
of
our
future
drugs.Risks
Related
to
Intellectual
PropertyWe license technology from other companies to develop products, and those companies could influence research and development or restrict our use of it. Inaddition, if we fail to comply with our obligations in our intellectual property licenses with third parties, we could lose license rights that are important to ourbusiness.
Companies
that
license
technologies
to
us
that
we
use
in
our
research
and
development
programs
may
require
us
to
achieve
milestones
or
devote
minimumamounts
of
resources
to
develop
products
using
those
technologies.
They
may
also
require
us
to
make
significant
royalty
and
milestone
payments,
including
apercentage
of
any
sublicensing
income,
as
well
as
payments
to
reimburse
them
for
patent
costs.
The
number
and
variety
of
our
research
and
development
programsrequire
us
to
establish49 Table
of
Contentspriorities
and
to
allocate
available
resources
among
competing
programs.
From
time
to
time
we
may
choose
to
slow
down
or
cease
our
efforts
on
particularproducts.
If
in
doing
so
we
fail
to
fully
perform
our
obligations
under
a
license,
the
licensor
can
terminate
the
licenses
or
permit
our
competitors
to
use
thetechnology.
Termination
of
these
licenses
or
reduction
or
elimination
of
our
licensed
rights
may
result
in
our
having
to
negotiate
new
or
reinstated
licenses
withless
favorable
terms.
Moreover,
we
may
lose
our
right
to
market
and
sell
any
products
based
on
the
licensed
technology.
The
occurrence
of
such
events
couldmaterially
harm
our
business.Our ability to successfully develop and, if regulatory approval is obtained, commercialize our drug candidates may be materially adversely affected if we areunable to obtain and maintain effective intellectual property rights for our drug candidates and technologies.
Our
success
depends
in
part
on
our
ability
to
obtain
and
maintain
patent
protection
and
other
intellectual
property
protection
for
our
drug
candidates
andproprietary
technology.
We
have
sought
to
protect
our
proprietary
position
by
filing
patent
applications
in
the
United
States
and
abroad
related
to
our
drugcandidates
and
technology
that
are
important
to
our
business.
This
process
is
expensive
and
time-consuming,
and
we
may
not
be
able
to
file
and
prosecute
allnecessary
or
desirable
patent
applications
at
a
reasonable
cost
or
in
a
timely
manner.
It
is
also
possible
that
we
will
fail
to
identify
patentable
aspects
of
ourresearch
and
development
output
before
it
is
too
late
to
obtain
patent
protection.
Our
existing
patents
and
any
future
patents
we
obtain
may
not
be
sufficientlybroad
to
prevent
others
from
using
our
technologies
or
from
developing
competing
drugs
and
technologies.
Biotechnology
patents
involve
complex
legal,
scientific
and
factual
questions
and
are
highly
uncertain.
To
date,
there
is
no
consistent
policy
regarding
thebreadth
of
claims
allowed
in
biotechnology
patents,
particularly
in
regard
to
patents
for
technologies
for
human
uses
like
those
we
use
in
our
business.
We
cannotpredict
whether
the
patents
we
or
our
licensors
seek
will
issue.
If
such
patents
are
issued,
a
competitor
may
challenge
them
and
limit
their
scope.
Moreover,
ourpatents
may
not
afford
effective
protection
against
competitors
with
similar
technology.
A
successful
challenge
to
any
one
of
our
patents
could
result
in
a
thirdparty's
ability
to
use
the
technology
covered
by
the
patent.
We
also
face
the
risk
that
others
will
infringe,
avoid
or
circumvent
our
patents.
Technology
that
welicense
from
others
is
subject
to
similar
risks
and
this
could
harm
our
ability
to
use
that
technology.
If
we,
or
a
company
that
licenses
technology
to
us,
were
not
thefirst
creator
of
an
invention
that
we
use,
our
use
of
the
underlying
product
or
technology
will
face
restrictions,
including
elimination.
For
example,
in
September2014,
two
European
patent
oppositions
were
filed
against
the
University
of
Southampton
European
patent
and
at
a
hearing
on
November
23,
2016
the
EuropeanPatent
Office
(EPO)
revoked
the
European
patent
on
the
ground
of
lack
of
inventive
step.
We
intend
to
appeal
this
decision
and
to
defend
the
European
patentvigorously
in
cooperation
with
the
University
of
Southampton.
This
EPO
decision
does
not
affect
the
later
filed
Celldex
patents
and
applications
for
varlilumab.We
also
have
an
issued
U.S.
patent
which
covers
varlilumab
as
a
composition
of
matter.
If
we
must
defend
against
suits
brought
against
us
or
prosecute
suits
against
others
involving
intellectual
property
rights,
we
will
incur
substantial
costs.
Inaddition
to
any
potential
liability
for
significant
monetary
damages,
a
decision
against
us
may
require
us
to
obtain
licenses
to
patents
or
other
intellectual
propertyrights
of
others
on
potentially
unfavorable
terms.
If
those
licenses
from
third
parties
are
necessary
but
we
cannot
acquire
them,
we
would
attempt
to
design
aroundthe
relevant
technology,
which
would
cause
higher
development
costs
and
delays,
and
may
ultimately
prove
impracticable.We may need to license intellectual property from third parties, and such licenses may not be available or may not be available on commercially reasonableterms.
A
third
party
may
hold
intellectual
property,
including
patent
rights,
that
are
important
or
necessary
to
the
development
of
our
drug
candidates.
It
may
benecessary
for
us
to
use
the
patented
or50 Table
of
Contentsproprietary
technology
of
a
third
party
to
commercialize
our
own
technology
or
drug
candidates,
in
which
case
we
would
be
required
to
obtain
a
license
from
suchthird
party.
A
license
to
such
intellectual
property
may
not
be
available
or
may
not
be
available
on
commercially
reasonable
terms,
which
could
have
a
materialadverse
effect
on
our
business
and
financial
condition.
We
are
aware
of
a
third
party
European
patent
that
relates
to
use
of
ErbB3
antibodies
for
treatment
of
hyperproliferative
disorders,
including
cancer.
Acounterpart
of
this
patent
has
also
issued
in
Japan
and
Australia.
As
a
result
of
an
opposition
proceeding,
the
European
patent
was
revoked
in
its
entirety.
Theowner
of
the
European
patent
has
appealed
the
decision
in
the
opposition
proceeding.
We
do
not
know
if
the
appeal
will
succeed,
or,
if
successful,
whether
thescope
of
claims,
post-appeal,
would
be
relevant
to
our
activities.
Should
the
appeal
be
successful
and
a
license
be
necessary
for
our
program
that
targets
ErbB3,
wecannot
predict
whether
we
would
be
able
to
obtain
such
a
license,
or,
if
a
license
were
available,
whether
it
would
be
available
on
commercially
reasonable
terms.If
the
appeal
results
in
such
third
party's
patents
having
a
valid
claim
relevant
to
our
use
of
ErbB3
antibodies
and
a
license
under
the
patents
is
unavailable
oncommercially
relevant
terms,
or
at
all,
our
ability
to
commercialize
CDX-3379
in
Europe
may
be
impaired
or
delayed.
We
would
vigorously
defend
ourselves,
butwe
cannot
predict
whether
the
patents
would
be
found
valid,
enforceable
or
infringed.
We
continue
to
monitor
counterpart
patent
applications
pending
in
otherjurisdictions,
including
the
United
States.
While
we
cannot
predict
whether
claims
will
issue
in
these
other
jurisdictions
or
whether
the
scope
of
such
claims
wouldbe
relevant
to
our
activities,
these
applications
entail
comparable
risks
to
us
in
these
other
jurisdictions.We may be unable to protect the confidentiality of our trade secrets, thus harming our business and competitive position.
We
rely
upon
trade
secrets,
including
unpatented
know-how,
technology
and
other
proprietary
information
to
develop
and
maintain
our
competitive
position,which
we
seek
to
protect,
in
part,
by
confidentiality
agreements
with
our
employees
and
our
collaborators
and
consultants.
We
also
have
agreements
with
ouremployees
that
obligate
them
to
assign
their
inventions
to
us.
However,
it
is
possible
that
technology
relevant
to
our
business
will
be
independently
developed
by
aperson
that
is
not
a
party
to
such
an
agreement.
Furthermore,
if
the
employees,
consultants
or
collaborators
that
are
parties
to
these
agreements
breach
or
violate
theterms
of
these
agreements,
we
may
not
have
adequate
remedies
for
any
such
breach
or
violation,
and
we
could
lose
our
trade
secrets
through
such
breaches
orviolations.
Further,
our
trade
secrets
could
be
disclosed,
misappropriated
or
otherwise
become
known
or
be
independently
discovered
by
our
competitors.
Inaddition,
intellectual
property
laws
in
foreign
countries
may
not
protect
our
intellectual
property
to
the
same
extent
as
the
laws
of
the
United
States.
If
our
tradesecrets
are
disclosed
or
misappropriated,
it
would
harm
our
ability
to
protect
our
rights
and
have
a
material
adverse
effect
on
our
business.We may become involved in lawsuits to protect or enforce our patents, which could be expensive, time-consuming and unsuccessful.
Competitors
may
infringe
our
patents.
To
counter
infringement
or
unauthorized
use,
we
may
be
required
to
file
infringement
claims,
which
can
be
expensiveand
time-consuming.
In
addition,
in
an
infringement
proceeding,
a
court
may
decide
that
a
patent
of
ours
is
invalid
or
unenforceable,
or
may
refuse
to
stop
theother
party
from
using
the
technology
at
issue
on
the
grounds
that
our
patents
do
not
cover
the
technology
in
question.
An
adverse
result
in
any
litigationproceeding
could
put
one
or
more
of
our
patents
at
risk
of
being
invalidated
or
interpreted
narrowly.
Furthermore,
because
of
the
substantial
amount
of
discoveryrequired
in
connection
with
intellectual
property
litigation,
there
is
a
risk
that
some
of
our
confidential
information
could
be
compromised
by
disclosure
during
thistype
of
litigation.51 Table
of
ContentsThird parties may initiate legal proceedings alleging that we are infringing their intellectual property rights, the outcome of which would be uncertain andcould have a material adverse effect on the success of our business.
Our
commercial
success
depends
upon
our
ability
and
the
ability
of
our
collaborators
to
develop,
manufacture,
market
and
sell
our
drug
candidates
and
useour
proprietary
technologies
without
infringing,
misappropriating
or
otherwise
violating
the
proprietary
rights
or
intellectual
property
of
third
parties.
We
maybecome
party
to,
or
be
threatened
with,
future
adversarial
proceedings
or
litigation
regarding
intellectual
property
rights
with
respect
to
our
drug
candidates
andtechnology.
Third
parties
may
assert
infringement
claims
against
us
based
on
existing
patents
or
patents
that
may
be
granted
in
the
future.
If
we
are
found
toinfringe
a
third-party's
intellectual
property
rights,
we
could
be
required
to
obtain
a
license
from
such
third-party
to
continue
developing
our
drug
candidates
andtechnology.
However,
we
may
not
be
able
to
obtain
any
required
license
on
commercially
reasonable
terms
or
at
all.
Even
if
we
were
able
to
obtain
a
license,
itcould
be
non-exclusive,
thereby
giving
our
competitors
access
to
the
same
technologies
licensed
to
us.
We
could
be
forced,
including
by
court
order,
to
ceasedeveloping
the
infringing
technology
or
product.
In
addition,
we
could
be
found
liable
for
monetary
damages.
Claims
that
we
have
misappropriated
theconfidential
information
or
trade
secrets
of
third
parties
can
have
a
similar
negative
impact
on
our
business.Third parties may assert that our employees or consultants have wrongfully used or disclosed confidential information or misappropriated trade secrets.
We
employ
individuals
who
were
previously
employed
at
universities
or
other
diagnostic
or
biopharmaceutical
companies,
including
our
competitors
orpotential
competitors.
Although
we
try
to
ensure
that
our
employees
and
consultants
do
not
use
the
proprietary
information
or
know-how
of
others
in
their
work
forus,
we
may
be
subject
to
claims
that
we
or
our
employees,
consultants
or
independent
contractors
have
inadvertently
or
otherwise
used
or
disclosed
intellectualproperty,
including
trade
secrets
or
other
proprietary
information,
of
a
former
employer
or
other
third
parties.
Litigation
may
be
necessary
to
defend
against
theseclaims.
If
we
fail
in
defending
any
such
claims,
in
addition
to
paying
monetary
damages,
we
may
lose
valuable
intellectual
property
rights
or
personnel.
Even
if
weare
successful
in
defending
against
such
claims,
litigation
could
result
in
substantial
costs
and
be
a
distraction
to
management
and
other
employees.Regulatory
RisksIf our processes and systems are not compliant with regulatory requirements, we could be subject to delays in submitting BLAs, NDAs or restrictions onmarketing of drugs after they have been approved.
We
currently
are
developing
drug
candidates
for
regulatory
approval
and
are
in
the
process
of
implementing
regulated
processes
and
systems
required
toobtain
and
maintain
regulatory
approval
for
our
drug
candidates.
Certain
of
these
processes
and
systems
for
conducting
clinical
trials
and
manufacturing
materialmust
be
compliant
with
regulatory
requirements
before
we
can
apply
for
regulatory
approval
for
our
drug
candidates.
These
processes
and
systems
will
be
subjectto
continual
review
and
periodic
inspection
by
the
FDA
and
other
regulatory
bodies.
If
we
are
unable
to
achieve
compliance
in
a
timely
fashion,
or
if
complianceissues
are
identified
at
any
point
in
the
development
and
approval
process,
we
may
experience
delays
in
filing
for
regulatory
approval
for
our
drug
candidates,
ordelays
in
obtaining
regulatory
approval
after
filing.
In
addition,
any
later
discovery
of
previously
unknown
problems
or
safety
issues
with
approved
drugs
ormanufacturing
processes,
or
failure
to
comply
with
regulatory
requirements,
may
result
in
restrictions
on
such
drugs
or
manufacturing
processes,
withdrawal
ofdrugs
from
the
market,
the
imposition
of
civil
or
criminal
penalties
or
a
refusal
by
the
FDA
and/or
other
regulatory
bodies
to
approve
pending
applications
formarketing
approval
of
new
drugs
or
supplements
to
approved
applications,
any
of
which
could
have
a
material
adverse
effect
on
our
business.
In
addition,
we
are
aparty
to
agreements
that
transfer52 Table
of
Contentsresponsibility
for
complying
with
specified
regulatory
requirements,
such
as
filing
and
maintenance
of
marketing
authorizations
and
safety
reporting
or
compliancewith
manufacturing
requirements,
to
our
collaborators
and
third-party
manufacturers.
If
our
collaborators
or
third-party
manufacturers
do
not
fulfill
theseregulatory
obligations,
any
drugs
for
which
we
or
they
obtain
approval
may
be
subject
to
later
restrictions
on
manufacturing
or
sale,
or
may
even
risk
withdrawal,which
could
have
a
material
adverse
effect
on
our
business.Even if we receive regulatory approval for a drug candidate, we will be subject to ongoing regulatory obligations and continued regulatory review, which mayresult in significant additional expense and subject us to penalties if we fail to comply with applicable regulatory requirements.
Once
regulatory
approval
has
been
granted,
the
approved
product
and
its
manufacturer
are
subject
to
continual
review
by
the
FDA
and/or
non-U.S.
regulatoryauthorities.
Any
regulatory
approval
that
we
or
our
collaboration
partners
receive
for
our
drug
candidates
may
be
subject
to
limitations
on
the
indicated
uses
forwhich
the
product
may
be
marketed
or
contain
requirements
for
potentially
costly
post-marketing
follow-up
studies
to
monitor
the
safety
and
efficacy
of
theproduct.
In
addition,
if
the
FDA
and/or
non-U.S.
regulatory
authorities
approve
any
of
our
drug
candidates,
we
will
be
subject
to
extensive
and
ongoing
regulatoryrequirements
by
the
FDA
and
other
regulatory
authorities
with
regard
to
the
labeling,
packaging,
adverse
event
reporting,
storage,
advertising,
promotion
andrecordkeeping
for
our
products.
In
addition,
manufacturers
of
our
drug
products
are
required
to
comply
with
cGMP
regulations,
which
include
requirements
relatedto
quality
control
and
quality
assurance
as
well
as
the
corresponding
maintenance
of
records
and
documentation.
Further,
regulatory
authorities
must
inspect
andapprove
these
manufacturing
facilities
before
they
can
be
used
to
manufacture
our
drug
products,
and
these
facilities
are
subject
to
continual
review
and
periodicinspections
by
the
FDA
and
other
regulatory
authorities
for
compliance
with
cGMP
regulations.
If
we
or
a
third
party
discover
previously
unknown
problems
witha
product,
such
as
adverse
events
of
unanticipated
severity
or
frequency,
or
problems
with
the
facility
where
the
product
is
manufactured,
a
regulatory
authoritymay
impose
restrictions
on
that
product,
the
manufacturer
or
us,
including
requiring
withdrawal
of
the
product
from
the
market
or
suspension
of
manufacturing.
Ifwe,
our
drug
candidates
or
the
manufacturing
facilities
for
our
drug
candidates
fail
to
comply
with
regulatory
requirements
of
the
FDA
and/or
other
non-U.S.regulatory
authorities,
we
could
be
subject
to
administrative
or
judicially
imposed
sanctions,
including
the
following:•warning
letters;
•civil
or
criminal
penalties
and
fines;
•injunctions;
•consent
decrees;
•suspension
or
withdrawal
of
regulatory
approval;
•suspension
of
any
ongoing
clinical
studies;
•voluntary
or
mandatory
product
recalls
and
publicity
requirements;
•refusal
to
accept
or
approve
applications
for
marketing
approval
of
new
drugs;
•restrictions
on
operations,
including
costly
new
manufacturing
requirements;
or
•seizure
or
detention
of
drugs
or
import
bans.
The
regulatory
requirements
and
policies
may
change
and
additional
government
regulations
may
be
enacted
for
which
we
may
also
be
required
to
comply.We
cannot
predict
the
likelihood,
nature
or
extent
of
government
regulation
that
may
arise
from
future
legislation
or
administrative
action,
either53 Table
of
Contentsin
the
United
States
or
in
other
countries.
If
we
are
not
able
to
maintain
regulatory
compliance,
we
may
not
be
permitted
to
market
our
future
products
and
ourbusiness
may
suffer.We may be subject, directly or indirectly, to federal and state healthcare fraud and abuse laws, false claims laws and health information privacy and securitylaws. If we are unable to comply, or have not fully complied, with such laws, we could face substantial penalties.
If
we
obtain
FDA
approval
for
any
of
our
drug
candidates
and
begin
commercializing
those
products
in
the
United
States,
our
operations
may
be
directly,
orindirectly
through
our
customers,
subject
to
various
federal
and
state
fraud
and
abuse
laws,
including,
without
limitation,
the
federal
Anti-Kickback
Statute
and
thefederal
False
Claims
Act.
These
laws
may
affect,
among
other
things,
our
proposed
sales,
marketing
and
education
programs.
In
addition,
we
may
be
subject
topatient
privacy
regulation
by
both
the
federal
government
and
the
states
in
which
we
conduct
our
business.
The
laws
that
may
affect
our
ability
to
operate
include:•the
federal
Anti-Kickback
Statute,
which
prohibits,
among
other
things,
persons
from
knowingly
and
willfully
soliciting,
receiving,
offering
orpaying
remuneration,
directly
or
indirectly,
to
induce,
or
in
return
for,
the
purchase
or
recommendation
of
an
item
or
service
reimbursable
under
afederal
healthcare
program,
such
as
the
Medicare
and
Medicaid
programs;
•federal
civil
and
criminal
false
claims
laws
and
civil
monetary
penalty
laws,
which
prohibit,
among
other
things,
individuals
or
entities
fromknowingly
presenting,
or
causing
to
be
presented,
claims
for
payment
from
Medicare,
Medicaid,
or
other
third-party
payors
that
are
false
orfraudulent;
•the
federal
Health
Insurance
Portability
and
Accountability
Act
of
1996,
or
HIPAA,
which
created
new
federal
criminal
statutes
that
prohibitexecuting
a
scheme
to
defraud
any
healthcare
benefit
program
or
making
false
statements
relating
to
healthcare
matters;
•HIPAA,
as
amended
by
the
Health
Information
Technology
for
Economic
and
Clinical
Health
Act
of
2009,
or
HITECH,
and
its
implementingregulations,
which
imposes
certain
requirements
relating
to
the
privacy,
security
and
transmission
of
individually
identifiable
health
information;
•the
federal
transparency
requirements
under
the
Patient
Protection
and
Affordable
Care
Act
of
2010
requires
manufacturers
of
drugs,
devices,biologics
and
medical
supplies
to
report
to
the
Department
of
Health
and
Human
Services
information
related
to
physician
payments
and
othertransfers
of
value
and
physician
ownership
and
investment
interests;
and
•state
law
and
foreign
law
equivalents
of
each
of
the
above
federal
laws,
such
as
anti-kickback
and
false
claims
laws
which
may
apply
to
items
orservices
reimbursed
by
any
third-party
payor,
including
commercial
insurers,
and
state
laws
governing
the
privacy
and
security
of
healthinformation
in
certain
circumstances,
many
of
which
differ
from
each
other
in
significant
ways
and
may
not
have
the
same
effect,
thus
complicatingcompliance
efforts.
Although
compliance
programs
can
mitigate
the
risk
of
investigation
and
prosecution
for
violations
of
these
laws,
the
risks
cannot
be
entirely
eliminated.
Ifour
operations
are
found
to
be
in
violation
of
any
of
the
laws
described
above
or
any
other
governmental
regulations
that
apply
to
us,
we
may
be
subject
topenalties,
including
civil
and
criminal
penalties,
damages,
fines
and
the
curtailment
or
restructuring
of
our
operations,
any
of
which
could
adversely
affect
ourability
to
operate
our
business
and
our
results
of
operations.
Moreover,
achieving
and
sustaining
compliance
with
applicable
federal
and
state
privacy,
security
andfraud
laws
may
prove
costly.54 Table
of
ContentsCompliance with laws and regulations pertaining to the privacy and security of health information may be time consuming, difficult and costly, particularly inlight of increased focus on privacy issues in countries around the world, including the U.S. and the EU.
We
are
subject
to
various
domestic
and
international
privacy
and
security
regulations.
The
confidentiality,
collection,
use
and
disclosure
of
personal
data,including
clinical
trial
patient-specific
information,
are
subject
to
governmental
regulation
generally
in
the
country
that
the
personal
data
were
collected
or
used.
Inthe
United
States
were
are
subject
to
various
state
and
federal
privacy
and
data
security
regulations,
including
but
not
limited
to
HIPAA,
and
as
amended
in
2014by
the
HITECH
Act.
HIPAA
mandates,
among
other
things,
the
adoption
of
uniform
standards
for
the
electronic
exchange
of
information
in
common
healthcaretransactions,
as
well
as
standards
relating
to
the
privacy
and
security
of
individually
identifiable
health
information,
which
require
the
adoption
of
administrative,physical
and
technical
safeguards
to
protect
such
information.
In
the
EU
personal
data
includes
any
information
that
relates
to
an
identified
or
identifiable
naturalperson
with
health
information
carrying
additional
obligations,
including
obtaining
the
explicit
consent
from
the
individual
for
collection,
use
or
disclosure
of
theinformation.
In
addition,
we
are
subject
to
EU
rules
with
respect
to
cross-border
transfers
of
such
data
out
of
the
EU.
Furthermore,
the
legislative
and
regulatorylandscape
for
privacy
and
data
protection
continues
to
evolve,
and
there
has
been
an
increasing
amount
of
focus
on
privacy
and
data
protection
issues.
The
UnitedStates
and
the
EU
and
its
member
states
continue
to
issue
new
privacy
and
data
protection
rules
and
regulations
that
relate
to
personal
data
and
health
information.
Compliance
with
these
laws
may
be
time
consuming,
difficult
and
costly.
If
we
fail
to
comply
with
applicable
laws,
regulations
or
duties
relating
to
the
use,privacy
or
security
of
personal
data
we
could
be
subject
to
the
imposition
of
significant
civil
and
criminal
penalties,
be
forced
to
alter
our
business
practices
andsuffer
reputational
harm.Changes in healthcare law and implementing regulations, including government restrictions on pricing and reimbursement, as well as healthcare policy andother healthcare payor cost-containment initiatives, may have a material adverse effect on us.
In
March
2010,
the
Patient
Protection
and
Affordable
Care
Act
of
2010,
as
amended
by
the
Health
Care
and
Education
Reconciliation
Act
of
2010,
orcollectively
PPACA,
became
law
in
the
United
States.
PPACA
substantially
changed
the
way
healthcare
is
financed
by
both
governmental
and
private
insurers
andsignificantly
affects
the
pharmaceutical
industry.
PPACA
aims
to,
among
other
things,
expand
coverage
for
the
uninsured
while
at
the
same
time
containing
overallhealthcare
costs.
Many
provisions
of
PPACA
may
impact
the
biopharmaceutical
industry,
including
that
in
order
for
a
biopharmaceutical
product
to
receive
federalreimbursement
under
the
Medicare
Part
B
and
Medicaid
programs
or
to
be
sold
directly
to
U.S.
government
agencies,
the
manufacturer
must
extend
discounts
toentities
eligible
to
participate
in
the
drug
pricing
program
under
the
Public
Health
Services
Act,
or
PHS.
The
required
PHS
discount
on
a
given
product
iscalculated
based
on
the
Average
Manufacturers
Price,
or
AMP,
and
Medicaid
rebate
amounts
reported
by
the
manufacturer.
PPACA
expanded
the
types
of
entitieseligible
to
receive
discounted
PHS
pricing,
although,
under
the
current
state
of
the
law,
with
the
exception
of
children's
hospitals,
these
newly
eligible
entities
willnot
be
eligible
to
receive
discounted
PHS
pricing
on
orphan
drugs
when
used
for
the
orphan
indication.
In
addition,
as
PHS
drug
pricing
is
determined
based
onAMP
and
Medicaid
rebate
data,
revisions,
including
the
recently
published
AMP
rule,
to
the
Medicaid
rebate
formula
and
AMP
definition
described
above
couldcause
the
required
PHS
discount
to
increase.
Since
its
enactment,
there
have
been
judicial
and
Congressional
challenges
to
certain
aspects
of
PPACA.
In
January
2017,
Congress
voted
to
adopt
a
budgetresolution
for
fiscal
year
2017,
or
the
Budget
Resolution,
that
authorizes
the
implementation
of
legislation
that
would
repeal
portions
of
PPACA.
The
BudgetResolution
is
not
a
law;
however,
it
is
widely
viewed
as
the
first
step
toward
the55 Table
of
Contentspassage
of
legislation
that
would
repeal
certain
aspects
of
PPACA.
Further,
on
January
20,
2017,
President
Trump
signed
an
Executive
Order
directing
federalagencies
with
authorities
and
responsibilities
under
PPACA
to
waive,
defer,
grant
exemptions
from,
or
delay
the
implementation
of
any
provision
of
PPACA
thatwould
impose
a
fiscal
or
regulatory
burden
on
states,
individuals,
healthcare
providers,
health
insurers,
or
manufacturers
of
pharmaceuticals
or
medical
devices.Congress
also
could
consider
subsequent
legislation
to
replace
elements
of
PPACA
that
are
repealed.
Because
of
the
continued
uncertainty
about
theimplementation
of
PPACA,
including
the
potential
for
further
legal
challenges
or
repeal
of
PPACA,
we
cannot
quantify
or
predict
with
any
certainty
the
likelyimpact
of
the
PPACA
or
its
repeal
on
our
business,
prospects,
financial
condition
or
results
of
operations.
In
addition,
other
legislative
changes
have
also
been
proposed
and
adopted
since
PPACA
was
enacted.
The
Budget
Control
Act
of
2011,
among
other
things,created
the
Joint
Select
Committee
on
Deficit
Reduction
to
recommend
to
Congress
proposals
in
spending
reductions.
The
Joint
Select
Committee
did
not
achievea
targeted
deficit
reduction
of
at
least
$1.2
trillion
for
the
years
2013
through
2021,
triggering
the
legislation's
automatic
reduction
to
several
government
programs.This
includes
a
2%
reduction
in
Medicare
provider
payments
paid
under
Medicare
Part
B
to
physicians
for
physician-administered
drugs,
which
went
into
effect
inApril
2013
and,
following
passage
of
the
Bipartisan
Budget
Act
of
2015,
will
remain
in
effect
through
2025
unless
additional
congressional
action
is
taken.
TheAmerican
Taxpayer
Relief
Act
of
2012,
among
other
things,
reduced
Medicare
payments
to
several
providers
and
increased
the
statute
of
limitations
period
for
thegovernment
to
recover
overpayments
to
providers
from
three
to
five
years.
In
addition,
legislation
has
been
proposed
to
shorten
the
period
of
biologic
data
andmarket
exclusivity
granted
by
the
FDA.
We
also
expect
ongoing
initiatives
to
increase
pressure
on
drug
pricing.
For
example,
President
Trump
has
indicated
support
for
possible
new
measuresrelated
to
drug
pricing.
We
cannot
assure
you
as
to
the
ultimate
content,
timing,
or
effect
of
changes,
nor
is
it
possible
at
this
time
to
estimate
the
impact
of
anysuch
potential
legislation;
however,
such
changes
or
the
ultimate
impact
of
changes
could
negatively
affect
our
revenue
or
sales
of
any
drug
candidates
for
whichwe
obtain
approval
in
the
future.
We
cannot
be
sure
whether
additional
legislative
changes
will
be
enacted,
or
whether
FDA
regulations,
guidance
or
interpretations
will
be
changed,
or
whatthe
impact
of
such
changes
(or
in
some
instances
current
regulations,
guidance
or
interpretations)
on
the
marketing
approvals
of
our
product
candidates,
if
any,
maybe.Risks
Related
to
Our
Capital
StockOur history of losses and uncertainty of future profitability make our common stock a highly speculative investment.
We
have
had
no
commercial
revenue
to
date
from
sales
of
our
drug
candidates.
We
had
an
accumulated
deficit
of
$719.5
million
as
of
December
31,
2016.We
expect
to
spend
substantial
funds
to
continue
the
research
and
development
testing
of
our
drug
candidates.
In
anticipation
of
FDA
approval
of
these
products,
we
will
need
to
make
substantial
investments
to
establish
sales,
marketing,
quality
control,
regulatorycompliance
capabilities
and
commercial
manufacturing
alliances.
These
investments
will
increase
if
and
when
any
of
these
drug
candidates
receive
FDA
approval.We
cannot
predict
how
quickly
our
lead
drug
candidates
will
progress
through
the
regulatory
approval
process.
As
a
result,
we
may
continue
to
lose
money
forseveral
years.
We
cannot
be
certain
that
we
will
achieve
or
sustain
profitability
in
the
future.
Failure
to
achieve
profitability
could
diminish
our
ability
to
sustain
operations,pay
dividends
on
our
common
stock,
obtain
additional
required
funds
and
make
required
payments
on
our
present
or
future
indebtedness.56 Table
of
ContentsOur share price has been and could remain volatile.
The
market
price
of
our
common
stock
has
historically
experienced
and
may
continue
to
experience
significant
volatility.
From
January
2016
throughDecember
2016,
the
market
price
of
our
common
stock
has
fluctuated
from
a
high
of
$15.61
per
share
in
the
first
quarter
of
2016,
to
a
low
of
$2.85
per
share
in
thefourth
quarter
of
2016.
Our
progress
in
developing
and
commercializing
our
products,
the
impact
of
government
regulations
on
our
products
and
industry,
thepotential
sale
of
a
large
volume
of
our
common
stock
by
stockholders,
our
quarterly
operating
results,
changes
in
general
conditions
in
the
economy
or
thefinancial
markets
and
other
developments
affecting
us
or
our
competitors
could
cause
the
market
price
of
our
common
stock
to
fluctuate
substantially
withsignificant
market
losses.
If
our
stockholders
sell
a
substantial
number
of
shares
of
common
stock,
especially
if
those
sales
are
made
during
a
short
period
of
time,those
sales
could
adversely
affect
the
market
price
of
our
common
stock
and
could
impair
our
ability
to
raise
capital.
In
addition,
in
recent
years,
the
stock
markethas
experienced
significant
price
and
volume
fluctuations.
This
volatility
has
affected
the
market
prices
of
securities
issued
by
many
companies
for
reasonsunrelated
to
their
operating
performance
and
may
adversely
affect
the
price
of
our
common
stock.
Adverse
changes
to
the
price
of
our
common
stock
could
resultin
an
impairment
to
the
amount
recorded
to
goodwill
on
our
balance
sheet.
In
addition,
we
could
be
subject
to
a
securities
class
action
litigation
as
a
result
ofvolatility
in
the
price
of
our
stock,
which
could
result
in
substantial
costs
and
diversion
of
management's
attention
and
resources
and
could
harm
our
stock
price,business,
prospects,
results
of
operations
and
financial
condition.If certain preclinical and clinical milestones are achieved, our stockholders may experience significant dilution as a result of milestone payments to formerKolltan stockholders.
The
merger
agreement
pursuant
to
which
we
acquired
Kolltan
provides
that,
in
the
event
that
certain
specified
preclinical
and
clinical
development
milestonesrelated
to
Kolltan's
development
programs
and/or
Celldex's
development
programs
and
certain
commercial
milestones
related
to
Kolltan's
drug
candidates
areachieved,
we
will
be
required
to
pay
Kolltan's
stockholders
milestone
payments
of
up
to
$172.5
million,
which
milestone
payments
may
be
made,
at
our
soleelection,
in
cash,
in
shares
of
our
common
stock
or
a
combination
of
both,
subject
to
NASDAQ
listing
requirements
and
provisions
of
the
merger
Agreement.
Thenumber
of
shares
of
our
common
stock
issuable
in
connection
with
a
milestone
payment,
if
any,
will
be
determined
based
on
the
average
closing
price
per
share
ofour
common
stock
for
the
five
trading
day
period
ending
three
calendar
days
prior
to
the
achievement
of
such
milestone.
Pursuant
to
applicable
NASDAQ
listingrules,
we
are
required
to
obtain
stockholder
approval
of
such
issuances
of
our
common
stock
to
the
extent
that
such
issuances
exceed
19.9%
of
its
common
stockoutstanding
prior
to
the
merger.
If
we
elect
to
issue
additional
shares
of
our
common
stock,
in
lieu
of
paying
cash,
for
such
milestone
payments,
our
stockholdersmay
experience
significant
dilution.Our ability to use our net operating loss carryforwards will be subject to limitation and, under certain circumstances, may be eliminated.
Utilization
of
our
net
operating
loss
and
research
and
development
credit
carryforwards
may
be
subject
to
substantial
annual
limitation
due
to
ownershipchange
limitations
that
have
occurred
previously
or
that
could
occur
in
the
future
provided
by
Section
382
of
the
Internal
Revenue
Code
of
1986,
or
Section
382,
aswell
as
similar
state
provisions.
In
general,
an
ownership
change,
as
defined
by
Section
382,
results
from
transactions
increasing
the
ownership
of
certainshareholders
or
public
groups
in
the
stock
of
a
corporation
by
more
than
50
percentage
points
over
a
three-year
period.57 Table
of
Contents
In
October
2007,
June
2009,
December
2009
and
December
2013,
we
experienced
a
change
in
ownership
as
defined
by
Section
382
of
the
Internal
RevenueCode.
Historically,
we
have
raised
capital
through
the
issuance
of
capital
stock
on
several
occasions
which,
combined
with
shareholders'
subsequent
disposition
ofthose
shares,
has
resulted
in
three
changes
of
control,
as
defined
by
Section
382.
As
a
result
of
these
ownership
changes,
utilization
of
our
Federal
net
operatingloss
carryforwards
is
subject
to
an
annual
limitation.
Any
unused
annual
limitation
may
be
carried
over
to
later
years,
and
the
amount
of
the
limitation
may,
undercertain
circumstances,
be
subject
to
adjustment
if
the
fair
value
of
the
our
net
assets
are
determined
to
be
below
or
in
excess
of
the
tax
basis
of
such
assets
at
thetime
of
the
ownership
change,
and
such
unrealized
loss
or
gain
is
recognized
during
the
five-year
period
after
the
ownership
change.
Subsequent
ownershipchanges,
as
defined
in
Section
382,
could
further
limit
the
amount
of
net
operating
loss
carryforwards
and
research
and
development
credits
that
can
be
utilizedannually
to
offset
future
taxable
income.
We
have
not
undertaken
a
study
to
assess
whether
an
ownership
change
or
multiple
ownership
changes
has
occurred
for
(i)
AVANT,
CuraGen
or
Kolltanprior
to
our
acquisitions,
(ii)
the
Company
on
the
state
level,
(iii)
the
Company
since
March
2015,
or
(iv)
research
and
development
credits.
If,
based
on
such
astudy,
we
were
to
determine
that
there
has
been
an
ownership
change
at
any
time
since
its
formation,
utilization
of
net
operating
loss
or
tax
credit
carryforwardswould
be
subject
to
an
annual
limitation
under
Section
382.
Refer
to
Note
15,
"Income
Taxes,"
in
the
accompanying
notes
to
the
financial
statements
for
additional
discussion
on
income
taxes.Item
1B.
UNRESOLVED
STAFF
COMMENTS
None.Item
2.
PROPERTIES
As
of
December
31,
2016
our
significant
leased
properties
are
described
below.Item
3.
LEGAL
PROCEEDINGS
We
are
not
currently
a
party
to
any
material
legal
proceedings.Item
4.
MINE
SAFETY
DISCLOSURES
Not
applicable.58Property
Location
Approximate
Square
Feet
Use
Lease
Expiration
DateHampton,
New
Jersey
49,600
Headquarters,
Office
and
Laboratory
July
2020(1)Needham,
Massachusetts
46,700
Office
and
Laboratory
July
2020(2)Fall
River,
Massachusetts
28,900
Manufacturing
Facility
July
2020(3)New
Haven,
Connecticut
17,700
Office
and
Laboratory
April
2019(4)Branford,
Connecticut
10,300
Office
December
2019(5)(1)Lease
includes
two
renewal
options
of
five
years
each.
(2)Lease
includes
two
renewal
options
of
five
years
each.
(3)Lease
includes
two
renewal
options
of
five
years
each.
(4)Lease
includes
one
renewal
option
of
two
years.
(5)Lease
includes
two
renewal
options
of
three
years.
Lease
also
includes
provision
for
early
termination
with
12
months
notice. Table
of
ContentsPART
II
Item
5.
MARKET
FOR
REGISTRANT'S
COMMON
EQUITY,
RELATED
STOCKHOLDER
MATTERS
AND
ISSUER
PURCHASES
OF
EQUITYSECURITIES
Our
common
stock
currently
trades
on
the
Nasdaq
Global
Market
(NASDAQ)
under
the
symbol
"CLDX".
The
following
table
sets
forth
for
the
periodsindicated
the
high
and
low
sale
prices
per
share
for
our
common
stock,
as
reported
by
NASDAQ.
As
of
March
6,
2017,
there
were
approximately
356
shareholders
of
record
of
our
common
stock.
On
March
6,
2017
the
closing
price
of
our
common
stock,
asreported
by
NASDAQ,
was
$3.81
per
share.
We
have
not
paid
any
dividends
on
our
common
stock
since
our
inception
and
do
not
intend
to
pay
any
dividends
inthe
foreseeable
future.59Fiscal
Period
High
Low
Year
Ended
December
31,
2016
First
Quarter
$15.61
$2.96
Second
Quarter
5.13
3.40
Third
Quarter
4.83
3.23
Fourth
Quarter
5.02
2.85
Year
Ended
December
31,
2015
First
Quarter
$32.82
$17.81
Second
Quarter
30.28
23.62
Third
Quarter
28.08
10.11
Fourth
Quarter
18.62
10.15
Table
of
ContentsCELLDEX
THEAPEUTICS,
INC.,
NASDAQ
MARKET
INDEX—U.S.
AND
PEER
GROUP
INDICES
The
graph
below
compares
the
cumulative
total
stockholder
return
on
the
common
stock
for
the
period
from
December
31,
2011
through
December
31,
2016,with
the
cumulative
return
on
(i)
NASDAQ
U.S.
Benchmark
TR
Index
and
(ii)
NASDAQ
Pharmaceutical
(Subsector)
Index.
The
comparison
assumes
investmentof
$100
on
December
31,
2011
in
our
common
stock
and
in
each
of
the
indices
and,
in
each
case,
assumes
reinvestment
of
all
dividends.
The
points
on
the
graphare
as
of
December
31
of
the
year
indicated.Unregistered
Sales
of
Equity
Securities
As
more
fully
discussed
in
Note
17
to
the
Financial
Statements
and
Supplementary
Data
in
Item
8
of
this
Annual
Report,
effective
November
29,
2016,
theCompany
acquired
Kolltan
in
accordance
with
the
Agreement
and
Plan
of
Merger
dated
as
of
November
1,
2016
(the
"Merger
Agreement").
Under
the
terms
of
theMerger
Agreement,
Kolltan's
investors
received,
in
exchange
for
their
share
and
debt
interests
in
Kolltan,
an
aggregate
of
18,257,996
shares
of
Celldex's
commonstock.
All
of
the
preceding
shares
were
issued
in
reliance
upon
an
exemption
from
the
registration
requirements
of
the
Securities
Act
of
1933,
as
amended,provided
by
Section
4(a)(2)
thereof
or
Regulation
D
thereunder
because
the
issuance
did
not
involve
a
public
offering.Item
6.
SELECTED
FINANCIAL
DATA
The
following
selected
financial
data
are
derived
from
our
financial
statements.
The
statement
of
operations
data
for
the
years
ended
December
31,
2016,2015
and
2014
and
the
balance
sheet
data
as
of
December
31,
2016
and
2015
have
been
derived
from
our
audited
financial
statements
included
in
Item
8
of
thisAnnual
Report
on
Form
10-K.
This
data
should
be
read
in
conjunction
with
our
audited
financial
statements
and
related
notes
which
are
included
elsewhere
in
thisAnnual
Report
on60
2011
2012
2013
2014
2015
2016
Celldex
Therapeutics,
Inc.
$100
$258
$931
$702
$603
$136
NASDAQ
U.S.
Benchmark
TR
Index
$100
$116
$155
$175
$176
$198
NASDAQ
Pharmaceutical
(Subsector)
Index
$100
$114
$155
$189
$199
$197
Table
of
ContentsForm
10-K,
and
"Management's
Discussion
and
Analysis
of
Financial
Condition
and
Results
of
Operations"
included
in
Item
7
below.STATEMENTS
OF
OPERATIONS
DATA
(In
thousands,
except
per
share
amounts)BALANCE
SHEET
DATA
(In
thousands)61
Year
Ended
December
31,
2016
2015
2014
2013
2012
REVENUE:
Product
Development
and
Licensing
Agreements
$2,174
$1,442
$838
$160
$146
Contracts
and
Grants
4,612
4,038
2,748
1,617
281
Product
Royalties
—
—
—
2,334
10,775
Total
Revenue
6,786
5,480
3,586
4,111
11,202
OPERATING
EXPENSE:
Research
and
Development
102,726
100,171
104,381
67,401
47,398
Royalty
—
—
—
2,334
10,775
Other
Operating
Expense
36,976
34,850
21,635
15,818
11,106
Total
Operating
Expense
139,702
135,021
126,016
85,553
69,279
Operating
Loss
(132,916)
(129,541)
(122,430)
(81,442)
(58,077)Investment
and
Other
Income,
Net
4,386
2,344
4,350
819
530
Interest
Expense
—
—
—
(927)
(1,576)Net
Loss
$(128,530)$(127,197)$(118,080)$(81,550)$(59,123)Basic
and
Diluted
Net
Loss
Per
Common
Share
$(1.27)$(1.31)$(1.32)$(1.02)$(1.02)Shares
Used
in
Calculating
Basic
and
Diluted
Net
Loss
PerCommon
Share
101,529
97,051
89,399
79,777
57,713
December
31,
2016
2015
2014
2013
2012
Working
Capital
*
$160,346
$264,696
$180,494
$284,839
$67,429
Total
Assets
383,358
337,584
248,014
347,095
125,541
Long-Term
Liabilities
82,704
17,239
11,863
6,950
12,082
Accumulated
Deficit
(719,486)
(590,956)
(463,759)
(345,679)
(264,129)Total
Stockholders'
Equity
265,431
290,105
211,660
319,795
95,774
*Total
current
assets
less
total
current
liabilities Table
of
ContentsItem
7.
MANAGEMENT'S
DISCUSSION
AND
ANALYSIS
OF
FINANCIAL
CONDITION
AND
RESULTS
OF
OPERATIONS
OVERVIEW
We
are
a
biopharmaceutical
company
focused
on
the
development
and
commercialization
of
several
immunotherapy
technologies
and
other
cancer-targetingbiologics.
Our
drug
candidates,
including
antibodies,
antibody-drug
conjugates
and
other
protein-based
therapeutics,
are
derived
from
a
broad
set
ofcomplementary
technologies
which
have
the
ability
to
engage
the
human
immune
system
and/or
directly
inhibit
tumors
to
treat
specific
types
of
cancer
or
otherdiseases.
Our
latest
stage
drug
candidate,
glembatumumab
vedotin
(also
referred
to
as
CDX-011)
is
a
targeted
antibody-drug
conjugate
in
a
randomized,
Phase
2b
studyfor
the
treatment
of
triple
negative
breast
cancer
and
a
Phase
2
study
for
the
treatment
of
metastatic
melanoma.
Varlilumab
(also
referred
to
as
CDX-1127)
is
animmune
modulating
antibody
that
is
designed
to
enhance
a
patient's
immune
response
against
cancer.
We
established
proof
of
principal
in
a
Phase
1
study
withvarlilumab,
which
supported
the
initiation
of
several
combination
studies
in
various
indications.
We
also
have
a
number
of
earlier
stage
drug
candidates
in
clinicaldevelopment,
including
CDX-1401,
a
targeted
immunotherapeutic
aimed
at
antigen
presenting
cells,
or
APCs,
for
cancer
indications;
CDX-301,
an
immune
cellmobilizing
agent
and
dendritic
cell
growth
factor;
and
CDX-014,
an
antibody-drug
conjugate
targeting
renal
and
ovarian
cancers.
In
November
2016,
wecompleted
the
acquisition
of
Kolltan
Pharmaceuticals,
Inc.
(Kolltan),
a
privately
held
company
focused
on
the
discovery
and
development
of
novel,
antibody-baseddrugs
targeting
receptor
tyrosine
kinases
(RTKs).
This
acquisition
added
the
following
drug
candidates
to
our
clinical
pipeline:
CDX-0158
(formerly
KTN0158),
ahumanized
monoclonal
antibody
(mAb)
currently
in
a
Phase
1
dose
escalation
study
in
refractory
gastrointestinal
stromal
tumors
(GIST)
and
other
KIT
positivetumors;
and,
CDX-3379
(formerly
KTN3379;
MEDI3379),
a
human
monoclonal
antibody
which
recently
completed
a
Phase
1b
study
in
patients
with
solid
tumors.We
also
acquired
the
TAM
program,
a
broad
antibody
discovery
effort
to
generate
antibodies
that
modulate
the
TAM
family
of
RTKs,
comprised
of
Tyro3,
AXLand
MerTK,
which
are
expressed
on
tumor-infiltrating
macrophages,
dendritic
cells
and
some
tumors.
Our
drug
candidates
address
market
opportunities
for
whichwe
believe
current
cancer
therapies
are
inadequate
or
non-existent.
We
are
building
a
fully
integrated,
commercial-stage
biopharmaceutical
company
that
develops
important
therapies
for
patients
with
unmet
medical
needs.Our
program
assets
provide
us
with
the
strategic
options
to
either
retain
full
economic
rights
to
our
innovative
therapies
or
seek
favorable
economic
terms
throughadvantageous
commercial
partnerships.
This
approach
allows
us
to
maximize
the
overall
value
of
our
technology
and
product
portfolio
while
best
ensuring
theexpeditious
development
of
each
individual
product.
The
following
table
reflects
Celldex-sponsored
clinical
studies
that
we
are
actively
pursuing
at
this
time.
All
programs
are
currently
fully-owned
by
Celldex.62Product
(generic)
Indication/Field
Status
SponsorGlembatumumab
vedotin
Triple
negative
breast
cancer
Phase
2b
CelldexGlembatumumab
vedotin
Metastatic
melanoma
(with
varlilumab
or
CPI*)
Phase
2
CelldexVarlilumab
Multiple
solid
tumors
(with
nivolumab)
Phase
2
Celldex**CDX-0158
Gastrointestinal
and
other
KIT-postive
tumors
Phase
1
CelldexCDX-3379
Multiple
solid
tumors
(in
combination
regimens)
Phase
1
CelldexCDX-014
Renal
cell
carcinoma
Phase
1
Celldex*checkpoint inhibitor **BMS
collaboration Table
of
Contents
We
also
routinely
work
with
external
parties,
such
as
government
agencies,
to
collaboratively
advance
our
drug
candidates.
The
following
pipeline
reflectsclinical
trials
of
our
drug
candidates
being
actively
pursued
by
outside
organizations.
In
addition
to
the
studies
listed
below,
we
also
have
an
Investigator
InitiatedResearch
(IIR)
program
with
seven
studies
ongoing
with
our
drug
candidates
and
additional
studies
currently
under
consideration.
The
expenditures
that
will
be
necessary
to
execute
our
business
plan
are
subject
to
numerous
uncertainties.
Completion
of
clinical
trials
may
take
several
yearsor
more,
and
the
length
of
time
generally
varies
substantially
according
to
the
type,
complexity,
novelty
and
intended
use
of
a
drug
candidate.
It
is
not
unusual
forthe
clinical
development
of
these
types
of
drug
candidates
to
each
take
five
years
or
more,
and
for
total
development
costs
to
exceed
$100
million
for
each
drugcandidate.
We
estimate
that
clinical
trials
of
the
type
we
generally
conduct
are
typically
completed
over
the
following
timelines:
The
duration
and
the
cost
of
clinical
trials
may
vary
significantly
over
the
life
of
a
project
as
a
result
of
differences
arising
during
the
clinical
trial
protocol,including,
among
others,
the
following:•the
number
of
patients
that
ultimately
participate
in
the
trial;
•the
duration
of
patient
follow-up
that
seems
appropriate
in
view
of
results;
•the
number
of
clinical
sites
included
in
the
trials;
•the
length
of
time
required
to
enroll
suitable
patient
subjects;
and
•the
efficacy
and
safety
profile
of
the
drug
candidate.
We
test
potential
drug
candidates
in
numerous
preclinical
studies
for
safety,
toxicology
and
immunogenicity.
We
may
then
conduct
multiple
clinical
trials
foreach
drug
candidate.
As
we
obtain
results
from
trials,
we
may
elect
to
discontinue
or
delay
clinical
trials
for
certain
drug
candidates
in
order
to
focus
our
resourceson
more
promising
drug
candidates.
An
element
of
our
business
strategy
is
to
pursue
the
research
and
development
of
a
broad
portfolio
of
drug
candidates.
This
is
intended
to
allow
us
to
diversifythe
risks
associated
with
our
research
and
development
expenditures.
To
the
extent
we
are
unable
to
maintain
a
broad
range
of
drug
candidates,
our
dependence
onthe
success
of
one
or
a
few
drug
candidates
increases.
Regulatory
approval
is
required
before
we
can
market
our
drug
candidates
as
therapeutic
products.
In
order
to
proceed
to
subsequent
clinical
trial
stages
and
toultimately
achieve
regulatory
approval,
the
regulatory
agency
must
conclude
that
our
clinical
data
is
safe
and
effective.
Historically,
the
results
from
preclinicaltesting
and
early
clinical
trials
(through
Phase
2)
have
often
not
been
predictive
of
results
obtained
in
later
clinical
trials.
A
number
of
new
drugs
and
biologicshave
shown
promising
results
in
early
clinical
trials,
but
subsequently
failed
to
establish
sufficient
safety
and
efficacy
data
to
obtain
necessary
regulatoryapprovals.63Product
(generic)
Indication/Field
Status
SponsorGlembatumumab
vedotin
Uveal
melanoma
Phase
2
NCI
(CRADA)Glembatumumab
vedotin
Squamous
cell
lung
cancer
Phase
2
PrECOG,
LLCCDX-1401/CDX-301
Multiple
solid
tumors
Phase
2
CITNClinical
Phase
Estimated
Completion
PeriodPhase
1
1
-
2
YearsPhase
2
1
-
5
YearsPhase
3
1
-
5
Years Table
of
Contents
Furthermore,
our
business
strategy
includes
the
option
of
entering
into
collaborative
arrangements
with
third
parties
to
complete
the
development
andcommercialization
of
our
drug
candidates.
In
the
event
that
third
parties
take
over
the
clinical
trial
process
for
one
of
our
drug
candidates,
the
estimated
completiondate
would
largely
be
under
control
of
that
third
party
rather
than
us.
We
cannot
forecast
with
any
degree
of
certainty
which
proprietary
products,
if
any,
will
besubject
to
future
collaborative
arrangements,
in
whole
or
in
part,
and
how
such
arrangements
would
affect
our
development
plan
or
capital
requirements.
Ourprograms
may
also
benefit
from
subsidies,
grants,
contracts
or
government
or
agency-sponsored
studies
that
could
reduce
our
development
costs.
As
a
result
of
the
uncertainties
discussed
above,
among
others,
it
is
difficult
to
accurately
estimate
the
duration
and
completion
costs
of
our
research
anddevelopment
projects
or
when,
if
ever,
and
to
what
extent
we
will
receive
cash
inflows
from
the
commercialization
and
sale
of
a
product.
Our
inability
to
completeour
research
and
development
projects
in
a
timely
manner
or
our
failure
to
enter
into
collaborative
agreements,
when
appropriate,
could
significantly
increase
ourcapital
requirements
and
could
adversely
impact
our
liquidity.
These
uncertainties
could
force
us
to
seek
additional,
external
sources
of
financing
from
time
to
timein
order
to
continue
with
our
business
strategy.
Our
inability
to
raise
additional
capital,
or
to
do
so
on
terms
reasonably
acceptable
to
us,
would
jeopardize
thefuture
success
of
our
business.
During
the
past
five
years
through
December
31,
2016,
we
incurred
an
aggregate
of
$422.1
million
in
research
and
development
expenses.
The
followingtable
indicates
the
amount
incurred
for
each
of
our
significant
research
programs
and
for
other
identified
research
and
development
activities
during
the
yearsended
December
31,
2016,
2015
and
2014.
The
amounts
disclosed
in
the
following
table
reflect
direct
research
and
development
costs,
license
fees
associated
withthe
underlying
technology
and
an
allocation
of
indirect
research
and
development
costs
to
each
program.Clinical
Development
Programs
As
previously
disclosed,
it
is
our
intention
to
integrate
Kolltan
without
increasing
our
planned
cash
burn
for
2017.
Following
the
addition
of
the
Kolltanprograms,
we
undertook
a
full
review
of
our
pipeline
and
associated
programs
to
identify
priority
areas
that
we
believe
have
the
highest
probability
of
potentiallyimpacting
disease
while
also
identifying
areas
for
improved
efficiency
and
cost
savings.
The
adjustments
are
reflected
in
the
following
clinical
pipeline
programupdate.64
Year
Ended
December
31,
2016
Year
Ended
December
31,
2015
Year
Ended
December
31,
2014
(In
thousands)
Glembatumumab
vedotin
$30,156
$19,124
$26,907
Varlilumab
28,554
18,484
9,459
CDX-0158
279
—
—
CDX-3379
416
—
—
CDX-014
3,623
5,724
3,722
CDX-1401
4,323
3,385
4,144
CDX-301
4,053
2,206
1,238
CDX-1140
3,802
—
—
TAM
438
—
—
Rintega
15,337
43,038
52,861
Other
Programs
11,745
8,210
6,050
Total
R&D
Expense
$102,726
$100,171
$104,381
Table
of
ContentsGlembatumumab Vedotin
Glembatumumab
vedotin
is
an
antibody-drug
conjugate,
or
ADC,
that
consists
of
a
fully
human
monoclonal
antibody,
CR011,
linked
to
a
potent
cell-killingdrug,
monomethyl
auristatin
E,
or
MMAE.
The
CR011
antibody
specifically
targets
glycoprotein
NMB,
referred
to
as
gpNMB
that
is
over-expressed
in
a
variety
ofcancers
including
breast
cancer,
melanoma,
non-small
cell
lung
cancer,
uveal
melanoma
and
osteosarcoma,
among
others.
The
ADC
technology,
comprised
ofMMAE
and
a
stable
linker
system
for
attaching
it
to
CR011,
was
licensed
from
Seattle
Genetics,
Inc.
and
is
the
same
as
that
used
in
the
marketed
productAdcetris®.
The
ADC
is
designed
to
be
stable
in
the
bloodstream.
Following
intravenous
administration,
glembatumumab
vedotin
targets
and
binds
to
gpNMB,
andupon
internalization
into
the
targeted
cell,
glembatumumab
vedotin
is
designed
to
release
MMAE
from
CR011
to
produce
a
cell-killing
effect.
Glembatumumabvedotin
is
being
studied
across
multiple
indications
in
company-sponsored
trials
and
in
collaborative
studies
with
external
parties.
The
Food
and
DrugAdministration,
or
FDA,
has
granted
Fast
Track
designation
to
glembatumumab
vedotin
for
the
treatment
of
advanced,
refractory/resistant
gpNMB-expressingbreast
cancer.
A
companion
diagnostic
is
in
development
for
certain
indications,
and
we
expect
that,
if
necessary,
such
a
companion
diagnostic
must
be
approvedby
the
FDA
or
certain
other
foreign
regulatory
agencies
before
glembatumumab
vedotin
may
be
commercialized
in
those
indications.
Treatment
of
Metastatic
Breast
Cancer:
The
Phase
1/2
study
of
glembatumumab
vedotin
administered
intravenously
once
every
three
weeks
evaluatedpatients
with
locally
advanced
or
metastatic
breast
cancer
(MBC)
who
had
received
prior
therapy
(median
of
seven
prior
regimens).
Results
were
published
in
theJournal of Clinical Oncology in
September
2014.
The
study
began
with
a
bridging
phase
to
confirm
the
maximum
tolerated
dose,
or
MTD,
and
then
expanded
intoa
Phase
2
open-label,
multi-center
study.
The
study
supported
an
acceptable
safety
profile
of
glembatumumab
vedotin
at
the
pre-defined
maximum
dose
level(1.88
mg/kg)
in
6
patients.
An
additional
28
patients
with
MBC
were
enrolled
in
an
expanded
Phase
2
cohort
(for
a
total
of
34
treated
patients
at
1.88
mg/kg,
thePhase
2
dose)
to
evaluate
the
progression-free
survival
(PFS)
rate
at
12
weeks.
The
1.88
mg/kg
dose
exhibited
an
acceptable
safety
profile
in
this
patient
populationwith
the
most
common
adverse
events
being
rash,
neuropathy
and
fatigue.
The
primary
anti-cancer
activity
endpoint,
which
called
for
at
least
5
of
25
(20%)patients
in
the
Phase
2
study
portion
to
be
progression-free
at
12
weeks,
was
met
as
9
of
27
(33%)
evaluable
patients
were
progression-free
at
12
weeks.
For
allpatients
treated
at
the
Phase
2
dose,
median
PFS
was
9.1
weeks.
A
subset
of
10
patients
had
"triple
negative
disease,"
a
more
aggressive
metastatic
breast
cancer
subtype
that
carries
a
high
risk
of
relapse
and
reducedsurvival
as
well
as
limited
therapeutic
options.
In
these
patients,
the
12-week
PFS
rate
was
60%
(6/10),
and
median
PFS
was
17.9
weeks.
Tumor
samples
from
asubset
of
patients
across
all
dose
groups
were
analyzed
for
gpNMB
expression.
The
tumor
samples
from
most
patients
showed
evidence
of
stromal
and/or
tumorcell
expression
of
gpNMB.
The
subsequent
EMERGE
study
was
a
randomized,
multi-center
Phase
2b
study
of
glembatumumab
vedotin
in
124
patients
with
heavily
pre-treated,advanced,
gpNMB-positive
breast
cancer.
Results
from
EMERGE
were
published
in
the
Journal of Clinical Oncology in
April
2015.
Patients
were
randomized(2:1)
to
receive
either
glembatumumab
vedotin
or
single-agent
Investigator's
Choice
chemotherapy.
Patients
randomized
to
receive
Investigator's
Choice
wereallowed
to
cross
over
to
receive
glembatumumab
vedotin
following
disease
progression.
Activity
endpoints
included
response
rate,
PFS
and
overall
survival
(OS).The
final
study
results,
as
shown
below,
suggested
that
glembatumumab
vedotin
induced
significant
response
rates
compared
to
currently
available
therapies
inpatient
subsets
with
advanced,
refractory
breast
cancers
with
high
gpNMB
expression
(expression
in
at
least
25%
of
tumor
cells)
and
in
patients
with
triplenegative
breast
cancer.
The
OS
and
PFS
of
patients
treated
with
glembatumumab
vedotin
were
also
observed
to
be
greatest
in
patients
with
high
gpNMBexpression
and,
in
particular,
in
patients
with
triple
negative
breast
cancer
who
also
had
high
gpNMB
expression.65 Table
of
ContentsEMERGE:
Overall
Response
Rate
and
Disease
Control
Data
(Intent-to-Treat
Population)
EMERGE:
Progression
Free
Survival
(PFS)
and
Overall
Survival
(OS)
Data
In
December
2013,
we
initiated
METRIC,
a
randomized,
controlled
Phase
2b
study
of
glembatumumab
vedotin
in
patients
with
triple
negative
breast
cancerthat
over-expresses
gpNMB.
Clinical
trial
study
sites
are
open
to
enrollment
across
the
U.S.,
Canada,
Australia
and
the
European
Union.
The
METRIC
protocolwas
amended
in
late
2014
based
on
feedback
from
clinical
investigators
conducting
the
study
that
the
eligibility
criteria
for
study
entry
were
limiting
their
ability
toenroll
patients
they
felt
were
clinically
appropriate.
In
addition,
we
had
spoken
to
country-specific
members
of
the
European
Medicines
Agency,
or
EMA,
andbelieved
an
opportunity
existed
to
expand
the
study
into
the
EU.
The
amendment
expanded
patient
entry
criteria
to
position
it
for
the
possibility
of
full
marketingapproval
with
global
regulators,
including
the
EMA,
and
to
support
improved
enrollment
in
the
study.
The
primary
endpoint
of
the
study
is
PFS
as
PFS
is
anestablished
endpoint
for
full
approval
registration
studies
in
this
patient
population
in
both
the
U.S.
and
the
EU.
The
sample
size
(n=300)
and
the
secondaryendpoint
of
OS
remained
unchanged.
Since
implementation
of
these
changes,
both
the
FDA
and
central
European
regulatory
authorities
have
reviewed
the
protocoldesign,
and
we
believe
the
METRIC
study
could
potentially
support
marketing
approval
in
both
the
U.S.
and
Europe
dependent
upon
data
results
and
review.Based
on
consistent
improvements
in
enrollment
trends
to
the
METRIC
study
over
the
last
several
months,
we
anticipate
that
study
enrollment
will
be
completedby
the
end
of
September
2017.
Efforts
to
ensure
delivery
of
manufactured
drug
that
is
ready
for
commercialization
and
a
companion
diagnostic,
includingpartnering
with
a
diagnostic
company,
are
underway.
Treatment
of
Metastatic
Melanoma:
The
Phase
1/2
open-label,
multi-center,
dose
escalation
study
evaluated
the
safety,
tolerability
and
pharmacokineticsof
glembatumumab
vedotin
in
117
patients
with
unresectable
stage
III
or
IV
melanoma
who
had
failed
no
more
than
one
prior
line
of
cytotoxic
therapy.
The
MTDand
resulting
Phase
2
dose
was
determined
to
be
1.88
mg/kg
administered
intravenously
once
every
three
weeks.
The
study
achieved
its
primary
activity
objectivewith
an
overall
response
rate
(ORR)
in
the
Phase
2
cohort
of
15%
(5/34).
Median
PFS
was
3.3
months
for
patients
treated
with
the
Phase
2
dose.
Glembatumumabvedotin
was
generally
well
tolerated,
with
the
most
frequent
treatment-related
adverse
events
being
rash,
fatigue,
alopecia,
pruritus,
diarrhea
and
nausea.66
High
gpNMB
Expression
Triple
Negative
and
gpNMB
Over-Expression
Glembatumumab
Vedotin
Investigator's
Choice
Glembatumumab
Vedotin
Investigator's
Choice
(n=23)
(n=11)
(n=10)
(n=6)
Response
Rate
30%
9%
40%
0%Disease
Control
Rate
65%
27%
90%
17%Tumor response assessed by RECIST 1.1, inclusive of response observed at a single time point.
High
gpNMB
Expression
Triple
Negative
and
gpNMB
Over-Expression
Glembatumumab
Vedotin
Investigator's
Choice
Glembatumumab
Vedotin
Investigator's
Choice
Median
PFS
(months)
2.8
1.5
3.5
1.5
p=0.18
p=0.0017
Median
OS
(months)
10.0
5.7
10.0
5.5
p=0.31
p=0.003
Table
of
ContentsThe
development
of
rash,
which
may
be
associated
with
the
presence
of
gpNMB
in
the
skin,
also
seemed
to
correlate
with
greater
PFS.
In
December
2014,
we
initiated
a
single
arm,
single-agent,
open-label
Phase
2
study
of
glembatumumab
vedotin
in
patients
with
unresectable
stage
III
or
IVmelanoma
(n=60)
and
enrollment
has
been
completed.
In
May
2016,
we
amended
the
protocol
to
add
a
second
cohort
of
patients
to
a
glembatumumab
vedotin
andvarlilumab
combination
arm
to
assess
the
potential
clinical
benefit
of
the
combination
and
to
explore
varlilumab's
potential
biologic
and
immunologic
effect
whencombined
with
an
ADC.
In
November
2016,
we
amended
the
protocol
again
to
add
a
third
cohort
of
patients
evaluating
glembatumumab
vedotin
in
combinationwith
an
approved
checkpoint
inhibitor
(i.e.,
nivolumab
or
pembrolizumab)
following
progression
on
the
checkpoint
inhibitor
alone.
Both
additional
cohorts
areopen
to
enrollment.
The
primary
endpoint
for
each
cohort
is
ORR.
Secondary
endpoints
include
analyses
of
PFS,
duration
of
response,
OS,
retrospectiveinvestigation
of
whether
the
anti-cancer
activity
of
glembatumumab
vedotin
is
dependent
upon
the
degree
of
gpNMB
expression
in
tumor
tissue
and
safety
of
boththe
monotherapy
and
combination
regimens.
We
presented
data
from
the
single-agent
cohort
at
the
European
Society
for
Medical
Oncology
(ESMO)
Congress
in
October
2016.
The
cohort
enrolled
62evaluable
patients
with
unresectable
stage
III
(n=1;
2%)
or
stage
IV
(n=61;
98%)
melanoma.
All
patients
had
progressed
after
checkpoint
inhibitor
therapy,
andalmost
all
patients
had
received
both
ipilimumab
(n=58;
94%)
and
anti-PD-1/anti-PDL-1
(n=58;
94%)
therapy.
Twelve
patients
presented
with
BRAF
mutation,and
eleven
had
prior
treatment
with
BRAF
or
BRAF/MEK
targeted
agents.
The
primary
endpoint
of
the
cohort
(6
or
more
objective
responses
in
the
first
52patients
enrolled)
was
exceeded.
Seven
of
62
(11%)
patients
experienced
a
confirmed
response,
and
an
additional
three
patients
also
experienced
single
timepointresponses.
The
median
duration
of
response
was
6.0
months.
A
52%
disease
control
rate
(patients
without
progression
for
greater
than
three
months)
wasdemonstrated
and
median
PFS
for
all
patients
was
4.4
months.
In
addition,
patients
who
experienced
rash
in
the
first
cycle
of
treatment
had
a
20%
confirmedresponse
rate
and
a
more
prolonged
PFS
of
5.5
months
[p=0.054;
hazard
rating=0.52
(0.27,
1.02)].
We
also
intend
to
conduct
exploratory
analyses
of
pre-entry
skinbiopsies
in
future
patients
to
investigate
potential
predictors
of
response
to
glembatumumab
vedotin,
given
the
potential
association
of
rash
and
outcome.
Treatment
of
Other
Indications:
We
have
entered
into
a
collaborative
relationship
with
PrECOG,
LLC,
which
represents
a
research
network
establishedby
the
Eastern
Cooperative
Oncology
Group
(ECOG),
under
which
PrECOG,
LLC,
is
conducting
an
open-label
Phase
1/2
study
in
patients
with
unresectablestage
IIIB
or
IV,
gpNMB-expressing,
advanced
or
metastatic
squamous
cell
carcinoma
(SCC)
of
the
lung,
who
have
progressed
on
prior
platinum-basedchemotherapy.
This
study
opened
to
enrollment
in
April
2016.
The
study
includes
a
dose-escalation
phase
followed
by
a
two-stage
Phase
2
portion
(Simon
two-stage
design).
The
Phase
1,
dose-escalation
portion
of
the
study
will
assess
the
safety
and
tolerability
of
glembatumumab
vedotin
at
the
current
dose
of
1.9
mg/kgand
then
2.2
mg/kg
in
order
to
determine
whether
higher
dosing
is
feasible
in
this
population.
The
first
stage
of
the
Phase
2
portion
plans
to
enroll
approximately20
patients,
and
if
at
least
two
patients
achieve
a
partial
response
or
complete
response,
a
second
stage
may
enroll
an
additional
15
patients.
The
primary
objectiveof
the
Phase
2
portion
of
the
study
is
to
assess
the
anti-tumor
activity
of
glembatumumab
vedotin
in
squamous
cell
lung
cancer
as
measured
by
ORR.
Secondaryobjectives
of
the
study
include
analyses
of
safety
and
tolerability
and
further
assessment
of
anti-tumor
activity
across
a
broad
range
of
endpoints.
We
have
also
entered
into
a
Cooperative
Research
and
Development
Agreement,
or
CRADA,
with
the
National
Cancer
Institute,
or
NCI,
under
which
NCI
issponsoring
two
studies
of
glembatumumab
vedotin—one
in
uveal
melanoma
and
one
in
osteosarcoma.
The
uveal
melanoma
study
is
a
single-arm,
open-label
studyin
patients
with
locally
recurrent
or
metastatic
uveal
melanoma
and
is
currently
open
to
enrollment.
The
primary
outcome
measure
is
ORR.
Secondary
outcomemeasures
include
change
in67 Table
of
ContentsgpNMB
expression
on
tumor
tissue
via
immunohistochemistry,
safety,
OS
and
PFS.
We
expect
data
from
this
study
will
be
presented
at
a
future
medical
meetingin
the
first
half
of
2017.
The
osteosarcoma
study
is
a
single-arm,
open-label,
evaluation
of
adolescent
and
adult
patients
with
recurrent
or
refractory
osteosarcoma.The
co-primary
objectives
are
to
determine
whether
glembatumumab
vedotin
therapy
either
increases
the
disease
control
rate
at
4
months
in
patients
with
recurrentmeasurable
osteosarcoma
as
compared
to
historical
experience
and/or
whether
glembatumumab
vedotin
therapy
produces
an
objective
response
rate
greater
than20%
in
patients
without
previous
eribulin
(eribulin
mesylate)
treatment.
Secondary
outcome
measures
include
safety,
pharmacokinetics
and
the
relation
of
gpNMBexpression
as
measured
by
immunohistochemistry
to
clinical
response.
The
study
had
a
two
stage
design
with
a
pre-specified
activity
threshold
necessary
in
thefirst
stage
to
progress
enrollment
to
the
second
stage.
The
study
did
not
meet
the
activity
threshold
for
progressing
to
stage
2
and
therefore
no
additional
patientswill
be
enrolled.
We
expect
data
from
this
study
will
be
presented
at
a
future
medical
meeting.Varlilumab
Varlilumab
is
a
fully
human
monoclonal
agonist
antibody
that
binds
to
and
activates
CD27,
a
critical
co-stimulatory
molecule
in
the
immune
activationcascade.
We
believe
varlilumab
works
primarily
by
stimulating
T
cells,
an
important
component
of
a
person's
immune
system,
to
attack
cancer
cells.
Restrictedexpression
and
regulation
of
CD27
enables
varlilumab
specifically
to
activate
T
cells,
resulting
in
an
enhanced
immune
response
with
the
potential
for
a
favorablesafety
profile.
In
preclinical
studies,
varlilumab
has
been
shown
to
directly
kill
or
inhibit
the
growth
of
CD27
expressing
lymphomas
and
leukemias
in
vitro and
invivo models.
We
have
entered
into
license
agreements
with
the
University
of
Southampton,
UK
for
intellectual
property
to
use
anti-CD27
antibodies
and
withMedarex
(acquired
by
Bristol-Myers
Squibb
Company,
or
BMS)
for
access
to
the
UltiMab
technology
to
develop
and
commercialize
human
antibodies
to
CD27.Varlilumab
was
initially
studied
as
a
single-agent
to
establish
a
safety
profile
and
assess
immunologic
and
clinical
activity
in
patients
with
cancer,
but
we
believethe
greatest
opportunity
for
varlilumab
is
as
an
immune
activator
in
combination
with
other
agents.
Currently,
we
are
focusing
our
efforts
on
a
Phase
1/2
clinicaltrial
being
conducted
in
collaboration
with
BMS
and
their
PD-1
immune
checkpoint
inhibitor,
Opdivo.
Varlilumab
is
also
being
explored
in
combination
studies,including
with
glembatumumab
vedotin,
and
in
ongoing
and
planned
investigator-sponsored
studies.
Single-Agent
Phase
1
Study:
Data
from
the
completed,
open-label
Phase
1
study
of
varlilumab
in
patients
with
selected
malignant
solid
tumors
orhematologic
cancers
were
presented
in
November
2014.
Varlilumab
to
date
has
shown
an
acceptable
safety
profile
and
induced
immunologic
activity
in
patientsthat
is
consistent
with
both
its
proposed
mechanism
of
action
and
data
in
preclinical
models.
A
total
of
90
patients
were
dosed
in
the
study
at
multiple
clinical
sitesin
the
U.S.
of
which
56
patients
were
dosed
in
dose
escalation
cohorts
(various
solid
and
hematologic
B-cell
tumors),
and
34
patients
were
dosed
in
the
expansioncohorts
(melanoma
and
RCC)
at
3
mg/kg.
In
both
the
solid
tumor
and
hematologic
dose-escalations,
the
pre-specified
maximum
dose
level
(10
mg/kg)
was
reachedwithout
identification
of
a
maximum
tolerated
dose.
The
majority
of
adverse
events,
or
AEs,
related
to
treatment
have
been
mild
to
moderate
(Grade
1/2)
inseverity,
with
only
three
serious
AEs
related
to
treatment
reported.
No
significant
immune-mediated
adverse
events
(colitis,
hepatitis,
etc.)
typically
associated
withcheckpoint
blockade
have
been
observed
to
date.
Two
patients
experienced
significant
objective
responses
including
a
complete
response
in
Hodgkin
lymphoma(continued
at
33.1+
months
as
of
September
2016;
patient
no
longer
on
study)
and
a
partial
response
in
renal
cell
carcinoma
of
27.7+
months
(as
of
September2016).
Thirteen
patients
experienced
stable
disease
with
a
range
of
3-47.3+
months
(as
of
September
2016).
As
of
December
2016,
there
are
two
patientscontinuing
in
long
term
follow-up.68 Table
of
Contents
Phase
1/2
Varlilumab/Opdivo®
Combination
Study:
In
May
2014,
we
entered
into
a
clinical
trial
collaboration
with
Bristol-Myers
Squibb
to
evaluatethe
safety,
tolerability
and
preliminary
efficacy
of
varlilumab
and
Opdivo,
Bristol-Myers
Squibb's
PD-1
immune
checkpoint
inhibitor,
in
a
Phase
1/2
study.
Underthe
terms
of
this
clinical
trial
collaboration,
Bristol-Myers
Squibb
made
a
one-time
payment
to
us
of
$5.0
million,
and
the
companies
amended
the
terms
of
ourexisting
license
agreement
with
Medarex
(acquired
by
Bristol-Myers
Squibb)
related
to
our
CD27
program
whereby
certain
future
milestone
payments
werewaived
and
future
royalty
rates
were
reduced
that
may
have
been
due
from
us
to
Medarex.
In
return,
Bristol-Myers
Squibb
was
granted
a
time-limited
right
of
firstnegotiation
if
we
wish
to
out-license
varlilumab.
The
companies
also
agreed
to
work
exclusively
with
each
other
to
explore
anti-PD-1
antagonist
antibody
and
anti-CD27
agonist
antibody
combination
regimens.
The
clinical
trial
collaboration
provides
that
the
companies
will
share
development
costs
and
that
we
will
beresponsible
for
conducting
the
Phase
1/2
study.
The
Phase
1/2
study
was
initiated
in
January
2015
and
is
being
conducted
in
adult
patients
with
multiple
solid
tumors
to
assess
the
safety
and
tolerability
ofvarlilumab
at
varying
doses
when
administered
with
Opdivo
followed
by
a
Phase
2
expansion
to
evaluate
the
activity
of
the
combination
in
disease
specificcohorts.
The
Phase
1
dose
escalation
portion
of
the
study,
conducted
in
patients
with
solid
tumors,
has
completed
enrollment
(n=36)
and
primarily
enrolled
patientswith
colorectal
and
ovarian
cancer.
Data
were
presented
from
the
Phase
1
portion
of
the
varlilumab
and
Opdivo
study
in
a
poster
at
the
American
Association
for
Cancer
Research
(AACR)Annual
Meeting
in
April
2016.
The
primary
objective
of
the
Phase
1
portion
of
the
study
was
to
evaluate
the
safety
and
tolerability
of
the
combination.
Thecombination
showed
acceptable
tolerability
and
safety
across
all
dose
levels
without
any
evidence
of
increased
autoimmunity
or
inappropriate
immune
activation.Marked
changes
in
the
tumor
microenvironment
including
increased
infiltrating
CD8+
T
cells
and
increased
PD-L1
expression,
which
have
been
shown
tocorrelate
with
a
greater
magnitude
of
treatment
effect
from
checkpoint
inhibitors
in
other
clinical
studies
were
observed.
Additional
evidence
of
immune
activity,such
as
increase
in
inflammatory
chemokines
and
decrease
in
T
regulatory
cells,
were
also
noted.
In
a
subset
of
patients
(n=17)
on
study
who
had
both
pre-
andpost-tumor
biopsies
available,
preliminary
evidence
suggest
a
correlation
between
biomarker
data
and
stable
disease
or
better
in
seven
of
these
patients
(4
ovariancancer,
2
colorectal
cancer,
1
squamous
cell
carcinoma
of
the
head
and
neck).
All
dose
levels
of
the
combination
therapy
showed
an
acceptable
tolerability
andsafety
profile,
without
identification
of
a
maximum
tolerated
dose.
In
the
Phase
2
portion
of
the
study,
varlilumab
is
administered
at
3
mg/kg
in
the
majority
ofcohorts,
based
upon
cumulative
data
across
multiple
studies.
The
Phase
2
portion
of
the
study
opened
to
enrollment
in
April
2016
and
includes
cohorts
in
colorectal
cancer
(n=18),
ovarian
cancer
(n=54),
head
and
necksquamous
cell
carcinoma
(n=54),
renal
cell
carcinoma
(n=25)
and
glioblastoma
(n=20).
Based
on
a
recent
protocol
amendments,
additional
dosing
schedules
arebeing
explored
in
ovarian
cancer
(versus
renal
cell
carcinoma)
and,
as
previously
disclosed,
in
head
and
neck
squamous
cell
carcinoma,
increasing
the
overall
sizeof
the
study
compared
to
the
original
study
design.
The
primary
objective
of
the
Phase
2
cohorts
is
ORR,
except
glioblastoma,
where
the
primary
objective
is
therate
of
12-month
overall
survival.
Secondary
objectives
include
pharmacokinetics
assessments,
determining
the
immunogenicity
of
varlilumab
when
given
incombination
with
Opdivo
and
further
assessing
the
anti-tumor
activity
of
combination
treatment.
We
plan
to
complete
enrollment
across
all
cohorts
in
the
Phase
2portion
of
the
study
in
the
first
quarter
of
2018
and
will
work
with
BMS
to
present
data
from
the
study
at
a
future
medical
meeting.
Phase
1/2
Varlilumab/Tecentriq®
Combination
Study:
In
March
2015,
we
entered
into
a
clinical
trial
collaboration
with
Roche
to
evaluate
the
safety,tolerability
and
preliminary
efficacy
of
varlilumab
and
Tecentriq
(anti-PDL1),
Roche's
cancer
immunotherapy,
in
a
Phase
1/2
study.
Under
the
terms
of
thisagreement,
Roche
is
providing
study
drug,
and
we
are
responsible
for
conducting
and
funding
the
study.
The
Phase
1
portion
of
the
study
is
being
conducted
inbladder
cancer
and
renal
cell
carcinoma,69 Table
of
Contentsand
the
primary
outcome
is
safety
and
tolerability.
The
Phase
1
portion
of
the
study
completed
enrollment
in
the
third
quarter
of
2016.
Patients
continue
to
befollowed,
and
we
expect
data
from
this
study
will
be
presented
at
a
future
medical
meeting.
Given
the
advancement
of
varlilumab
into
a
broad
Phase
2
study
incombination
with
Opdivo
and
our
efforts
to
identify
areas
for
cost-containment,
we
will
not
be
advancing
the
varlilumab/Tecentriq
study
to
Phase
2.
Phase
1/2
Varlilumab/Sutent®
Combination
Study:
In
May
2015,
we
initiated
a
Phase
1/2
safety
and
tolerability
study
examining
the
combination
ofvarlilumab
and
Sutent
in
patients
with
metastatic
clear
cell
renal
cell
carcinoma.
The
Phase
1
portion
of
the
study
assesses
the
safety
and
tolerability
of
varlilumabat
varying
doses
when
administered
with
Sutent.
The
Phase
1
portion
of
the
study
completed
enrollment
in
the
fourth
quarter
of
2016.
Patients
continue
to
befollowed,
and
data
from
this
study
will
be
presented
at
a
future
medical
meeting.
Given
the
advancement
of
varlilumab
into
a
broad
Phase
2
study
in
combinationwith
Opdivo
and
our
efforts
to
identify
areas
for
cost-containment,
we
will
not
be
advancing
the
varlilumab/Sutent
study
to
Phase
2.
Phase
1/2
Varlilumab/Yervoy®
+/–
CDX–1401
Combination
Study:
In
April
2015,
we
initiated
a
Phase
1/2
safety
pilot
and
expansion
study
examiningthe
combination
of
varlilumab
and
Yervoy
in
patients
with
stage
III
or
IV
metastatic
melanoma.
Since
initiating
the
study,
the
standard
of
care
has
evolved,
andthere
has
been
increasing
physician
reluctance
to
use
Yervoy
in
this
setting.
As
such,
given
the
broad
development
strategy
in
place
for
varlilumab,
as
previouslydisclosed,
this
study
was
closed
to
enrollment
in
the
third
quarter
of
2016.CDX-0158
CDX-0158
(formerly
KTN0158),
is
a
humanized
monoclonal
antibody
designed
to
inhibit
KIT
activation
in
tumor
cells
and
mast
cells.
KIT
is
expressed
inmany
tumor
types
including
gastrointestinal
stromal
tumors
(or
GIST),
sarcomas,
small
cell
lung
cancer,
melanoma,
acute
myeloid
leukemia
(AML)
and
mast
cellleukemia.
It
has
also
been
implicated
in
asthma
and
neurofibromatosis.
We
are
currently
developing
CDX-0158
for
the
treatment
of
GIST.
Small
molecule
drugscurrently
approved
to
treat
GIST
inhibit
mutant
KIT,
but
acquired
resistance
develops
via
secondary,
drug-resistant
KIT
mutations
in
the
majority
of
patients
overtime.
CDX-0158
is
designed
to
uniquely
prevent
KIT
activation
by
inhibiting
both
receptor
dimerization
and
ligand
binding.
CDX-0158
has
demonstratedpreclinical
activity
versus
the
most
common
c-KIT
mutations
in
human
GIST,
including
treatment
of
mastocytoma
in
a
canine
model.
A
Phase
1
dose
escalation
study
in
patients
with
advanced
refractory
GIST
and
other
KIT
positive
tumors
opened
to
enrollment
in
December
2015
todetermine
the
maximum
tolerated
dose,
recommend
a
dose
for
further
study
and
characterize
the
safety
profile.
Enrollment
is
ongoing.
Upon
completion
of
Phase
1assuming
a
successful
outcome,
we
plan
to
develop
CDX-0158
in
patients
with
refractory
GIST
given
the
significant
unmet
need
for
these
patients.
Preclinical
data
published
in
Molecular Cancer Therapeutics in
January
2017
demonstrate
that
KIT
inhibition
in
certain
immune
cells
with
CDX-0158enhances
the
activity
of
checkpoint
blockade,
providing
additional
opportunities
for
combination
therapy.
This
mechanism
may
also
be
effective
with
otherimmunotherapies,
in
particular
with
our
CD27
agonist,
varlilumab.CDX-3379
CDX-3379
(formerly
KTN3379
and
MEDI3379)
is
a
human
monoclonal
antibody
with
half-life
extension
designed
to
block
the
activity
of
ErbB3
(HER3).We
believe
ErbB3
may
be
an
important
receptor
regulating
cancer
cell
growth
and
survival
as
well
as
resistance
to
targeted
therapies
and
is
expressed
in
manycancers,
including
head
and
neck,
thyroid,
breast,
lung
and
gastric
cancers,
as
well
as
melanoma.
We
believe
the
proposed
mechanism
of
action
for
CDX-3379
setsit
apart
from
other
drugs70 Table
of
Contentsin
development
in
this
class
due
to
its
ability
to
block
both
ligand-independent
and
ligand-dependent
ErbB3
signaling
by
binding
to
a
unique
epitope.
It
has
afavorable
pharmacologic
profile,
including
a
longer
half-life
and
slower
clearance
relative
to
other
drug
candidates
in
this
class.
CDX-3379
also
has
potential
toenhance
anti-tumor
activity
and/or
overcome
resistance
in
combination
with
other
targeted
and
cytotoxic
therapies
to
directly
kill
tumor
cells.
Tumor
cell
death
andthe
ensuing
release
of
new
tumor
antigens
has
the
potential
to
serve
as
a
focus
for
combination
therapy
with
immuno-oncology
approaches,
even
in
refractorypatients.
A
Phase
1a/1b
study
was
conducted,
including
a
single-agent
dose-escalation
portion
and
combination
expansion
cohorts.
Data
from
the
dose-escalationportion,
which
completed
enrollment
in
September
2015,
and
initial
data
from
the
expansion
cohorts
(enrollment
ongoing
at
the
time)
were
presented
at
theAmerican
Society
of
Clinical
Oncology
Annual
Meeting
in
June
2016.
The
single-agent
dose-escalation
portion
of
the
study
did
not
identify
an
MTD,
and
therewere
no
dose
limiting
toxicities.
The
most
common
adverse
events
included
rash
and
diarrhea
and
were
predominantly
grade
1
or
2.
Four
combination
arms
acrossmultiple
tumor
types
were
added
to
evaluate
CDX-3379
with
several
drugs
that
target
EGFR,
HER2
or
BRAF.
They
include
combinations
with
Erbitux®
(n=16),Tarceva®
(n=8),
Zelboraf®
(n=4)
and
Herceptin®
(n=10).
Patients
had
advanced
disease
and
were
generally
heavily
pretreated.
Across
the
combination
arms,
themost
frequent
adverse
events
were
diarrhea,
nausea,
rash
and
fatigue.
Objective
responses
were
observed
in
the
Erbitux
and
Zelboraf
combination
arms.
In
theErbitux
arm,
there
was
one
complete
response
in
a
patient
with
head
and
neck
cancer,
who
had
been
previously
treated
with
Erbitux
and
was
refractory.
In
theZelboraf
arm,
there
were
two
partial
responses
in
patients
who
had
lung
cancer,
one
of
whom
had
been
previously
treated
with
Tafinlar®
and
was
consideredrefractory.
We
are
currently
exploring
plans
for
advancement
into
Phase
2
study.CDX-1401
CDX-1401,
developed
from
our
APC
Targeting
Technology,
is
an
NY-ESO-1-antibody
fusion
protein
for
immunotherapy
in
multiple
solid
tumors.
CDX-1401,
which
is
administered
with
an
adjuvant,
is
composed
of
the
cancer-specific
antigen
NY-ESO-1
fused
to
a
fully
human
antibody
that
binds
to
DEC-205
forefficient
delivery
to
dendritic
cells.
Delivery
of
tumor-specific
proteins
directly
to
dendritic
cells
in vivo elicits
potent,
broad,
anti-tumor
immune
responses
acrosspopulations
with
different
genetic
backgrounds.
In
humans,
NY-ESO-1
has
been
detected
in
20%
to
30%
of
melanoma,
lung,
esophageal,
liver,
gastric,
ovarian
andbladder
cancers,
and
up
to
70%
of
synovial
sarcomas,
thus
representing
a
broad
opportunity.
We
are
developing
CDX-1401
for
the
treatment
of
malignantmelanoma
and
a
variety
of
solid
tumors
which
express
the
cancer
antigen
NY-ESO-1,
which
we
licensed
from
the
Ludwig
Institute
for
Cancer
Research
in
2006.Preclinical
studies
have
shown
that
CDX-1401
treatment
results
in
activation
of
human
T
cell
responses
against
NY-ESO-1.
We
have
completed
a
Phase
1
study
of
CDX-1401
which
assessed
the
safety,
immunogenicity
and
clinical
activity
of
escalating
doses
of
CDX-1401
with
TLRagonists
(resiquimod
and/or
poly-ICLC)
in
45
patients
with
advanced
malignancies
refractory
to
all
available
therapies.
Results
were
published
in
ScienceTranslational Medicine in
April
2014.
Sixty
percent
of
patients
had
confirmed
NY-ESO
expression
in
archived
tumor
samples.
Thirteen
patients
maintained
stabledisease
for
up
to
13.4
months
with
a
median
of
6.7
months.
Treatment
indicates
an
acceptable
safety
profile
to
date,
and
there
were
no
dose
limiting
toxicities.
Avariety
of
immune
activation
parameters
were
observed.
Humoral
responses
were
elicited
in
both
NY-ESO-1
positive
and
negative
patients.
NY-ESO-1-specific
Tcell
responses
were
absent
or
low
at
baseline,
but
increased
post-vaccination
in
56%
of
evaluable
patients,
including
both
CD4
and/or
CD8
T
cell
responses.Robust
immune
responses
were
observed
with
CDX-1401
with
resiquimod
and
poly-ICLC
alone
and
in
combination.
Long-term
patient
follow
up
suggested
thattreatment
with
CDX-1401
may
predispose
patients
to
better
outcomes
on
subsequent
therapy
with
checkpoint
inhibitors.
Of
the
45
patients
in
the
Phase
1
study,eight
went
on
to
receive71 Table
of
Contentssubsequent
therapy
of
either
Yervoy
or
an
investigational
checkpoint
inhibitor,
and
six
of
these
patients
had
objective
tumor
regression.
Six
patients
withmelanoma
received
Yervoy
within
three
months
of
treatment
with
CDX-1401,
and
four
(67%)
had
objective
tumor
responses,
including
one
complete
response,which
compares
favorably
to
the
overall
response
rate
of
11%
previously
reported
in
metastatic
melanoma
patients
treated
with
single-agent
Yervoy.
In
addition,two
patients
with
non-small
cell
lung
cancer
received
an
investigational
checkpoint
blockade
within
two
months
of
completing
treatment
with
CDX-1401,
and
bothachieved
partial
responses.
Together
with
Roche,
we
are
supporting
an
investigator
initiated
study
of
CDX-1401
in
combination
with
Tecentriq®
in
patients
withlung
cancer.
CDX-1401's
potential
activity
is
being
explored
in
investigator
sponsored
and
collaborative
studies.
A
Phase
2
study
of
CDX-1401
in
combination
with
CDX-301
is
being
conducted
in
metastatic
melanoma
by
the
Cancer
Immunotherapy
Trials
Network
(CITN)
under
a
CRADA
with
the
Cancer
Therapy
EvaluationProgram
of
the
NCI.
This
study
was
designed
to
determine
the
activity
of
CDX-1401
with
or
without
CDX-301
in
melanoma.
The
primary
outcome
measure
of
thestudy
is
immune
response
to
NY-ESO-1.
Secondary
outcome
measures
include
analysis
and
characterization
of
peripheral
blood
mononuclear
cells
(dendritic
cells,T
cells,
natural
killer
cells,
etc.),
additional
immune
monitoring,
safety
and
clinical
outcomes
(survival
and
time
to
tumor
recurrence).
Enrollment
is
complete
andinitial
results
were
presented
in
June
at
the
2016
American
Society
of
Clinical
Oncology
(ASCO)
Annual
Meeting.
The
data
confirmed
that
CDX-1401
is
capableof
driving
NY-ESO-1
immunity
and
further
demonstrated
the
potential
of
CDX-301
as
a
combination
agent
for
enhancing
tumor
specific
immune
responses.
TheNCI
and
CITN
are
planning
to
enroll
additional
cohorts
to
investigate
alternative
regimens
of
CDX-301.
Other
studies
are
being
considered
through
investigator-sponsored
and
collaborative
agreements.CDX-301
CDX-301,
a
recombinant
FMS-like
tyrosine
kinase
3
ligand,
or
Flt3L,
is
a
hematopoietic
cytokine
that
uniquely
expands
dendritic
cells
and
hematopoieticstem
cells
in
combination
with
other
agents
to
potentiate
the
anti-tumor
response.
Depending
on
the
setting,
cells
expanded
by
CDX-301
promote
either
enhancedor
permissive
immunity.
CDX-301
is
in
clinical
development
for
multiple
cancers,
in
combination
with
vaccines,
adjuvants
and
other
treatments
that
release
tumorantigens.
We
licensed
CDX-301
from
Amgen
Inc.
in
March
2009
and
believe
CDX-301
may
hold
significant
opportunity
for
synergistic
development
incombination
with
other
proprietary
molecules
in
our
portfolio.
A
Phase
1
study
of
CDX-301
evaluated
seven
different
dosing
regimens
of
CDX-301
to
determine
the
appropriate
dose
for
further
development
based
onsafety,
tolerability
and
biological
activity.
The
data
from
the
study
were
consistent
with
previous
clinical
experience
and
demonstrated
that
CDX-301
has
anacceptable
safety
profile
to
date
and
can
mobilize
hematopoietic
stem
cell
(HSC)
populations
in
healthy
volunteers.
Based
on
the
safety
profile
and
the
clinical
andpreclinical
data
to
date,
we
initiated
a
pilot
clinical
study
of
CDX-301
for
the
mobilization
and
transplantation
of
allogeneic
hematopoietic
stem
cells
in
patientswith
hematological
malignancies
undergoing
hematopoietic
stem
cell
transplantation.
Preliminary
results
from
this
Phase
2
study
were
presented
at
the
annualmeeting
of
the
American
Society
for
Blood
and
Marrow
Transplantation
in
February
2016.
These
preliminary
data
from
three
donor/patient
pairs
showed
thatCDX-301
given
as
a
single
agent
has
an
acceptable
safety
profile
and
mobilized
hematopoietic
stem
cells
in
healthy
donors.
The
stem
cell
graft
contained
notableincreases
in
naïve
lymphocytes
and
plasmacytoid
dendritic
cells
consistent
with
preclinical
data
suggesting
a
possible
better
outcome.
Recipients
experiencedsuccessful
engraftment
in
an
expected
time
frame.
Given
that
hematopoietic
stem
cell
transplantation
is
outside
of
our
core
focus,
in
an
effort
to
prioritize
humanand
capital
resources,
we
announced
in
May
2016
that
we
decided
not
to
advance
CDX-301
in
this
particular
indication
at
this
time.72 Table
of
Contents
In
June,
at
the
2016
ASCO
Annual
Meeting,
initial
results
from
a
Phase
2
study
of
CDX-1401
in
combination
with
CDX-301
in
metastatic
melanoma
werepresented
that
further
demonstrated
the
value
of
CDX-301
as
a
combination
agent
for
enhancing
tumor
specific
immune
responses.
The
Phase
2
study
wasconducted
by
the
Cancer
Immunotherapy
Trials
Network,
or
CITN,
under
a
CRADA
with
the
Cancer
Therapy
Evaluation
Program
of
the
NCI.
Based
on
theseresults
the
CITN
is
planning
to
enroll
additional
cohorts
to
investigate
alternative
regimens
of
CDX-301.
Other
studies
are
being
considered
through
investigator-sponsored
and
collaborative
agreements.CDX-014
CDX-014
is
a
human
monoclonal
ADC
that
targets
T
cell
immunoglobulin
and
mucin
domain
1,
or
TIM-1.
TIM-1
expression
is
upregulated
in
severalcancers,
most
notably
renal
cell
and
ovarian
carcinomas,
and
is
associated
with
a
more
malignant
phenotype
of
renal
cell
carcinoma
(RCC)
and
tumor
progression.TIM-1
has
restricted
expression
in
healthy
tissues,
making
it
potentially
amenable
to
an
ADC
approach.
The
TIM-1
antibody
is
linked
to
MMAE
using
SeattleGenetics'
proprietary
technology.
The
ADC
is
designed
to
be
stable
in
the
bloodstream
but
to
release
MMAE
upon
internalization
into
TIM-1-expressing
tumorcells,
resulting
in
a
targeted
cell-killing
effect.
CDX-014
has
shown
anti-tumor
activity
in
preclinical
models
of
ovarian
and
renal
cancer.
In
July
2016,
weannounced
that
enrollment
had
opened
in
a
Phase
1/2
study
of
CDX-014
to
patients
with
both
clear
cell
and
papillary
RCC.
The
Phase
1
dose-escalation
portion
ofthe
study
is
evaluating
cohorts
of
patients
receiving
increasing
doses
of
CDX-014
to
determine
the
maximum
tolerated
dose
and
a
recommended
dose
for
Phase
2study.
We
anticipate
the
Phase
1
dose-escalation
portion
of
the
study
will
complete
enrollment
by
year-end
2017.
The
Phase
2
portion
of
the
study
plans
to
enrollapproximately
25
patients
to
assess
the
anti-tumor
activity
of
CDX-014
at
the
recommended
dose
in
advanced
renal
cell
carcinoma
as
measured
by
objectiveresponse
rate.
Secondary
objectives
include
safety
and
tolerability,
pharmacokinetics,
immunogenicity
and
additional
measures
of
anti-tumor
activity.Rintega
On
March
7,
2016,
we
announced
that
our
Phase
3
study
of
Rintega®
in
patients
with
newly
diagnosed
EGFRvIII-positive
glioblastoma
was
beingdiscontinued.
This
decision
was
made
based
on
the
outcome
of
a
preplanned
interim
analysis
conducted
by
an
independent
Data
Safety
and
Monitoring
Board(DSMB).
The
DSMB
determined
that
continuation
of
the
study
would
not
result
in
reaching
statistical
significance
for
the
primary
endpoint
of
the
study,
overallsurvival
in
patients
with
minimal
residual
disease,
as
both
the
Rintega
arm
and
the
control
arm
were
performing
on
par
with
each
other.
In
the
ACT
IV
study,Rintega
performed
consistently
with
prior
Phase
2
studies
but
the
control
arm
significantly
outperformed
expectations
(Hazard
ratio
=
0.99;
median
OS:
Rintega20.4
months
vs.
control
21.1
months).
Based
on
this
recommendation,
we
discontinued
the
study.
Data
from
the
ACT
IV
study
were
presented
at
the
Society
forNeuro-Oncology
Annual
Meeting
in
November
2016.
All
patients
on
the
Rintega
arm
of
the
ACT
IV
study,
prior
Phase
2
studies
and
existing
compassionate
userecipients
have
been
offered
ongoing
access
to
Rintega
on
a
compassionate
use
basis,
and
we
continue
to
support
new
requests
for
compassionate
use
in
recurrentglioblastoma
on
a
limited
basis.
Study
closure
activities
are
complete,
and
we
continue
to
anticipate
that
we
will
not
incur
substantial
additional
costs
related
toRintega.CRITICAL
ACCOUNTING
POLICIES
AND
ESTIMATES
Our
significant
accounting
policies
are
described
in
Note
2
to
the
financial
statements
included
in
Item
8
of
this
Form
10-K.
We
believe
our
most
criticalaccounting
policies
include
accounting
for
business
combinations,
revenue
recognition,
intangible
and
long-lived
assets,
research
and
development
expenses
andstock-based
compensation
expense.73 Table
of
Contents
The
methods,
estimates
and
judgments
we
use
in
applying
our
most
critical
accounting
policies
have
a
significant
impact
on
the
results
we
report
in
ourfinancial
statements.
We
evaluate
our
estimates
and
judgments
on
an
on-going
basis.
We
base
our
estimates
on
historical
experience
and
on
assumptions
that
webelieve
to
be
reasonable
under
the
circumstances.
Our
experience
and
assumptions
form
the
basis
for
our
judgments
about
the
carrying
value
of
assets
andliabilities
that
are
not
readily
apparent
from
other
sources.
Actual
results
may
vary
from
what
we
anticipate
and
different
assumptions
or
estimates
about
the
futurecould
materially
change
our
reported
results.
We
believe
the
following
accounting
policies
are
the
most
critical
to
us
in
that
they
are
important
to
the
portrayal
ofour
financial
statements
and
they
require
our
most
difficult,
subjective
or
complex
judgments
in
the
preparation
of
our
financial
statements:Business Combinations
We
account
for
business
combinations
under
the
acquisition
method
of
accounting.
We
record
the
fair
value
of
the
consideration
transferred
to
acquire
abusiness
to
the
tangible
assets
and
identifiable
intangible
assets
acquired
and
liabilities
assumed
on
the
basis
of
their
fair
values
at
the
date
of
acquisition.
Weassess
the
fair
value
of
assets,
including
intangible
assets
such
as
IPR&D,
using
a
variety
of
methods
including
present-value
models.
Each
asset
is
measured
at
fairvalue
from
the
perspective
of
a
market
participant.
The
method
used
to
estimate
the
fair
values
of
IPR&D
assets
incorporates
significant
assumptions
regarding
theestimates
a
market
participant
would
make
in
order
to
evaluate
an
asset,
including
a
market
participant's
assumptions
regarding
the
probability
of
completingIPR&D
projects,
which
would
require
obtaining
regulatory
approval
for
marketing
of
the
associated
drug
candidate;
a
market
participant's
estimates
regarding
thetiming
of
and
the
expected
costs
to
complete
IPR&D
projects;
a
market
participant's
estimates
of
future
cash
flows
from
potential
product
sales;
and
theappropriate
discount
rates
for
a
market
participant.
Transaction
costs
and
restructuring
costs
associated
with
the
transaction
are
expensed
as
incurred.
The
difference
between
the
purchase
price
and
the
fair
value
of
assets
acquired
and
liabilities
assumed
in
a
business
combination
is
recorded
to
goodwill.Goodwill
is
evaluated
for
impairment
on
an
annual
basis
during
the
third
quarter,
or
earlier
if
impairment
indicators
are
present.
We
performed
an
annualimpairment
test
of
the
goodwill
asset
as
of
July
1,
2016
and
concluded
that
the
goodwill
asset
was
not
impaired.
We
record
contingent
consideration
resulting
from
a
business
combination
at
its
fair
value
on
the
acquisition
date.
We
determine
the
fair
value
of
thecontingent
consideration
based
primarily
on
the
following
factors:•timing
and
probability
of
success
of
clinical
events
or
regulatory
approvals;
•timing
and
probability
of
success
of
meeting
clinical
and
commercial
milestones;
and
•discount
rates.
Our
contingent
consideration
liabilities
arose
in
connection
with
our
acquisition
of
Kolltan.
On
a
quarterly
basis,
we
revalue
these
obligations
and
recordincreases
or
decreases
in
their
fair
value
as
an
adjustment
to
operating
earnings.
Changes
to
contingent
consideration
obligations
can
result
from
adjustments
todiscount
rates,
accretion
of
the
discount
rates
due
to
the
passage
of
time,
changes
in
our
estimates
of
the
likelihood
or
timing
of
achieving
development
orcommercial
milestones,
changes
in
the
probability
of
certain
clinical
events
or
changes
in
the
assumed
probability
associated
with
regulatory
approval.
The
assumptions
related
to
determining
the
value
of
contingent
consideration
include
a
significant
amount
of
judgment,
and
any
changes
in
the
underlyingestimates
could
have
a
material
impact
on
the
amount
of
contingent
consideration
expense
recorded
in
any
given
period.74 Table
of
ContentsRevenue Recognition
We
recognize
revenue
when
all
of
the
following
criteria
are
met:
persuasive
evidence
of
an
arrangement
exists;
delivery
has
occurred
or
services
have
beenrendered;
the
seller's
price
to
the
buyer
is
fixed
or
determinable;
and
collectability
is
reasonably
assured.
We
have
entered
into
and
in
the
future
may
enter
into
biopharmaceutical
product
development
agreements
with
collaborative
partners
for
the
research
anddevelopment
of
therapeutic
drug
candidates.
The
terms
of
the
agreements
may
include
nonrefundable
signing
and
licensing
fees,
funding
for
research,
developmentand
manufacturing,
milestone
payments
and
royalties
on
any
product
sales
derived
from
collaborations.
These
multiple
element
arrangements
are
analyzed
todetermine
whether
the
deliverables
can
be
separated
or
whether
they
must
be
accounted
for
as
a
single
unit
of
accounting.
In
accounting
for
these
transactions,
weallocate
revenue
to
the
various
elements
based
on
their
relative
fair
value.
The
fair
value
of
a
revenue
generating
element
can
be
based
on
current
selling
pricesoffered
by
us
or
another
party
for
current
products
or
our
best
estimate
of
a
selling
price
for
future
products.
Revenue
allocated
to
an
individual
element
isrecognized
when
all
other
revenue
recognition
criteria
are
met
for
that
element.
These
collaborative
and
other
agreements
may
contain
milestone
payments.
Revenues
from
milestones,
if
they
are
considered
substantive,
are
recognizedupon
successful
accomplishment
of
the
milestones.
Determining
whether
a
milestone
is
substantive
involves
judgment,
including
an
assessment
of
our
involvementin
achieving
the
milestones
and
whether
the
amount
of
the
payment
is
commensurate
to
our
performance.
If
not
considered
substantive,
milestones
are
initiallydeferred
and
recognized
over
the
remaining
period
of
the
performance
obligation.
Payments
received
to
fund
certain
research
activities
are
recognized
as
revenue
in
the
period
in
which
the
research
activities
are
performed.
Revenue
fromcontracts
and
grants
is
recognized
as
the
services
are
performed
and
recorded
as
effort
is
expended
on
the
contracted
work
and
billed
to
the
government
or
ourcontractual
partner.
Payments
received
in
advance
that
are
related
to
future
performance
are
deferred
and
recognized
as
revenue
when
the
research
projects
areperformed.
Product
royalty
revenue
consists
of
payments
received
from
licensees
for
a
portion
of
sales
proceeds
from
products
that
utilize
our
licensed
technologies
andare
recognized
when
the
amount
of
and
basis
for
such
royalty
payments
are
reported
to
us
in
accurate
and
appropriate
form
and
in
accordance
with
the
relatedlicense
agreement.Intangible and Long-Lived Assets
We
evaluate
the
recoverability
of
our
long-lived
assets,
including
property
and
equipment,
and
finite-lived
intangible
assets
when
circumstances
indicate
thatan
event
of
impairment
may
have
occurred.
Determination
of
recoverability
is
based
on
an
estimate
of
undiscounted
future
cash
flows
resulting
from
the
use
of
theasset
and
its
eventual
disposition.
In
the
event
that
such
cash
flows
are
not
expected
to
be
sufficient
to
recover
the
carrying
amount
of
the
assets,
the
assets
arewritten-down
to
their
estimated
fair
values.
IPR&D
assets
acquired
in
a
business
combination
initially
are
recorded
at
fair
value
and
accounted
for
as
indefinite-lived
intangible
assets.
These
assets
arecapitalized
on
our
balance
sheets
until
either
the
project
underlying
them
is
completed
or
the
assets
become
impaired.
If
a
project
is
completed,
the
carrying
valueof
the
related
intangible
asset
is
amortized
over
the
remaining
estimated
life
of
the
asset
beginning
in
the
period
in
which
the
project
is
completed.
If
a
projectbecomes
impaired
or
is
abandoned,
the
carrying
value
of
the
related
intangible
asset
is
written
down
to
its
fair
value
and
an
impairment
charge
is
taken
in
theperiod
in
which
the
impairment
occurs.
IPR&D
assets
are
tested
for
impairment
on
an
annual
basis
during
the
third
quarter,
or
earlier
if
impairment
indicators
arepresent.75 Table
of
ContentsDiscounted
cash
flow
models
are
typically
used
in
these
tests
and
the
models
require
the
use
of
significant
estimates
and
assumptions
including
but
not
limited
to:•timing
and
costs
to
complete
the
in-process
projects;
•timing
and
probability
of
success
of
clinical
events
or
regulatory
approvals;
•estimated
future
cash
flows
from
product
sales
resulting
from
completed
products
and
in-process
projects;
and
•discount
rates
We
performed
an
annual
impairment
test
of
the
IPR&D
assets
as
of
July
1,
2016
and
concluded
that
the
IPR&D
assets
were
not
impaired.
Intangible
assetsacquired
in
a
business
combination
with
a
finite
life
are
recorded
at
fair
value
and
amortized
over
the
greater
of
economic
consumption
or
on
a
straight-line
basisover
their
estimated
useful
life.
The
difference
between
the
purchase
price
and
the
fair
value
of
assets
acquired
and
liabilities
assumed
in
a
business
combination
is
recorded
to
goodwill.Goodwill
is
evaluated
for
impairment
on
an
annual
basis
during
the
third
quarter,
or
earlier
if
impairment
indicators
are
present.
We
performed
an
annualimpairment
test
of
the
goodwill
asset
as
of
July
1,
2016
and
concluded
that
goodwill
was
not
impaired.Research and Development Expenses
Research
and
development
costs,
including
internal
and
contract
research
costs,
are
expensed
as
incurred.
Research
and
development
expenses
consist
mainlyof
clinical
trial
costs,
manufacturing
of
clinical
material,
toxicology
and
other
preclinical
studies,
personnel
costs,
depreciation,
license
fees
and
funding
of
outsidecontracted
research.
Clinical
trial
expenses
include
expenses
associated
with
clinical
research
organizations,
or
CRO,
services.
Contract
manufacturing
expenses
include
expensesassociated
with
contract
manufacturing
organizations,
or
CMO,
services.
The
invoicing
from
CROs
and
CMOs
for
services
rendered
can
lag
several
months.
Weaccrue
the
cost
of
services
rendered
in
connection
with
CRO
and
CMO
activities
based
on
our
estimate
of
costs
incurred.
We
maintain
regular
communication
withour
CROs
and
CMOs
to
assess
the
reasonableness
of
our
estimates.
Differences
between
actual
expenses
and
estimated
expenses
recorded
have
not
been
materialand
are
adjusted
for
in
the
period
in
which
they
become
known.Stock-Based Compensation Expense
We
record
stock-based
compensation
expense
for
all
stock-based
awards
made
to
employees
and
directors
based
on
the
estimated
fair
values
of
the
stock-based
awards
expected
to
vest
at
the
grant
date
and
is
adjusted,
if
necessary,
to
reflect
actual
forfeitures.
Our
estimates
of
employee
stock
option
values
rely
onestimates
of
future
uncertain
events.
Significant
assumptions
include
the
use
of
historical
volatility
to
estimate
the
expected
stock
price
volatility.
We
also
estimateexpected
term
based
on
historical
exercise
patterns.
Actual
volatility
and
lives
of
options
may
be
significantly
different
from
our
estimates.
Compensation
expensefor
all
stock-based
awards
to
employees
and
directors
is
recognized
using
the
straight-line
method
over
the
term
of
vesting
or
performance.
We
record
stock-based
compensation
expense
for
stock
options
granted
to
non-employees
based
on
the
fair
value
of
the
stock
options
which
is
re-measuredover
the
vesting
term
resulting
in
periodic
adjustments
to
stock-based
compensation
expense.76 Table
of
ContentsRESULTS
OF
OPERATIONSYear Ended December 31, 2016 compared with Year Ended December 31, 2015Net Loss
The
$1.3
million
increase
in
net
loss
for
the
year
ended
December
31,
2016
compared
to
the
year
ended
December
31,
2015
was
primarily
the
result
of
anincrease
in
research
and
development
expenses
and
general
and
administrative
expenses,
offset
by
an
increase
in
investment
and
other
income
and
revenue.Revenue
The
$0.7
million
increase
in
product
development
and
licensing
agreements
revenue
for
the
year
ended
December
31,
2016
compared
to
the
year
endedDecember
31,
2015
was
primarily
related
to
our
BMS
agreement.
In
May
2014,
we
entered
into
a
clinical
trial
collaboration
with
BMS
whereby
BMS
made
a
one-time
payment
to
us
of
$5.0
million
which
we
are
recognizing
as
revenue
along
with
BMS's
50%
share
of
the
clinical
trial
cost
over
our
estimated
performanceperiod
of
five
years.
The
$0.6
million
increase
in
contracts
and
grants
revenue
for
the
year
ended
December
31,
2016
compared
to
the
year
ended
December
31,2015
was
primarily
related
to
an
increase
in
grant
revenue
of
$1.2
million,
partially
offset
by
a
decrease
of
$0.7
million
in
revenue
from
our
Rockefeller
Universityagreement
pursuant
to
which
we
perform
research
and
development
services
for
Rockefeller.77
Year
Ended
December
31
Increase/
(Decrease)
2016
2015
$
%
(In
thousands)
Revenue:
Product
Development
and
Licensing
Agreements
$2,174
$1,442
$732
51%Contracts
and
Grants
4,612
4,038
574
14%Total
Revenue
6,786
5,480
1,306
24%Operating
Expense:
Research
and
Development
102,726
100,171
2,555
3%General
and
Administrative
35,979
33,837
2,142
6%Amortization
of
Acquired
Intangible
Assets
997
1,013
(16)
(2)%Total
Operating
Expense
139,702
135,021
4,681
3%Operating
Loss
(132,916)
(129,541)
3,375
3%Investment
and
Other
Income,
Net
4,386
2,344
2,042
87%Net
Loss
$(128,530)$(127,197)$1,333
1% Table
of
ContentsResearch and Development Expense
Research
and
development
expenses
consist
primarily
of
(i)
personnel
expenses,
(ii)
laboratory
supply
expenses
relating
to
the
development
of
ourtechnology,
(iii)
facility
expenses,
(iv)
license
fees
and
(v)
product
development
expenses
associated
with
our
drug
candidates
as
follows:
Personnel
expenses
primarily
include
salary,
benefits,
stock-based
compensation
and
payroll
taxes.
The
$6.3
million
increase
in
personnel
expenses
for
theyear
ended
December
31,
2016
compared
to
the
year
ended
December
31,
2015
was
primarily
due
to
Kolltan-related
severance
expense
and
higher
stock-basedcompensation
of
$0.7
million
and
$1.6
million,
respectively,
and
increased
headcount.
We
expect
personnel
expenses,
not
including
the
Kolltan-related
severanceexpenses,
to
remain
relatively
consistent
over
the
next
twelve
months,
although
there
may
be
fluctuations
on
a
quarterly
basis.
Laboratory
supply
expenses
include
laboratory
materials
and
supplies,
services,
and
other
related
expenses
incurred
in
the
development
of
our
technology.The
$0.7
million
decrease
in
laboratory
supply
expenses
for
the
year
ended
December
31,
2016
compared
to
the
year
ended
December
31,
2015
was
primarily
dueto
lower
manufacturing
supply
purchases.
We
expect
supply
expenses
to
remain
relatively
consistent
over
the
next
twelve
months,
although
there
may
befluctuations
on
a
quarterly
basis.
Facility
expenses
include
depreciation,
amortization,
utilities,
rent,
maintenance,
and
other
related
expenses
incurred
at
our
facilities.
The
$0.6
millionincrease
in
facility
expenses
for
the
year
ended
December
31,
2016
compared
to
the
year
ended
December
31,
2015
was
primarily
due
to
an
increase
in
rent.
Weexpect
facility
expenses
to
remain
relatively
consistent
over
the
next
twelve
months,
although
there
may
be
fluctuations
on
a
quarterly
basis.
License
fee
expenses
include
annual
license
maintenance
fees
and
milestone
payments
due
upon
the
achievement
of
certain
development,
regulatory
and/orcommercial
milestones.
The
$0.7
million
increase
in
license
fee
expenses
for
the
year
ended
December
31,
2016
compared
to
the
year
ended
December
31,
2015was
due
to
the
timing
of
certain
development
and/or
regulatory
milestones
achieved
by
our
drug
candidates.
We
expect
license
fee
expense
to
remain
relativelyconsistent
over
the
next
twelve
months,
although
there
may
be
fluctuations
on
a
quarterly
basis.
Product
development
expenses
include
clinical
investigator
site
fees,
external
trial
monitoring
costs,
data
accumulation
costs,
contracted
research
and
outsideclinical
drug
product
manufacturing.
The
$5.9
million
decrease
in
product
development
expenses
for
the
year
ended
December
31,
2016
compared
to
the
yearended
December
31,
2015
was
primarily
due
to
a
$19.9
million
decrease
in
Rintega
program
costs.
That
decrease
was
partially
offset
by
increases
inglembatumumab
vedotin
and
varlilumab
program
costs
of
$4.6
million
and
$9.6
million,
respectively.
We
expect
product
development
expenses
to
decrease
overthe
next
twelve
months
as
decreases
in
Rintega
costs
are
only
partially
offset
by
increases
in
the
CDX-0158
and
CDX-3379
programs,
although
there
may
befluctuations
on
a
quarterly
basis.78
Year
Ended
December
31,
Increase/
(Decrease)
2016
2015
$
%
(In
thousands)
Personnel
$36,070
$29,774
$6,296
21%Laboratory
Supplies
3,697
4,355
(658)
(15)%Facility
6,314
5,756
558
10%License
Fees
1,614
896
718
80%Product
Development
46,852
52,776
(5,924)
(11)% Table
of
ContentsGeneral and Administrative Expense
The
$2.1
million
increase
in
general
and
administrative
expenses
for
the
year
ended
December
31,
2016
compared
to
the
year
ended
December
31,
2015
wasprimarily
due
to
Kolltan-related
severance
expense,
restructuring
expense
related
to
our
decision
to
not
occupy
our
Needham,
MA
expansion
space
and
higherstock-based
compensation
of
$2.4
million,
$1.2
million
and
$0.9
million,
respectively.
Those
increases
were
partially
offset
by
lower
commercial
planning
costs
of$2.8
million.
We
expect
general
and
administrative
expense,
not
including
the
Kolltan-related
severance
and
restructuring
expenses,
to
remain
relatively
consistentover
the
next
twelve
months,
although
there
may
be
fluctuations
on
a
quarterly
basis.Amortization Expense
Amortization
expenses
for
the
year
ended
December
31,
2016
were
consistent
compared
to
the
year
ended
December
31,
2015.
We
expect
amortizationexpense
of
acquired
intangible
assets
to
remain
relatively
consistent
over
the
next
twelve
months.Investment and Other Income, Net
The
$2.0
million
increase
in
investment
and
other
income,
net
for
the
year
ended
December
31,
2016
compared
to
the
year
ended
December
31,
2015
wasprimarily
due
to
higher
other
income
of
$1.8
million
related
to
our
sale
of
New
Jersey
tax
benefits.
We
anticipate
investment
income
to
decrease
over
the
nexttwelve
months.Year Ended December 31, 2015 compared with Year Ended December 31, 2014Net Loss
The
$9.1
million
increase
in
net
loss
for
the
year
ended
December
31,
2015
compared
to
the
year
ended
December
31,
2014
was
primarily
the
result
of
anincrease
in
general
and
administrative
expenses,
partially
offset
by
a
decrease
in
research
and
development
expenses.79
Year
Ended
December
31
Increase/
(Decrease)
2015
2014
$
%
(In
thousands)
Revenue:
Product
Development
and
Licensing
Agreements
$1,442
$838
$604
72%Contracts
and
Grants
4,038
2,748
1,290
47%Total
Revenue
5,480
3,586
1,894
53%Operating
Expense:
Research
and
Development
100,171
104,381
(4,210)
(4)%General
and
Administrative
33,837
20,622
13,215
64%Amortization
of
Acquired
Intangible
Assets
1,013
1,013
—
0%Total
Operating
Expense
135,021
126,016
9,005
7%Operating
Loss
(129,541)
(122,430)
7,111
6%Investment
and
Other
Income,
Net
2,344
4,350
(2,006)
(46)%Net
Loss
$(127,197)$(118,080)$9,117
8% Table
of
ContentsRevenue
The
$0.6
million
increase
in
product
development
and
licensing
agreements
revenue
for
the
year
ended
December
31,
2015
compared
to
the
year
endedDecember
31,
2014
was
primarily
related
to
our
BMS
agreement.
In
May
2014,
we
entered
into
a
clinical
trial
collaboration
with
BMS
whereby
BMS
made
a
one-time
payment
to
us
of
$5.0
million
which
we
are
recognizing
as
revenue
along
with
BMS's
50%
share
of
the
clinical
trial
cost
over
our
estimated
performanceperiod
of
five
years.
The
$1.3
million
increase
in
contracts
and
grants
revenue
for
the
year
ended
December
31,
2015
compared
to
the
year
ended
December
31,2014
was
primarily
related
to
our
Rockefeller
University
agreement
pursuant
to
which
we
perform
research
and
development
services
for
Rockefeller.Research and Development Expense
Research
and
development
expenses
consist
primarily
of
(i)
personnel
expenses,
(ii)
laboratory
supply
expenses
relating
to
the
development
of
ourtechnology,
(iii)
facility
expenses,
(iv)
license
fees
and
(v)
product
development
expenses
associated
with
our
drug
candidates
as
follows:
The
$0.8
million
increase
in
laboratory
supply
expenses
for
the
year
ended
December
31,
2015
compared
to
the
year
ended
December
31,
2014
was
primarilydue
to
higher
manufacturing
supply
purchases.
The
$0.7
million
increase
in
facility
expenses
for
the
year
ended
December
31,
2015
compared
to
the
year
ended
December
31,
2014
was
primarily
due
to
anincrease
in
rent
and
depreciation
and
amortization
expense.
The
$2.3
million
decrease
in
license
fee
expenses
for
the
year
ended
December
31,
2015
compared
to
the
year
ended
December
31,
2014
was
primarily
due
tothe
one-time
$2.5
million
milestone
incurred
and
paid
to
Seattle
Genetics
in
2014
as
a
result
of
the
METRIC
study
initiation.
The
$14.4
million
decrease
in
product
development
expenses
for
the
year
ended
December
31,
2015
compared
to
the
year
ended
December
31,
2014
wasprimarily
due
to
a
$13.5
million
decrease
in
ACT
IV
costs.
Increases
in
glembatumumab
vedotin
and
varlilumab
clinical
trial
costs
of
$2.4
million
and$3.0
million,
respectively,
were
offset
by
decreases
in
contract
manufacturing
costs
of
$6.4
million.General and Administrative Expense
The
$13.2
million
increase
in
general
and
administrative
expenses
for
the
year
ended
December
31,
2015
compared
to
the
year
ended
December
31,
2014
wasprimarily
due
to
higher
headcount,
stock-based
compensation
of
$3.2
million
and
a
$6.5
million
increase
in
Rintega
and
glembatumumab
vedotin
commercialplanning
costs.Amortization Expense
Amortization
expenses
for
the
year
ended
December
31,
2015
were
consistent
compared
to
the
year
ended
December
31,
2014.80
Year
Ended
December
31,
Increase/
(Decrease)
2015
2014
$
%
(In
thousands)
Personnel
$29,774
$20,666
$9,108
44%Laboratory
Supplies
4,355
3,598
757
21%Facility
5,756
5,062
694
14%License
Fees
896
3,150
(2,254)
(72)%Product
Development
52,776
67,205
(14,429)
(21)% Table
of
ContentsInvestment and Other Income, Net
The
$2.0
million
decrease
in
investment
and
other
income,
net
for
the
year
ended
December
31,
2015
compared
to
the
year
ended
December
31,
2014
wasprimarily
due
to
other
income
of
$3.0
million
received
in
2014
in
connection
with
our
TopoTarget
agreement.
These
payments
are
the
last
milestone
payments
wewere
owed
from
TopoTarget.LIQUIDITY
AND
CAPITAL
RESOURCES
Our
cash
equivalents
are
highly
liquid
investments
with
a
maturity
of
three
months
or
less
at
the
date
of
purchase
and
consist
primarily
of
investments
inmoney
market
mutual
funds
with
commercial
banks
and
financial
institutions.
We
maintain
cash
balances
with
financial
institutions
in
excess
of
insured
limits.
Wedo
not
anticipate
any
losses
with
respect
to
such
cash
balances.
We
invest
our
excess
cash
balances
in
marketable
securities
including
municipal
bond
securities,U.S.
government
agency
securities,
and
high-grade
corporate
bonds
that
meet
high
credit
quality
standards,
as
specified
in
our
investment
policy.
Our
investmentpolicy
seeks
to
manage
these
assets
to
achieve
our
goals
of
preserving
principal
and
maintaining
adequate
liquidity.
The
use
of
our
cash
flows
for
operations
has
primarily
consisted
of
salaries
and
wages
for
our
employees,
facility
and
facility-related
costs
for
our
offices,laboratories
and
manufacturing
facility,
fees
paid
in
connection
with
preclinical
studies,
clinical
studies,
contract
manufacturing,
laboratory
supplies
and
services,consulting,
legal
and
other
professional
fees.
To
date,
the
primary
sources
of
cash
flows
from
operations
have
been
payments
received
from
our
collaborativepartners
and
from
government
entities.
The
timing
of
any
new
collaboration
agreements,
government
contracts
or
grants
and
any
payments
under
these
agreements,contracts
or
grants
cannot
be
easily
predicted
and
may
vary
significantly
from
quarter
to
quarter.
At
December
31,
2016,
our
principal
sources
of
liquidity
consisted
of
cash,
cash
equivalents
and
marketable
securities
of
$189.8
million.
We
have
hadrecurring
losses
and
incurred
a
loss
of
$128.5
million
for
the
year
ended
December
31,
2016.
Net
cash
used
in
operations
for
the
year
ended
December
31,
2016was
$113.0
million.
We
believe
that
the
cash,
cash
equivalents
and
marketable
securities
at
December
31,
2016
combined
with
the
anticipated
proceeds
from
futuresales
of
our
common
stock
under
the
Cantor
agreement,
are
sufficient
to
meet
estimated
working
capital
requirements
and
fund
planned
operations
through
2018,however,
this
could
be
impacted
if
we
elected
to
pay
Kolltan
contingent
milestones,
if
any,
in
cash.
In
the
event
that
certain
specified
preclinical
and
clinical
development
milestones
related
to
Kolltan's
development
programs
and/or
our
developmentprograms
and
certain
commercial
milestones
related
to
Kolltan's
drug
candidates
are
achieved,
we
will
be
required
to
pay
Kolltan's
stockholders
milestonepayments
of
up
to
$172.5
million,
which
milestone
payments
may
be
made,
at
our
sole
election,
in
cash,
in
shares
of
our
common
stock
or
a
combination
of
both,subject
to
NASDAQ
listing
requirements
and
provisions
of
the
merger
agreement.
During
the
next
twelve
months
and
beyond,
we
will
take
further
steps
to
raise
additional
capital
to
meet
our
liquidity
needs.
Our
capital
raising
activities
mayinclude,
but
may
not
be
limited
to,
one
or
more
of
the
following:
the
licensing
of
drug
candidates
with
existing
or
new
collaborative
partners,
possible
businesscombinations,
issuance
of
debt,
or
the
issuance
of
common
stock
or
other
securities
via
private
placements
or
public
offerings.
While
we
may
seek
capital
througha
number
of
means,
there
can
be
no
assurance
that
additional
financing
will
be
available
on
acceptable
terms,
if
at
all,
and
our
negotiating
position
in
capital-raisingefforts
may
worsen
as
existing
resources
are
used.
There
is
also
no
assurance
that
we
will
be
able
to
enter
into
further
collaborative
relationships.
Additional
equityfinancings
may
be
dilutive
to
our
stockholders;
debt
financing,
if
available,
may
involve
significant
cash
payment
obligations
and
covenants
that
restrict
our
abilityto
operate
as
a
business;
and
licensing
or
strategic
collaborations
may
result
in
royalties
or
other
terms
which
reduce
our
economic81 Table
of
Contentspotential
from
products
under
development.
Our
ability
to
continue
funding
our
planned
operations
into
and
beyond
twelve
months
from
the
issuance
date
is
alsodependent
on
the
timing
and
manner
of
payment
of
future
contingent
milestones
from
the
Kolltan
acquisition,
in
the
event
that
we
achieve
the
drug
candidatemilestones
related
to
those
payments.
We
may
decide
to
pay
those
milestone
payments
in
cash.
Further,
if
we
do
not
obtain
shareholder
approval
to
issue
shares
inlieu
of
cash
payments,
we
would
need
to
make
those
payments
in
cash
in
order
to
meet
our
NASDAQ
listing
requirements.
If
we
are
unable
to
raise
the
fundsnecessary
to
meet
our
long-term
liquidity
needs,
we
may
have
to
delay
or
discontinue
the
development
of
one
or
more
programs,
discontinue
or
delay
on-going
oranticipated
clinical
trials,
license
out
programs
earlier
than
expected,
raise
funds
at
a
significant
discount
or
on
other
unfavorable
terms,
if
at
all,
or
sell
all
or
a
partof
our
business.Operating Activities
Net
cash
used
in
operating
activities
was
$113.0
million
for
the
year
ended
December
31,
2016
compared
to
$98.9
million
for
the
year
ended
December
31,2015.
The
increase
in
net
cash
used
in
operating
activities
was
primarily
due
to
an
increase
in
net
loss
of
$1.3
million
and
changes
in
working
capital.
We
expectthat
cash
used
in
operating
activities
will
remain
relatively
consistent
over
the
next
twelve
months,
although
there
may
be
fluctuations
on
a
quarterly
basis.
Net
cash
used
in
operating
activities
was
$98.9
million
for
the
year
ended
December
31,
2015
compared
to
$101.5
million
for
the
year
ended
December
31,2014.
The
decrease
in
net
cash
used
in
operating
activities
was
primarily
due
to
increases
in
accounts
payable
and
other
accrued
expenses
of
$3.4
million
andstock-based
compensation
expense
of
$5.9
million,
offset
by
an
increase
in
net
loss
of
$9.1
million.
We
have
incurred
and
will
continue
to
incur
significant
costs
in
the
area
of
research
and
development,
including
preclinical
and
clinical
trials
and
clinical
drugproduct
manufacturing
as
our
drug
candidates
are
developed.
We
plan
to
spend
significant
amounts
to
progress
our
current
drug
candidates
through
the
clinical
trialand
commercialization
processes
as
well
as
to
develop
additional
drug
candidates.
As
our
drug
candidates
progress
through
the
clinical
trial
process,
we
may
beobligated
to
make
significant
milestone
payments.Investing Activities
Net
cash
provided
by
investing
activities
was
$68.9
million
for
the
year
ended
December
31,
2016
compared
to
net
cash
used
by
investing
activities
of$50.2
million
for
the
year
ended
December
31,
2015.
The
increase
in
net
cash
provided
by
investing
activities
was
primarily
due
to
net
sales
and
maturities
ofmarketable
securities
for
the
year
ended
December
31,
2016
of
$68.9
million
as
compared
to
net
purchases
of
marketable
securities
of
$45.3
million
for
the
yearended
December
31,
2015.
We
expect
that
cash
provided
by
investing
activities
will
increase
over
the
next
twelve
months
as
we
fund
our
operations
through
thenet
proceeds
from
the
sale
and
maturity
of
marketable
securities,
cash
provided
by
financing
activities
and/or
new
partnerships,
although
there
may
be
significantfluctuations
on
a
quarterly
basis.
Net
cash
used
in
investing
activities
was
$50.2
million
for
the
year
ended
December
31,
2015
compared
to
$41.0
million
for
the
year
ended
December
31,2014.
The
increase
in
net
cash
used
in
investing
activities
was
primarily
due
to
net
purchases
of
marketable
securities
for
the
year
ended
December
31,
2015
of$45.3
million
as
compared
to
$39.1
million
for
the
year
ended
December
31,
2014.Financing Activities
Net
cash
provided
by
financing
activities
was
$14.5
million
for
the
year
ended
December
31,
2016
compared
to
$193.2
million
for
the
year
endedDecember
31,
2015.
Net
proceeds
from
stock
issuances,
including
stock
issued
pursuant
to
employee
benefit
plans,
were
$14.5
million
during
the
year
endedDecember
31,
2016
compared
to
$193.2
million
for
the
year
ended
December
31,
2015.82 Table
of
Contents
Net
cash
provided
by
financing
activities
was
$193.2
million
for
the
year
ended
December
31,
2015
compared
to
$1.2
million
for
the
year
endedDecember
31,
2014.
Net
proceeds
from
stock
issuances,
including
stock
issued
pursuant
to
employee
benefit
plans,
were
$193.2
million
during
the
year
endedDecember
31,
2015
compared
to
$1.2
million
for
the
year
ended
December
31,
2014.Equity Offerings
In
December
2013,
we
filed
an
automatic
shelf
registration
statement
with
the
Securities
and
Exchange
Commission
to
register
for
sale
any
combination
of
thetypes
of
securities
described
in
the
shelf
registration
statement.
In
December
2016,
we
filed
a
new
shelf
registration
statement
with
the
Securities
and
ExchangeCommission
to
register
for
sale
any
combination
of
the
types
of
securities
described
in
the
shelf
registration
statement
up
to
a
maximum
aggregate
offering
price
of$250
million.
Such
registration
statement
was
declared
effective
on
February
13,
2017.
In
May
2016,
we
entered
into
an
agreement
with
Cantor
Fitzgerald
&
Co.
(Cantor)
to
allow
us
to
issue
and
sell
shares
of
our
common
stock
having
anaggregate
offering
price
of
up
to
$60.0
million
from
time
to
time
through
Cantor,
acting
as
agent.
During
the
year
ended
December
31,
2016,
we
issued
3,303,800shares
of
our
common
stock
under
this
controlled
equity
offering
sales
agreement
with
Cantor
resulting
in
net
proceeds
to
us
of
$13.9
million,
after
deductingcommission
and
offering
expenses.
During
the
years
ended
December
31,
2015,
we
issued
8,337,500
shares
of
our
common
stock
in
underwritten
public
offerings
resulting
in
net
proceeds
to
usof
$188.8
million,
after
deducting
underwriting
fees
and
offering
expenses.AGGREGATE
CONTRACTUAL
OBLIGATIONS
We
have
entered
into
license
agreements
whereby
we
have
received
licenses
or
options
to
license
technology,
specified
patents
and/or
patent
applications.These
license
and
collaboration
agreements
generally
provide
for
royalty
payments
equal
to
specified
percentages
of
product
sales,
annual
license
maintenancefees,
continuing
patent
prosecution
costs
and
potential
future
milestone
payments
to
third
parties
upon
the
achievement
of
certain
development,
regulatory
and/orcommercial
milestones.
Because
the
achievement
of
these
milestones
had
not
occurred
as
of
December
31,
2016
such
contingencies
have
not
been
recorded
in
ourfinancial
statements.
We
expect
to
incur
approximately
$0.9
million
of
license
and
milestone
payments
in
2017.
The
following
table
summarizes
our
contractual
obligations
(not
including
contingent
royalty
and
milestone
payments
as
described
above)
at
December
31,2016
and
the
effect
such
obligations
and
commercial
commitments
are
expected
to
have
on
our
liquidity
and
cash
flow
in
future
years.
These
obligations,commitments
and
supporting
arrangements
represent
expected
payments
based
on
current
operating
forecasts,
which
are
subject
to
change:83
Total
2017
2018
-
2019
2020
-
2021
Thereafter
(In
thousands)
Contractual
obligations:
Operating
lease
obligations(1)
$15,830
$4,319
$9,163
$2,348
$—
Other
contractual
obligations(2)(3)
9,408
7,661
1,747
—
—
Total
contractual
obligations
$25,238
$11,980
$10,910
$2,348
$—
(1)Such
amounts
primarily
consist
of
payments
for
our
facility
leases
and
do
not
assume
the
exercise
of
renewal
terms
or
early
terminationprovisions. Table
of
ContentsRECENT
ACCOUNTING
PRONOUNCEMENTS
Refer
to
Note
2,
"Summary
of
Significant
Accounting
Policies,"
in
the
accompanying
notes
to
the
financial
statements
for
a
discussion
of
recent
accountingpronouncements.OFF-BALANCE
SHEET
ARRANGEMENTS
None.Item
7A.
QUANTITATIVE
AND
QUALITATIVE
DISCLOSURES
ABOUT
MARKET
RISK
We
own
financial
instruments
that
are
sensitive
to
market
risk
as
part
of
our
investment
portfolio.
Our
investment
portfolio
is
used
to
preserve
our
capital
untilit
is
used
to
fund
operations,
including
our
research
and
development
activities.
None
of
these
market-risk
sensitive
instruments
are
held
for
trading
purposes.
Weinvest
our
cash
primarily
in
money
market
mutual
funds.
These
investments
are
evaluated
quarterly
to
determine
the
fair
value
of
the
portfolio.
From
time
to
time,we
invest
our
excess
cash
balances
in
marketable
securities
including
municipal
bond
securities,
U.S.
government
agency
securities,
and
high-grade
corporatebonds
that
meet
high
credit
quality
standards,
as
specified
in
our
investment
policy.
Our
investment
policy
seeks
to
manage
these
assets
to
achieve
our
goals
ofpreserving
principal
and
maintaining
adequate
liquidity.
Because
of
the
short-term
nature
of
these
investments,
we
do
not
believe
we
have
material
exposure
due
tomarket
risk.
The
impact
to
our
financial
position
and
results
of
operations
from
likely
changes
in
interest
rates
is
not
material.
We
do
not
utilize
derivative
financial
instruments.
The
carrying
amounts
reflected
in
the
balance
sheet
of
cash
and
cash
equivalents,
accounts
receivables
andaccounts
payable
approximates
fair
value
at
December
31,
2016
due
to
the
short-term
maturities
of
these
instruments.84(2)We
enter
into
agreements
in
the
normal
course
of
business
with
contract
research
organizations
for
clinical
trials,
contract
manufacturingorganizations,
vendors
for
preclinical
research
studies
and
other
services
and
products
for
operating
purposes.
We
have
includedobligations
in
the
table
above
if
the
contracts
are
not
cancelable
at
any
time
by
us,
generally
upon
30
days
prior
written
notice
to
thevendor.
(3)In
the
event
that
certain
specified
preclinical
and
clinical
development
milestones
related
to
Kolltan's
development
programs
and/or
ourdevelopment
programs
and
certain
commercial
milestones
related
to
Kolltan's
drug
candidates
are
achieved,
we
will
be
required
to
payKolltan's
stockholders
milestone
payments
of
up
to
$172.5
million,
which
milestone
payments
may
be
made,
at
our
sole
election,
in
cash,in
shares
of
our
common
stock
or
a
combination
of
both,
subject
to
NASDAQ
listing
requirements
and
provisions
of
the
merger
agreement.Because
the
timing
and
certainty
of
these
milestones
being
achieved
is
unknown,
these
potential
future
obligations
are
not
included
withinthe
table. Table
of
ContentsItem
8.
FINANCIAL
STATEMENTS
AND
SUPPLEMENTARY
DATA
REPORT
OF
INDEPENDENT
REGISTERED
PUBLIC
ACCOUNTING
FIRM
To
the
Board
of
Directors
and
Stockholders
of
Celldex
Therapeutics,
Inc.
In
our
opinion,
the
accompanying
consolidated
balance
sheets
and
the
related
consolidated
statements
of
operations
and
comprehensive
loss,
of
stockholders'equity,
and
of
cash
flows
present
fairly,
in
all
material
respects,
the
financial
position
of
Celldex
Therapeutics,
Inc.
and
its
subsidiaries
at
December
31,
2016
andDecember
31,
2015
and
the
results
of
their
operations
and
their
cash
flows
for
each
of
the
three
years
in
the
period
ended
December
31,
2016
in
conformity
withaccounting
principles
generally
accepted
in
the
United
States
of
America.
Also
in
our
opinion,
the
Company
maintained,
in
all
material
respects,
effective
internalcontrol
over
financial
reporting
as
of
December
31,
2016,
based
on
criteria
established
in
Internal Control—Integrated Framework (2013) issued
by
the
Committeeof
Sponsoring
Organizations
of
the
Treadway
Commission
(COSO).
The
Company's
management
is
responsible
for
these
financial
statements,
for
maintainingeffective
internal
control
over
financial
reporting
and
for
its
assessment
of
the
effectiveness
of
internal
control
over
financial
reporting,
included
in
Management'sAnnual
Report
on
Internal
Control
over
Financial
Reporting
appearing
under
Item
9A.
Our
responsibility
is
to
express
opinions
on
these
financial
statements
andon
the
Company's
internal
control
over
financial
reporting
based
on
our
integrated
audits.
We
conducted
our
audits
in
accordance
with
the
standards
of
the
PublicCompany
Accounting
Oversight
Board
(United
States).
Those
standards
require
that
we
plan
and
perform
the
audits
to
obtain
reasonable
assurance
about
whetherthe
financial
statements
are
free
of
material
misstatement
and
whether
effective
internal
control
over
financial
reporting
was
maintained
in
all
material
respects.Our
audits
of
the
financial
statements
included
examining,
on
a
test
basis,
evidence
supporting
the
amounts
and
disclosures
in
the
financial
statements,
assessingthe
accounting
principles
used
and
significant
estimates
made
by
management,
and
evaluating
the
overall
financial
statement
presentation.
Our
audit
of
internalcontrol
over
financial
reporting
included
obtaining
an
understanding
of
internal
control
over
financial
reporting,
assessing
the
risk
that
a
material
weakness
exists,and
testing
and
evaluating
the
design
and
operating
effectiveness
of
internal
control
based
on
the
assessed
risk.
Our
audits
also
included
performing
such
otherprocedures
as
we
considered
necessary
in
the
circumstances.
We
believe
that
our
audits
provide
a
reasonable
basis
for
our
opinions.
A
company's
internal
control
over
financial
reporting
is
a
process
designed
to
provide
reasonable
assurance
regarding
the
reliability
of
financial
reporting
andthe
preparation
of
financial
statements
for
external
purposes
in
accordance
with
generally
accepted
accounting
principles.
A
company's
internal
control
overfinancial
reporting
includes
those
policies
and
procedures
that
(i)
pertain
to
the
maintenance
of
records
that,
in
reasonable
detail,
accurately
and
fairly
reflect
thetransactions
and
dispositions
of
the
assets
of
the
company;
(ii)
provide
reasonable
assurance
that
transactions
are
recorded
as
necessary
to
permit
preparation
offinancial
statements
in
accordance
with
generally
accepted
accounting
principles,
and
that
receipts
and
expenditures
of
the
company
are
being
made
only
inaccordance
with
authorizations
of
management
and
directors
of
the
company;
and
(iii)
provide
reasonable
assurance
regarding
prevention
or
timely
detection
ofunauthorized
acquisition,
use,
or
disposition
of
the
company's
assets
that
could
have
a
material
effect
on
the
financial
statements.
Because
of
its
inherent
limitations,
internal
control
over
financial
reporting
may
not
prevent
or
detect
misstatements.
Also,
projections
of
any
evaluation
ofeffectiveness
to
future
periods
are
subject
to
the
risk
that
controls
may
become
inadequate
because
of
changes
in
conditions,
or
that
the
degree
of
compliance
withthe
policies
or
procedures
may
deteriorate./s/
PricewaterhouseCoopers
LLPBoston,
Massachusetts
March
14,
201785 Table
of
ContentsCELLDEX
THERAPEUTICS,
INC.
BALANCE
SHEETS
(In
thousands,
except
share
and
per
share
amounts)
The
accompanying
notes
are
an
integral
part
of
the
financial
statements.86
Consolidated
December
31,
2016
December
31,
2015
ASSETS
Current
Assets:
Cash
and
Cash
Equivalents
$42,461
$72,108
Marketable
Securities
147,315
217,781
Accounts
and
Other
Receivables
1,784
970
Prepaid
and
Other
Current
Assets
4,009
4,077
Total
Current
Assets
195,569
294,936
Property
and
Equipment,
Net
13,192
11,461
Intangible
Assets,
Net
81,487
20,794
Other
Assets
2,134
1,428
Goodwill
90,976
8,965
Total
Assets
$383,358
$337,584
LIABILITIES
AND
STOCKHOLDERS'
EQUITY
Current
Liabilities:
Accounts
Payable
$1,740
$1,506
Accrued
Expenses
28,657
24,316
Current
Portion
of
Long-Term
Liabilities
4,826
4,418
Total
Current
Liabilities
35,223
30,240
Other
Long-Term
Liabilities
82,704
17,239
Total
Liabilities
117,927
47,479
Commitments
and
Contingent
Liabilities
(Notes
13
and
15)
Stockholders'
Equity:
Convertible
Preferred
Stock,
$.01
Par
Value;
3,000,000
Shares
Authorized;
NoShares
Issued
and
Outstanding
at
December
31,
2016
and
2015
—
—
Common
Stock,
$.001
Par
Value;
297,000,000
Shares
Authorized;
120,516,654
and98,685,595
Shares
Issued
and
Outstanding
at
December
31,
2016
and
2015,respectively
121
99
Additional
Paid-In
Capital
982,255
878,655
Accumulated
Other
Comprehensive
Income
2,541
2,307
Accumulated
Deficit
(719,486)
(590,956)Total
Stockholders'
Equity
265,431
290,105
Total
Liabilities
and
Stockholders'
Equity
$383,358
$337,584
Table
of
ContentsCELLDEX
THERAPEUTICS,
INC.
STATEMENTS
OF
OPERATIONS
AND
COMPREHENSIVE
LOSS
(In
thousands,
except
per
share
amounts)
The
accompanying
notes
are
an
integral
part
of
the
financial
statements.87
Consolidated
Year
Ended
December
31,
2016
Year
Ended
December
31,
2015
Consolidated
Year
Ended
December
31,
2014
REVENUE:
Product
Development
and
Licensing
Agreements
$2,174
$1,442
$838
Contracts
and
Grants
4,612
4,038
2,748
Total
Revenue
6,786
5,480
3,586
OPERATING
EXPENSE:
Research
and
Development
102,726
100,171
104,381
General
and
Administrative
35,979
33,837
20,622
Amortization
of
Acquired
Intangible
Assets
997
1,013
1,013
Total
Operating
Expense
139,702
135,021
126,016
Operating
Loss
(132,916)
(129,541)
(122,430)Investment
and
Other
Income,
Net
4,386
2,344
4,350
Net
Loss
$(128,530)$(127,197)$(118,080)Basic
and
Diluted
Net
Loss
Per
Common
Share
$(1.27)$(1.31)$(1.32)Shares
Used
in
Calculating
Basic
and
Diluted
Net
Loss
per
Share
101,529
97,051
89,399
COMPREHENSIVE
LOSS:
Net
Loss
$(128,530)$(127,197)$(118,080)Other
Comprehensive
Income
(Loss):
Foreign
Currency
Translation
Adjustments
—
15
(5)Unrealized
Gain
(Loss)
on
Marketable
Securities
234
(298)
(73)Comprehensive
Loss
$(128,296)$(127,480)$(118,158) Table
of
ContentsCELLDEX
THERAPEUTICS,
INC.STATEMENTS
OF
STOCKHOLDERS'
EQUITY(In
thousands,
except
share
amounts)The
accompanying
notes
are
an
integral
part
of
the
financial
statements.88
Common
Stock
Shares
Common
Stock
Par
Value
Additional
Paid-In
Capital
Accumulated
Other
Comprehensive
Income
Accumulated
Deficit
Total
Stockholders'
Equity
Consolidated
Balance
atDecember
31,
2013
89,246,832
$89
$662,717
$2,668
$(345,679)$319,795
Shares
Issued
under
Stock
Option
andEmployee
Stock
Purchase
Plans
193,775
1
1,170
—
—
1,171
Shares
Issued
in
Connection
withSupply
Agreement
152,172
—
2,000
—
—
2,000
Share-Based
Compensation
—
—
6,852
—
—
6,852
Foreign
Currency
TranslationAdjustments
—
—
—
(5)
—
(5)Unrealized
Losses
on
MarketableSecurities
—
—
—
(73)
—
(73)Net
Loss
—
—
—
—
(118,080)
(118,080)Consolidated
Balance
atDecember
31,
2014
89,592,779
90
672,739
2,590
(463,759)
211,660
Shares
Issued
under
Stock
Option
andEmployee
Stock
Purchase
Plans
755,316
1
4,310
—
—
4,311
Shares
Issued
in
UnderwrittenOffering
8,337,500
8
188,832
—
—
188,840
Share-Based
Compensation
—
—
12,774
—
—
12,774
Foreign
Currency
TranslationAdjustments
—
—
—
15
—
15
Unrealized
Losses
on
MarketableSecurities
—
—
—
(298)
—
(298)Net
Loss
—
—
—
—
(127,197)
(127,197)Balance
at
December
31,
2015
98,685,595
99
878,655
2,307
(590,956)
290,105
Shares
Issued
under
Stock
Option
andEmployee
Stock
Purchase
Plans
158,152
1
534
—
—
535
Shares
Issued
in
Connection
withCantor
Agreement
3,303,800
3
13,943
—
—
13,946
Shares
Issued
in
Connection
with
theKolltan
Acquisition
18,257,996
18
73,379
—
—
73,397
Shares
Issued
in
Connection
withKolltan
Severance
111,111
—
427
—
—
427
Share-Based
Compensation
—
—
15,317
—
—
15,317
Unrealized
Gains
on
MarketableSecurities
—
—
—
234
—
234
Net
Loss
—
—
—
—
(128,530)
(128,530)Consolidated
Balance
atDecember
31,
2016
120,516,654
$121
$982,255
$2,541
$(719,486)$265,431
Table
of
ContentsCELLDEX
THERAPEUTICS,
INC.
STATEMENTS
OF
CASH
FLOWS
(In
thousands)
The
accompanying
notes
are
an
integral
part
of
the
financial
statements.89
Consolidated
Year
Ended
December
31,
2016
Year
Ended
December
31,
2015
Consolidated
Year
Ended
December
31,
2014
Cash
Flows
From
Operating
Activities:
Net
Loss
$(128,530)$(127,197)$(118,080)Adjustments
to
Reconcile
Net
Loss
to
Net
Cash
Used
inOperating
Activities:
Depreciation
and
Amortization
3,095
2,998
2,388
Amortization
of
Intangible
Assets
997
1,013
1,013
Amortization
and
Premium
of
Marketable
Securities,
Net
926
350
95
Realized
Gain
on
Sales
and
Maturities
of
MarketableSecurities
—
—
(11)Loss
on
Sale
or
Disposal
of
Assets
81
—
6
Stock-Based
Compensation
Expense
15,317
12,774
6,852
Non-Cash
Expense
1,638
288
72
Changes
in
Operating
Assets
and
Liabilities:
Accounts
and
Other
Receivables
(814)
(543)
62
Prepaid
and
Other
Current
Assets
1,320
(653)
(2,026)Other
Assets
(89)
6
65
Accounts
Payable
and
Accrued
Expenses
(4,970)
4,875
1,450
Other
Liabilities
(2,007)
7,202
6,577
Net
Cash
Used
in
Operating
Activities
(113,036)
(98,887)
(101,537)Cash
Flows
From
Investing
Activities:
Sales
and
Maturities
of
Marketable
Securities
242,792
161,090
109,232
Purchases
of
Marketable
Securities
(173,925)
(206,405)
(148,314)Investment
in
Other
(1,801)
—
—
Cash
Acquired
in
Kolltan
Acquisition,
net
4,592
—
—
Acquisition
of
Property
and
Equipment
(2,751)
(4,876)
(1,929)Net
Cash
Provided
by
(Used
in)
Investing
Activities
68,907
(50,191)
(41,011)Cash
Flows
From
Financing
Activities:
Net
Proceeds
from
Stock
Issuances
13,946
188,840
—
Proceeds
from
Issuance
of
Stock
from
Employee
Benefit
Plans
536
4,311
1,171
Net
Cash
Provided
by
Financing
Activities
14,482
193,151
1,171
Effect
of
Exchange
Rate
Changes
on
Cash
and
Cash
Equivalents
—
15
(5)Net
(Decrease)
Increase
in
Cash
and
Cash
Equivalents
(29,647)
44,088
(141,382)Cash
and
Cash
Equivalents
at
Beginning
of
Period
72,108
28,020
169,402
Cash
and
Cash
Equivalents
at
End
of
Period
$42,461
$72,108
$28,020
Non-cash Investing Activities
Accrued
construction
in
progress
$159
$75
$1,027
Non-cash Supplemental Disclosure
Shares
issued
to
former
Kolltan
executive
for
settlement
ofseverance
$426
$—
$—
Shares
issued
in
connection
with
Kolltan
Acquisition
$73,397
$—
$—
Table
of
ContentsCELLDEX
THERAPEUTICS,
INC.
NOTES
TO
FINANCIAL
STATEMENTS
(1)
NATURE
OF
BUSINESS
AND
OVERVIEW
Celldex
Therapeutics,
Inc.
(the
"Company"
or
"Celldex")
is
a
biopharmaceutical
company
focused
on
the
development
and
commercialization
of
severalimmunotherapy
technologies
for
the
treatment
of
cancer
and
other
difficult-to-treat
diseases.
The
Company
currently
has
seven
drug
candidates
in
clinicaldevelopment
including
glembatumumab
vedotin
(also
referred
to
as
CDX-011),
varlilumab
(also
referred
to
as
CDX-1127),
CDX-0158,
CDX-3379,
CDX-1401,CDX-301
and
CDX-014.
As
more
fully
discussed
in
Note
17,
on
November
29,
2016,
the
Company
acquired
(the
"Kolltan
Acquisition")
Kolltan
Pharmaceuticals,
Inc.
("Kolltan"),
aprivately
held
clinical-stage
biotechnology
company
based
in
New
Haven,
Connecticut
in
accordance
with
the
Agreement
and
Plan
of
Merger
dated
as
ofNovember
1,
2016
(the
"Merger
Agreement").
Under
the
terms
of
the
Merger
Agreement,
Kolltan's
investors
received,
in
exchange
for
their
share
and
debtinterests
in
Kolltan,
an
aggregate
of
18,257,996
shares
of
Celldex's
common
stock.
In
addition,
following
closing,
certain
officers
of
Kolltan
will
receive
anaggregate
of
437,901
shares
of
Celldex's
common
stock
in
lieu
of
cash
severance
obligations,
less
tax
withholdings.
In
December
2016,
the
Company
issued111,111
shares
of
Celldex's
common
stock
as
partial
payment
of
this
obligation.
In
addition,
in
the
event
that
certain
specified
preclinical
and
clinical
developmentmilestones
related
to
Kolltan's
development
programs
and/or
Celldex's
development
programs
and
certain
commercial
milestones
related
to
Kolltan's
drugcandidates
are
achieved,
Celldex
will
be
required
to
pay
Kolltan's
stockholders
milestone
payments
of
up
to
$172.5
million,
which
milestone
payments
may
bemade,
at
Celldex's
sole
election,
in
cash,
in
shares
of
Celldex's
common
stock
or
a
combination
of
both,
subject
to
NASDAQ
listing
requirements
and
provisions
ofthe
Merger
Agreement.
The
number
of
shares
of
Celldex
common
stock
issuable
in
connection
with
a
milestone
payment,
if
any,
will
be
determined
based
on
theaverage
closing
price
per
share
of
Celldex
common
stock
for
the
five
trading
day
period
ending
three
calendar
days
prior
to
the
achievement
of
such
milestone.Pursuant
to
applicable
NASDAQ
listing
rules,
Celldex
is
required
to
obtain
stockholder
approval
of
such
issuances
of
Celldex's
common
stock
to
the
extent
thatsuch
issuances
exceed
19.9%
of
its
common
stock
outstanding
prior
to
the
merger.
If
Celldex
does
not
obtain
stockholder
approval
of
such
common
stockissuances,
Celldex
may
elect
to
pay
the
milestone
consideration
in
cash
to
maintain
compliance
with
applicable
NASDAQ
listing
standards.
Celldex
may
stilldecide
to
pay
cash
even
if
Celldex
obtains
stockholder
approval
although
it
is
required
to
maintain
a
certain
percentage
of
the
overall
consideration
paid
in
Celldexcommon
stock
to
satisfy
certain
tax
requirements
under
the
Merger
Agreement.
At
December
31,
2016,
the
Company
had
cash,
cash
equivalents
and
marketable
securities
of
$189.8
million.
The
Company
has
had
recurring
losses
andincurred
a
loss
of
$128.5
million
for
the
year
ended
December
31,
2016.
Net
cash
used
in
operations
for
the
year
ended
December
31,
2016
was
$113.0
million.The
Company
believes
that
the
cash,
cash
equivalents
and
marketable
securities
at
March
14,
2017
will
be
sufficient
to
meet
estimated
working
capitalrequirements
and
fund
planned
operations
for
at
least
the
next
twelve
months
from
the
date
of
issuance
of
these
financial
statements.
During
the
next
twelve
months
and
beyond,
the
Company
will
take
further
steps
to
raise
additional
capital
to
meet
its
liquidity
needs.
These
capital
raisingactivities
may
include,
but
may
not
be
limited
to,
one
or
more
of
the
following:
the
licensing
of
drug
candidates
with
existing
or
new
collaborative
partners,possible
business
combinations,
issuance
of
debt,
or
the
issuance
of
common
stock
or
other
securities
via
private
placements
or
public
offerings.
While
theCompany
may
seek
capital
through
a
number
of
means,
there
can
be
no
assurance
that
additional
financing
will
be
available
on
acceptable
terms,
if
at
all,
and
theCompany's
negotiating
position
in
capital-raising
efforts
may
worsen
as
existing90 Table
of
ContentsCELLDEX
THERAPEUTICS,
INC.NOTES
TO
FINANCIAL
STATEMENTS
(Continued)(1)
NATURE
OF
BUSINESS
AND
OVERVIEW
(Continued)resources
are
used.
There
is
also
no
assurance
that
the
Company
will
be
able
to
enter
into
further
collaborative
relationships.
Additional
equity
financings
may
bedilutive
to
the
Company's
stockholders;
debt
financing,
if
available,
may
involve
significant
cash
payment
obligations
and
covenants
that
restrict
the
Company'sability
to
operate
as
a
business;
and
licensing
or
strategic
collaborations
may
result
in
royalties
or
other
terms
which
reduce
the
Company's
economic
potentialfrom
products
under
development.
The
Company's
ability
to
continue
funding
its
planned
operations
into
and
beyond
twelve
months
from
the
issuance
date
is
alsodependent
on
the
timing
and
manner
of
payment
of
future
contingent
milestones
from
the
Kolltan
acquisition,
in
the
event
that
the
Company
achieves
the
drugcandidate
milestones
related
to
those
payments.
The
Company
may
decide
to
pay
those
milestone
payments
in
cash.
Further,
if
the
Company
does
not
obtainshareholder
approval
to
issue
shares
in
lieu
of
cash
payments,
the
Company
would
need
to
make
those
payments
in
cash
in
order
to
meet
its
NASDAQ
listingrequirements.
If
the
Company
is
unable
to
raise
the
funds
necessary
to
meet
its
long-term
liquidity
needs,
it
may
have
to
delay
or
discontinue
the
development
ofone
or
more
programs,
discontinue
or
delay
on-going
or
anticipated
clinical
trials,
license
out
programs
earlier
than
expected,
raise
funds
at
a
significant
discountor
on
other
unfavorable
terms,
if
at
all,
or
sell
all
or
a
part
of
the
Company.(2)
SUMMARY
OF
SIGNIFICANT
ACCOUNTING
POLICIESBasis of Presentation
Following
the
Kolltan
Acquisition,
the
consolidated
financial
statements
reflect
the
financial
position,
results
of
operation
and
cash
flows
of
the
combinedcompanies.
Accordingly,
this
report
reflects
the
financial
condition
as
of
December
31,
2016
and
the
results
of
operations
and
cash
flows
for
the
period
from
theKolltan
Acquisition
on
November
29,
2016
through
December
31,
2016.
On
December
31,
2016,
the
Company
completed
the
merger
of
Kolltan
with
and
intoCelldex
pursuant
to
a
short-form
merger
effected
under
Delaware
law.
As
a
result,
the
separate
corporate
existence
of
Kolltan
has
ceased
and
the
Company
hassucceeded
to
all
rights,
privileges,
powers
and
franchises
of
Kolltan.
On
December
31,
2014,
the
Company's
wholly-owned
subsidiary,
Celldex
Research
Corporation,
merged
into
Celldex
Therapeutics,
Inc.
In
February
2016,the
Company
formed
a
wholly-owned
subsidiary,
Celldex
Therapeutics
Europe
GmbH,
in
Zug,
Switzerland.
In
July
2016,
we
formed
a
wholly-owned
subsidiary,Celldex
Australia
Pty
Ltd,
in
Brisbane,
Australia.
The
statements
of
operations
and
comprehensive
loss,
of
stockholders'
equity,
and
of
cash
flows,
are
consolidatedfor
the
years
ended
December
31,
2016
and
2014.
These
consolidated
financial
statements
reflect
the
operations
of
the
Company
and
its
wholly-owned
subsidiaryprior
to
the
merger.
All
intercompany
balances
and
transactions
have
been
eliminated
in
consolidation.
The
Company
operates
in
one
segment,
which
is
thebusiness
of
development,
manufacturing
and
commercialization
of
novel
therapeutics
for
human
health
care.Use of Estimates
The
preparation
of
the
financial
statements
in
conformity
with
accounting
principles
generally
accepted
in
the
United
States
of
America
(U.S.
GAAP)
requiresmanagement
to
make
estimates
and
use
assumptions
that
affect
the
reported
amounts
of
assets
and
liabilities
and
the
disclosure
of91 Table
of
ContentsCELLDEX
THERAPEUTICS,
INC.NOTES
TO
FINANCIAL
STATEMENTS
(Continued)(2)
SUMMARY
OF
SIGNIFICANT
ACCOUNTING
POLICIES
(Continued)contingent
assets
and
liabilities
at
the
dates
of
the
financial
statements
and
the
reported
amounts
of
revenues
and
expenses
during
the
reporting
period.
Actualresults
could
differ
from
those
estimates.Cash and Cash Equivalents
The
Company
considers
all
highly
liquid
investments
purchased
with
a
maturity
date
of
90
days
or
less
at
the
date
of
purchase
to
be
cash
equivalents.
Cashequivalents
consist
principally
of
money
market
funds
and
debt
securities.Marketable Securities
The
Company
invests
its
excess
cash
balances
in
marketable
securities
including
municipal
bond
securities,
U.S.
government
agency
securities,
and
high-grade
corporate
bonds.
The
Company
classifies
all
of
its
marketable
securities
as
current
assets
on
the
balance
sheets
because
they
are
available-for-sale
andavailable
to
fund
current
operations.
Marketable
securities
are
stated
at
fair
value
with
their
unrealized
gains
and
losses
included
as
a
component
of
accumulatedother
comprehensive
income
(loss),
which
is
a
separate
component
of
stockholders'
equity,
until
such
gains
and
losses
are
realized.
If
a
decline
in
the
fair
value
isconsidered
other-than-temporary,
based
on
available
evidence,
the
unrealized
loss
is
transferred
from
other
comprehensive
income
(loss)
to
the
statements
ofoperations.
Realized
gains
and
losses
are
determined
on
the
specific
identification
method
and
are
included
in
investment
and
other
income,
net.Concentration of Credit Risk and of Significant Customers and Suppliers
Financial
instruments
that
potentially
subject
the
Company
to
concentrations
of
credit
risk
primarily
consist
of
cash,
cash
equivalents,
marketable
securitiesand
accounts
receivable.
The
Company
invests
its
cash,
cash
equivalents
and
marketable
securities
in
debt
instruments
and
interest
bearing
accounts
at
majorfinancial
institutions
in
excess
of
insured
limits.
The
Company
mitigates
credit
risk
by
limiting
the
investment
type
and
maturity
to
securities
that
preserve
capital,maintain
liquidity
and
have
a
high
credit
quality.
The
Company
has
not
historically
experienced
credit
losses
from
its
accounts
receivable
and
therefore
has
notestablished
an
allowance
for
doubtful
accounts.
Revenue
from
Rockefeller
and
BMS
represented
40%
and
31%
for
the
year
ended
December
31,
2016,
62%
and
24%
for
the
year
ended
December
31,
2015,and
75%
and
20%
for
the
year
ended
December
31,
2014,
of
total
Company
revenue,
respectively.
The
Company
relies
on
contract
manufacturing
organizations
(CMO)
to
manufacture
drug
substance
and
drug
product
for
its
late-stage
clinical
study
ofglembatumumab
vedotin
as
well
as
for
future
commercial
supplies.
The
Company
also
relies
on
CMOs
for
supply
of
raw
materials
as
well
as
filling,
packaging,storage
and
shipping
of
drug
product.
These
clinical
studies
would
be
adversely
affected
by
a
significant
interruption
in
the
supply
of
glembatumumab
vedotin.
TheCompany
also
relies
on
third-party
collaborators
to
develop
companion
diagnostic
tests
for
certain
of
its
drug
candidates,
including
glembatumumab
vedotin.Fair Value Measurements
The
Company
has
certain
assets
and
liabilities
that
are
measured
at
fair
value
in
the
financial
statements.
The
Company
seeks
to
maximize
the
use
ofobservable
inputs
(market
data
obtained
from92 Table
of
ContentsCELLDEX
THERAPEUTICS,
INC.NOTES
TO
FINANCIAL
STATEMENTS
(Continued)(2)
SUMMARY
OF
SIGNIFICANT
ACCOUNTING
POLICIES
(Continued)sources
independent
from
the
Company)
and
to
minimize
the
use
of
unobservable
inputs
(the
Company's
assumptions
about
how
market
participants
would
priceassets
and
liabilities)
when
measuring
the
fair
value
of
its
assets
and
liabilities.
These
assets
and
liabilities
are
classified
into
one
of
three
levels
of
the
followingfair
value
hierarchy
as
defined
by
U.S.
GAAP:
Level
1:
Observable
inputs
such
as
quoted
prices
in
active
markets
for
identical
assets
or
liabilities.
An
active
market
for
an
asset
or
liability
is
amarket
in
which
transactions
for
the
asset
or
liability
occur
with
sufficient
frequency
and
volume
to
provide
pricing
information
on
an
ongoing
basis.
Level
2:
Observable
inputs
other
than
Level
1
prices,
such
as
quoted
prices
in
active
markets
for
similar
assets
or
liabilities
and
quoted
prices
foridentical
assets
or
liabilities
in
markets
that
are
not
active.
Level
3:
Unobservable
inputs
based
on
the
Company's
assessment
of
the
assumptions
that
market
participants
would
use
in
pricing
the
asset
orliability.Property and Equipment
Property
and
equipment
is
stated
at
cost
and
depreciated
over
the
estimated
useful
lives
of
the
related
assets
using
the
straight-line
method.
Laboratoryequipment
and
office
furniture
and
equipment
are
depreciated
over
five
years
and
computer
equipment
is
depreciated
over
three
years.
Manufacturing
equipment
isamortized
over
seven
to
ten
years.
Leasehold
improvements
are
amortized
over
the
shorter
of
the
estimated
useful
life
or
the
non-cancelable
term
of
the
relatedlease,
including
any
renewals
that
are
reasonably
assured
of
occurring.
Property
and
equipment
under
construction
is
classified
as
construction
in
progress
and
isdepreciated
or
amortized
only
after
the
asset
is
placed
in
service.
Expenditures
for
maintenance
and
repairs
are
charged
to
expense
whereas
the
costs
of
significantimprovements
which
extend
the
life
of
the
underlying
asset
are
capitalized.
Upon
retirement
or
sale,
the
cost
of
assets
disposed
of
and
the
related
accumulateddepreciation
are
eliminated
and
any
resulting
gain
or
loss
is
reflected
in
the
Company's
statements
of
operations
and
comprehensive
loss.
The
treatment
of
costs
to
construct
property
and
equipment
depends
on
the
nature
of
the
costs
and
the
stage
of
construction.
Costs
incurred
in
the
projectplanning,
design,
construction
and
installation
phases
are
capitalized
as
part
of
the
cost
of
the
asset.
The
Company
stops
capitalizing
these
costs
when
the
asset
issubstantially
complete
and
ready
for
its
intended
use.
For
manufacturing
property
and
equipment,
the
Company
also
capitalizes
the
cost
of
validating
these
assetsfor
the
underlying
manufacturing
process.
The
Company
completes
the
capitalization
of
validation
costs
when
the
asset
is
substantially
complete
and
ready
for
itsintended
use.
Costs
capitalized
include
incremental
labor
and
fringe
benefits,
and
direct
consultancy
services.Business Combinations
The
Company
records
the
fair
value
of
the
consideration
transferred
to
acquire
a
business
to
the
tangible
assets
and
identifiable
intangible
assets
acquired
andliabilities
assumed
on
the
basis
of
their
fair
values
at
the
date
of
acquisition.
The
Company
assesses
the
fair
value
of
assets,
including
intangible
assets
such
as
in-process
research
and
development
(IPR&D),
using
a
variety
of
methods
including
present
value
models.
Each
asset
is
measured
at
fair
value
from
the
perspectiveof
a
market
participant.
The
method
used
to
estimate
the
fair
values
of
IPR&D
assets
incorporates
significant93 Table
of
ContentsCELLDEX
THERAPEUTICS,
INC.NOTES
TO
FINANCIAL
STATEMENTS
(Continued)(2)
SUMMARY
OF
SIGNIFICANT
ACCOUNTING
POLICIES
(Continued)assumptions
regarding
the
estimates
a
market
participant
would
make
in
order
to
evaluate
an
asset,
including
a
market
participant's
assumptions
regarding
theprobability
of
completing
IPR&D
projects,
which
would
require
obtaining
regulatory
approval
for
marketing
of
the
associated
drug
candidate;
a
marketparticipant's
estimates
regarding
the
timing
of
and
the
expected
costs
to
complete
IPR&D
projects;
a
market
participant's
estimates
of
future
cash
flows
frompotential
product
sales;
and
the
appropriate
discount
rates
for
a
market
participant.
Transaction
costs
and
restructuring
costs
associated
with
the
transaction
areexpensed
as
incurred.
The
Company
records
contingent
consideration
resulting
from
a
business
combination
at
its
fair
value
on
the
acquisition
date.
The
Company
determines
thefair
value
of
the
contingent
consideration
based
primarily
on
the
(i)
timing
and
probability
of
success
of
clinical
events
or
regulatory
approvals;
(ii)
timing
andprobability
of
success
of
meeting
clinical
and
commercial
milestones;
and
(iii)
discount
rates.
The
Company's
contingent
consideration
liabilities
arose
inconnection
with
its
acquisition
of
Kolltan.
On
a
quarterly
basis,
the
Company
revalues
these
obligations
and
record
increases
or
decreases
in
their
fair
value
as
anadjustment
to
operating
earnings.
Changes
to
contingent
consideration
obligations
can
result
from
adjustments
to
discount
rates,
accretion
of
the
discount
rates
dueto
the
passage
of
time,
changes
in
the
Company's
estimates
of
the
likelihood
or
timing
of
achieving
development
or
commercial
milestones,
changes
in
theprobability
of
certain
clinical
events
or
changes
in
the
assumed
probability
associated
with
regulatory
approval.
The
assumptions
related
to
determining
the
valueof
contingent
consideration
include
a
significant
amount
of
judgment,
and
any
changes
in
the
underlying
estimates
could
have
a
material
impact
on
the
amount
ofcontingent
consideration
expense
recorded
in
any
given
period.Intangible Assets
IPR&D
assets
acquired
in
a
business
combination
initially
are
recorded
at
fair
value
and
accounted
for
as
indefinite-lived
intangible
assets.
These
assets
arecapitalized
on
the
Company's
balance
sheets
until
either
the
project
underlying
them
is
completed
or
the
assets
become
impaired.
If
a
project
is
completed,
thecarrying
value
of
the
related
intangible
asset
is
amortized
over
the
remaining
estimated
life
of
the
asset
beginning
in
the
period
in
which
the
project
is
completed.
Ifa
project
becomes
impaired
or
is
abandoned,
the
carrying
value
of
the
related
intangible
asset
is
written
down
to
its
fair
value
and
an
impairment
charge
is
taken
inthe
period
in
which
the
impairment
occurs.
IPR&D
assets
are
tested
for
impairment
on
an
annual
basis
during
the
third
quarter,
or
earlier
if
impairment
indicators
are
present.
As
part
of
the
annualimpairment
test
of
the
IPR&D
assets
as
of
July
1,
2016,
the
Company
performed
a
calculation
of
the
fair
value
of
the
asset
and
concluded
that
the
IPR&D
assetswere
not
impaired.
Intangible
assets
acquired
in
a
business
combination
with
a
finite
life
are
recorded
at
fair
value
and
amortized
over
the
greater
of
economic
consumption
or
ona
straight-line
basis
over
their
estimated
useful
life.Goodwill
The
difference
between
the
purchase
price
and
the
fair
value
of
assets
acquired
and
liabilities
assumed
in
a
business
combination
is
allocated
to
goodwill.Goodwill
is
evaluated
for
impairment
on
an
annual
basis
during
the
third
quarter,
or
earlier
if
impairment
indicators
are
present.
The
Company
has94 Table
of
ContentsCELLDEX
THERAPEUTICS,
INC.NOTES
TO
FINANCIAL
STATEMENTS
(Continued)(2)
SUMMARY
OF
SIGNIFICANT
ACCOUNTING
POLICIES
(Continued)the
option
to
assess
qualitative
factors
to
determine
if
it
is
more
likely
than
not
that
goodwill
might
be
impaired
and
whether
it
is
necessary
to
perform
the
two-stepgoodwill
impairment
test
required
under
U.S.
GAAP.
As
part
of
its
annual
impairment
test
of
the
goodwill
asset
as
of
July
1,
2016,
the
Company
bypassed
theoptional
qualitative
assessment
and
performed
the
two-step
impairment
test.
The
Company
concluded
that
goodwill
was
not
impaired.Impairment of Intangible and Long-Lived Assets
The
Company
evaluates
the
recoverability
of
its
long-lived
assets,
including
property
and
equipment,
and
intangible
assets
when
circumstances
indicate
thatan
event
of
impairment
may
have
occurred.
Determination
of
recoverability
is
based
on
an
estimate
of
undiscounted
future
cash
flows
resulting
from
the
use
of
theasset
and
its
eventual
disposition.
In
the
event
that
such
cash
flows
are
not
expected
to
be
sufficient
to
recover
the
carrying
amount
of
the
assets,
the
assets
arewritten-down
to
their
estimated
fair
values.Revenue Recognition
The
Company
recognizes
revenue
when
all
of
the
following
criteria
are
met:
persuasive
evidence
of
an
arrangement
exists;
delivery
has
occurred
or
serviceshave
been
rendered;
the
seller's
price
to
the
buyer
is
fixed
or
determinable;
and
collectability
is
reasonably
assured.
The
Company
has
entered
into
and
in
the
future
may
enter
into
biopharmaceutical
product
development
agreements
with
collaborative
partners
for
theresearch
and
development
of
therapeutic
drug
candidates.
The
terms
of
the
agreements
may
include
nonrefundable
signing
and
licensing
fees,
funding
for
research,development
and
manufacturing,
milestone
payments
and
royalties
on
any
product
sales
derived
from
collaborations.
These
multiple
element
arrangements
areanalyzed
to
determine
whether
the
deliverables
can
be
separated
or
whether
they
must
be
accounted
for
as
a
single
unit
of
accounting.
In
accounting
for
thesetransactions,
the
Company
allocates
revenue
to
the
various
elements
based
on
their
relative
fair
value.
The
fair
value
of
a
revenue
generating
element
can
be
basedon
current
selling
prices
offered
by
the
Company
or
another
party
for
current
products
or
the
Company's
best
estimate
of
a
selling
price
for
future
products.Revenue
allocated
to
an
individual
element
is
recognized
when
all
other
revenue
recognition
criteria
are
met
for
that
element.
These
collaborative
and
other
agreements
may
contain
milestone
payments.
Revenues
from
milestones,
if
they
are
considered
substantive,
are
recognizedupon
successful
accomplishment
of
the
milestones.
Determining
whether
a
milestone
is
substantive
involves
judgment,
including
an
assessment
of
the
Company'sinvolvement
in
achieving
the
milestones
and
whether
the
amount
of
the
payment
is
commensurate
to
the
Company's
performance.
If
not
considered
substantive,milestones
are
initially
deferred
and
recognized
over
the
period
of
the
remaining
performance
obligation.
Payments
received
to
fund
certain
research
activities
are
recognized
as
revenue
in
the
period
in
which
the
research
activities
are
performed.
Revenue
fromcontracts
and
grants
is
recognized
as
the
services
are
performed
and
recorded
as
effort
is
expended
on
the
contracted
work
and
billed
to
the
government
or
theCompany's
contractual
partner.
Payments
received
in
advance
that
are
related
to
future
performance
are
deferred
and
recognized
as
revenue
when
the
researchprojects
are
performed.
Product
royalty
revenue
consists
of
payments
received
from
licensees
for
a
portion
of
sales
proceeds
from
products
that
utilize
the
Company's
licensedtechnologies
and
are
recognized
when
the95 Table
of
ContentsCELLDEX
THERAPEUTICS,
INC.NOTES
TO
FINANCIAL
STATEMENTS
(Continued)(2)
SUMMARY
OF
SIGNIFICANT
ACCOUNTING
POLICIES
(Continued)amount
of
and
basis
for
such
royalty
payments
are
reported
to
the
Company
in
accurate
and
appropriate
form
and
in
accordance
with
the
related
license
agreement.Research and Development Expenses
Research
and
development
costs,
including
internal
and
contract
research
costs,
are
expensed
as
incurred.
Research
and
development
expenses
consist
mainlyof
clinical
trial
costs,
manufacturing
of
clinical
material,
toxicology
and
other
preclinical
studies,
personnel
costs,
depreciation,
license
fees
and
funding
of
outsidecontracted
research.
Clinical
trial
expenses
include
expenses
associated
with
clinical
research
organizations,
or
CRO,
services.
Contract
manufacturing
expenses
include
expensesassociated
with
contract
manufacturing
organizations,
or
CMO,
services.
The
invoicing
from
CROs
and
CMOs
for
services
rendered
can
lag
several
months.
TheCompany
accrues
the
cost
of
services
rendered
in
connection
with
CRO
and
CMO
activities
based
on
our
estimate
of
costs
incurred.
The
Company
maintainsregular
communication
with
our
CROs
and
CMOs
to
assess
the
reasonableness
of
its
estimates.
Differences
between
actual
expenses
and
estimated
expensesrecorded
have
not
been
material
and
are
adjusted
for
in
the
period
in
which
they
become
known.Patent Costs
Patent
costs
are
expensed
as
incurred.
Certain
patent
costs
are
reimbursed
by
the
Company's
product
development
and
licensing
partners.
Any
reimbursedpatent
costs
are
recorded
as
product
development
and
licensing
agreement
revenues
in
the
Company's
financial
statements.Stock-Based Compensation
The
Company
records
stock-based
compensation
expense
for
all
stock-based
awards
made
to
employees
and
directors
based
on
the
estimated
fair
values
ofthe
stock-based
awards
expected
to
vest
at
the
grant
date
and
is
adjusted,
if
necessary,
to
reflect
actual
forfeitures.
Compensation
expense
for
all
stock-basedawards
to
employees
and
directors
is
recognized
using
the
straight-line
method
over
the
term
of
vesting
or
performance.
The
Company
records
stock-based
compensation
expense
for
stock
options
granted
to
non-employees
based
on
the
fair
value
of
the
stock
options
which
is
re-measured
over
the
graded
vesting
term
resulting
in
periodic
adjustments
to
stock-based
compensation
expense.Foreign Currency Translation
Net
unrealized
gains
and
losses
resulting
from
foreign
currency
translation
are
included
in
other
comprehensive
income
(loss).
At
December
31,
2016
andDecember
31,
2015,
accumulated
other
comprehensive
income
includes
a
net
unrealized
gain
related
to
foreign
currency
translation
of
$2.6
million.Income Taxes
The
Company
uses
the
asset
and
liability
method
to
account
for
income
taxes,
including
the
recognition
of
deferred
tax
assets
and
deferred
tax
liabilities
forthe
anticipated
future
tax
consequences96 Table
of
ContentsCELLDEX
THERAPEUTICS,
INC.NOTES
TO
FINANCIAL
STATEMENTS
(Continued)(2)
SUMMARY
OF
SIGNIFICANT
ACCOUNTING
POLICIES
(Continued)attributable
to
differences
between
financial
statement
amounts
and
their
respective
tax
basis.
Quarterly,
the
Company
reviews
its
deferred
tax
assets
for
recovery.A
valuation
allowance
is
established
when
the
Company
believes
that
it
is
more
likely
than
not
that
its
deferred
tax
assets
will
not
be
realized.
Changes
in
valuationallowances
from
period
to
period
are
included
in
the
Company's
tax
provision
in
the
period
of
change.
The
Company
records
uncertain
tax
positions
in
the
financial
statements
only
if
it
is
more
likely
than
not
that
the
uncertain
tax
position
will
be
sustained
uponexamination
by
the
taxing
authorities.
The
Company
records
interest
and
penalties
related
to
uncertain
tax
positions
in
income
tax
expense.Comprehensive Loss
Comprehensive
loss
is
comprised
of
net
loss
and
certain
changes
in
stockholders'
equity
that
are
excluded
from
net
loss.
The
Company
includes
foreigncurrency
translation
adjustments
and
unrealized
gains
and
losses
on
marketable
securities
in
other
comprehensive
loss.
The
statements
of
operations
andcomprehensive
loss
reflect
total
comprehensive
loss
for
the
years
ended
December
31,
2016,
2015
and
2014.Net Loss Per Share
Basic
net
loss
per
common
share
is
based
upon
the
weighted-average
number
of
common
shares
outstanding
during
the
period,
excluding
restricted
stock
thathas
been
issued
but
is
not
yet
vested.
Diluted
net
loss
per
common
share
is
based
upon
the
weighted-average
number
of
common
shares
outstanding
during
theperiod
plus
additional
weighted-average
potentially
dilutive
common
shares
outstanding
during
the
period
when
the
effect
is
dilutive.
The
potentially
dilutivecommon
shares
that
have
not
been
included
in
the
net
loss
per
common
share
calculations
because
the
effect
would
have
been
anti-dilutive
are
as
follows:Recent Accounting Pronouncements
From
time
to
time,
new
accounting
pronouncements
are
issued
by
the
Financial
Accounting
Standards
Board
(FASB)
or
other
standard
setting
bodies
that
areadopted
by
the
Company
as
of
the
specified
effective
date.
Unless
otherwise
discussed,
the
Company
believes
that
the
impact
of
recently
issued
standards
that
arenot
yet
effective
will
not
have
a
material
impact
on
the
Company's
financial
position
or
results
of
operations
upon
adoption.
In
May
2014,
the
FASB
issued
a
new
U.S.
GAAP
accounting
standard
that
creates
modifications
to
various
other
revenue
accounting
standards
for
specializedtransactions
and
industries.
The
new
U.S.
GAAP
accounting
standard
requires
a
company
to
recognize
revenue
when
it
transfers
goods
or
services
to
customers
inan
amount
that
reflects
the
consideration
that
the
company
expects
to
receive97
Year
Ended
December
31,
2016
2015
2014
Stock
options
10,218,710
8,110,239
7,015,350
Restricted
stock
50,000
19,500
7,000
10,268,710
8,129,739
7,022,350
Table
of
ContentsCELLDEX
THERAPEUTICS,
INC.NOTES
TO
FINANCIAL
STATEMENTS
(Continued)(2)
SUMMARY
OF
SIGNIFICANT
ACCOUNTING
POLICIES
(Continued)for
those
goods
or
services.
In
August
2015,
the
FASB
deferred
the
effective
date
of
the
new
standard
from
January
1,
2017
to
January
1,
2018.
The
amendmentallows
for
two
methods
of
adoption,
a
full
retrospective
method
or
a
modified
retrospective
approach
with
the
cumulative
effect
recognized
at
the
date
of
initialapplication.
The
Company
will
further
study
the
implications
of
this
standard
in
order
to
evaluate
the
expected
impact
on
the
financial
statements.
In
February
2016,
the
FASB
issued
a
new
U.S.
GAAP
accounting
standard
which
requires
that
all
lessees
recognize
the
assets
and
liabilities
that
arise
fromleases
on
the
balance
sheet
and
disclose
qualitative
and
quantitative
information
about
its
leasing
arrangements.
The
new
standard
will
be
effective
for
theCompany
on
January
1,
2019.
The
Company
is
currently
evaluating
the
potential
impact
that
this
standard
may
have
on
the
Company's
financial
statements.
In
March
2016,
the
FASB
issued
a
new
U.S.
GAAP
accounting
standard
which
involves
several
aspects
of
the
accounting
for
share-based
paymenttransactions,
including
the
income
tax
consequences,
classification
of
awards
as
either
equity
or
liabilities
and
classification
on
the
statement
of
cash
flows.
Thenew
standard
will
be
effective
for
the
Company
on
January
1,
2017.
The
adoption
of
this
standard
is
not
expected
to
have
a
material
impact
on
our
financialstatements.
In
June
2016,
the
FASB
issued
a
new
U.S.
GAAP
accounting
standard
which
changes
the
impairment
model
for
most
financial
assets
and
certain
otherinstruments.
Under
the
new
standard,
entities
holding
financial
assets
and
net
investment
in
leases
that
are
not
accounted
for
at
fair
value
through
net
income
to
bepresented
at
the
net
amount
expected
to
be
collected.
An
allowance
for
credit
losses
will
be
a
valuation
account
that
will
be
deducted
from
the
amortized
cost
basisof
the
financial
asset
to
present
the
net
carrying
value
at
the
amount
expected
to
be
collected
on
the
financial
asset.
The
new
standard
will
be
effective
for
theCompany
on
January
1,
2020.
The
adoption
of
this
standard
is
not
expected
to
have
a
material
impact
on
the
Company's
financial
statements.
In
August
2016,
the
FASB
issued
a
new
U.S.
GAAP
accounting
standard
which
clarifies
certain
aspects
of
the
statement
of
cash
flows,
including
theclassification
of
debt
prepayment
or
debt
extinguishment
costs,
settlement
of
zero-coupon
debt
instruments
or
other
debt
instruments
with
coupon
interest
rates
thatare
insignificant
in
relation
to
the
effective
interest
rate
of
the
borrowing,
contingent
consideration
payments
made
after
a
business
combination,
proceeds
from
thesettlement
of
insurance
claims,
proceeds
from
the
settlement
of
corporate-owned
life
insurance
policies,
distributions
received
from
equity
method
investees
andbeneficial
interests
in
securitization
transactions.
The
new
standard
also
clarifies
that
an
entity
should
determine
each
separately
identifiable
source
or
use
withinthe
cash
receipts
and
cash
payments
on
the
basis
of
the
nature
of
the
underlying
cash
flows.
In
situations
in
which
cash
receipts
and
payments
have
aspects
of
morethan
one
class
of
cash
flows
and
cannot
be
separated
by
source
or
use,
the
appropriate
classification
should
depend
on
the
activity
that
is
likely
to
be
thepredominant
source
or
use
of
cash
flows
for
the
item.
The
new
standard
will
be
effective
for
us
on
January
1,
2018.
The
Company
is
currently
evaluating
thepotential
impact
that
this
standard
may
have
on
the
Company's
financial
statements.98 Table
of
ContentsCELLDEX
THERAPEUTICS,
INC.NOTES
TO
FINANCIAL
STATEMENTS
(Continued)(3)
COMPREHENSIVE
LOSS
The
changes
in
accumulated
other
comprehensive
income
(loss)
by
component
for
the
years
ended
December
31,
2016,
2015
and
2014
are
summarizedbelow.
No
amounts
were
reclassified
out
of
accumulated
other
comprehensive
income
during
the
years
ended
December
31,
2016,
2015
and
2014.99
Unrealized
Gain
(Loss)
on
Marketable
Securities
Foreign
Currency
Items
Total
(In
thousands)
Balance
at
December
31,
2013
$82
$2,586
$2,668
Other
comprehensive
loss
before
reclassifications
(73)
(5)
(78)Amounts
reclassified
from
other
comprehensive
income
—
—
—
Net
current-period
other
comprehensive
loss
(73)
(5)
(78)Balance
at
December
31,
2014
9
2,581
2,590
Other
comprehensive
(loss)
gain
before
reclassifications
(298)
15
(283)Amounts
reclassified
from
other
comprehensive
income
—
—
—
Net
current-period
other
comprehensive
(loss)
gain
(298)
15
(283)Balance
at
December
31,
2015
$(289)$2,596
$2,307
Other
comprehensive
gain
before
reclassifications
234
—
234
Amounts
reclassified
from
other
comprehensive
income
—
—
—
Net
current-period
other
comprehensive
gain
234
—
234
Balance
at
December
31,
2016
$(55)$2,596
$2,541
Table
of
ContentsCELLDEX
THERAPEUTICS,
INC.NOTES
TO
FINANCIAL
STATEMENTS
(Continued)(4)
FAIR
VALUE
MEASUREMENTS
The
following
tables
set
forth
the
Company's
financial
assets
subject
to
fair
value
measurements:
Contingent
consideration
liabilities
related
to
acquisitions
are
classified
as
Level
3
within
the
valuation
hierarchy
and
are
valued
based
on
various
estimates,including
probability
of
success,
discount
rates
and
amount
of
time
until
the
conditions
of
the
milestone
payments
are
met.
In
connection
with
the
Kolltanacquisition,
we
may
be
required
to
pay
future
consideration
that
is
contingent
upon
the
achievement
of
specified
development,
regulatory
approvals
or
sales-basedmilestone
events.
We
determine
the
fair
value
of
these
obligations
on
the
acquisition
date
using
various
estimates
that
are
not
observable
in
the
market
andrepresent
a
Level
3
measurement
within
the
fair
value
hierarchy.
The
following
table
represents
a
roll-forward
of
our
acquisition-related
contingent
consideration(in
thousands):
There
have
been
no
transfers
of
assets
or
liabilities
between
the
fair
value
measurement
classifications.
The
Company's
financial
instruments
consist
mainly
ofcash
and
cash
equivalents,
marketable
securities,
short-term
accounts
receivable
and
accounts
payable.
The
Company
values
its
marketable
securities
utilizingindependent
pricing
services
which
normally
derive
security
prices
from
recently
reported
trades
for
identical
or
similar
securities,
making
adjustments
based
onsignificant
observable
transactions.
At
each
balance
sheet
date,
observable
market
inputs
may
include
trade100
As
of
December
31,
2015
Level
1
Level
2
Level
3
(In
thousands)
Assets:
Money
market
funds
and
cash
equivalents
$59,831
—
$59,831
—
Marketable
securities
$217,781
—
$217,781
—
$277,612
—
$277,612
—
As
of
December
31,
2016
Level
1
Level
2
Level
3
(In
thousands)
Assets:
Money
market
funds
and
cash
equivalents
$20,445
—
$20,445
—
Marketable
securities
$147,315
—
$147,315
—
$167,760
—
$167,760
—
Liabilities:
Kolltan
acquisition
contingent
consideration
$44,200
—
—
$44,200
$44,200
—
—
$44,200
December
31,
2016
Balance
at
beginning
of
period
$—
Milestone
payments
—
Changes
in
fair
value
—
Kolltan
acquisition
contingent
consideration
$44,200
Balance
at
end
of
period
$44,200
Table
of
ContentsCELLDEX
THERAPEUTICS,
INC.NOTES
TO
FINANCIAL
STATEMENTS
(Continued)(4)
FAIR
VALUE
MEASUREMENTS
(Continued)information,
broker
or
dealer
quotes,
bids,
offers
or
a
combination
of
these
data
sources.
Short-term
accounts
receivable
and
accounts
payable
are
reflected
in
theaccompanying
financial
statements
at
cost,
which
approximates
fair
value
due
to
the
short-term
nature
of
these
instruments.(5)
MARKETABLE
SECURITIES
A
summary
of
marketable
securities
is
shown
below:
The
marketable
securities
held
by
the
Company
were
high
investment
grade
and
there
were
no
marketable
securities
that
the
Company
considered
to
be
other-than-temporarily
impaired
as
of
December
31,
2016.
Marketable
securities
include
$0.6
million
and
$1.5
million
in
accrued
interest
at
December
31,
2016
andDecember
31,
2015,
respectively.101
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
(In
thousands)
December
31,
2016
Marketable
securities
U.S.
government
and
municipal
obligations
Maturing
in
one
year
or
less
$52,754
$5
$(12)$52,747
Maturing
after
one
year
through
three
years
296
8
—
304
Total
U.S.
government
and
municipal
obligations
$53,050
$13
$(12)$53,051
Corporate
debt
securities
Maturing
in
one
year
or
less
$94,320
$—
$(56)$94,264
Maturing
after
one
year
through
three
years
—
—
—
—
Total
corporate
debt
securities
$94,320
$—
$(56)$94,264
Total
marketable
securities
$147,370
$13
$(68)$147,315
December
31,
2015
Marketable
securities
U.S.
government
and
municipal
obligations
Maturing
in
one
year
or
less
$48,871
$4
$(20)$48,855
Maturing
after
one
year
through
three
years
15,940
24
(57)
15,907
Total
U.S.
government
and
municipal
obligations
$64,811
$28
$(77)$64,762
Corporate
debt
securities
Maturing
in
one
year
or
less
$129,327
$2
$(141)$129,188
Maturing
after
one
year
through
three
years
23,932
1
(102)
23,831
Total
corporate
debt
securities
$153,259
$3
$(243)$153,019
Total
marketable
securities
$218,070
$31
$(320)$217,781
Table
of
ContentsCELLDEX
THERAPEUTICS,
INC.NOTES
TO
FINANCIAL
STATEMENTS
(Continued)(6)
PROPERTY
AND
EQUIPMENT,
NET
Property
and
equipment
include
the
following:
Depreciation
and
amortization
expense
related
to
property
and
equipment
was
$3.1
million,
$3.0
million
and
$2.4
million
for
the
years
ended
December
31,2016,
2015
and
2014,
respectively.(7)
INTANGIBLE
ASSETS
AND
GOODWILL
Intangible
assets,
net
of
accumulated
amortization,
and
goodwill
are
as
follows:
The
IPR&D
intangible
asset
recorded
in
connection
with
the
CuraGen
acquisition
of
$11.8
million
relates
to
the
development
of
glembatumumab
vedotin.
Atthe
date
of
acquisition
and
at
December
31,
2016,
glembatumumab
vedotin
had
not
yet
reached
technological
feasibility
nor
did
it
have
any
alternative
future
use.Glembatumumab
vedotin
is
in
a
randomized,
Phase
2b
study
for
the
treatment
of
triple
negative
breast
cancer
and
a
Phase
2
study
for
the
treatment
of
metastaticmelanoma.
The
IPR&D
intangible
asset
recorded
in
connection
with
the
Kolltan
acquisition
of
$61.7
million
relates
to
the
development
of
the
CDX-1058,
CDX-3379
andTAM
programs.
At
the
date
of
acquisition
and
at
December
31,
2016,
the
CDX-1058,
CDX-3379
and
TAM
programs
had
not
yet
reached
technological
feasibilitynor
did
they
have
any
alternative
future
use.
CDX-0158
is
a
humanized
monoclonal
antibody
currently
in
a
Phase
1
dose
escalation
study
in
refractorygastrointestinal
stromal
tumors
and
CDX-3379
is
a
human
monoclonal
antibody
which
recently
completed
a
Phase
1b
study
in
patients
with
solid
tumors.
TheTAM
program
is
a
multi-faceted
broad
antibody
discovery
effort
to102
December
31,
2016
December
31,
2015
(In
thousands)
Laboratory
Equipment
$6,771
$5,432
Manufacturing
Equipment
4,312
4,178
Office
Furniture
and
Equipment
3,677
3,088
Leasehold
Improvements
17,115
15,371
Construction
in
Progress
1,283
451
Total
Property
and
Equipment
33,158
28,520
Less
Accumulated
Depreciation
and
Amortization
(19,966)
(17,059)
$13,192
$11,461
December
31,
2016
December
31,
2015
Estimated
Life
Cost
Accumulated
Amortization
Net
Cost
Accumulated
Amortization
Net
(In
thousands)
Intangible
Assets:
IPR&D
Indefinite
$73,490
$—
$73,490
$11,800
$—
$11,800
Amgen
Amendment
16
years
14,500
(6,503)
7,997
14,500
(5,605)
8,895
Core
Technology
11
years
1,296
(1,296)
—
1,296
(1,197)
99
Total
Intangible
Assets
$89,286
$(7,799)$81,487
$27,596
$(6,802)$20,794
Goodwill
Indefinite
$90,976
$—
$90,976
$8,965
$—
$8,965
Table
of
ContentsCELLDEX
THERAPEUTICS,
INC.NOTES
TO
FINANCIAL
STATEMENTS
(Continued)(7)
INTANGIBLE
ASSETS
AND
GOODWILL
(Continued)generate
antibodies
that
modulate
the
TAM
family
of
RTKs,
comprised
of
Tyro3,
AXL
and
MerTK,
which
are
expressed
on
tumor-infiltrating
macrophages,dendritic
cells
and
some
tumors.
Amortization
expense
for
intangible
assets
was
$1.0
million
for
the
years
ended
December
31,
2016,
2015
and
2014.
The
estimated
future
amortizationexpense
of
intangible
assets
for
the
years
ending
December
31,
2017,
2018,
2019,
2020
and
2021
is
$0.9
million,
$0.9
million,
$0.9
million,
$0.9
million
and$0.9
million,
respectively.(8)
ACCRUED
EXPENSES
Accrued
expenses
include
the
following:(9)
OTHER
LONG-TERM
LIABILITIES
Other
long-term
liabilities
include
the
following:
In
November
2015,
December
2014,
January
2014,
January
2013
and
January
2012,
the
Company
received
approval
from
the
New
Jersey
EconomicDevelopment
Authority
and
agreed
to
sell
New
Jersey
tax
benefits
of
$9.8
million,
$1.9
million,
$1.1
million,
$0.8
million
and
$0.8
million
to
an
independent
thirdparty
for
$9.2
million,
$1.8
million,
$1.0
million,
$0.8
million
and
$0.7
million,
respectively.
Under
the
agreement,
the
Company
must
maintain
a
base
ofoperations
in
New
Jersey
for
five
years
or
the
tax
benefits
must
be
paid
back
on
a
pro-rata
basis
based
on
the
number
of
years
completed.
During
the
years
endedDecember
31,
2016,
2015
and
2014,
the
Company
recorded
$2.8
million,
$1.0
million
and
$0.4
million
to
other
income
related
to
the
sale
of
these
tax
benefits,respectively.103
December
31,
2016
December
31,
2015
(In
thousands)
Accrued
Payroll
and
Employee
Benefits
$7,132
$5,601
Accrued
Research
and
Development
Contract
Costs
17,742
14,548
Accrued
Professional
Fees
1,146
399
Other
Accrued
Expenses
2,637
3,768
$28,657
$24,316
December
31,
2016
December
31,
2015
(In
thousands)
Deferred
Rent
$398
$409
Net
Deferred
Tax
Liability
related
to
IPR&D
(Note
17)
28,054
4,661
Deferred
Income
from
Sale
of
Tax
Benefits
9,436
12,219
Needham
Expansion
Restructuring
(Note
18)
1,154
—
Long-Term
Severance
(Note
17)
539
—
Contingent
Milestones
(Note
17)
44,200
—
Deferred
Revenue
3,749
4,368
Total
87,530
21,657
Less
Current
Portion
(4,826)
(4,418)Long-Term
Portion
$82,704
$17,239
Table
of
ContentsCELLDEX
THERAPEUTICS,
INC.NOTES
TO
FINANCIAL
STATEMENTS
(Continued)(10)
STOCKHOLDERS'
EQUITYCommon Stock
In
December
2013,
the
Company
filed
an
automatic
shelf
registration
statement
with
the
Securities
and
Exchange
Commission
to
register
for
sale
anycombination
of
the
types
of
securities
described
in
the
shelf
registration
statement.
In
December
2016,
the
Company
filed
a
new
shelf
registration
statement
withthe
Securities
and
Exchange
Commission
to
register
for
sale
any
combination
of
the
types
of
securities
described
in
the
shelf
registration
statement
up
to
amaximum
aggregate
offering
price
of
$250
million.
Such
registration
statement
was
declared
effective
on
February
13,
2017.
During
the
year
ended
December
31,
2014,
the
Company
entered
into
an
amended
and
restated
supply
agreement
with
Biosyn
Corporation.
Under
the
supplyagreement,
Biosyn
will
manufacture
and
supply
keyhole
limpet
hemocyanin
(KLH)
to
the
Company
for
use
in
connection
with
the
development,
manufacture
orcommercial
sale
of
Rintega.
In
connection
with
the
supply
agreement,
the
Company
issued
to
Biosyn
152,172
shares
of
its
common
stock
having
a
value
of$2.0
million.
During
the
years
ended
December
31,
2016,
2015
and
2014,
the
Company
recorded
$1.6
million,
$0.3
million
and
$0.1
million
to
research
anddevelopment
expense
related
to
this
supply
agreement,
respectively.
During
the
year
ended
December
31,
2015,
the
Company
issued
8,337,500
shares
of
its
common
stock
in
underwritten
public
offerings
resulting
in
netproceeds
to
the
Company
of
$188.8
million,
after
deducting
underwriting
fees
and
offering
expenses.
During
the
year
ended
December
31,
2016,
the
Company
entered
into
a
research
and
collaboration
agreement
with
an
undisclosed
private
company
to
accessnovel
technologies
and
paid
$3.5
million
to
support
research
activities
and
make
an
investment
in
the
private
company.
The
Company
initially
recorded$1.8
million
to
other
assets
related
to
this
investment
and
$1.7
million
was
recorded
to
prepaid
and
other
currents
assets
and
is
being
amortized
over
the
term
of
theagreement.
At
December
31,
2016,
$0.7
million
remained
recorded
to
prepaid
research
related
to
this
collaboration.
In
May
2016,
the
Company
entered
into
an
agreement
with
Cantor
Fitzgerald
&
Co.
("Cantor")
to
allow
the
Company
to
issue
and
sell
shares
of
its
commonstock
having
an
aggregate
offering
price
of
up
to
$60.0
million
from
time
to
time
through
Cantor,
acting
as
agent.
During
the
year
ended
December
31,
2016,Company
issued
3,303,800
shares
of
its
common
stock
under
this
controlled
equity
offering
sales
agreement
with
Cantor
resulting
in
net
proceeds
to
the
Companyof
$13.9
million,
after
deducting
commission
and
offering
expenses.Convertible Preferred Stock
At
December
31,
2016,
the
Company
had
authorized
3,000,000
shares
of
preferred
stock
all
of
which
have
been
designated
Class
C
Preferred
Stock
including350,000
shares
which
have
been
designated
Series
C-1
Junior
Participating
Cumulative
Preferred
Stock
(the
"Series
C-1
Preferred
Stock").(11)
STOCK-BASED
COMPENSATION
The
Company
has
the
following
stock-based
compensation
plans:
the
2004
Employee
Stock
Purchase
Plan
(the
"2004
ESPP
Plan"),
the
2008
Stock
Optionand
Incentive
Plan
(the
"2008
Plan")
and
Celldex
Research's
2005
Equity
Incentive
Plan
(the
"Celldex
Research
2005
Plan").
There
are
no
shares
available
forfuture
grant
under
the
Celldex
Research
2005
Plan.104 Table
of
ContentsCELLDEX
THERAPEUTICS,
INC.NOTES
TO
FINANCIAL
STATEMENTS
(Continued)(11)
STOCK-BASED
COMPENSATION
(Continued)Employee Stock Purchase Plan
At
December
31,
2016,
a
total
of
200,000
shares
of
common
stock
are
reserved
for
issuance
under
the
2004
ESPP
Plan.
Under
the
2004
ESPP
Plan,
eachparticipating
employee
may
purchase
shares
of
common
stock
through
payroll
deductions
at
a
purchase
price
equal
to
85%
of
the
lower
of
the
fair
market
value
ofthe
common
stock
at
either
the
beginning
of
the
offering
period
or
the
applicable
exercise
date.
During
the
years
ended
December
31,
2016
and
2015,
the
Companyissued
59,335
and
15,755
shares
under
the
2004
ESPP
Plan,
respectively.
At
December
31,
2016,
78,236
shares
were
available
for
issuance
under
the
2004
ESPPPlan.Employee Stock Option and Incentive Plan
The
2008
Plan
permits
the
granting
of
incentive
stock
options
(intended
to
qualify
as
such
under
Section
422A
of
the
Internal
Revenue
Code
of
1986,
asamended),
non-qualified
stock
options,
stock
appreciation
rights,
performance
share
units,
restricted
stock
and
other
awards
of
restricted
stock
in
lieu
of
cashbonuses
to
employees,
consultants
and
non-employee
directors.
At
December
31,
2016,
the
2008
Plan
allowed
for
a
maximum
of
14,350,000
shares
of
common
stock
to
be
issued
for
grants
of
Stock
Options
and
otherAwards
made
prior
to
June
9,
2025
and
grants
of
Incentive
Stock
Options
made
prior
to
April
16,
2025.
The
Company's
board
of
directors
determines
the
term
ofeach
option,
option
price,
and
number
of
shares
for
which
each
option
is
granted
and
the
rate
at
which
each
option
vests.
Options
generally
vest
over
a
period
not
toexceed
four
years.
The
term
of
each
option
cannot
exceed
ten
years
(five
years
for
options
granted
to
holders
of
more
than
10%
of
the
voting
stock
of
theCompany)
and
the
exercise
price
of
stock
options
cannot
be
less
than
the
fair
market
value
of
the
common
stock
at
the
date
of
grant
(110%
of
fair
market
value
forincentive
stock
options
granted
to
holders
of
more
than
10%
of
the
voting
stock
of
the
Company).
Vesting
of
all
employee
and
non-employee
director
stock
optionawards
may
accelerate
upon
a
change
in
control
as
defined
in
the
2008
Plan.
A
summary
of
stock
option
activity
for
the
year
ended
December
31,
2016
is
as
follows:
The
total
intrinsic
value
of
stock
options
exercised
during
the
years
ended
December
31,
2016,
2015
and
2014
was
$0.1
million,
$14.4
million
and$2.7
million,
respectively.
The
weighted
average
grant-date
fair
value
of
stock
options
granted
during
the
years
ended
December
31,
2016,
2015
and105
Shares
Weighted
Average
Exercise
Price
Per
Share
Weighted
Average
Remaining
Contractual
Term
(In
Years)
Options
Outstanding
at
December
31,
2015
8,110,239
$13.13
6.7
Granted
2,464,750
$4.78
Exercised
(48,817)$2.90
Canceled
(307,462)$14.05
Options
Outstanding
at
December
31,
2016
10,218,710
$11.14
6.5
Options
Vested
and
Expected
to
Vest
at
December
31,
2016
10,148,728
$11.14
6.5
Options
Exercisable
at
December
31,
2016
6,086,840
$10.86
5.0
Shares
Available
for
Grant
under
the
2008
Plan
3,577,635
Table
of
ContentsCELLDEX
THERAPEUTICS,
INC.NOTES
TO
FINANCIAL
STATEMENTS
(Continued)(11)
STOCK-BASED
COMPENSATION
(Continued)2014
was
$3.18,
$15.25
and
$8.82,
respectively.
The
total
fair
value
of
stock
options
vested
during
the
years
ended
December
31,
2016,
2015
and
2014
was$17.0
million,
$10.0
million
and
$5.7
million,
respectively.
The
aggregate
intrinsic
value
of
stock
options
outstanding
at
December
31,
2016
was
$0.4
million.
The
aggregate
intrinsic
value
of
stock
options
vested
andexpected
to
vest
at
December
31,
2016
was
$0.4
million.
As
of
December
31,
2016,
total
compensation
cost
related
to
non-vested
employee
and
non-employeedirector
stock
options
not
yet
recognized
was
approximately
$27.4
million,
net
of
estimated
forfeitures,
which
is
expected
to
be
recognized
as
expense
over
aweighted
average
period
of
2.8
years.Restricted Stock
A
summary
of
restricted
stock
activity
under
the
2008
Plan
for
the
year
ended
December
31,
2016
is
as
follows:Valuation and Expenses Information
Stock-based
compensation
expense
for
the
years
ended
December
31,
2016,
2015
and
2014
was
recorded
as
follows:106
Shares
Weighted
Average
Grant
Date
Fair
Value
(per
share)
Outstanding
and
unvested
at
December
31,
2015
19,500
$25.41
Granted
60,000
$4.72
Vested
(19,500)$25.41
Canceled
(10,000)$4.72
Outstanding
and
unvested
at
December
31,
2016
50,000
$4.72
2016
2015
2014
(In
thousands)
Research
and
development
$7,821
$6,186
$3,459
General
and
administrative
7,496
6,588
3,393
Total
stock-based
compensation
expense
$15,317
$12,774
$6,852
Table
of
ContentsCELLDEX
THERAPEUTICS,
INC.NOTES
TO
FINANCIAL
STATEMENTS
(Continued)(11)
STOCK-BASED
COMPENSATION
(Continued)
The
fair
values
of
employee
stock
options
granted
during
the
years
ended
December
31,
2016,
2015
and
2014
were
valued
using
the
Black-Scholes
option-pricing
model
with
the
following
assumptions:
The
Company
estimates
expected
term
based
on
historical
exercise
patterns.
The
Company
uses
its
historical
stock
price
volatility
consistent
with
theexpected
term
of
grant
as
the
basis
for
its
expected
volatility
assumption.
The
risk-free
interest
rate
is
based
upon
the
yield
of
U.S.
Treasury
securities
consistentwith
the
expected
term
of
the
option.
The
dividend
yield
assumption
is
based
on
the
Company's
history
of
zero
dividend
payouts
and
expectation
that
no
dividendswill
be
paid
in
the
foreseeable
future.(12)
REVENUEBristol-Myers Squibb Company (BMS)
In
May
2014,
the
Company
entered
into
a
clinical
trial
collaboration
with
BMS
to
evaluate
the
safety,
tolerability
and
preliminary
efficacy
of
varlilumab
andOpdivo®,
BMS's
PD-1
immune
checkpoint
inhibitor,
in
a
Phase
1/2
study.
Under
the
terms
of
this
clinical
trial
collaboration,
BMS
made
a
one-time
payment
tothe
Company
of
$5.0
million
and
BMS
and
the
Company
amended
the
terms
of
the
Company's
existing
license
agreement
with
Medarex,
which
was
acquired
byBMS,
related
to
the
Company's
CD27
program
whereby
certain
future
milestone
payments
were
waived
and
future
royalty
rates
were
reduced
that
may
have
beendue
from
the
Company
to
Medarex.
In
return,
BMS
was
granted
a
time-limited
right
of
first
negotiation
if
the
Company
wishes
to
out-license
varlilumab.
Thecompanies
also
agreed
to
work
exclusively
with
each
other
to
explore
anti-PD-1
antagonist
antibody
and
anti-CD27
agonist
antibody
combination
regimens.
Theclinical
trial
collaboration
provides
that
the
companies
will
share
development
costs
and
that
the
Company
will
be
responsible
for
conducting
the
ongoing
Phase1/2
study.
The
Company
has
determined
that
its
performance
obligations
under
the
BMS
agreement,
which
primarily
include
performing
research
and
development,supplying
varlilumab
and
participating
in
the
joint
development
committee,
should
be
accounted
for
as
a
single
unit
of
accounting
and
estimated
that
itsperformance
period
under
the
BMS
agreement
would
be
5
years.
Accordingly,
the
$5.0
million
up-front
payment
was
initially
recorded
as
deferred
revenue
and
isbeing
recognized
as
revenue
on
a
straight-line
basis
over
the
estimated
5-year
performance
period
using
the
Contingency
Adjusted
Performance
Model
("CAPM").The
BMS
agreement
also
provides
for
BMS
to
reimburse
the
Company
for
50%
of
the
external
costs
incurred
by
the
Company
in
connection
with
the
clinical
trial.These
BMS
payments
are
being
recognized
as
revenue
using
the
CAPM.
The
Company
recorded
$2.1
million,
$1.3
million
and
$0.7
million
in
revenue
related
tothe
BMS
agreement
during
the
year
ended
December
31,
2016,
2015
and
2014,
respectively.107
Year
Ended
December
31,
2016
Year
Ended
December
31,
2015
Year
Ended
December
31,
2014Expected
stock
price
volatility
70
-
77%
67
-
69%
70
-
72%Expected
option
term
6.0
Years
6.0
Years
6.0
YearsRisk-free
interest
rate
1.4
-
2.3%
1.8
-
2.2%
1.9
-
2.2%Expected
dividend
yield
None
None
None Table
of
ContentsCELLDEX
THERAPEUTICS,
INC.NOTES
TO
FINANCIAL
STATEMENTS
(Continued)(12)
REVENUE
(Continued)Rockefeller University (Rockefeller)
In
September
2013,
the
Company
entered
into
an
agreement,
as
amended,
with
Rockefeller
pursuant
to
which
the
Company
performs
research
anddevelopment
services
for
Rockefeller.
The
Company
bills
Rockefeller
quarterly
for
actual
time
and
direct
costs
incurred
and
records
those
amounts
to
revenue
inthe
quarter
the
services
are
performed.
The
Company
recorded
$2.7
million,
$3.4
million
and
$2.7
million
in
revenue
related
to
the
Rockefeller
agreement
duringthe
years
ended
December
31,
2016,
2015
and
2014,
respectively.(13)
COLLABORATION
AGREEMENTS
The
Company
has
entered
into
license
agreements
whereby
the
Company
has
received
licenses
or
options
to
license
technology,
specified
patents
or
patentapplications.
The
Company's
licensing
and
development
collaboration
agreements
generally
provide
for
royalty
payments
equal
to
specified
percentages
of
productsales,
annual
license
maintenance
fees,
continuing
patent
prosecution
costs
and
potential
future
milestone
payments
to
third
parties
upon
the
achievement
of
certaindevelopmental,
regulatory
and/or
commercial
milestones.
Nonrefundable
license
fee
expense
of
$1.6
million,
$0.9
million
and
$3.2
million
was
recorded
toresearch
and
development
expense
for
the
years
ended
December
31,
2016,
2015
and
2014,
respectively.Medarex, Inc. (Medarex), which was acquired by Bristol-Myers Squibb
The
Company
and
Medarex
have
entered
into
an
assignment
and
license
agreement,
as
amended,
that
provides
for
the
assignment
of
certain
patent
and
otherintellectual
property
rights
and
a
license
to
certain
Medarex
technology
related
to
the
Company's
APC
Targeting
Technology™
and
an
anti-mannose
receptorproduct.
Under
the
terms
of
the
agreement,
the
Company
may
be
required
to
pay
royalties
in
the
low-single
digits
on
any
net
product
sale
of
a
Licensed
Royalty-Bearing
Product
or
Anti-Mannose
Product
to
Medarex
until
the
later
of
(i)
the
expiration
of
the
last
to
expire
applicable
patent
and
(ii)
the
tenth
anniversary
of
thefirst
commercial
sale
of
such
licensed
product.
The
Company
and
Medarex
have
also
entered
into
a
research
and
commercialization
agreement,
as
amended,
that
provides
that
the
Company
may
be
requiredto
pay
Medarex
milestones
of
up
to
$7.0
million
upon
obtaining
first
approval
for
commercial
sale
in
a
first
indication
of
a
product
containing
a
licensed
antibodyand
royalty
payments
in
the
low-to-mid
single
digits
on
any
net
product
sales
with
respect
to
the
development
of
any
products
containing
such
licensed
antibodiesuntil
the
later
of
(i)
the
expiration
of
the
last
to
expire
applicable
patent
and
(ii)
the
tenth
anniversary
of
the
first
commercial
sale
of
such
licensed
product.
InSeptember
2010,
the
Company
exercised
an
option
under
the
agreement,
whereby
it
licensed
from
Medarex
access
to
the
UltiMab
technology
to
develop
andcommercialize
human
antibodies
to
CD27,
including
varlilumab.
In
connection
with
the
clinical
trial
collaboration,
the
Company
entered
into
with
BMS
in
May2014,
certain
future
milestone
payments
were
waived
and
future
royalty
rates
that
the
Company
may
have
owed
Medarex
in
connection
with
any
CD27
programwere
reduced.Rockefeller University (Rockefeller)
In
November
2005,
the
Company
and
Rockefeller
entered
into
a
license
agreement
for
the
exclusive
worldwide
rights
to
human
DEC-205
receptor,
with
theright
to
sublicense
the
technology.108 Table
of
ContentsCELLDEX
THERAPEUTICS,
INC.NOTES
TO
FINANCIAL
STATEMENTS
(Continued)(13)
COLLABORATION
AGREEMENTS
(Continued)The
license
grant
is
exclusive
except
that
Rockefeller
may
use
and
permit
other
nonprofit
organizations
to
use
the
human
DEC-205
receptor
patent
rights
foreducational
and
research
purposes.
The
Company
may
be
required
to
pay
Rockefeller
milestones
of
up
to
$3.8
million
upon
obtaining
first
approval
forcommercial
sale
in
a
first
indication
of
a
product
targeting
the
licensed
receptor
and
royalty
payments
in
the
low-to-mid
single
digits
on
any
net
product
sales
withrespect
to
development
and
commercialization
of
the
human
DEC-205
receptor.University of Southampton, UK (Southampton)
In
November
2008,
the
Company
entered
into
a
license
agreement
with
Southampton
to
develop
human
antibodies
towards
CD27,
a
potentially
importanttarget
for
immunotherapy
of
various
cancers.
The
Company
may
be
required
to
pay
Southampton
milestones
of
up
to
approximately
$1.0
million
upon
obtainingfirst
approval
for
commercial
sale
in
a
first
indication
and
royalty
payments
in
the
low-single
digits
on
any
net
product
sales
with
respect
to
development
andcommercialization
of
varlilumab.Amgen Inc. (Amgen)
In
March
2009,
the
Company
entered
into
a
license
agreement
with
Amgen
to
acquire
the
exclusive
rights
to
CDX-301
and
CD40
ligand
(CD40L).
CDX-301and
CD40L
are
immune
modulating
molecules
that
increase
the
numbers
and
activity
of
immune
cells
that
control
immune
responses.
The
Company
may
berequired
to
pay
Amgen
milestones
of
up
to
$0.9
million
upon
obtaining
first
approval
for
commercial
sale
in
a
first
indication
and
royalty
payments
in
the
low-single
digits
on
any
net
product
sales
with
respect
to
development
and
commercialization
of
the
technology
licensed
from
Amgen,
including
CDX-301.Seattle Genetics, Inc. (Seattle Genetics)
In
connection
with
the
acquisition
of
CuraGen,
the
Company
assumed
the
license
agreement
between
CuraGen
and
Seattle
Genetics
whereby
CuraGenacquired
the
rights
to
proprietary
antibody-drug
conjugate
(ADC)
technology
for
use
with
the
Company's
proprietary
antibodies
for
the
potential
treatment
ofcancer.
The
Company
may
be
required
to
pay
Seattle
Genetics
milestones
of
up
to
$5.0
million
and
$8.5
million
for
glembatumumab
vedotin
and
CDX-014,respectively,
upon
obtaining
first
approval
for
commercial
sale
in
a
first
indication
and
royalty
payments
in
the
mid-single
digits
on
any
net
product
sales
withrespect
to
development
and
commercialization
of
these
drug
candidates.109 Table
of
ContentsCELLDEX
THERAPEUTICS,
INC.NOTES
TO
FINANCIAL
STATEMENTS
(Continued)(14)
INCOME
TAXES
The
components
of
income
tax
expense
attributable
to
continuing
operations
consist
of
the
following:
A
reconciliation
between
the
amount
of
reported
income
tax
and
the
amount
computed
using
the
U.S.
Statutory
rate
of
34%
follows:
The
Company
incurred
a
foreign
pre-tax
loss
of
$3.7
million
during
the
year
ended
December
31,
2016.
Deferred
tax
assets
and
liabilities
are
recognizedbased
on
temporary
differences
between
the
financial
reporting
and
tax
basis
of
assets
and
liabilities
using
future
expected
enacted
rates.
A
valuation
allowance
isrecorded
against
deferred
tax
assets
if
it
is
more
likely
than
not
that
some
or
all
of
the
deferred
tax
assets
will
not
be
realized.110
Year
Ended
December
31,
2016
2015
2014
(In
thousands)
Income
tax
benefit
(provision):
Federal
$45,518
$46,598
$43,536
State
7,268
10,642
7,328
Foreign
1,124
—
—
Expiration
of
Net
Operating
Losses
and
Research
&
Development
Tax
Credits
—
(155)
(2,302)
53,910
57,085
48,562
Deferred
tax
valuation
allowance
(53,910)
(57,085)
(48,562)
$—
$—
$—
2016
2015
2014
(In
thousands)
Pre-tax
loss
$(128,530)$(127,197)$(118,080)Loss
at
Statutory
Rates
(43,700)
(43,247)
(40,147)Difference
in
Foreign
Tax
Rates
150
—
—
Research
and
Development
Credits
(5,203)
(4,935)
(4,126)State
Taxes
(7,268)
(10,642)
(7,328)Other
2,111
1,584
737
Expiration
of
Net
Operating
Losses
and
Research
&
Development
Tax
Credits
—
155
2,302
Change
in
Valuation
Allowance
53,910
57,085
48,562
Income
tax
(benefit)
provision
$—
$—
$—
Table
of
ContentsCELLDEX
THERAPEUTICS,
INC.NOTES
TO
FINANCIAL
STATEMENTS
(Continued)(14)
INCOME
TAXES
(Continued)
The
principal
components
of
the
deferred
tax
assets
and
liabilities
at
December
31,
2016
and
2015,
respectively,
are
as
follows:
The
net
deferred
tax
liability
of
$28.1
million
and
$4.7
million
at
December
31,
2016
and
2015,
respectively
relates
to
the
temporary
differences
associatedwith
the
IPR&D
intangible
assets
acquired
in
the
Kolltan
and
CuraGen
acquisitions,
respectively,
which
are
not
deductible
for
tax
purposes.
Since
the
IPR&Dintangible
assets
are
indefinite-lived,
the
related
deferred
tax
liability
cannot
be
netted
against
definite-lived
deferred
tax
assets
to
reduce
the
valuation
allowancerequired.
As
of
December
31,
2016,
the
Company
had
the
following
federal
net
operating
loss
("NOL")
carryforwards:•Prior
to
the
merger
of
the
Company
and
AVANT,
$33.0
million
was
generated
by
the
Company
which
expire
at
various
dates
starting
in
2023
andgoing
through
2028;
•Prior
to
the
merger
of
the
Company
and
AVANT,
$101.2
million,
net
of
expirations
and
utilization,
was
generated
by
AVANT
which
expire
atvarious
dates
starting
in
2018
and
going
through
2028;
•Following
the
merger
of
the
Company
and
AVANT,
$356.7
million
was
generated
by
the
combined
company
which
expire
at
various
dates
startingin
2028
and
going
through
2036;
and
•Prior
to
its
acquisition
by
the
Company,
$518.3
million
was
generated
by
CuraGen.
•Prior
to
its
acquisition
by
the
Company,
$110.5
million
was
generated
by
Kolltan
Pharmaceuticals,
Inc.111
December
31,
2016
December
31,
2015
(In
thousands)
Gross
Deferred
Tax
Assets
Net
Operating
Loss
Carryforwards
$174,555
$180,777
Foreign
Net
Operating
Loss
Carryforwards
1,124
—
Tax
Credit
Carryforwards
32,306
35,895
Deferred
Research
and
Development
Expenses
109,520
48,608
Stock-based
Compensation
12,362
8,393
Fixed
Assets
1,526
2,017
Deferred
Revenue
1,418
1,703
Accrued
Expenses
and
Other
894
219
333,705
277,612
Gross
Deferred
Tax
Liabilities
Other
Acquired
Intangibles
(2,868)
(3,382)IPR&D
Intangibles
(28,054)
(4,661)
(30,922)
(8,043)Total
Deferred
Tax
Assets
and
Liabilities
302,783
269,569
Deferred
Tax
Assets
Valuation
Allowance
(330,837)
(274,230)Net
Deferred
Tax
Asset
(Liability)
$(28,054)$(4,661) Table
of
ContentsCELLDEX
THERAPEUTICS,
INC.NOTES
TO
FINANCIAL
STATEMENTS
(Continued)(14)
INCOME
TAXES
(Continued)
As
of
December
31,
2016,
the
Company
had
foreign
net
operating
loss
carryforwards
of
$3.7
million
which
can
be
carried
forward
indefinitely.
As
of
December
31,
2016,
the
Company
has
an
additional
$17.7
million
of
federal
and
state
net
operating
losses
not
reflected
above,
that
are
attributable
tostock
option
exercises
which
will
be
recorded
as
an
increase
in
additional
paid
in
capital
on
the
balance
sheet
once
they
are
"realized"
in
accordance
with
ASC
718.
As
of
December
31,
2016,
the
Company
had
federal
and
state
net
operating
loss
carryforwards
of
$458.5
million
and
$344.9
million,
respectively,
which
maybe
available
to
offset
certain
future
income
tax
liabilities
and
begin
to
expire
in
2018
and
2028,
respectively.
As
of
December
31,
2016,
the
Company
also
hadfederal
and
state
research
and
development
tax
credit
carryforwards
of
$26.1
million
and
$9.4
million,
respectively,
which
may
be
available
to
offset
future
incometax
liabilities
and
begin
to
expire
in
2018
and
2017,
respectively.
Utilization
of
the
net
operating
loss
carryforwards
and
research
and
credit
carryforwards
may
besubject
to
a
substantial
annual
limitation
under
Section
382
of
the
Internal
Revenue
Code
of
1986
due
to
ownership
changes
that
have
occurred
previously
or
thatcould
occur
in
the
future.
These
ownership
changes
may
limit
the
amount
of
carryforwards
that
can
be
utilized
annually
to
offset
future
taxable
income.
In
general,an
ownership
change,
as
defined
by
Section
382,
results
from
transactions
increasing
the
ownership
of
certain
shareholders
or
public
groups
in
the
stock
of
acorporation
by
more
than
50%
over
a
three-year
period.
The
Company
has
estimated
the
amounts
of
net
operating
loss
and
research
and
development
tax
creditcarryforwards
which
will
expire
unutilized
as
a
result
of
its
estimated
annual
limitations
under
Section
382,
and
has
excluded
those
amounts
from
the
carryforwardamounts
disclosed
in
this
paragraph
and
in
the
deferred
tax
assets
and
liabilities
table
included
in
this
footnote.
The
Company
has
concluded
Section
382
studiesthrough
2015
for
Celldex
generated
NOLs.
The
Company
as
a
stand-alone
company
experienced
a
change
in
ownership
in
October
2007.
As
a
result
of
the
ownership
changes
in
October
2007,utilization
of
the
Company's
NOLs
prior
to
October
2007
is
subject
to
an
annual
limitation
of
$4.5
million
on
$28.3
million
of
NOLs
generated
before
that
date.
Asa
result
of
the
ownership
changes
in
June
2009
and
December
2009,
there
is
an
annual
limitation
amount
of
$6.0
million
on
$67.7
million
of
NOLs
generatedbefore
that
date.
As
a
result
of
the
ownership
change
in
December
2013,
there
is
an
annual
limitation
amount
of
$77.0
million
on
$178.7
million
of
NOLsgenerated
before
that
date.
Any
unused
annual
limitation
may
be
carried
over
to
later
years,
and
the
amount
of
the
limitation
may,
under
certain
circumstances,
besubject
to
adjustment
if
the
fair
value
of
the
Company's
net
assets
are
determined
to
be
below
or
in
excess
of
the
tax
basis
of
such
assets
at
the
time
of
theownership
change,
and
such
unrealized
loss
or
gain
is
recognized
during
the
five
year
period
after
the
ownership
change.
However,
the
Company
has
notcompleted
a
382
study
to
assess
whether
a
change
of
control
has
occurred
for
the
NOLs
it
has
acquired
in
its
various
acquisitions,
including
most
recently
Kolltan,or
whether
there
have
been
multiple
changes
of
control
since
inception,
particularly
within
the
ownership
of
acquired
entities
prior
to
their
acquisition
by
theCompany,
due
to
the
significant
complexity
and
cost
associated
with
such
a
study.
If
the
Company
or
its
acquired
entities
have
experienced
additional
changes
ofcontrol,
as
defined
by
Section
382,
at
any
time
since
inception,
utilization
of
the
net
operating
loss
carryforwards
or
research
and
development
tax
creditcarryforwards
could
be
subject
to
additional
annual
limitations
under
Section
382,
which
are
determined
by
first
multiplying
the
value
of
the
Company's
stock
atthe
time
of
the
ownership
change
by
the
applicable
long-term
tax-exempt
rate,
and
then
could
be
subject
to112 Table
of
ContentsCELLDEX
THERAPEUTICS,
INC.NOTES
TO
FINANCIAL
STATEMENTS
(Continued)(14)
INCOME
TAXES
(Continued)additional
adjustments,
as
required.
Any
additional
limitations
may
result
in
expiration
of
a
portion
of
the
net
operating
loss
carryforwards
or
research
anddevelopment
tax
credit
carryforwards
before
utilization.
Further,
until
a
study
is
completed
and
any
additional
limitations
are
known,
no
amounts
are
beingpresented
as
an
uncertain
tax
positions.
The
Company
applies
the
authoritative
guidance
on
account
for
and
disclosure
of
uncertainty
in
income
tax
positions
which
requires
the
Company
todetermine
whether
an
income
tax
position
of
the
Company
is
more
likely
than
not
to
be
sustained
upon
examination,
including
resolution
of
any
related
appeals
orlitigation
processes,
based
on
the
technical
merits
of
the
position.
For
income
tax
positions
meeting
the
more
likely
than
not
threshold,
the
tax
amount
recognizedin
the
financial
statements
is
reduced
to
the
largest
benefit
that
has
a
greater
than
50%
likelihood
of
being
realized
upon
the
ultimate
settlement
with
the
relevanttaxing
authority.
At
December
31,
2016
and
2015,
we
had
no
unrecognized
tax
benefits.
A
full
valuation
allowance
has
been
provided
against
our
deferred
taxassets
and
liabilities
and,
if
an
adjustment
for
unrecognized
tax
benefits
is
required,
this
adjustment
would
be
offset
by
an
adjustment
to
the
valuation
allowance.Thus,
there
would
be
no
impact
to
the
balance
sheet
or
statement
of
operations
if
an
adjustment
were
required.
Massachusetts,
New
Jersey
and
Connecticut
are
the
three
states
in
which
the
Company
primarily
operates
or
has
operated
and
has
income
tax
nexus.
TheCompany
is
not
currently
under
examination
by
these
or
any
other
jurisdictions
for
any
tax
year.
For
federal
and
state
jurisdictions,
all
years
which
generated
netoperating
losses
and/or
tax
credit
carryforwards
remain
subject
to
examination
to
the
extent
those
carryforwards
are
utilized
in
a
subsequent
period.
The
Company
has
evaluated
the
positive
and
negative
evidence
bearing
upon
the
realizability
of
its
net
deferred
tax
assets,
which
are
comprised
principally
ofnet
operating
loss
carryforwards,
capitalized
R&D
expenditures
and
R&D
tax
credit
carryforwards.
The
Company
has
determined
that
it
is
more
likely
than
notthat
it
will
not
recognize
the
benefits
of
federal
and
state
deferred
tax
assets
and,
as
a
result,
a
full
valuation
allowance
was
maintained
at
December
31,
2016against
the
Company's
net
deferred
tax
assets.
The
net
increase
in
the
valuation
allowance
during
the
year
ended
December
31,
2016
primarily
related
to
anincrease
in
deferred
tax
assets
for
research
and
development
expenses
which
have
been
deferred
for
tax
purposes.113 Table
of
ContentsCELLDEX
THERAPEUTICS,
INC.NOTES
TO
FINANCIAL
STATEMENTS
(Continued)(15)
COMMITMENTS
AND
CONTINGENCIES
The
Company
has
facility
and
equipment
leases
that
expire
at
various
dates
through
2020.
Certain
of
these
facility
leases
contain
renewal
options,
earlytermination
provisions,
and
provisions
that
escalate
the
base
rent
payments
and
require
the
Company
to
pay
common
area
maintenance
costs
("CAM")
during
thelease
term.
The
following
obligations
for
base
rent
and
CAM
costs
under
facility
and
other
non-cancelable
operating
leases
as
of
December
31,
2016
do
not
includethe
exercise
of
renewal
terms
or
early
termination
provisions
(in
thousands):
The
Company's
total
rent
and
CAM
expense
for
all
facility
leases
was
$4.8
million,
$2.9
million
and
$2.7
million
for
the
years
ended
December
31,
2016,2015
and
2014,
respectively.(16)
RETIREMENT
SAVINGS
PLAN
The
Company
maintains
a
401(k)
Plan
which
is
available
to
substantially
all
employees.
Under
the
terms
of
the
401(k)
Plan,
participants
may
elect
tocontribute
up
to
60%
of
their
compensation,
or
the
statutory
prescribed
limits.
The
Company
may
make
50%
matching
contributions
on
up
to
4%
of
a
participant'sannual
salary.
Benefit
expense
for
the
401(k)
Plan
was
$0.4
million,
$0.4
million
and
$0.3
million
for
the
years
ended
December
31,
2016,
2015
and
2014,respectively.(17)
KOLLTAN
ACQUISITION
In
connection
with
the
Kolltan
Acquisition,
effective
November
29,
2016,
the
Company
issued
18,257,996
shares
of
common
stock
of
the
Company
inexchange
for
all
of
the
share
and
debt
interests
in
Kolltan.
Following
closing,
certain
officers
of
Kolltan
will
receive
an
aggregate
of
437,901
shares
of
Celldex'scommon
stock
in
lieu
of
cash
severance
obligations,
less
tax
withholdings.
In
December
2016,
the
Company
issued
111,111
shares
of
Celldex's
common
stock
aspartial
payment
of
this
obligation.
In
addition,
in
the
event
that
certain
specified
preclinical
and
clinical
development
milestones
related
to
Kolltan's
developmentprograms
and/or
Celldex's
development
programs
and
certain
commercial
milestones
related
to
Kolltan's
drug
candidates
are
achieved,
Celldex
will
be
required
topay
Kolltan's
stockholders
milestone
payments
of
up
to
$172.5
million,
which
milestone
payments
may
be
made,
at
Celldex's
sole
election,
in
cash,
in
shares
ofCelldex's
common
stock
or
a
combination
of
both,
subject
to
NASDAQ
listing
requirements
and
provisions
of
the
Merger
Agreement.
The
Company
acquired
Kolltan
to
gain
access
to
Kolltan's
programs
including:
(i)
CLDX-0158
(formerly
KTN0158)
which
is
currently
in
a
Phase
1
doseescalation
study
in
patient
with
refractory
gastrointestinal
stromal
tumors
(GIST);
(ii)
CLDX-3379
(formerly
KTN3379)
which
recently
completed
a
Phase
1bstudy
with
combination
cohorts
where
meaningful
responses
and
stable
disease
were
observed
in
cetuximab
(Erbitux®)
refractory
patients
in
patients
with
headand
neck
squamous
cell
carcinoma
and
in
BRAF-mutant
non-small
cell
lung
cancer
(NSCLC);
and
(iii)
a
multi-faceted
TAM1142017
$4,319
2018
4,782
2019
4,381
2020
2,348
2021
—
Thereafter
—
Total
minimum
lease
payments
$15,830
Table
of
ContentsCELLDEX
THERAPEUTICS,
INC.NOTES
TO
FINANCIAL
STATEMENTS
(Continued)(17)
KOLLTAN
ACQUISITION
(Continued)program,
a
broad
antibody
discovery
effort
underway
to
generate
antibodies
that
modulate
the
TAM
family
of
RTKs,
comprised
of
Tyro3,
AXL
and
MerTK,which
are
expressed
on
tumor-infiltrating
macrophages,
dendritic
cells
and
some
tumors.
The
transaction
is
being
accounted
for
as
a
business
combination
with
Celldex
treated
as
the
accounting
acquirer.
All
of
the
assets
acquired
and
liabilitiesassumed
in
the
transaction
are
recognized
at
their
acquisition-date
fair
values,
while
transaction
costs
associated
with
the
transaction
are
expensed
as
incurred.Purchase Price
The
purchase
price
for
Kolltan
is
based
on
the
acquisition-date
fair
value
of
the
consideration
transferred,
which
was
calculated
based
on
the
closing
price
ofthe
Company's
common
stock
of
$4.02
per
share
on
November
29,
2016.
The
acquisition-date
fair
value
of
the
consideration
transferred
consisted
of
the
following(in
thousands):
The
contingent
consideration
relates
to
the
achievement
of
certain
regulatory
and
sales
milestones
as
described
in
the
agreement.
The
estimate
of
fair
value
ofcontingent
consideration
was
$44.2
million
at
the
acquisition
date
and
at
December
31,
2016,
which
was
recorded
as
a
noncurrent
liability.
The
Companydetermined
the
fair
value
of
these
obligations
to
pay
additional
milestone
payments
using
various
estimates,
including
probabilities
of
success,
discount
rates
andamount
of
time
until
the
conditions
of
the
milestone
payments
are
met.
This
fair
value
measurement
is
based
on
significant
inputs
not
observable
in
the
market,representing
a
Level
3
measurement
within
the
fair
value
hierarchy.
The
resulting
probability-weighted
cash
flows
were
discounted
using
a
cost
of
debt
rateranging
from
10-11%
for
the
milestones.
The
range
of
estimated
milestone
payments
is
from
zero,
if
no
milestones
are
achieved,
to
$172.5
million
if
all
milestonesare
met.
In
the
future,
if
the
estimate
of
the
fair
value
of
the
contingent
consideration
changes,
the
changes
in
fair
value
will
be
recognized
in
operating
earnings.Changes
in
fair
values
reflect
new
information
about
the
probability
and
timing
of
meeting
the
conditions
of
the
milestone
payments.
In
the
absence
of
newinformation,
changes
in
fair
value
will
only
reflect
the
interest
component
of
contingent
consideration
related
to
the
passage
of
time
as
development
workprogresses
towards
the
achievement
of
the
milestones.Allocations of Assets and Liabilities
The
Company
has
allocated
the
consideration
transferred
for
Kolltan
to
net
tangible
assets,
intangible
assets,
and
goodwill.
The
difference
between
theaggregate
consideration
transferred
and
the
fair
value
of
assets
acquired
and
liabilities
assumed
was
allocated
to
goodwill.
This
goodwill
relates
to
the
potentialsynergies
from
the
Kolltan
Acquisition
and
a
deferred
tax
liability
related
to
acquired
IPR&D
intangible
assets.
None
of
the
goodwill
is
expected
to
be
deductiblefor
income
tax
purposes.115Fair
value
of
common
stock
issued
for
upfront
payment
$73,397
Fair
value
of
contingent
consideration
44,200
Kolltan
transaction
expenses
paid
in
cash
by
the
Company
3,768
Total
consideration
transferred
$121,365
Table
of
ContentsCELLDEX
THERAPEUTICS,
INC.NOTES
TO
FINANCIAL
STATEMENTS
(Continued)(17)
KOLLTAN
ACQUISITION
(Continued)The
following
table
summarizes
the
fair
values
of
the
assets
acquired
and
liabilities
assumed
at
the
acquisition
date
(in
thousands):
The
purchase
price
allocation
has
been
prepared
on
a
preliminary
basis
and
is
subject
to
change
as
additional
information
becomes
available
concerning
thefair
value
and
tax
basis
of
the
acquired
assets
and
liabilities.
Any
adjustments
to
the
purchase
price
allocation
will
be
made
as
soon
as
practicable
but
no
later
thanone
year
from
the
acquisition
date.
The
estimated
fair
value
attributed
to
IPR&D
intangible
assets
represents
an
estimate
of
the
fair
value
of
purchased
in-process
technology
for
Kolltan'sresearch
programs
that,
as
of
November
29,
2016,
had
not
reached
technological
feasibility
and
have
no
alternative
future
use.
Only
those
research
programs
thathad
advanced
to
a
stage
of
development
where
the
Company
believed
reasonable
net
future
cash
flow
forecasts
could
be
prepared
and
a
reasonable
likelihood
oftechnical
success
existed
were
included
in
the
estimated
fair
value.
Accordingly,
the
IPR&D
programs
primarily
represent
the
estimated
fair
value
of
$40.0
million,$3.5
million
and
$18.0
million
for
the
CDX-0158,
CDX-3379
and
TAM
programs,
respectively.
The
estimated
fair
value
of
the
IPR&D
programs
was
determinedbased
on
estimates
of
expected
future
net
cash
flows.
These
expected
future
net
cash
flows
included
estimates
for
revenue
and
associated
costs
for
the
IPR&Dprograms
based
on
(i)
relevant
industry
factors,
(ii)
current
and
expected
trends
in
the
product
development
life
cycle,
(iii)
the
ability
to
engage
a
strategic
partner,(iv)
the
ability
to
obtain
regulatory
approval,
and
(v)
the
ability
to
manufacture
and
commercialize
the
products.
The
probability-adjusted
future
net
cash
flowswhich
reflect
the
different
stages
of
development
of
each
program
are
then
present
valued
utilizing
an
estimate
of
the
appropriate
discount
rate
which
is
consistentwith
the
uncertainties
of
the
cash
flows
utilized.
The
expected
future
net
cash
flows
for
the
CDX-0158,
CDX-3379
and
TAM
programs
were
based
on
the
expectation
that
a
Biologics
License
Application("BLA")
would
be
filed
with
the
FDA
no
earlier
than
the
end
of
2023,
2024,
and
2028,
respectively.
The
Company
expects
the
commercial
launch
as
promptly
ascommercially
practicable
after
necessary
regulatory
approvals
are
received.
The
estimated
development
costs
included
in
the
expected
future
net
cash
flows
wasapproximately
$132
million.
These
assumptions
require
various
levels
of
in-house
and
external
testing,
clinical
trials
and
approvals
from
the
FDA
or
comparableforeign
regulatory
authorities
before
the
CDX-0158,
CDX-3379
and
TAM
programs
could
be
commercialized
in
the
U.S.
or
other
territories.
Drug
developmentinvolves
a
high
degree
of
risk
and
most
products
that
make
it
into
clinical
development
do
not
receive
marketing
approval.
Numerous
risks
and
uncertainties
candelay
or
stop
clinical
development
of
a
pharmaceutical
product
prior
to
the
receipt
of
marketing
approval,
including,
but
not
limited
to,
results
from
clinical
trialsthat
do
not
support
continuing
development,
issues
related
to
manufacturing
or
intellectual
property
protection,
and
other
events
or
circumstances
that
cause116Cash
and
cash
equivalents
$8,160
Other
current
and
long-term
assets
799
Property
and
Equipment,
Net
2,072
In-process
research
and
development
(IPR&D)
61,690
Goodwill
82,011
Deferred
tax
liabilities,
net
(23,393)Other
assumed
liabilities
(9,974)Total
$121,365
Table
of
ContentsCELLDEX
THERAPEUTICS,
INC.NOTES
TO
FINANCIAL
STATEMENTS
(Continued)(17)
KOLLTAN
ACQUISITION
(Continued)unanticipated
delays,
technical
problems
or
other
difficulties.
Given
these
risks
and
uncertainties,
there
can
be
no
assurance
that
the
development
of
the
CDX-0158,CDX-3379
and
TAM
programs
will
be
successfully
completed.
If
the
development
of
the
CDX-0158,
CDX-3379
and
TAM
programs
are
not
successful,
in
wholeor
in
part,
or
completed
in
a
timely
manner,
the
Company
may
not
realize
the
expected
financial
benefits
from
the
development
of
the
CDX-0158,
CDX-3379
andTAM
programs
or
the
transaction
as
a
whole.
The
deferred
tax
liability,
net
of
$23.4
million
primarily
relates
to
the
temporary
differences
associated
with
the
IPR&D
intangible
assets,
which
are
notdeductible
for
tax
purposes.Acquisition-Related Expenses, Including Severance
The
Company
incurred
$0.7
million
in
acquisition-related
expenses
in
the
consolidated
statements
of
operations
for
the
year
ended
December
31,
2016.
Thesecosts
include
fees
for
legal,
accounting,
due
diligence,
tax,
valuation,
printing
and
other
various
services
necessary
to
complete
the
transaction.
In
addition,
theCompany
recorded
$2.4
million
and
$0.7
million
in
Kolltan
severance
expenses
to
general
and
administrative
and
research
and
development,
respectively,
in
theconsolidated
statements
of
operations
for
the
year
ended
December
31,
2016
since
the
severance
was
determined
to
be
for
the
benefit
of
the
Company.Pro Forma Financial Information
The
operating
results
of
Kolltan
and
pro
forma
adjustments
including
severance
expense
and
transaction
expenses
of
$3.1
million
and
$0.7
million,respectively,
have
been
included
in
the
accompanying
consolidated
financial
statements
from
November
29,
2016
to
December
31,
2016.
Kolltan
had
no
revenuesfrom
November
29,
2016
through
December
31,
2016.
The
following
unaudited
pro
forma
financial
summary
is
presented
as
if
the
operations
of
the
Company
andKolltan
were
combined
as
of
January
1,
2015.
The
unaudited
pro
forma
combined
results
are
not
necessarily
indicative
of
the
actual
results
that
would
haveoccurred
had
the
acquisition
been
consummated
at
that
date
or
of
the
future
operations
of
the
combined
entities.(18)
RESTRUCTURING
EXPENSE
In
December
2016,
the
Company
decided
not
to
occupy
the
11,500
square
feet
of
expansion
space
("Needham
Expansion")
at
its
Needham,
Massachusettsfacility.
The
Company
agreed
to
lease
the
Needham
Expansion
in
August
2015
and
the
term
of
the
lease
expires
in
July
2020.
The
Company
is
actively
trying
tosublease
the
lease
obligation.
The
Company
recorded
restructuring
expenses
of
$1.2
million
to
general
and
administrative
expense
for
the
twelve
months
endedDecember
31,
2016.117
Unaudited
Years
Ended
December
31,
2016
2015
(In
thousands)
Revenue
$6,786
$5,480
Net
loss
$(146,905)$(157,690)Basic
and
Diluted
Net
Loss
Per
Common
Share
$(1.24)$(1.37) Table
of
ContentsCELLDEX
THERAPEUTICS,
INC.NOTES
TO
FINANCIAL
STATEMENTS
(Continued)(18)
RESTRUCTURING
EXPENSE
(Continued)
The
activity
related
to
restructuring
for
the
twelve
months
ended
December
31,
2016,
is
presented
below
(in
thousands):
In
accordance
with
U.S.
GAAP,
the
Company
recorded
an
initial
estimate,
at
fair
value,
in
the
fourth
quarter
of
2016.
The
Company
will
review
itsassumptions
and
estimates
quarterly
and
updates
the
liability
as
changes
in
circumstances
require.
The
liability
recorded
with
respect
to
the
potential
leaserestructuring
was
calculated
using
probability
weighted
discounted
cash
flows
based
on
the
Company's
assumptions
and
estimates
regarding
the
possible
outcomesof
the
potential
time
to
sublease
the
space
and
sublease
rental
rates.
The
Company
used
a
credit-adjusted
risk-free
rate
of
approximately
10%
to
discount
theestimated
cash
flows.
The
expense
and
liability
related
to
the
potential
lease
restructuring
requires
the
Company
to
make
significant
estimates
and
assumptions.
The
Company
willreview
the
estimates
and
assumptions
on
at
least
a
quarterly
basis,
until
the
outcome
is
finalized,
and
make
whatever
modifications
management
believes
to
benecessary,
based
on
the
Company's
best
judgment,
to
reflect
any
changed
circumstances.
It
is
possible
that
such
estimates
could
change
in
the
future
resulting
inadditional
adjustments.
Because
the
Company's
estimate
of
the
liability
related
to
the
potential
lease
restructuring
includes
the
application
of
a
discount
rate
toreflect
the
time
value
of
money,
the
estimate
of
the
liability
will
change
as
a
result
of
time
passing.
Any
such
changes
to
the
Company's
estimate
of
the
liability
arerecorded
as
additional
restructuring
and
other
expense.(19)
SELECTED
QUARTERLY
FINANCIAL
DATA
(Unaudited)
118
Charge
for
the
Twelve
Months
Ended
December
31,
2016
Cash
Payments
in
2016
Accrual
as
of
December
31,
2016
(In
thousands)
Needham
Expansion
$1,154
$—
$1,154
Short-term
portion
of
lease
accrual
378
Long-term
portion
of
lease
accrual
$776
2015
Q1
2015
Q2
2015
Q3
2015
Q4
2015
(In
thousands,
except
per
share
amounts)
Total
revenue
$486
$2,178
$1,026
$1,790
Net
loss
(30,174)
(32,359)
(31,980)
(32,684)Basic
and
diluted
net
loss
per
common
share
(0.33)
(0.33)
(0.32)
(0.33)2016
Q1
2016
Q2
2016
Q3
2016
Q4
2016
(In
thousands,
except
per
share
amounts)
Total
revenue
$1,303
$1,389
$2,220
$1,874
Net
loss
(34,673)
(31,952)
(29,598)
(32,307)Basic
and
diluted
net
loss
per
common
share
(0.35)
(0.32)
(0.29)
(0.30) Table
of
ContentsItem
9.
CHANGES
IN
AND
DISAGREEMENTS
WITH
ACCOUNTANTS
ON
ACCOUNTING
AND
FINANCIAL
DISCLOSURE
None.Item
9A.
CONTROLS
AND
PROCEDURES
Evaluation of Disclosure Controls and Procedures
As
of
December
31,
2016,
we
evaluated,
with
the
participation
of
our
Chief
Executive
Officer
and
Chief
Financial
Officer,
the
effectiveness
of
our
disclosurecontrols
and
procedures
(as
defined
in
Rules
13a-15(e)
and
15d-15(e)
under
the
Securities
Exchange
Act
of
1934,
as
amended
(the
"Exchange
Act")).
Based
on
thatevaluation,
our
Chief
Executive
Officer
and
Chief
Financial
Officer
concluded
that
our
disclosure
controls
and
procedures
were
effective
at
the
reasonableassurance
level
as
of
December
31,
2016.
Our
disclosure
controls
and
procedures
are
designed
to
provide
reasonable
assurance
that
information
required
to
bedisclosed
in
the
reports
that
we
file
or
submit
under
the
Exchange
Act
is
recorded,
processed,
summarized
and
reported
within
time
periods
specified
by
the
SEC'srules
and
forms,
and
that
such
information
is
accumulated
and
communicated
to
our
management,
including
our
Chief
Executive
Officer
and
Chief
FinancialOfficer,
as
appropriate
to
allow
timely
decisions
regarding
required
disclosure.Management's Annual Report on Internal Control Over Financial Reporting
Our
management
is
responsible
for
establishing
and
maintaining
adequate
internal
control
over
our
financial
reporting.
Internal
control
over
financialreporting
is
defined
in
Rules
13a-15(f)
and
15d-15(f)
under
the
Exchange
Act
as
the
process
designed
by,
or
under
the
supervision
of,
our
Chief
Executive
Officerand
Chief
Financial
Officer,
and
effected
by
our
board
of
directors,
management
and
other
personnel,
to
provide
reasonable
assurance
regarding
the
reliability
ofour
financial
reporting
and
the
preparation
of
our
financial
statements
for
external
purposes
in
accordance
with
generally
accepted
accounting
principles,
andincludes
those
policies
and
procedures
that:•pertain
to
the
maintenance
of
records
that,
in
reasonable
detail,
accurately
and
fairly
reflect
the
transactions
and
dispositions
of
assets;
•provide
reasonable
assurance
that
transactions
are
recorded
as
necessary
to
permit
preparation
of
financial
statements
in
accordance
with
generallyaccepted
accounting
principles,
and
that
receipts
and
expenditures
are
being
made
only
in
accordance
with
the
authorizations
of
management
anddirectors;
and
•provide
reasonable
assurance
regarding
the
prevention
or
timely
detection
of
unauthorized
acquisition,
use
or
disposition
of
assets
that
could
have
amaterial
effect
on
our
financial
statements.
Because
of
its
inherent
limitations,
internal
control
over
financial
reporting
may
not
prevent
or
detect
misstatements.
Projections
of
any
evaluation
ofeffectiveness
to
future
periods
are
subject
to
the
risk
that
controls
may
become
inadequate
because
of
changes
in
conditions,
or
that
the
degree
of
compliance
withthe
policies
or
procedures
may
deteriorate.
Under
the
supervision
and
with
the
participation
of
our
management,
including
our
Chief
Executive
Officer
and
Chief
Financial
Officer,
we
conducted
anevaluation
of
the
effectiveness
of
our
internal
control
over
financial
reporting
based
on
the
framework
provided
in
Internal Control—Integrated Framework (2013)issued
by
the
Committee
of
Sponsoring
Organizations
of
the
Treadway
Commission.
Based
on
this
evaluation,
our
management
concluded
that
our
internal
controlover
financial
reporting
was
effective
as
of
December
31,
2016.119 Table
of
Contents
The
effectiveness
of
our
internal
control
over
financial
reporting
as
of
December
31,
2016
has
been
audited
by
PricewaterhouseCoopers
LLP,
an
independentregistered
public
accounting
firm,
as
stated
in
their
report,
which
is
included
herein.Changes in Internal Control Over Financial Reporting
There
were
no
changes
in
our
internal
control
over
financial
reporting
during
the
three
months
ended
December
31,
2016
that
have
materially
affected,
or
arereasonably
likely
to
materially
affect,
our
internal
control
over
financial
reporting.Item
9B.
OTHER
INFORMATION
None.PART
III
Item
10.
DIRECTORS,
EXECUTIVE
OFFICERS
AND
CORPORATE
GOVERNANCE
The
information
required
by
this
Item
10
will
be
included
in
the
definitive
Proxy
Statement
for
our
2017
Annual
Meeting
of
Stockholders,
or
the
2017
ProxyStatement,
under
"Information
Regarding
the
Current
Directors
and
Executive
Officers
of
Celldex
Therapeutic,
Inc.,"
"Section
16(a)
Beneficial
OwnershipReporting
Compliance,"
"Code
of
Business
Conduct
and
Ethics"
and
"The
Board
of
Directors
and
Its
Committees"
and
is
incorporated
herein
by
reference.
If
the2017
Proxy
Statement
is
not
filed
with
the
SEC
within
120
days
after
the
end
of
our
most
recent
fiscal
year,
we
will
provide
such
information
by
means
of
anamendment
to
this
Annual
Report
on
Form
10-K.Item
11.
EXECUTIVE
COMPENSATION
The
information
required
by
this
Item
11
will
be
included
in
the
2017
Proxy
Statement
under
"Executive
Compensation,"
and
"Compensation
CommitteeInterlocks
and
Insider
Participation,"
and
is
incorporated
herein
by
reference.
If
the
2017
Proxy
Statement
is
not
filed
with
the
SEC
within
120
days
after
the
end
ofour
most
recent
fiscal
year,
we
will
provide
such
information
by
means
of
an
amendment
to
this
Annual
Report
on
Form
10-K.Item
12.
SECURITY
OWNERSHIP
OF
CERTAIN
BENEFICIAL
OWNERS
AND
MANAGEMENT
AND
RELATED
STOCKHOLDER
MATTERS
The
information
required
by
this
Item
12
will
be
included
in
the
2017
Proxy
Statement
under
"Security
Ownership
of
Certain
Beneficial
Owners
andManagement"
and
"Equity
Compensation
Plan
Information"
and
is
incorporated
herein
by
reference.
If
the
2017
Proxy
Statement
is
not
filed
with
the
SEC
within120
days
after
the
end
of
our
most
recent
fiscal
year,
we
will
provide
such
information
by
means
of
an
amendment
to
this
Annual
Report
on
Form
10-K.Item
13.
CERTAIN
RELATIONSHIPS
AND
RELATED
TRANSACTIONS,
AND
DIRECTOR
INDEPENDENCE
The
information
required
by
this
Item
13
will
be
included
in
the
2017
Proxy
Statement
under
"Election
of
Directors"
and
"Approval
of
Related
PersonTransactions
and
Transactions
with
Related
Persons"
and
is
incorporated
herein
by
reference.
If
the
2017
Proxy
Statement
is
not
filed
with
the
SEC
within120
days
after
the
end
of
our
most
recent
fiscal
year,
we
will
provide
such
information
by
means
of
an
amendment
to
this
Annual
Report
on
Form
10-K.120 Table
of
ContentsItem
14.
PRINCIPAL
ACCOUNTING
FEES
AND
SERVICES
The
information
required
by
this
Item
14
will
be
included
in
the
2017
Proxy
Statement
under
"Independent
Registered
Public
Accounting
Firm"
and
isincorporated
herein
by
reference.
If
the
2017
Proxy
Statement
is
not
filed
with
the
SEC
within
120
days
after
the
end
of
our
most
recent
fiscal
year,
we
will
providesuch
information
by
means
of
an
amendment
to
this
Annual
Report
on
Form
10-K.121 Table
of
ContentsPART
IV
Item
15.
EXHIBITS,
FINANCIAL
STATEMENT
SCHEDULES
(A)The
following
documents
are
filed
as
part
of
this
Form
10-K:
(1)Financial Statements:
The
Financial
Statements
and
Supplementary
Data
are
included
in
Part
II
Item
8
of
this
report.(2)Financial Statement Schedules:
Schedules
are
omitted
since
the
required
information
is
not
applicable
or
is
not
present
in
amounts
sufficient
to
require
submission
of
the
schedule,
or
becausethe
information
required
is
included
in
the
Financial
Statements
or
Notes
thereto.(3)Exhibits:122
Incorporated
by
Reference
toNo.
Description
Form
and
SEC
File
No.
Exhibit
No.
SEC
Filing
Date
Plan of Acquisition, Reorganization, Arrangement, Liquidation or Succession
2.1
Agreement
and
Plan
of
Merger,
dated
as
of
October
19,
2007,
by
andamong
AVANT,
Celldex
Merger
Corporation,
and
CelldexTherapeutics,
Inc.
8-K
(000-15006)
2.1
10/22/07
2.2
Agreement
and
Plan
of
Merger,
dated
as
of
May
28,
2009,
by
and
amongCelldex
Therapeutics,
Inc.,
CuraGen
Corporation
and
Cottrell
MergerSub,
Inc.
8-K
(000-15006)
2.1
5/29/09
2.3
Agreement
and
Plan
of
Merger,
dated
as
of
November
1,
2016,
by
andamong
Kolltan
Pharmaceuticals,
Inc.,
Celldex
Therapeutics,
Inc.,Connemara
Merger
Sub
1
Inc.
and
Connemara
Merger
Sub
2
LLC.
8-K
(000-15006)
2.1
11/1/16
Articles of Incorporation and By-Laws
3.1
Third
Restated
Certificate
of
Incorporation
S-4
(333-59215)
3.1
7/16/98
3.2
Certificate
of
Amendment
of
Third
Restated
Certificate
of
Incorporation
S-4
(333-59215)
3.1
7/16/98
3.3
Second
Certificate
of
Amendment
of
Third
Restated
Certificate
ofIncorporation
S-4
(333-59215)
3.2
7/16/98
3.4
Third
Certificate
of
Amendment
of
Third
Restated
Certificate
ofIncorporation
10-Q
(000-15006)
3.1
5/10/02
3.5
Fourth
Certificate
of
Amendment
of
Third
Restated
Certificate
ofIncorporation
8-K
(000-15006)
3.1
3/11/08
3.6
Fifth
Certificate
of
Amendment
of
Third
Restated
Certificate
ofIncorporation
8-K
(000-15006)
3.2
3/11/08
3.7
Sixth
Certificate
of
Amendment
of
Third
Restated
Certificate
ofIncorporation
10-Q
(000-15006)
3.7
11/10/08 Table
of
Contents123
Incorporated
by
Reference
toNo.
Description
Form
and
SEC
File
No.
Exhibit
No.
SEC
Filing
Date
3.8
Amended
and
Restated
By-Laws,
dated
April
7,
2014
8-K
(000-15006)
3.1
4/8/14
Instruments Defining the Rights of Security Holders
4.1
Specimen
of
Common
Stock
Certificate
10-K
(000-15006)
4.1
2/24/15
4.2
Certificate
of
Designations,
Preferences
and
Rights
of
a
Series
ofPreferred
Stock
classifying
and
designating
the
Series
C-1
JuniorParticipating
Cumulative
Preferred
Stock
8-A
(000-15006)
3.1
11/8/04
Material Contracts—Leases
10.1
Commercial
Lease
Agreement
of
May
1,
1996
between
the
Company
andFourth
Avenue
Ventures
Limited
Partnership
10-Q/A
(000-15006)
10.11
8/23/96
10.2
Extension
of
Lease
Agreement
of
May
1,
1997
between
the
Company
andDIV
Needham
53
LLC
(successor
in
interest
to
Fourth
Avenue
VenturesLimited
Partnership)
dated
as
of
August
23,
2001
10-K
(000-15006)
10.9
3/27/02
10.3
First
Amendment
to
Lease
by
and
between
the
Company
and
DIVNeedham
115
LLC
(successor
in
interest
to
Fourth
Avenue
VenturesLimited
Partnership)
dated
November
29,
2005
10-K
(000-15006)
10.40
3/16/06
10.4
Second
Amendment
to
Lease
by
and
between
the
Company
and
DIVNeedham
115
LLC
dated
as
of
August
1,
2015
10-K/A
(000-15006)
10.4
2/25/16
*10.5
Lease
Agreement,
by
and
between
the
Company
and
the
MassachusettsDevelopment
Finance
Agency,
dated
as
of
December
22,
2003
10-Q
(000-15006)
10.1
4/30/04
10.6
First
Amendment
to
Lease
between
Massachusetts
Development
FinanceAgency
and
the
Company
dated
March
17,
2005
10-K/A
(000-15006)
10.6
12/23/10
10.7
Second
Amendment
to
Lease
by
and
between
the
Company
and
theMassachusetts
Development
Finance
Agency
dated
as
of
November
4,2005
10-K
(000-15006)
10.41
3/16/06
10.8
Third
Amendment
to
Lease
between
Massachusetts
Development
FinanceAgency
and
the
Company
dated
December
20,
2006
10-K/A
(000-15006)
10.7
12/23/10
10.9
Fifth
Amendment
to
Lease
between
Massachusetts
Development
FinanceAgency
and
the
Company
dated
October
3,
2008
10-K/A
(000-15006)
10.8
12/23/10 Table
of
Contents124
Incorporated
by
Reference
toNo.
Description
Form
and
SEC
File
No.
Exhibit
No.
SEC
Filing
Date
10.10
Sixth
Amendment
to
Lease
between
Massachusetts
Development
FinanceAgency
and
the
Company
dated
August
20,
2009
10-K/A
(000-15006)
10.9
12/23/10
10.11
Seventh
Amendment
to
Lease
by
and
between
the
Company
and
theMassachusetts
Development
Finance
Agency
dated
as
of
June
22,
2010
10-Q
(000-15006)
10.1
8/5/10
10.12
Eighth
Amendment
to
Lease
by
and
between
the
Company
and
theMassachusetts
Development
Finance
Agency
dated
as
of
November
1,2015
10-K/A
(000-15006)
10.12
2/25/16
10.13
Lease
Agreement
dated
as
of
May
1,
2013
by
and
between
CrownPerryville,
LLC
and
the
Company.
10-Q
(000-15006)
10.1
5/03/13
10.14
First
Amendment
to
Lease
between
Company
and
Crown
Perryville,
LLCdated
as
of
June
17,
2015
10-Q
(000-15006)
10.2
8/10/15
Material Contracts—License, Collaboration, Supply and Distribution Agreements
*10.15
License
Agreement
dated
as
of
November
1,
2005
by
and
between
TheRockefeller
University
and
the
Company
S-4
(333-148291)
10.2
1/18/08
*10.16
Assignment
and
License
Agreement,
as
amended,
dated
April
6,
2004
byand
among
Medarex,
Inc.,
GenPharm
International,
Inc.
and
the
Company
S-4
(333-148291)
10.4
1/18/08
*10.17
Research
and
Commercialization
Agreement,
as
amended,
dated
as
ofApril
6,
2004
by
and
among
Medarex,
Inc.,
GenPharm
International,
Inc.and
the
Company
S-4
(333-148291)
10.5
1/18/08
*10.18
Exclusive
Patent
and
Know-How
License
Agreement
dated
as
ofNovember
5,
2008
between
the
Company
and
the
University
ofSouthampton
10-K
(000-15006)
10.47
3/2/09
*10.19
License
and
Assignment
Agreement,
between
Amgen
Inc.
and
theCompany
dated
March
16,
2009
10-K/A
(000-15006)
10.1
12/23/10
*10.20
Collaboration
Agreement
dated
June
18,
2004
between
Seattle
Geneticsand
CuraGen
10-K
(000-15006)
10.27
3/12/10
*10.21
Second
Restated
Collaboration
Agreement
dated
April
12,
2004
andamended
October
19,
2004
between
Abgenix
Inc.
and
CuraGen
10-K
(000-15006)
10.28
3/12/10
10.22
Amgen
Letter
Agreement,
by
and
between
CuraGen
and
AmgenFremont,
Inc.
dated
May
2,
2009
10-K
(000-15006)
10.29
3/12/10
*10.23
Transfer
and
Termination
Agreement,
dated
as
of
April
21,
2008
by
andbetween
TopoTarget
A/S
and
CuraGen
10-K
(000-15006)
10.30
3/12/10
*10.24
License
Agreement
between
Medarex
and
Company
dated
September
17,2010
10-Q/A
(000-15006)
10.3
12/23/10 Table
of
Contents125
Incorporated
by
Reference
toNo.
Description
Form
and
SEC
File
No.
Exhibit
No.
SEC
Filing
Date
10.25
Master
Services
Agreement
dated
March
29,
2010
by
and
between
theCompany
and
Prologue
Research
International,
Inc.
(Prologue)
10-Q
(000-15006)
10.2
11/3/11
10.26
Amendment
to
Master
Services
Agreement
dated
July
6,
2011
by
andbetween
the
Company
and
Novella
Clinical
Inc.
(formerly
known
asPrologue)
10-Q
(000-15006)
10.3
11/3/11
10.27
Master
Services
Agreement
dated
May
6,
2013
by
and
between
theCompany
and
PPD
Development,
LLC
10-Q
(000-15006)
10.3
8/6/13
*10.28
Third
Amended
and
Restated
Supply
Agreement
dated
October
15,
2014between
the
Company
and
Biosyn
Corporation
10-Q
(000-15006)
10.1
11/5/14
10.29
Subscription
Agreement
dated
as
of
October
15,
2014
by
and
between
theCompany
and
Biosyn
Corporation
8-K
(000-15006)
10.1
10/20/14
Material Contracts—Stock Purchase, Financing and Credit Agreements
10.30
Sales
Agreement,
dated
May
19,
2016,
by
and
between
CelldexTherapeutics,
Inc.
and
Cantor
Fitzgerald
&
Co.
8-K
(000-15006)
1.1
5/19/16
Material Contracts—Management Contracts and Compensatory Plans
†10.31
2008
Stock
Option
and
Incentive
Plan,
as
amended
and
restated
8-K
(000-15006)
10.1
6/11/15
†10.32
2004
Employee
Stock
Purchase
Plan,
as
amended
and
restated
8-K
(000-15006)
10.1
6/13/13
†10.33
Employment
Agreement,
dated
as
of
January
1,
2013,
by
and
between
theCompany
and
Anthony
S.
Marucci
8-K
(000-15006)
10.1
12/21/12
†10.34
Employment
Agreement,
dated
as
of
January
1,
2013,
by
and
between
theCompany
and
Avery
W.
Catlin
8-K
(000-15006)
10.2
12/21/12
†10.35
Employment
Agreement,
dated
as
of
January
1,
2013,
by
and
between
theCompany
and
Thomas
Davis,
MD
8-K
(000-15006)
10.3
12/21/12
†10.36
Employment
Agreement,
dated
as
of
January
1,
2013,
by
and
between
theCompany
and
Tibor
Keler,
Ph.D.
8-K
(000-15006)
10.4
12/21/12
†10.37
Employment
Agreement,
dated
as
of
January
1,
2013,
by
and
between
theCompany
and
Ronald
A.
Pepin,
Ph.D.
8-K
(000-15006)
10.5
12/21/12
†10.38
Employment
Agreement,
dated
as
of
July
1,
2015,
by
and
between
theCompany
and
Richard
Wright,
Ph.D.
10-Q
(000-15006)
10.3
8/10/15
†10.39
Amended
and
Restated
Employment
Agreement,
dated
August
10,
2016,by
and
between
the
Company
and
Elizabeth
Crowley
8-K
(000-15006)
10.1
8/11/16 Table
of
ContentsItem
16.
FORM
10-K
SUMMARY
None.126
Incorporated
by
Reference
toNo.
Description
Form
and
SEC
File
No.
Exhibit
No.
SEC
Filing
Date
†10.40
Employment
Agreement,
dated
November
29,
2016,
by
and
between
theCompany
and
Theresa
LaVallee,
Ph.D.
8-K
(000-15006)
10.1
12/5/16
†10.41
Form
of
Stock
Option
Agreement
8-K
(000-15006)
10.1
1/25/10
†10.42
Form
of
Restricted
Stock
Award
10-K
(000-15006)
10.42
3/12/10
21.1
Subsidiaries
of
Celldex
Therapeutics,
Inc.
Filed
herewith
23.1
Consent
of
PricewaterhouseCoopers
LLP,
an
Independent
RegisteredPublic
Accounting
Firm
Filed
herewith
31.1
Certification
of
President
and
Chief
Executive
Officer
Filed
herewith
31.2
Certification
of
Senior
Vice
President
and
Chief
Financial
Officer
Filed
herewith
32
Section
1350
Certifications
Furnished
herewith
101
XBRL
Instance
Document
Filed
herewith
101
XBRL
Taxonomy
Extension
Schema
Document
Filed
herewith
101
XBRL
Taxonomy
Extension
Calculation
Linkbase
Document
Filed
herewith
101
XBRL
Taxonomy
Extension
Definition
Linkbase
Document
Filed
herewith
101
XBRL
Taxonomy
Extension
Label
Linkbase
Document
Filed
herewith
101
XBRL
Taxonomy
Extension
Presentation
Linkbase
Document
Filed
herewith
*Confidential
treatment
has
been
requested
for
certain
provisions
of
this
Exhibit
pursuant
to
Rule
24b-2
promulgated
under
the
SecuritiesExchange
Act
of
1934,
as
amended.
†Indicates
a
management
contract
or
compensation
plan,
contract
or
arrangement. Table
of
ContentsSIGNATURES
Pursuant
to
the
requirements
of
Section
13
or
15(d)
of
the
Securities
Exchange
Act
of
1934,
the
registrant
has
duly
caused
this
report
to
be
signed
on
its
behalfby
the
undersigned,
thereunto
duly
authorized.
Pursuant
to
the
requirements
of
the
Securities
Exchange
Act
of
1934,
this
report
has
been
signed
by
the
following
persons
on
behalf
of
the
registrant
and
in
thecapacities
and
on
the
dates
indicated.127
CELLDEX
THERAPEUTICS,
INC.
By:
/s/
ANTHONY
S.
MARUCCI
Date
Anthony
S.
MarucciMarch
14,
2017
President and Chief Executive OfficerSignature
Title
Date
/s/
ANTHONY
S.
MARUCCI
Anthony
S.
Marucci
President,
Chief
Executive
Officer,
and
Director
(Principal
Executive
Officer)
March
14,
2017/s/
AVERY
W.
CATLIN
Avery
W.
Catlin
Senior
Vice
President,
Chief
Financial
Officer
and
Treasurer
(Principal
Financial
and
Accounting
Officer)
March
14,
2017/s/
LARRY
ELLBERGER
Larry
Ellberger
Director,
Chairman
of
the
Board
of
Directors
March
14,
2017/s/
HERBERT
J.
CONRAD
Herbert
J.
Conrad
Director
March
14,
2017/s/
GEORGE
O.
ELSTON
George
O.
Elston
Director
March
14,
2017/s/
JAMES
J.
MARINO
James
J.
Marino
Director
March
14,
2017/s/
GERALD
MCMAHON
Gerald
McMahon,
Ph.D.
Director
March
14,
2017/s/
HARRY
H.
PENNER,
JR.
Harry
H.
Penner,
Jr.
Director
March
14,
2017/s/
KAREN
L.
SHOOS
Karen
L.
Shoos
Director
March
14,
2017 QuickLinks
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here
to
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through
this
documentExhibit
21.1
SUBSIDIARIES
OF
CELLDEX
THERAPEUTICS,
INC.
Name
Jurisdiction
of
Organization
Ownership
Percentage
Abigail
Pharmaceuticals,
Inc.
British
Virgin
Islands
100%Bulldog
Pharmaceuticals,
Inc.
British
Virgin
Islands
100%Celldex
Australia
PTY
LTD
Australia
100%Celldex
Therapeutics
Europe
GmbH
Switzerland
100%Eltam
Pharmaceuticals,
Inc.
British
Virgin
Islands
100% QuickLinks
Exhibit
21.1
SUBSIDIARIES
OF
CELLDEX
THERAPEUTICS,
INC.
QuickLinks
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here
to
rapidly
navigate
through
this
documentExhibit
23.1
CONSENT
OF
INDEPENDENT
REGISTERED
PUBLIC
ACCOUNTING
FIRM
We
hereby
consent
to
the
incorporation
by
reference
in
the
Registration
Statements
on
Form
S-8
(Nos.
333-205694,
333-189336,
333-151728
and
333-117602)
and
on
Form
S-3
(Nos.
333-214882
and
333-215747)
of
Celldex
Therapeutics,
Inc.
of
our
report
dated
March
14,
2017
relating
to
the
financial
statementsand
the
effectiveness
of
internal
control
over
financial
reporting,
which
appears
in
this
Form
10-K./s/
PricewaterhouseCoopers
LLPBoston,
Massachusetts
March
14,
2017 QuickLinks
Exhibit
23.1
CONSENT
OF
INDEPENDENT
REGISTERED
PUBLIC
ACCOUNTING
FIRM
QuickLinks
--
Click
here
to
rapidly
navigate
through
this
documentExhibit
31.1
CERTIFICATION
I,
Anthony
S.
Marucci,
certify
that:
1.
I
have
reviewed
this
annual
report
on
Form
10-K
of
Celldex
Therapeutics,
Inc.;
2.
Based
on
my
knowledge,
this
report
does
not
contain
any
untrue
statement
of
a
material
fact
or
omit
to
state
a
material
fact
necessary
to
make
thestatements
made,
in
light
of
the
circumstances
under
which
such
statements
were
made,
not
misleading
with
respect
to
the
period
covered
by
this
report;
3.
Based
on
my
knowledge,
the
financial
statements,
and
other
financial
information
included
in
this
report,
fairly
present
in
all
material
respects
thefinancial
condition,
results
of
operations
and
cash
flows
of
the
registrant
as
of,
and
for,
the
periods
presented
in
this
report;
4.
The
registrant's
other
certifying
officer
and
I
are
responsible
for
establishing
and
maintaining
disclosure
controls
and
procedures
(as
defined
in
ExchangeAct
Rules
13a-15(e)
and
15d-15(e))
and
internal
control
over
financial
reporting
(as
defined
in
the
Exchange
Act
Rules
13a-15(f)
and
15d-15(f))
for
the
registrantand
have:
(a)
Designed
such
disclosure
controls
and
procedures,
or
caused
such
disclosure
controls
and
procedures
to
be
designed
under
our
supervision,
toensure
that
material
information
relating
to
the
registrant,
including
its
consolidated
subsidiaries,
is
made
known
to
us
by
others
within
those
entities,particularly
during
the
period
in
which
this
report
is
being
prepared;
(b)
Designed
such
internal
control
over
financial
reporting,
or
caused
such
internal
control
over
financial
reporting
to
be
designed
under
oursupervision,
to
provide
reasonable
assurance
regarding
the
reliability
of
financial
reporting
and
the
preparation
of
financial
statements
for
external
purposesin
accordance
with
generally
accepted
accounting
principles;
(c)
Evaluated
the
effectiveness
of
the
registrant's
disclosure
controls
and
procedures
and
presented
in
this
report
our
conclusions
about
theeffectiveness
of
the
disclosure
controls
and
procedures,
as
of
the
end
of
the
period
covered
by
this
report
based
on
such
evaluation;
and
(d)
Disclosed
in
this
report
any
change
in
the
registrant's
internal
control
over
financial
reporting
that
occurred
during
the
registrant's
most
recentfiscal
quarter
(the
registrant's
fourth
fiscal
quarter
in
the
case
of
an
annual
report)
that
has
materially
affected,
or
is
reasonably
likely
to
materially
affect,the
registrant's
internal
control
over
financial
reporting;
and
5.
The
registrant's
other
certifying
officer
and
I
have
disclosed,
based
on
our
most
recent
evaluation
of
internal
control
over
financial
reporting,
to
theregistrant's
auditors
and
the
audit
committee
of
the
registrant's
board
of
directors
(or
persons
performing
the
equivalent
functions):
(a)
All
significant
deficiencies
and
material
weaknesses
in
the
design
or
operation
of
internal
control
over
financial
reporting
which
are
reasonablylikely
to
adversely
affect
the
registrant's
ability
to
record,
process,
summarize
and
report
financial
information;
and
(b)
Any
fraud,
whether
or
not
material,
that
involves
management
or
other
employees
who
have
a
significant
role
in
the
registrant's
internal
controlover
financial
reporting.Date:
March
14,
2017
By:
/s/
ANTHONY
S.
MARUCCI
Name:
Anthony
S.
Marucci
Title:
President and Chief Executive Officer QuickLinks
Exhibit
31.1
CERTIFICATION
QuickLinks
--
Click
here
to
rapidly
navigate
through
this
documentExhibit
31.2
CERTIFICATION
I,
Avery
W.
Catlin,
certify
that:
1.
I
have
reviewed
this
annual
report
on
Form
10-K
of
Celldex
Therapeutics,
Inc.;
2.
Based
on
my
knowledge,
this
report
does
not
contain
any
untrue
statement
of
a
material
fact
or
omit
to
state
a
material
fact
necessary
to
make
thestatements
made,
in
light
of
the
circumstances
under
which
such
statements
were
made,
not
misleading
with
respect
to
the
period
covered
by
this
report;
3.
Based
on
my
knowledge,
the
financial
statements,
and
other
financial
information
included
in
this
report,
fairly
present
in
all
material
respects
thefinancial
condition,
results
of
operations
and
cash
flows
of
the
registrant
as
of,
and
for,
the
periods
presented
in
this
report;
4.
The
registrant's
other
certifying
officer
and
I
are
responsible
for
establishing
and
maintaining
disclosure
controls
and
procedures
(as
defined
in
ExchangeAct
Rules
13a-15(e)
and
15d-15(e))
and
internal
control
over
financial
reporting
(as
defined
in
the
Exchange
Act
Rules
13a-15(f)
and
15d-15(f))
for
the
registrantand
have:
(a)
Designed
such
disclosure
controls
and
procedures,
or
caused
such
disclosure
controls
and
procedures
to
be
designed
under
our
supervision,
toensure
that
material
information
relating
to
the
registrant,
including
its
consolidated
subsidiaries,
is
made
known
to
us
by
others
within
those
entities,particularly
during
the
period
in
which
this
report
is
being
prepared;
(b)
Designed
such
internal
control
over
financial
reporting,
or
caused
such
internal
control
over
financial
reporting
to
be
designed
under
oursupervision,
to
provide
reasonable
assurance
regarding
the
reliability
of
financial
reporting
and
the
preparation
of
financial
statements
for
external
purposesin
accordance
with
generally
accepted
accounting
principles;
(c)
Evaluated
the
effectiveness
of
the
registrant's
disclosure
controls
and
procedures
and
presented
in
this
report
our
conclusions
about
theeffectiveness
of
the
disclosure
controls
and
procedures,
as
of
the
end
of
the
period
covered
by
this
report
based
on
such
evaluation;
and
(d)
Disclosed
in
this
report
any
change
in
the
registrant's
internal
control
over
financial
reporting
that
occurred
during
the
registrant's
most
recentfiscal
quarter
(the
registrant's
fourth
fiscal
quarter
in
the
case
of
an
annual
report)
that
has
materially
affected,
or
is
reasonably
likely
to
materially
affect,the
registrant's
internal
control
over
financial
reporting;
and
5.
The
registrant's
other
certifying
officer
and
I
have
disclosed,
based
on
our
most
recent
evaluation
of
internal
control
over
financial
reporting,
to
theregistrant's
auditors
and
the
audit
committee
of
the
registrant's
board
of
directors
(or
persons
performing
the
equivalent
functions):
(a)
All
significant
deficiencies
and
material
weaknesses
in
the
design
or
operation
of
internal
control
over
financial
reporting
which
are
reasonablylikely
to
adversely
affect
the
registrant's
ability
to
record,
process,
summarize
and
report
financial
information;
and
(b)
Any
fraud,
whether
or
not
material,
that
involves
management
or
other
employees
who
have
a
significant
role
in
the
registrant's
internal
controlover
financial
reporting.Date:
March
14,
2017
By:
/s/
AVERY
W.
CATLIN
Name:
Avery
W.
Catlin
Title:
Senior Vice President and Chief Financial Officer QuickLinks
Exhibit
31.2
CERTIFICATION
QuickLinks
--
Click
here
to
rapidly
navigate
through
this
documentExhibit
32
CERTIFICATION
OF
CHIEF
EXECUTIVE
OFFICER
AND
CHIEF
FINANCIAL
OFFICER
PURSUANT
TO
18
U.S.C.
SECTION
1350,
AS
ADOPTED
PURSUANT
TO
SECTION
906
OF
THE
SARBANES-OXLEY
ACT
OF
2002
Each
of
the
undersigned
hereby
certifies,
pursuant
to
18
U.S.C.
Section
1350,
as
adopted
pursuant
to
Section
906
of
the
Sarbanes-Oxley
Act
of
2002,
in
hiscapacity
as
an
officer
of
Celldex
Therapeutics,
Inc.
(the
"Company"),
that,
to
his
knowledge,
the
Annual
Report
of
the
Company
on
Form
10-K
for
the
periodended
December
31,
2016
(the
"Form
10-K"),
fully
complies
with
the
requirements
of
Section
13(a)
or
15(d)
of
the
Securities
Exchange
Act
of
1934
(15
U.S.C.§78m
or
78o(d))
and
that
the
information
contained
in
such
report
fairly
presents,
in
all
material
respects,
the
financial
condition
and
results
of
operations
of
theCompany.
This
written
statement
is
being
furnished
to
the
Securities
and
Exchange
Commission
as
an
exhibit
to
the
Form
10-K.
A
signed
original
of
this
statementhas
been
provided
to
the
Company
and
will
be
retained
by
the
Company
and
furnished
to
the
Securities
and
Exchange
Commission
or
its
staff
upon
request.
This
certification
shall
be
not
be
deemed
"filed"
for
any
purpose,
nor
shall
it
be
deemed
to
be
incorporated
by
reference
into
any
filing
under
the
SecuritiesAct
of
1933
or
the
Exchange
Act.Date:
March
14,
2017
By:
/s/
ANTHONY
S.
MARUCCI
Name:
Anthony
S.
Marucci
Title:
President and Chief Executive OfficerDate:
March
14,
2017
By:
/s/
AVERY
W.
CATLIN
Name:
Avery
W.
Catlin
Title:
Senior Vice President and Chief Financial Officer QuickLinks
Exhibit
32
CERTIFICATION
OF
CHIEF
EXECUTIVE
OFFICER
AND
CHIEF
FINANCIAL
OFFICER
PURSUANT
TO
18
U.S.C.
SECTION
1350,
AS
ADOPTEDPURSUANT
TO
SECTION
906
OF
THE
SARBANES-OXLEY
ACT
OF
2002