Celldex Gains on Bristol-Myers Squibb Deal - Analyst Blog

Celldex Therapeutics, Inc.'s CLDX shares shot up 26.9% on news regarding an agreement with Bristol-Myers Squibb Company BMY for the development of Celldex's varlilumab and Bristol-Myers' nivolumab in a phase I/II study.

The study will evaluate the safety, tolerability and preliminary efficacy of nivolumab (a programmed death receptor-1 (PD-1) immune checkpoint inhibitor) and varlilumab (a monoclonal investigational antibody targeting CD27) for various types of cancer, including non-small cell lung cancer, metastatic melanoma, ovarian, colorectal and squamous cell head and neck cancers. The study is slated to begin in the fourth quarter of 2014.

Terms of the Deal

Celldex will receive a one-time payment of $5 million from Bristol-Myers. The cost of development for this study, which will be conducted by Celldex, will be shared by both companies. Bristol-Myers has a time-limited right of first negotiation in the event of wanting to out-license varlilumab.

Additionally, an existing deal between Celldex and Medarex (a wholly owned subsidiary of Bristol-Myers) related to Celldex's CD27 program has been re-structured. As a result, certain future milestone payments, due from Celldex to Medarex, have been waived and future royalty rates have been reduced.

Our Take

We are positive on Celldex's agreement with Bristol-Myers – the agreement should be beneficial for Celldex which is gaining a strong partner in the form of Bristol-Myers, a company with expertise in the field of immuno-oncology. The deal terms look favorable – sharing of development costs and more importantly, the restructuring of the Medarex agreement. Moreover, Celldex has the freedom to explore varlilumab with other important mechanisms outside this collaboration.

Of late, immuno-oncology has attracted the interest of several companies. Recently, AstraZeneca plc AZN signed a deal with Incyte Corporation INCY for the development of its investigational immunotherapy, MEDI4736, in combination with Incyte's INCB24360 for the treatment of cancer.

Celldex currently carries a Zacks Rank #3 (Hold). A better-ranked stock in the biotech sector is Gilead Sciences Inc. GILD, carrying a Zacks Rank #1 (Strong Buy).

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