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 The leading web portal for pharmacy resources, news, education and careers November 28, 2014
Pharmacy Choice - Pharmaceutical News - CELLDEX THERAPEUTICS, INC. - 10-K - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - November 28, 2014

Pharmacy News Article

 3/8/13 - CELLDEX THERAPEUTICS, INC. - 10-K - 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 for the treatment of
cancer and other difficult-to-treat diseases. Our drug candidates are derived
from a broad set of complementary technologies which have the ability to utilize
the human immune system and enable the creation of therapeutic agents. We are
using these technologies to develop targeted immunotherapeutics comprised of
antibodies, adjuvants and monotherapies and antibody-drug conjugates that
prevent or treat cancer and other diseases that modify undesirable activity by
the body's own proteins or cells.

    Our lead drug candidates include rindopepimut (CDX-110), a targeted
immunotherapeutic in a pivotal Phase 3 study for the treatment of front-line
glioblastoma and a Phase 2 study for the treatment of recurrent glioblastoma and
CDX-011, an antibody-drug conjugate which recently completed a randomized
Phase 2b study for the treatment of advanced breast cancer. In addition, we have
a number of earlier stage candidates in clinical development, including
CDX-1135, a molecule that inhibits a part of the immune system called the
complement system, CDX-1127, a therapeutic fully human monoclonal antibody for
cancer indications, CDX-301, an immune cell mobilizing agent and dendritic cell
growth factor and CDX-1401, an APC Targeting Technology? program for cancer
indications. Our drug candidates address market opportunities for which we
believe current 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
through advantageous commercial partnerships. This approach allows us to
maximize the overall value of our technology and product portfolio while best
ensuring the expeditious development of each individual product.

    The following table includes the programs that we currently believe are
significant to our business:

Product (generic)                  Indication/Field             Partner     Status
CLINICAL
CDX-110                   Front-line glioblastoma                  -      Phase 3
(rindopepimut)
CDX-011                   Metastatic breast cancer and             -      Phase 2b
(glembatumumab vedotin)   melanoma
CDX-110                   Recurrent glioblastoma                   -      Phase 2
(rindopepimut)
CDX-1135                  Renal disease                            -      Pilot
CDX-1127                  Lymphoma/leukemia and solid tumors       -      Phase 1
CDX-301                   Cancer, autoimmune disease and           -      Phase 1
                          transplant
CDX-1401                  Multiple solid tumors                    -      Phase 1
PRECLINICAL
CDX-014                   Ovarian and renal cancer                 -      Preclinical


    The expenditures that will be necessary to execute our business plan are
subject to numerous uncertainties. Completion of clinical trials may take
several years or more, and the length of time generally varies substantially
according to the type, complexity, novelty and intended use of a product
candidate. It is not unusual for the clinical development of these types of
product candidates to each take five years or more, and for total development
costs to exceed $100 million for each product

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candidate. Our estimates that clinical trials of the type we generally conduct are typically completed over the following timelines:

                                             Estimated
                                            Completion
                           Clinical Phase     Period
                           Phase 1          1 - 2 Years
                           Phase 2          1 - 5 Years
                           Phase 3          1 - 5 Years


    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 product candidate.

    We test potential product candidates in numerous preclinical studies for
safety, toxicology and immunogenicity. We may then conduct multiple clinical
trials for each product candidate. As we obtain results from trials, we may
elect to discontinue or delay clinical trials for certain product candidates in
order to focus our resources on more promising product candidates.

    An element of our business strategy is to pursue the research and
development of a broad portfolio of product candidates. This is intended to
allow us to diversify the risks associated with our research and development
expenditures. As a result, we believe our future capital requirements and our
future financial success are not substantially dependent on any one product
candidate. To the extent we are unable to maintain a broad range of product
candidates, our dependence on the success of one or a few product candidates
increases.

    Regulatory approval is required before we can market our product candidates
as therapeutic products. In order to proceed to subsequent clinical trial stages
and to ultimately achieve regulatory approval, the regulatory agency must
conclude that our clinical data is safe and effective. Historically, the results
from preclinical testing 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 biologics have shown promising results in early clinical trials,
but subsequently failed to establish sufficient safety and efficacy data to
obtain necessary regulatory approvals.

    Furthermore, our business strategy includes the option of entering into
collaborative arrangements with third parties to complete the development and
commercialization of our product candidates. In the event that third parties
take over the clinical trial process for one of our product candidates, the
estimated completion date 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 be subject to future collaborative
arrangements, in whole or in part, and how such arrangements would affect our
development plan or capital requirements. Our programs 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 and development 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 complete our research and development projects in a timely manner
or our failure to enter into collaborative agreements, when appropriate, could
significantly increase our capital requirements and

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could adversely impact our liquidity. These uncertainties could force us to seek
additional, external sources of financing from time to time in 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 the future success of
our business.

    During the past five years through December 31, 2012, we incurred an
aggregate of $156.3 million in research and development expenses. The following
table indicates the amount incurred for each of our significant research
programs and for other identified research and development activities during the
years ended December 31, 2012, 2011 and 2010. The amounts disclosed in the
following table reflect direct research and development costs, license fees
associated with the underlying technology and an allocation of indirect research
and development costs to each program.

                          Year Ended            Year Ended            Year Ended
                       December 31, 2012     December 31, 2011     December 31, 2010
                                              (In thousands)
  Rindopepimut          $          25,004     $           8,366     $           1,718
  CDX-011                           6,325                 4,917                 4,104
  CDX-1135                          7,109                 5,524                   839
  CDX-1127                          4,020                 5,965                 4,967
  CDX-301                           1,482                 1,112                 4,345
  CDX-1401                          1,032                 2,464                 2,899
  CDX-014                           1,071                   481                   130
  Other Programs                    1,355                 3,610                 8,648

  Total R&D Expense     $          47,398     $          32,439     $          27,650



Clinical Development Programs

Rindopepimut

    Our lead clinical development program, rindopepimut, is a targeted
immunotherapeutic that targets the tumor-specific molecule, epidermal growth
factor receptor variant III, or EGFRvIII. EGFRvIII is a mutated form of the
epidermal growth factor receptor, or EGFR, that is only expressed in cancer
cells and not in normal tissue and can directly contribute to cancer cell
growth. EGFRvIII is expressed in approximately 30% of glioblastoma, or GB,
tumors, also referred to as glioblastoma multiforme, or GBM, the most common and
aggressive form of brain cancer. Rindopepimut is composed of the EGFRvIII
peptide linked to a carrier protein called Keyhole Limpet Hemocyanin, or KLH,
and administered together with the adjuvant GM-CSF. The Food and Drug
Administration, or FDA, and the European Medicines Agency, or EMA, have both
granted orphan drug designation for rindopepimut for the treatment of EGFRvIII
expressing GB. The FDA has also granted Fast Track designation.

    In April 2008, we and Pfizer Inc. entered into a License and Development
Agreement under which Pfizer was granted an exclusive worldwide license to
rindopepimut. This agreement provided for reimbursement by Pfizer of all costs
incurred by us in connection with the collaboration since the effective date. In
November 2010, the agreement was terminated and all rights to rindopepimut were
returned to us. Since the termination of this agreement, Pfizer is no longer
funding the development of rindopepimut.

    The Phase 2a study of rindopepimut referred to as ACTIVATE was led by
collaborating investigators at the Brain Center at Duke Comprehensive Cancer
Center in Durham, North Carolina and at M.D. Anderson Cancer Center in Houston,
Texas and enrolled 18 evaluable GB patients. An extension of the Phase 2a study
referred to as ACT II evaluated 22 additional GB patients treated in

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combination with the current standard of care, maintenance temozolomide, or TMZ, at the same two institutions.


    We initiated ACT III, a Phase 2b/3 randomized study of rindopepimut combined
with standard of care, TMZ, versus standard of care alone in patients with GB in
over 30 sites throughout the United States. In December 2008, we announced an
amendment to convert the ACT III study to a single-arm Phase 2 clinical trial in
which all patients were to receive rindopepimut in combination with TMZ. The
decision, which followed the recommendation of the Independent Data Monitoring
Committee, was based on the observation that the majority of patients randomized
to the control (standard of care) arm withdrew from this open-label study after
being randomized to the control arm. Patients participating in the control arm
of the study were offered the option to receive treatment with rindopepimut.
Under this amendment, the ACT III study provided for a multi-center,
non-randomized dataset for rindopepimut in patients with newly diagnosed GB.

    In November 2012, we announced three-year survival data for each of our
three Phase 2 studies in rindopepimut, ACT III, ACT II and ACTIVATE. The median
overall survival, or OS, in ACT III was 24.6 months from diagnosis (21.8 months
from study entry) and OS was 26% at three years. The median OS in ACT II was
24.4 months from diagnosis (20.5 months from study entry) and OS was 23% at
three years. The median OS in ACTIVATE was 24.6 months from diagnosis
(20.4 months from study entry) and OS was 33% at three years. In addition we
also announced data from a retrospective analysis of EGFRvIII expression status
and associated clinical outcome in the Phase 3 Radiation Therapy Oncology
Group's, or RTOG, 0525 study. This analysis was conducted by The University of
Texas MD Anderson Cancer Center in cooperation with RTOG to provide an
assessment of the prognosis for patients with EGFRvIII-positive disease
contemporary with the ACT III data. Across three Phase 2 studies of
rindopepimut, survival data remains consistent and suggests a continuing
survival benefit in comparison to independent control datasets (see chart below)
at the median and at three years.


    Rindopepimut Overall Survival (OS) in EGFRvIII-Positive Glioblastoma vs
                          Independent Control Datasets

            Rindopepimut Phase 2 Studies (all data from study entry)

                                          Medium       OS at
                                         (months)     3 years
                      ACT III (n=65)          21.8          26 %
                      ACT II (n=22)           20.5          23 %
                      ACTIVATE (n=18)         20.4          33 %



            Independent Control Datasets (all data from study entry)

MD Anderson EGFRvIII-positive patients matched(1) to ACTIVATE patient population (n=17) (contemporary with ACTIVATE)

                  12.2 (2)    6 %
Radiation Therapy Oncology Group (RTOG) 0525 study-all
EGFRvIII-positive patients (n=142) (contemporary with ACT III)          15.1       18 %
RTOG 0525 study-all EGFRvIII-positive patients treated with
standard dose temozolomide (n=62) (contemporary with ACT III)           14.2        7 %
RTOG 0525 study-EGFRvIII-positive patients matched(1) to ACT III/IV
patient population (n=29) (contemporary with ACT III)                     

16 13 %

(1)

Controls are closely matched to rindopepimut patient criteria including

     gross total resection of patient tumor and ~3 months without disease
     progression at time of study entry

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(2)

In order to provide comparable timeframes across datasets, data have been

estimated assuming study entry at three months from diagnosis.


    In December 2011, we initiated ACT IV, a pivotal, randomized, double-blind,
controlled Phase 3 study of rindopepimut in patients with surgically resected,
EGFRvIII-positive GB. Patients are randomized after the completion of surgery
and standard chemoradiation treatment. The treatment regime includes a
rindopepimut priming phase post-radiation followed by an adjuvant TMZ phase and
a rindopepimut maintenance therapy phase. Patients are treated until disease
progression or intolerance to therapy. The primary objective of the study is to
determine whether rindopepimut plus adjuvant GM-CSF improves the overall
survival of patients with newly diagnosed EGFRvIII-positive GB after Gross Total
Resection, or GTR, when compared to treatment with TMZ and a control injection
of KLH. KLH is a component of rindopepimut and was selected due to its ability
to generate a similar injection site reaction to that observed with
rindopepimut. ACT IV will enroll up to 440 patients at over 150 centers
worldwide to recruit approximately 374 patients with GTR to be included in the
primary analysis. We expect to complete patient accrual by the end of 2013 and
anticipate receiving data 18 to 24 months after completing accrual. We
anticipate ACT IV to cost over $60 million during its duration.

    In December 2011, we also initiated ReACT, a Phase 2 study of rindopepimut
in combination with Avastin in patients with recurrent EGFRvIII-positive GB.
ReACT will enroll approximately 95 patients in a first or second relapse of GB
following receipt of standard therapy and will be conducted at approximately 20
sites across the United States. Approximately 70 patients who have yet to
receive Avastin will be randomized to receive either rindopepimut and Avastin or
a control injection of KLH and Avastin in a blinded fashion. Another 25 patients
who are refractory to Avastin having received Avastin in either the frontline or
recurrent setting with subsequent progression will receive rindopepimut plus
Avastin in a single treatment arm. We expect data from this study to be
available in the second half of 2013.

In addition, researchers at Stanford University are conducting an investigator sponsored, pilot trial of rindopepimut in pediatric patients with pontine glioma. Patient enrollment is ongoing for this trial.

Glembatumumab Vedotin (CDX-011)


    CDX-011 is an antibody-drug conjugate, or ADC, that consists of a
fully-human monoclonal antibody, CR011, linked to a potent cell-killing drug,
monomethyl-auristatin E, or MMAE. The CR011 antibody specifically targets
glycoprotein NMB, referred to as GPNMB, that is expressed in a variety of human
cancers including breast cancer and melanoma. The ADC technology, comprised of
MMAE and a stable linker system for attaching it to CR011, was licensed from
Seattle Genetics, Inc. The ADC is designed to be stable in the bloodstream.
Following intravenous administration, CDX-011 targets and binds to GPNMB and
upon internalization into the targeted cell, CDX-011 is designed to release MMAE
from CR011 to produce a cell-killing effect. The FDA has granted Fast Track
designation to CDX-011 for the treatment of advanced,
refractory/resistant GPNMB-expressing breast cancer.

    Treatment of Breast Cancer:  In June 2008, an open-label, multi-center Phase
1/2 study was initiated of CDX-011 administered intravenously once every three
weeks to patients with locally advanced or metastatic breast cancer who had
received prior therapy (median of seven prior regimens). The study began with a
bridging phase to confirm the maximum tolerated dose, or MTD, and then expanded
into a Phase 2 open-label, multi-center study.

    The study confirmed the safety of CDX-011 at the pre-defined maximum dose
level (1.88 mg/kg) in 6 patients. An additional 28 patients were enrolled in an
expanded Phase 2 cohort (for a total of 34 treated patients at 1.88 mg/kg, the
Phase 2 dose) to evaluate the PFS rate at 12 weeks. As previously seen in
melanoma patients, the 1.88 mg/kg dose was well tolerated in this patient
population with the most common adverse events of rash, alopecia, and fatigue.
The primary activity endpoint, which called

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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 26 (35%) evaluable patients were progression-free at 12 weeks.

    For all patients treated at the maximum dose level, tumor shrinkage was seen
in 62% (16/26) and median PFS was 9.1 weeks. A subset of 10 patients had "triple
negative disease," a more aggressive breast cancer subtype that carries a high
risk of relapse and reduced survival as well as limited therapeutic options due
to lack of over-expression of HER2/neu, estrogen and progesterone receptors. In
these patients, 78% (7/9) had some tumor shrinkage, 12-week PFS rate was 70%
(7/10), and median PFS was 17.9 weeks. Tumor samples from a subset of patients
across all dose groups were analyzed for GPNMB expression. The tumor samples
from most patients showed evidence of stromal and/or tumor cell expression
of GPNMB.

    In December 2011, we completed enrollment of EMERGE, a randomized,
multi-center Phase 2b study of CDX-011 in 122 patients with heavily pre-treated,
advanced, GPNMB positive breast cancer. Patients were randomized (2:1) to
receive either CDX-011 or single-agent Investigator's Choice, or IC,
chemotherapy. Patients randomized to receive IC were allowed to cross over to
receive CDX-011 following disease progression. Activity endpoints include
response rate, PFS and OS.

    In December 2012, we announced final results, as shown below, from the
EMERGE study which suggested that CDX-011 induces significant response rates
compared to currently available therapies in patient subsets with advanced,
refractory breast cancers with GPNMB over-expression (expression in greater than
25% of tumor cells) and in patients with triple negative breast cancer. The
overall survival, or OS, and progression free survival, or PFS, of patients
treated with CDX-011 was also observed to be greatest in patients with triple
negative breast cancer who also over-express GPNMB and all patients with GPNMB
over-expression.


             EMERGE: Overall Response Rate and Disease Control Data

                                                                  On target 

effect clearly demonstrated in

targeted patient populations

                                                                                              Triple Negative
                                                                       GPNMB                     and GPNMB
               All Patients            Triple Negative           
Over-Expression             Over-Expression
            CDX-011        IC       CDX-011          IC       CDX-011           IC          CDX-011         IC
            (n=81)       (n=36)      (n=27)        (n=9)       (n=25)         (n=8)          (n=12)       (n=4)
Response          16 %        14 %         19 %          0 %         32 %           13 %           33 %        0 %
Disease
Control
Rate              57 %        53 %         67 %         33 %         64 %           38 %           75 %       25 %



Responses per RECIST 1.1; IC = Investigator's Choice; CDX-011 arm includes 15
patients who crossed over to receive CDX-011 treatment after progression on IC.
Analysis of best response excludes patients who discontinued from study without
evaluable post-baseline radiographic imaging (n=15 for CDX-011 arm; n=5 for IC
arm).

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     EMERGE: Overall Survival (OS) and Progression Free Survival (PFS) Data

                                                               On target

effect clearly demonstrated in

                                                                     targeted patient populations
                                                                                         Triple Negative
                                                                  GPNMB                     and GPNMB
              All Patients          Triple Negative          Over-Expression             Over-Expression
            CDX-011       IC      CDX-011        IC        CDX-011         IC          CDX-011         IC
Median
OS
(months)          7.5      7.4         6.9         6.5          10.0          5.7           10.0          5.5
                   p=0.24                 p=0.30                   p=0.18                      p=0.003
Median
PFS
(months)          2.1      2.0         2.3         1.6           2.7          1.5            3.0          1.5
                   p=0.38                 p=0.43                   p=0.14                      p=0.008

Analyses include all treated patients. Patients who initially received
Investigator's Choice (IC) and subsequently crossed over to receive CDX-011
(n=15) are included in the PFS analysis for each treatment. These patients, with
a median OS of 12.5 months, are assigned to the IC arm only for OS analysis.
Median OS for the remaining IC patients who did not cross over is 5.4 months.
When cross over patients are removed, median OS in patients with GPNMB
over-expression is 10.0 months for CDX-011 vs 5.2 months for IC (p=0.05) and
median OS in triple negative patients with GPNMB over-expression is 10.0 months
for CDX-011 vs 5.2 months for IC (p=0.009).

    In December 2012, we had our end of Phase 2b meeting with the FDA for our
CDX-011 program. Based on this meeting, we intend to initiate a randomized study
of CDX-011 suitable for accelerated approval in patients with triple negative
breast cancer that also over-express GPNMB in the second half of 2013.

    One lot of our CDX-011 product candidate was aseptically filled in 2009 by
Formatech, a third party contract manufacturer. At the end of January 2012, we
were notified by the FDA that because significant Good Manufacturing Practice,
or cGMP, violations were uncovered during inspection of Formatech, our Phase 2b
study for CDX-011 was being placed on partial clinical hold. The clinical hold
did not significantly impact the conduct or analysis of the Phase 2b study for
purposes of determining next steps in our future development of CDX-011. In
March 2013, we received written confirmation from the FDA that the clinical hold
was removed following their review of our clinical hold response regarding
reprocessing of the CDX-011 manufactured at Formatech.

    Treatment of Metastatic Melanoma:  In 2009, we completed enrollment of 117
patients in a Phase 1/2 open-label, multi-center, dose escalation study to
evaluate the safety, tolerability and pharmacokinetics of CDX-011 for patients
with un-resectable Stage III or Stage IV melanoma who had failed no more than
one prior line of cytotoxic therapy. The MTD was determined to be 1.88 mg/kg
administered intravenously once every three weeks. The study achieved its
primary activity objective with an ORR in the Phase 2 cohort of 15% (5/34).
Median PFS was 3.9 months. CDX-011 was generally well tolerated, with the most
frequent treatment-related adverse events being rash, fatigue, hair loss,
pruritus, diarrhea and neuropathy. In the subset of patients with tumor
biopsies, high levels of tumor expression of GPNMB appeared to correlate with
favorable outcome. In the seven patients whose tumors were found to express high
amounts of GPNMB, and who were treated at the maximum tolerated doses across all
dosing schedules, median PFS was 4.9 months. The development of rash, which may
be associated with the presence of GPNMB in the skin also seemed to correlate
with greater PFS.

We intend to initially focus our resources on advancing CDX-011 for the treatment of breast cancer while pursuing further development of CDX-011 in melanoma and other indications that are known to express GPNMB.

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CDX-1135


    CDX-1135 is a molecule that inhibits a part of the human immune system
called the complement system. The complement system is a series of proteins that
are important initiators of the body's acute inflammatory response against
disease, infection and injury. Excessive complement activation also plays a role
in some persistent inflammatory conditions. CDX-1135 is a soluble form of
naturally occurring Complement Receptor 1 that has been shown to inhibit the
activation of the complement cascade in animal models and in human clinical
trials. In preclinical studies, CDX-1135 has been shown to inhibit both the
classical and alternative pathways of complement activation.

    Dense Deposit Disease, or DDD, is a rare and devastating disease that is
caused by uncontrolled activation of the alternative pathway of complement and
leads to progressive kidney damage in children. There is currently no treatment
for patients with DDD and about half progress to end-stage renal disease within
10 years. Because DDD recurs in virtually all patients who receive a kidney
transplant, transplantation is not a viable option for these patients. In animal
models of DDD, CDX-1135 treatment showed evidence of reversal of kidney damage.

    Initial experience under an investigator sponsored IND indicated that
CDX-1135 limits complement abnormalities in DDD. In 2011, we completed process
development activities and in 2011 and 2012 we manufactured multiple runs of
cGMP clinical drug product at our Fall River manufacturing facility in
preparation for our Phase 2 pilot study. We are planning to initiate a pilot
study of CDX-1135 in a small number of DDD patients to determine the appropriate
dose and regimen for further clinical development based on safety, tolerability
and biological activity with data expected by the end of 2013.

CDX-1127


    CDX-1127 is a human monoclonal antibody that targets CD27, a potentially
important target for immunotherapy of various cancers. We have entered into
license agreements with the University of Southampton, UK for intellectual
property related to uses of anti-CD27 antibodies and with Medarex (now a
subsidiary of the Bristol-Myers Squibb Company) for access to the UltiMab
technology to develop and commercialize human antibodies to CD27. CD27 acts
downstream from CD40 and may provide a novel way to regulate the immune
responses. CD27 is a co-stimulatory molecule on T cells and is over-expressed in
certain lymphomas and leukemias. CDX-1127 is an agonist antibody designed to
have two potential therapeutic mechanisms. CDX-1127 has been shown to activate
immune cells that can target and eliminate cancerous cells in tumor-bearing mice
and to directly kill or inhibit the growth of CD27 expressing lymphomas and
leukemias in vitro and in vivo. Both mechanisms have been seen even at low doses
in appropriate preclinical models.

    In November 2011, we initiated an open label, dose-escalating Phase 1 study
of CDX-1127 in patients with selected malignant solid tumors or hematologic
cancers at multiple clinical sites in the United States. The Phase 1 study is
designed to test five escalating doses of CDX-1127 to determine a Phase 2 dose
for further development based on safety, tolerability, potential activity and
immunogenicity. The study will accrue approximately 30 patients in each of the
two arms, either selected refractory or relapsed solid tumors or lymphomas or
leukemias known to express CD27. Patients will have received all appropriate
prior therapies for their specific disease. The trial design incorporates both
single dosing and multiple dosing regimens at each dose level. Enrollment has
completed in the Phase 1 portion of the solid tumor arm and CDX-1127 was
determined to be well tolerated to date, including at the highest dose level.
Following a review of the clinical data from these patients, an expansion cohort
will be enrolled in 2013. We continue to enroll patients in the dose escalation
portion of the lymphoma and leukemia arm and also plan the initiation of an
expansion cohort of this arm in 2013. We anticipate reporting data from the
CDX-1127 program in the second half of 2013.

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CDX-301


    CDX-301 is a FMS-like tyrosine kinase 3 ligand, or Flt3L, stem cell
mobilizer and dendritic cell growth factor. We licensed CDX-301 from Amgen in
March 2009. CDX-301 is a potent hematopoietic cytokine that stimulates the
expansion and differentiation of hematopoietic progenitor and stem cells.
CDX-301 has demonstrated a unique capacity to increase the number of circulating
dendritic cells in both laboratory and clinical studies. In addition, CDX-301
has shown impressive results in models of cancer, infectious diseases and
inflammatory/autoimmune diseases. We believe CDX-301 may hold significant
opportunity for synergistic development in combination with other proprietary
molecules in our portfolio.

    In February 2013, we announced final results from our dose-escalating
Phase 1 study of CDX-301 in 30 healthy subjects in collaboration with
Rockefeller University. The Phase 1 study evaluated seven different dosing
regimens of CDX-301 to determine the appropriate dose for further development
based on safety, tolerability, and biological activity. The data from the study
were consistent with previous clinical experience and demonstrated that CDX-301
was well-tolerated and can effectively mobilize hematopoietic stem cell
populations in healthy volunteers. Based on the safety profile and the increases
observed for CD34+ stem cells and dendritic cells, we plan to initiate a pilot
study in hematopoietic stem cell transplant by the end of 2013.

CDX-1401


    CDX-1401, developed from our APC Targeting Technology, is a fusion protein
consisting of a fully human monoclonal antibody with specificity for the
dendritic cell receptor, DEC-205, linked to the NY-ESO-1 tumor antigen. In
humans, NY-ESO-1 has been detected in 20 - 30% of all melanoma, lung,
esophageal, liver, gastric, prostate, ovarian and bladder cancers, thus
representing a broad opportunity. This product is intended to selectively
deliver the NY-ESO-1 antigen to dendritic cells for generating robust immune
responses against cancer cells expressing NY-ESO-1. We are developing CDX-1401
for the treatment of malignant melanoma and a variety of solid tumors which
express the proprietary cancer antigen NY-ESO-1, which we licensed from the
Ludwig Institute for Cancer Research in 2006. Preclinical studies have shown
that CDX-1401 is effective for activation of human T cell responses against
NY-ESO-1.

    In October 2012, we announced results from a dose-escalating, multi-center,
Phase 1 study that evaluated three different doses of CDX-1401 in combination
with toll-like receptor agonists poly-ICLC or Hiltonol? and/or R848 or
resiquimod. In total, the study enrolled 45 patients with advanced malignancies
that had progressed after any available curative and/or salvage therapies. 60%
of patients had confirmed NY-ESO expression in archived tumor sample. Thirteen
patients maintained stable disease for up to 13.4 months with a median of
6.7 months. Treatment was well-tolerated and there were no dose limiting
toxicities. Humoral responses were elicited in both NY-ESO-1 positive and
negative patients. NY-ESO-1-specific T cell responses were absent or low at
baseline, but increased post-vaccination in 53% 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. The study has
identified a well-tolerated and immunogenic regimen to take forward into the
future studies and we expect that a study sponsored by the Cancer Immunotherapy
Trials Network of the National Cancer Institute will be initiated in 2013.

Preclinical Programs

CDX-014


    CDX-014 is a fully-human monoclonal ADC that targets TIM-1, a molecule that
is highly expressed on renal and ovarian cancers with minimal expression in
normal tissues. The antibody, CDX-014, is linked to MMAE using Seattle Genetics'
proprietary technology. The ADC is designed to

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be stable in the bloodstream, but to release MMAE upon internalization into
TIM-1-expressing tumor cells, resulting in a targeted cell-killing effect.
CDX-014 has shown potent activity in preclinical models of ovarian and renal
cancer. We are conducting proof-of-concept studies in 2013 to optimize the drug
candidate to move into future manufacturing and IND-enabling studies.

Marketed Products

Rotavirus Vaccine


    Rotavirus is a major cause of diarrhea and vomiting in infants and children.
In 1997, we licensed our oral rotavirus strain to Glaxo and Glaxo assumed
responsibility for all subsequent clinical trials and all other development
activities. We licensed-in the rotavirus strain that was used to develop Glaxo's
Rotarix rotavirus vaccine in 1995 and owe a license fee of 30% to Cincinnati
Children's Hospital Medical Center, or CCH, on net royalties received from
Glaxo. In May 2005, we entered into an agreement whereby an affiliate of Paul
Royalty Fund II, L.P., or PRF, purchased a 70% interest in the net royalties we
received on worldwide sales of Rotarix.

    In December 2012, a U.S. patent for our rotavirus strain that we licensed to
Glaxo expired. The Glaxo agreement terminates automatically upon the expiration,
lapse or invalidation of the last relevant patent right (patent or patent
application) covered by the Glaxo agreement. The only remaining relevant patent
right is a patent application in Mexico with a projected final expiry date in
May 2013 which is under appeal. The PRF agreement provided for a normal expiry
of the PRF agreement on December 12, 2012 except that the PRF agreement provides
for an exclusive 120-day right of negotiation for extension in certain
circumstances.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES


    Our significant accounting policies are described in Note 2 to the
consolidated financial statements included in Item 8 of this Form 10-K. We
believe our most critical accounting policies include accounting for business
combinations, revenue recognition, impairment of long-lived assets, research and
development expenses and stock-based compensation expense.

    The methods, estimates and judgments we use in applying our most critical
accounting policies have a significant impact on the results we report in our
consolidated financial statements. We evaluate our estimates and judgments on an
on-going basis. We base our estimates on historical experience and on
assumptions that we believe to be reasonable under the circumstances. Our
experience and assumptions form the basis for our judgments about the carrying
value of assets and liabilities that are not readily apparent from other
sources. Actual results may vary from what we anticipate and different
assumptions or estimates about the future could 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 of our financial statements and
they require our most difficult, subjective or complex judgments in the
preparation of our consolidated 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
a business to the tangible assets and identifiable intangible assets acquired
and liabilities assumed on the basis of their fair values at the date of
acquisition. We assess 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 fair value from the perspective of a market participant.
The method used to estimate the fair values of IPR&D assets incorporates
significant assumptions regarding the estimates a market participant would make
in order to evaluate an asset, including a market participant's assumptions
regarding the probability of completing IPR&D projects, which would require
obtaining regulatory approval for marketing of the

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associated drug candidate; a market participant's estimates regarding the timing
of and the expected costs to complete IPR&D projects; a market participant's
estimates of future cash flows from potential product sales; and the appropriate
discount rates for a market participant. Transaction costs and restructuring
costs associated with the transaction are expensed as incurred.

    IPR&D assets acquired in a business combination initially are recorded at
fair value and accounted for as indefinite-lived intangible assets. These assets
are maintained on our consolidated balance sheets until either the project
underlying them is completed or the assets become impaired. If a project is
completed, the carrying 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. If a 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 in the 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. We performed an annual
impairment test of the IPR&D assets as of July 1, 2012 and concluded that the
IPR&D assets were 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
on a straight-line basis over 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
annual impairment test of the goodwill asset as of July 1, 2012 and concluded
that the goodwill asset was not impaired.

Revenue Recognition


    We recognizes revenue when all of the following criteria are met: persuasive
evidence of an arrangement exists; delivery has occurred or services have been
rendered; 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 and
development of therapeutic drug products. 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 are
analyzed to determine whether the deliverables can be separated or whether they
must be accounted for as a single unit of accounting. In accounting for these
transactions, we allocate revenue to the various elements based on their fair
value. The fair value of a revenue generating element can be based on current
selling prices offered 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 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 recognized
upon successful accomplishment of the milestones. Determining whether a
milestone is substantive involves judgment, including an assessment of our
involvement in achieving the milestones and whether the amount of the payment is
commensurate to our performance. If not considered substantive, milestones are
initially deferred and recognized over 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 from contracts and grants is recognized as the services are performed and recorded as effort is expended on the contracted work and billed to the

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government or our contractual partner. Payments received in advance that are
related to future performance are deferred and recognized as revenue when the
research projects are performed.

    Product royalty revenue consists of payments received from licensees for a
portion of sales proceeds from products that utilize our licensed technologies
and are 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
related license agreement.

Impairment of Long-Lived Assets


    We evaluate the recoverability of our long-lived assets, including property
and equipment, and intangible assets when circumstances indicate that an event
of impairment may have occurred. Determination of recoverability is based on an
estimate of undiscounted future cash flows resulting from the use of the asset
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 are
written-down to their estimated fair values.

Research and Development Expenses


    Research and development costs, including internal and contract research
costs, are expensed as incurred. Research and development expenses consist
mainly of clinical trial costs, manufacturing of clinical material, toxicology
and other studies, personnel costs, depreciation, license fees and funding of
outside research.

    Clinical trial expenses include expenses associated with clinical research
organizations (CRO). The invoicing from CROs for services rendered can lag
several months. We accrue the cost of services rendered in connection with CRO
activities based on our estimate of site management, monitoring costs, and
project management costs. We maintain regular communication with our CROs to
gauge the reasonableness of our estimates. Differences between actual clinical
trial expenses and estimated clinical trial expenses recorded have not been
material and 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. Compensation expense for 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-measured over the vesting term resulting in periodic adjustments to stock-based compensation expense.

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RESULTS OF OPERATIONS

Year Ended December 31, 2012 compared with Year Ended December 31, 2011


                                           Year Ended
                                          December 31,         Increase/      Increase/
                                                               (Decrease)     (Decrease)
                                        2012        2011           $              %
                                                 (In thousands)
Revenue:
Product Development and Licensing
Agreements                            $     146   $     110    $        36             33 %
Contracts and Grants                        281          36            245            681 %
Product Royalties                        10,775       9,119          1,656             18 %

Total Revenue                         $  11,202   $   9,265    $     1,937             21 %

Operating Expense:
Research and Development                 47,398      32,439         14,959             46 %
Royalty                                  10,775       9,119          1,656             18 %
General and Administrative               10,016       9,193            823              9 %
Amortization of Acquired Intangible
Assets                                    1,090       1,913           (823 )          (43 )%

Total Operating Expense                  69,279      52,664         16,615             32 %

Operating Loss                          (58,077 )   (43,399 )       14,678             34 %
Investment and Other Income, Net            530         396            134             34 %
Interest Expense                         (1,576 )    (1,796 )         (220 )          (12 )%

Net Loss                              $ (59,123 ) $ (44,799 )  $    14,324             32 %



Net Loss

    The $14.3 million increase in net loss for the year ended December 31, 2012
compared to the year ended December 31, 2011 was primarily the result of an
increase in research and development and general and administrative expenses,
partially offset by a decrease in amortization expense on acquired intangible
assets.

Revenue

    The $0.2 million increase in contracts and grants revenue for the year ended
December 31, 2012 compared to the year ended December 31, 2011 was due to an APC
Targeting Technology-based HIV vaccine being funded through a Small Business
Innovation Research, or SBIR, grant in collaboration with Rockefeller
University. The $1.7 million increase in product royalty revenue for the year
ended December 31, 2012 compared to the year ended December 31, 2011 was related
to our retained interests in Rotarix net royalties which were not sold to PRF
and which is equal to the amount payable to CCH and recognized in royalty
expense by us. We expect that royalty revenue related to the Glaxo agreement
will end during the year ending December 31, 2013. In December 2012, a U.S.
patent for our rotavirus strain that we licensed to Glaxo expired. The Glaxo
agreement terminates automatically upon the expiration, lapse or invalidation of
the last relevant patent right (patent or patent application) covered by the
Glaxo agreement. The only remaining relevant patent right is a patent
application in Mexico with a projected final expiry date in May 2013 which is
under appeal. The PRF agreement provided for a normal expiry of the PRF
agreement on December 12, 2012 except that the PRF agreement provides for an
exclusive 120-day right of negotiation for extension in certain circumstances.

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Research and Development Expense

Research and development expenses consist primarily of (i) personnel expenses, (ii) laboratory supply expenses relating to the development of our technology, (iii) facility expenses, and (iv) product development expenses associated with our drug candidates as follows:


                                   Year Ended
                                  December 31,        Increase/      Increase/
                                                      (Decrease)     (Decrease)
                                 2012       2011          $              %
                                         (In thousands)
         Personnel             $ 13,465   $ 12,715    $       750              6 %
         Laboratory Supplies      2,062      1,920            142              7 %
         Facility                 4,457      4,674           (217 )           (5 )%
         Product Development     24,426     10,044         14,382            143 %


    Personnel expenses primarily include salary, benefits, stock-based
compensation and payroll taxes. The $0.8 million increase in personnel expenses
for the year ended December 31, 2012 compared to the year ended December 31,
2011 was primarily due to higher headcount. We expect personnel expenses to
increase over the next twelve months as we plan to continue to increase our
headcount, primarily to support our rindopepimut and CDX-011 programs.

    Laboratory supply expenses include laboratory materials and supplies,
services, and other related expenses incurred in the development of our
technology. The $0.1 million increase in laboratory supply expenses for the year
ended December 31, 2012 compared to the year ended December 31, 2011 was
primarily due to higher manufacturing supply purchases. We expect supply
expenses to remain relatively consistent over the next twelve months, although
there may be fluctuations on a quarterly basis.

    Facility expenses include depreciation, amortization, utilities, rent,
maintenance, and other related expenses incurred at our facilities. The
$0.2 million decrease in facility expenses for the year ended December 31, 2012
compared to the year ended December 31, 2011 was primarily due to lower
depreciation and amortization expenses. We expect facility expenses to remain
relatively consistent 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 outside clinical drug product manufacturing. The $14.4 million increase in
product development expenses for the year ended December 31, 2012 compared to
the year ended December 31, 2011 was primarily the result of an increase in
clinical trial costs of $14.3 million primarily due to our rindopepimut program.
We expect product development expenses to increase over the next twelve months
due to the increase in clinical trial expenses related to our rindopepimut and
CDX-011 programs, although there may be fluctuations on a quarterly basis.

Royalty Expense

    Royalty expenses include product royalty and sublicense royalty fees on our
out-licensed programs. The $1.7 million increase in royalty expenses for the
year ended December 31, 2012 compared to the year ended December 31, 2011 was
primarily due to an increase in Rotarix related royalty fees. Our retained
interests in Rotarix net royalties which were not sold to PRF are recorded as
product royalty revenue and a corresponding amount that is payable to CCH is
recorded as royalty expense. We expect royalty expense related to the Glaxo
agreement will end during the year ended December 31, 2013. The Glaxo agreement
terminates automatically upon the expiration, lapse or invalidation of the last
relevant patent right (patent or patent application) covered by the Glaxo
agreement. The only remaining relevant patent right is a patent application in
Mexico with a projected final expiry date in May 2013 which is under appeal. The
PRF agreement provided for a normal expiry of the PRF

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agreement on December 12, 2012 except that the PRF agreement provides for an exclusive 120-day right of negotiation for extension in certain circumstances.

General and Administrative Expense


    The $0.8 million increase in general and administrative expenses for the
year ended December 31, 2012 compared to the year ended December 31, 2011 was
primarily due to higher headcount and rindopepimut-related commercialization
expenses. We expect general and administrative expense to increase over the next
twelve months due to increased commercialization efforts, although there may be
fluctuations on a quarterly basis.

Amortization Expense

The $0.8 million decrease in amortization expenses for the year ended December 31, 2012 compared to the year ended December 31, 2011 was due to certain intangible assets becoming fully amortized during 2011. We expect amortization expense of acquired intangible assets to remain relatively consistent over the next twelve months.

Investment and Other Income, Net


    The $0.1 million increase in investment and other income, net for the year
ended December 31, 2012 compared to the year ended December 31, 2011 was
primarily due to us recognizing $0.1 million in other income related to our sale
of New Jersey tax benefits. We anticipate investment income to increase over the
next twelve months due to higher cash and investment balances resulting from
fundraising efforts in January and February 2013.

Interest Expense


    The $0.2 million decrease in interest expense for the year ended
December 31, 2012 compared to the year ended December 31, 2011 was due to a
decrease in our Term Loan balance. We anticipate interest expense to decrease
over the next twelve months as we continue to make monthly principal payments on
our Term Loan.

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Year Ended December 31, 2011 compared with Year Ended December 31, 2010


                                            Year Ended
                                           December 31,        Increase/      Increase/
                                                               (Decrease)     (Decrease)
                                         2011        2010          $              %
                                                 (In thousands)
Revenue:
Product Development and Licensing
Agreements                             $     110   $ 40,187    $   (40,077 )         (100 )%
Contracts and Grants                          36        220           (184 )          (84 )%
Product Royalties                          9,119      6,386          2,733             43 %

Total Revenue                          $   9,265   $ 46,793    $   (37,528 )          (80 )%

Operating Expense:
Research and Development                  32,439     27,650          4,789             17 %
Royalty                                    9,119     12,077         (2,958 )          (24 )%
General and Administrative                 9,193     10,378         (1,185 )          (11 )%
Amortization of Acquired Intangible
Assets                                     1,913      3,143         (1,230 )          (39 )%

Total Operating Expense                   52,664     53,248           (584 )           (1 )%

Operating Loss                           (43,399 )   (6,455 )       36,944            572 %
Investment and Other Income, Net             396      5,259         (4,863 )          (92 )%
Interest Expense                          (1,796 )   (1,337 )          459             34 %

Net Loss                               $ (44,799 ) $ (2,533 )  $    42,266          1,669 %



Net Loss

The $42.3 million increase in net loss for the year ended December 31, 2011 compared to the year ended December 31, 2010 was primarily the result of a decrease in product development and licensing agreement revenue.

Revenue


    The $40.1 million decrease in product development and licensing agreement
revenue for the year ended December 31, 2011 compared to the year ended
December 31, 2010 was primarily due to the termination of the Pfizer Agreement
which resulted in us recognizing the remaining deferred revenue of $35.6 million
during the year ended December 31, 2010. The $0.2 million decrease in contracts
and grants revenue for the year ended December 31, 2011 compared to the year
ended December 31, 2010 was due to a decrease in revenue related to our vaccine
development work on Rockefeller's DCVax-001 (CDX-2401) program. The $2.7 million
increase in product royalty revenue for the year ended December 31, 2011
compared to the year ended December 31, 2010 was related to our retained
interests in Rotarix net royalties which were not sold to PRF and which is equal
to the amount payable to CCH and recognized in royalty expense by us.

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Table of Contents

Research and Development Expense

Research and development expenses consist primarily of (i) personnel expenses, (ii) laboratory supply expenses relating to the development of our technology, (iii) facility expenses, and (iv) product development expenses associated with our drug candidates as follows:


                                   Year Ended
                                  December 31,        Increase/      Increase/
                                                      (Decrease)     (Decrease)
                                 2011       2010          $              %
                                         (In thousands)
         Personnel             $ 12,715   $ 12,204    $       511              4 %
         Laboratory Supplies      1,920      1,779            141              8 %
         Facility                 4,674      4,962           (288 )           (6 )%
         Product Development     10,044      5,832          4,212             72 %


    Personnel expenses primarily include salary, benefits, stock-based
compensation and payroll taxes. The $0.5 million increase in personnel expenses
for the year ended December 31, 2011 compared to the year ended December 31,
2010 was due to higher headcount.

    Laboratory supply expenses include laboratory materials and supplies,
services, and other related expenses incurred in the development of our
technology. The $0.1 million increase in laboratory supply expenses for the year
ended December 31, 2011 compared to the year ended December 31, 2010 was
primarily due to the renovations completed during the year ended December 31,
2010 at our Fall River, MA manufacturing facility during which manufacturing
activities ceased.

Facility e




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