CELLDEX THERAPEUTICS, INC.

FORM 10-Q

For the Quarterly Period Ended September 30, ~~2017~~2018

Table of Contents

		Page
Part I — Financial Information

Item 1. Unaudited Financial Statements		3

Condensed Consolidated Balance Sheets at September 30, ~~2017~~2018 and December 31, ~~2016~~2017		3

Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three and Nine Months Ended September 30, ~~2017~~2018 and ~~2016~~2017		4

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, ~~2017~~2018 and ~~2016~~2017		5

Notes to Unaudited Condensed Consolidated Financial Statements		6

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	16	15

Item 3. Quantitative and Qualitative Disclosures About Market Risk	32	26

Item 4. Controls and Procedures	32	27

Part II — Other Information

Item 1A. Risk Factors	33	28

~~Item 5. Other Information~~	33

Item 6. Exhibits	33	29

~~Signatures~~	35

Exhibit Index	34	30

Signatures		31

PART I — FINANCIAL INFORMATION

Item 1. Unaudited Financial Statements

CELLDEX THERAPEUTICS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except share and per share amounts)

	September 30, 2017			December 31, 2016			September 30, 2018			December 31, 2017
ASSETS
Current Assets:
Cash and Cash Equivalents	$	54,735		$	42,461		$	32,823		$	40,288
Marketable Securities	85,795			147,315			72,795			99,139
Accounts and Other Receivables	3,013			1,784			3,175			1,880
Prepaid and Other Current Assets	3,774			4,009			2,176			3,449
Total Current Assets	147,317			195,569			110,969			144,756
Property and Equipment, Net	11,308			13,192			6,699			10,372
Intangible Assets, Net	67,815			81,487			48,690			67,591
Other Assets	2,002			2,134			1,929			1,929
Goodwill	90,976			90,976			—			90,976
Total Assets	$	319,418		$	383,358		$	168,287		$	315,624

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts Payable	$	1,278		$	1,740		$	2,311		$	1,715
Accrued Expenses	17,845			28,657			9,614			19,455
Current Portion of Long-Term Liabilities	5,792			4,826			4,926			6,566
Total Current Liabilities	24,915			35,223			16,851			27,736
Other Long-Term Liabilities	75,351			82,704			23,302			51,519
Total Liabilities	100,266			117,927			40,153			79,255

Commitments and Contingent Liabilities

Stockholders’ Equity:
Convertible Preferred Stock, $.01 Par Value; 3,000,000 Shares Authorized; No Shares Issued and Outstanding at September 30, 2017 and December 31, 2016	—			—
Common Stock, $.001 Par Value; 297,000,000 Shares Authorized; 132,108,478 and 120,516,654 Shares Issued and Outstanding at September 30, 2017 and December 31, 2016, respectively	132			121
Convertible Preferred Stock, $.01 Par Value; 3,000,000 Shares Authorized; No Shares Issued and Outstanding at September 30, 2018 and December 31, 2017							—			—
Common Stock, $.001 Par Value; 297,000,000 Shares Authorized; 168,575,504 and 138,520,404 Shares Issued and Outstanding at September 30, 2018 and December 31, 2017, Respectively							169			139
Additional Paid-In Capital	1,025,108			982,255			1,078,419			1,046,183
Accumulated Other Comprehensive Income	2,588			2,541			2,582			2,564
Accumulated Deficit	(808,676		)	(719,486		)	(953,036		)	(812,517		)
Total Stockholders’ Equity	219,152			265,431			128,134			236,369
Total Liabilities and Stockholders’ Equity	$	319,418		$	383,358		$	168,287		$	315,624

See accompanying notes to unaudited condensed consolidated financial statements

CELLDEX THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)

(In thousands, except per share amounts)

	Three Months Ended September 30, 2017			Three Months Ended September 30, 2016			Nine Months Ended September 30, 2017			Nine Months Ended September 30, 2016			Three Months Ended September 30, 2018			Three Months Ended September 30, 2017			Nine Months Ended September 30, 2018			Nine Months Ended September 30, 2017
REVENUES:
Product Development and Licensing Agreements	$	1,238		$	493		$	2,488		$	1,551		$	131		$	1,238		$	2,792		$	2,488
Contracts and Grants	2,686			1,727			6,799			3,362			810			2,686			4,982			6,799
Total Revenues	3,924			2,220			9,287			4,913			941			3,924			7,774			9,287

OPERATING EXPENSES:
Research and Development	21,915			25,009			72,707			78,168			11,918			21,915			55,242			72,707
General and Administrative	5,346			6,950			19,109			24,049			3,722			5,346			14,936			19,109
In-Process Research and Development Impairment	13,000			—			13,000			—
Goodwill Impairment													—			—			90,976			—
Intangible Asset Impairment													—			13,000			18,677			13,000
Gain on Fair Value Remeasurement of Contingent Consideration	(4,600		)	—			(200		)	—			(6,935		)	(4,600		)	(27,968		)	(200		)
Amortization of Acquired Intangible Assets	224			254			672			760			—			224			224			672
Total Operating Expenses	35,885			32,213			105,288			102,977			8,705			35,885			152,087			105,288

Operating Loss	(31,961		)	(29,993		)	(96,001		)	(98,064		)	(7,764		)	(31,961		)	(144,313		)	(96,001		)
Investment and Other Income, Net	398			395			1,611			1,841			521			398			1,767			1,611
Net Loss Before Income Tax Benefit	(31,563		)	(29,598		)	(94,390		)	(96,223		)	(7,243		)	(31,563		)	(142,546		)	(94,390		)
Income Tax Benefit	5,200			—			5,200			—			—			5,200			765			5,200
Net Loss	$	(26,363	)	$	(29,598	)	$	(89,190	)	$	(96,223	)	$	(7,243	)	$	(26,363	)	$	(141,781	)	$	(89,190	)

Basic and Diluted Net Loss Per Common Share	$	(0.20	)	$	(0.29	)	$	(0.71	)	$	(0.97	)	$	(0.04	)	$	(0.20	)	$	(0.94	)	$	(0.71	)

Shares Used in Calculating Basic and Diluted Net Loss per Share	129,640			100,672			125,856			99,398
Shares Used in Calculating Basic and Diluted Net Loss Per Share													163,679			129,640			150,636			125,856

COMPREHENSIVE LOSS:
Net Loss	$	(26,363	)	$	(29,598	)	$	(89,190	)	$	(96,223	)	$	(7,243	)	$	(26,363	)	$	(141,781	)	$	(89,190	)
Other Comprehensive Income:
Other Comprehensive Income (Loss):
Unrealized Gain (Loss) on Marketable Securities	11			(113		)	47			303			(8		)	11			18			47
Comprehensive Loss	$	(26,352	)	$	(29,711	)	$	(89,143	)	$	(95,920	)	$	(7,251	)	$	(26,352	)	$	(141,763	)	$	(89,143	)

See accompanying notes to unaudited condensed consolidated financial statements

CELLDEX THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW

(Unaudited)

(In thousands)

	Nine Months Ended September 30, 2017			Nine Months Ended September 30, 2016			Nine Months Ended September 30, 2018			Nine Months Ended September 30, 2017
Cash Flows from Operating Activities:
Cash Flows From Operating Activities:
Net Loss	$	(89,190	)	$	(96,223	)	$	(141,781	)	$	(89,190	)
Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities:
Depreciation and Amortization	3,392			2,135			2,856			3,392
Amortization of Intangible Assets	672			760			224			672
Amortization and Premium of Marketable Securities, Net	(171		)	768			(666		)	(171		)
Loss on Sale or Disposal of Assets	6			74			1,170			6
In-Process Research and Development Impairment	13,000			—
Goodwill Impairment							90,976			—
Intangible Asset Impairment							18,677			13,000
Gain on Fair Value Remeasurement of Contingent Consideration	(200		)	—			(27,968		)	(200		)
Income Tax Benefit	(5,200		)	—
Non-Cash Income Tax Benefit							(765		)	(5,200		)
Stock-Based Compensation Expense	9,728			11,709			6,329			9,728
Non-Cash Expense	—			1,638
Changes in Operating Assets and Liabilities:
Accounts and Other Receivables	(1,229		)	(609		)	(790		)	(1,229		)
Prepaid and Other Current Assets	525			(325		)	1,545			525
Other Assets	132			—			—			132
Accounts Payable and Accrued Expenses	(10,888		)	(11,560		)	(9,246		)	(10,888		)
Other Liabilities	(987		)	(1,054		)	(366		)	(987		)
Net Cash Used in Operating Activities	(80,410		)	(92,687		)	(59,805		)	(80,410		)

Cash Flows from Investing Activities:
Cash Flows From Investing Activities:
Sales and Maturities of Marketable Securities	183,683			194,915			178,335			183,683
Purchases of Marketable Securities	(122,235		)	(149,877		)	(151,558		)	(122,235		)
Investment in Other	—			(1,801		)
Acquisition of Property and Equipment	(1,598		)	(2,113		)	(651		)	(1,598		)
Proceeds from Sale or Disposal of Assets							342			—
Net Cash Provided by Investing Activities	59,850			41,124			26,468			59,850

Cash Flows from Financing Activities:
Cash Flows From Financing Activities:
Net Proceeds from Stock Issuances	32,642			10,666			25,453			32,642
Proceeds from Issuance of Stock from Employee Benefit Plans	192			532			419			192
Net Cash Provided by Financing Activities	32,834			11,198			25,872			32,834

Net Increase (Decrease) in Cash and Cash Equivalents	12,274			(40,365		)
Net (Decrease) Increase in Cash and Cash Equivalents							(7,465		)	12,274
Cash and Cash Equivalents at Beginning of Period	42,461			72,108			40,288			42,461
Cash and Cash Equivalents at End of Period	$	54,735		$	31,743		$	32,823		$	54,735

Non-cash Investing Activities
Acquisition of Property and Equipment Included in Accounts Payable and Accrued Expenses	$	75		$	65
Accrued construction in progress							$	86		$	75
Non-cash Supplemental Disclosure
Shares Issued to Former Kolltan Executive for Settlement of Severance	$	302		$	—
Shares issued to former Kolltan executive for settlement of severance							$	65		$	302

See accompanying notes to unaudited condensed consolidated financial statements

CELLDEX THERAPEUTICS, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

September 30, ~~2017~~2018

(1) Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared by Celldex Therapeutics, Inc. (the “Company” or “Celldex”) in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and reflect the operations of the Company and its ~~wholly-owned subsidiary.~~ ~~In June 2017, the Company liquidated its wholly-owned subsidiary, Celldex Therapeutics Europe GmbH.~~whollyowned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

These interim financial statements do not include all the information and footnotes required by U.S. GAAP for annual financial statements and should be read in conjunction with the audited financial statements for the year ended December 31, ~~2016,~~2017, which are included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March ~~14, 2017.~~7, 2018. In the opinion of management, the interim financial statements reflect all normal recurring adjustments necessary to fairly state the Company’s financial position and results of operations for the interim periods presented. The year-end condensed balance sheet data presented for comparative purposes was derived from audited financial statements but does not include all disclosures required by U.S. GAAP.

The results of operations for the interim periods are not necessarily indicative of the results of operations to be expected for any future interim period or the fiscal year ending December 31, ~~2017.~~2018.

At September 30, ~~2017,~~2018, the Company had cash, cash equivalents and marketable securities of ~~$140.5~~$105.6 million. The Company has had recurring losses and incurred a loss of ~~$89.2~~$141.8 million for the nine months ended September 30, ~~2017.~~2018. Net cash used in operations for the nine months ended September 30, ~~2017~~2018 was ~~$80.4~~$59.8 million. The Company believes that the cash, cash equivalents and marketable securities at November 7, ~~2017~~2018 will be sufficient to meet estimated working capital requirements 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 raising activities 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 the Company 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 the Company’s negotiating position in capital-raising efforts may worsen as existing resources are used. There is also no assurance that the Company will be able to enter into further collaborative relationships. Additional equity financings may be dilutive to the Company’s stockholders; debt financing, if available, may involve significant cash payment obligations and covenants that restrict the Company’s ability to operate as a business; and licensing or strategic collaborations may result in royalties or other terms which reduce the Company’s economic potential from products under development. The Company’s ability to continue funding its planned operations into and beyond twelve months from the issuance date is also dependent on the timing and manner of payment of future contingent milestones from the Kolltan acquisition, in the event that the Company achieves the drug candidate milestones related to those payments. The Company, at its option, may decide to pay those milestone payments in cash, shares of its common stock or a combination thereof. If the Company is unable to raise the funds necessary to meet its liquidity needs, it may have to delay or discontinue the development of one or more programs, discontinue or delay ongoing or anticipated 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 part of the Company.

(2) Significant Accounting Policies

The significant accounting policies used in preparation of these condensed consolidated financial statements on Form 10-Q for the ~~quarterly period~~three and nine months ended September 30, ~~2017~~2018 are consistent with those discussed in Note 2 to the financial statements in our Annual Report on Form 10-K for the year ended December 31, ~~2016,~~2017, except ~~for~~as it relates to the adoption of new accounting standards during the first nine months of ~~2017~~2018 as discussed below.

~~Newly-Adopted~~Newly Adopted Accounting Pronouncements

On January 1, ~~2017,~~2018, the Company adopted the new U.S. GAAP standard “Revenue from Contracts with Customers” using a modified retrospective application method, recognizing an immaterial cumulative-effect adjustment to accumulated deficit. The Company applied the new guidance to (i) contracts not completed as of the date of adoption and (ii) all new revenue contracts entered into after January 1, 2018. Refer to Note 11 “Revenue” for additional details on this adoption and the Company’s updated revenue accounting policy and disclosures.

On January 1, 2018, the Company adopted a ~~new~~ U.S. GAAP ~~accounting~~ standard update “Classification of Certain Cash Receipts and Cash Payments”which ~~involves several aspects of~~clarifies the ~~accounting for share-based payment transactions, including the income tax consequences,~~ classification of ~~awards as either equity or liabilities~~certain cash receipts and ~~classification on~~payments in the statement of cash flows. The ~~Company elected to continue to estimate forfeitures expected to occur to determine stock-based compensation expense. Upon~~ adoption of this new standard did not impact the Company’s gross deferred tax assets and corresponding valuation allowance each increased by $17.7 million related to tax deductions from the exercise of stock options that previously would have been credited to additional paid-in-capital when realized.consolidated financial statements.

On ~~January~~July 1, ~~2017,~~2018, the Company adopted a ~~new~~ U.S. GAAP standard that aligns the accounting for share-based payment awards issued to employees and nonemployees. Under the new guidance, the existing employee guidance is applied to nonemployee share-based transactions. The adoption of this new standard ~~which simplifies how an entity is required to test goodwill for impairment. A goodwill impairment will be measured by~~did not have a material impact on the ~~amount by which a reporting unit’s carrying value exceeds its fair value, with the amount of impairment not to exceed the carrying amount of goodwill.~~Company’s consolidated financial statements.

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 are adopted by the Company as of the specified effective date. Unless otherwise discussed, the Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on the Company’s consolidated financial statements upon adoption.

In May 2014, the FASB issued a new U.S GAAP accounting standard that updates guidance and disclosure requirements for recognizing revenue. The new revenue recognition standard provides a five-step model for recognizing revenue from contracts with customers. The core principle is that a company should recognize revenue when it transfers goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. The new standard will be effective for the Company on January 1, 2018 and can be applied using one of two methods: retrospectively to each prior period presented or a modified retrospective application by recognizing a cumulative-effect adjustment as a component of equity as of the date of adoption. The Company expects to adopt the new revenue standard using the modified retrospective application method. During the fourth quarter of 2017, the Company plans to finalize its assessments over the impact that these standards may have on its consolidated financial statements and disclosures. As a result of adopting this standard, the Company plans to implement additional processes and controls, including additional disclosures, to comply with the new standard.

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 from leases on the balance sheet and disclose qualitative and quantitative information about its leasing arrangements. The Company will adopt the new guidance for its fiscal year beginning January 1, 2019 and expects to use the modified retrospective transition method, which requires the Company to apply the standard as of the effective date and does not require restatement of prior periods. The Company does not expect that this standard will have a material impact on its Consolidated Statement of Operations and Comprehensive Loss or Statement of Cash Flow, however the Company expects that adoption of this standard will result in the recognition of material right-of-use assets and lease liabilities on its Consolidated Balance Sheet.

In August 2018, the SEC issued a final rule amending certain disclosure requirements including expanding the disclosure requirements on the analysis of stockholders’ equity for interim financial statements. Under the amendments, an analysis of changes in each caption of stockholders’ equity presented in the consolidated balance sheet must be provided in a note or separate statement. This final rule will be effective for the ~~Company on January 1,~~quarter ended March 31, 2019. The Company is currently evaluating the ~~potential~~ impact ~~that this standard may have~~of the final rule on ~~the Company’s~~its consolidated financial ~~statements.~~statements and related disclosures.

In August ~~2016,~~ 2018, the FASB issued ~~new U.S. GAAP guidance which clarifies the classification of~~amendments that modify certain ~~cash receipts and payments in the statement of cash flows. This standard is~~disclosure requirements for fair value measurements. The amendments become effective for ~~the company on~~our fiscal year, including interim periods, beginning January 1, ~~2018.~~2020. Early adoption, of all the amendments or only the provisions that eliminate or modify the requirements, is permitted. The adoption of this new guidance is not expected to have a material impact on the Company’s consolidated financial ~~statements.~~statements and related disclosures.

(3) Fair Value Measurements

The following tables set forth the Company’s financial assets and liabilities subject to fair value measurements:

As of
September 30, 2017

Level 1

Level 2

Level 3

(In thousands)

Assets:

Money market funds and cash equivalents

$
42,032

$
—

$
42,032

$
—

Marketable securities

85,795

—

85,795

—

$
127,827

$
—

$
127,827

$
—

Liabilities:

Kolltan acquisition contingent consideration

$
44,000

$
—

$
—

$
44,000

$
44,000

$
—

$
—

$
44,000

	As of December 31, 2016		Level 1		Level 2		Level 3		As of September 30, 2018		Level 1	Level 2		Level 3
	(In thousands)								(In thousands)
Assets:
Money market funds and cash equivalents	$	20,445	$	—	$	20,445	$	—	$	24,145	—	$	24,145	—
Marketable securities	147,315		—		147,315		—		72,795		—	72,795		—
	$	167,760	$	—	$	167,760	$	—	$	96,940	—	$	96,940	—
Liabilities:
Kolltan acquisition contingent consideration									$	15,432	—	—		$	15,432
									$	15,432	—	—		$	15,432

									As of December 31, 2017		Level 1	Level 2		Level 3
									(In thousands)
Assets:
Money market funds and cash equivalents									$	24,061	—	$	24,061	—
Marketable securities									99,139		—	99,139		—
									$	123,200	—	$	123,200	—
Liabilities:
Kolltan acquisition contingent consideration	$	44,200	$	—	$	—	$	44,200	$	43,400	—	—		$	43,400
	$	44,200	$	—	$	—	$	44,200	$	43,400	—	—		$	43,400

The Company’s financial assets consist mainly of ~~cash~~money market funds and cash equivalents and marketable securities and are classified as Level 2 within the valuation hierarchy. The Company values its marketable securities utilizing independent pricing services which normally derive security prices from recently reported trades for identical or similar securities, making adjustments based on significant observable transactions. At each balance sheet date, observable market inputs may include trade information, broker or dealer quotes, bids, offers or a combination of these data sources.

The following table reflects the activity for the Company’s contingent consideration liabilities measured at fair value using Level 3 inputs for the nine months ended September 30, ~~2017~~2018 (in thousands):

Other Long-Term
Liabilities:
Contingent
Consideration

Balance at December 31, 2016

$
44,200

Fair value adjustments included in operating expenses

(200
)
Balance at September 30, 2017

$
44,000

	Other Liabilities: Contingent Consideration

Balance at December 31, 2017	$	43,400
Fair value adjustments included in operating expenses	(27,968		)
Balance at September 30, 2018	$	15,432

The valuation technique used to measure fair value of the Company’s Level 3 liabilities, which consist of contingent consideration related to the acquisition of Kolltan in 2016, ~~(Note 11),~~ was primarily an income approach. The Company may be required to pay future consideration of up to ~~$172.5~~$162.5 million that is contingent upon the achievement of specified development, regulatory approvals or sales-based milestone events. The significant unobservable inputs used in the fair value measurement of the contingent consideration are estimates including probability of success, discount rates and amount of time until the conditions of the milestone payments are met.

During the three months ended September 30, 2018, the Company recorded a $6.9 million gain on fair value remeasurement of contingent consideration primarily due to lower probability that milestones related to our anti-KIT program would be triggered by the Company’s current anti-KIT program development. During the nine months ended September 30, 2018, the Company recorded a $28.0 million gain on fair value remeasurement of contingent consideration primarily due to discontinuation of the Glemba and CDX-014 programs, updated assumptions for the varlilumab program, and lower probability that milestones related to our anti-KIT program would be triggered by the Company’s current anti-KIT program development. During the three and nine months ended September 30, 2017, the Company recorded a $4.6 million and a $0.2 million gain on fair value remeasurement of contingent consideration, respectively, primarily due to a reduction in fair value attributed to the milestones related to the Company’s anti-KIT program and partially offset by losses related to changes in discount rates and the passage of time affecting remaining milestones. The Company’s anti-KIT program includes CDX-0158 and CDX-0159, a variant of CDX-0158. CDX-0159 is being fully developed in-house with the intention of replacing CDX-0158 in clinical development. The Company expects manufacturing and IND-enabling efforts for CDX-0159 will be completed in 2018.

The Company did not have any transfers of assets or liabilities between the fair value measurement classifications during the nine months ended September 30, ~~2017.~~2018.

(4) Marketable Securities

The following is a summary of marketable securities, classified as available-for-sale:

Amortized
Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Fair Value

(In thousands)

September 30, 2017

Marketable securities

U.S. government and municipal obligations

Maturing in one year or less

$
13,725

$
5

$
(3
)
$
13,727

Maturing after one year through three years

—

—

—

—

Total U.S. government and municipal obligations

$
13,725

$
5

$
(3
)
$
13,727

Corporate debt securities

Maturing in one year or less

$
72,078

$
3

$
(13
)
$
72,068

Maturing after one year through three years

—

—

—

—

Total corporate debt securities

$
72,078

$
3

$
(13
)
$
72,068

Total marketable securities

$
85,803

$
8

$
(16
)
$
85,795

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

	Gross Unrealized
	Amortized Cost		Gains		Losses			Fair Value
	(In thousands)
September 30, 2018
U.S. government and municipal obligations (maturing in one year or less)	$	22,318	$	—	$	(7	)	$	22,311
Corporate debt securities (maturing in one year or less)	50,491		—		(7		)	50,484
Total Marketable Securities	$	72,809	$	—	$	(14	)	$	72,795

December 31, 2017
U.S. government and municipal obligations (maturing in one year or less)	$	26,164	$	3	$	(9	)	$	26,158
Corporate debt securities (maturing in one year or less)	73,007		1		(27		)	72,981
Total Marketable Securities	$	99,171	$	4	$	(36	)	$	99,139

The Company holds ~~investment grade~~investment-grade marketable securities, and none were ~~considered to be other-than-temporarily impaired~~in a continuous unrealized loss position for more than twelve months as of September 30, 2018 and December 31, 2017. The unrealized losses are attributable to changes in interest rates and the Company does not believe any unrealized losses represent other-than-temporary impairments.

Marketable securities include ~~$0.3~~$0.1 million and ~~$0.6~~$0.3 million in accrued interest at September 30, ~~2017~~2018 and December 31, ~~2016,~~2017, respectively.

(5) Intangible Assets and Goodwill

Intangible Assets, Net

The table below presents information for the Company’s finite-lived intangible assets that are subject to amortization and indefinite-lived intangible assets:

		September 30, 2017							December 31, 2016							Gross Carrying Amount		Accumulated Amortization			Accumulated Impairments			Net Carrying Amount
	Estimated Life	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		(In thousands)
	(In thousands)
September 30, 2018
Finite-lived Intangible Assets:
License Rights	16 years	$	14,500	$	(7,175	)	$	7,325	$	14,500	$	(6,503	)	$	7,997	$	14,500	$	(7,623	)	$	(6,877	)	$	—
Indefinite-lived Intangible Assets:
IPR&D	Indefinite	60,490		—			60,490		73,490		—			73,490		60,490		—			(11,800		)	48,690
Total Intangible Assets, Net		$	74,990	$	(7,175	)	$	67,815	$	87,990	$	(6,503	)	$	81,487	$	74,990	$	(7,623	)	$	(18,677	)	$	48,690

December 31, 2017
Finite-lived Intangible Assets:
License Rights																$	14,500	$	(7,399	)	$	—		$	7,101
Indefinite-lived Intangible Assets:
IPR&D																60,490		—			—			60,490
Total Intangible Assets, Net																$	74,990	$	(7,399	)	$	—		$	67,591

Finite-lived intangible assets consist solely of license rights amended under a 2009 agreement with Amgen Fremont related to developing and commercializing Glemba. As a result of the discontinuation of the Glemba program, the Company recorded a non-cash impairment charge of $6.9 million during the first quarter of 2018. Amortization expense related to this finite-lived intangible asset was $0.0 million and $0.2 million for the three and nine month periods ended September 30, 2018, respectively, and $0.2 million and $0.7 million for the three and nine month periods ended September 30, 2017, respectively.

Indefinite-lived intangible assets consist of acquired in-process research and development (“IPR&D”) related to the development of ~~glembatumumab vedotin acquired in connection with the CuraGen acquisition and the development of~~CDX-3379, the anti-KIT program ~~CDX-3379~~ and the TAM ~~programs acquired in connection with the Kolltan acquisition. As of September 30, 2017, no IPR&D asset had reached technological feasibility nor did any have alternative future uses.~~

program. The Company performs an impairment test on IPR&D assets at least annually, or more frequently if events or changes in circumstances indicate that IPR&D assets may be impaired. ~~During~~As a result of the ~~three and nine months ended September 30, 2017,~~discontinuation of the

Glemba program, the Company recorded a non-cash ~~partial~~ impairment charge of ~~$13.0~~$11.8 million onduring the first quarter of 2018. CDX-3379 is in Phase 2 development. The anti-KIT ~~program~~and TAM programs are in preclinical development. As of September 30, 2018, none of the remaining IPR&D assets acquired from Kolltan. The Company determined that changes in projected development and regulatory timelines related to the anti-KIT program taken together constituted a triggering event that required the Company to evaluate the intangible asset for impairment. As part of this evaluation, the present value of probability adjusted estimated nethad reached technological feasibility nor did any have alternative future cash flows was used to determine the fair value of the program and compared to the carrying value of the program. As a result of this impairment assessment, the Company concluded that a non-cash partial impairment charge of $13.0 million on the anti-KIT program IPR&D asset acquired from Kolltan be recorded for the three and nine months ended September 30, 2017 for the amount the fair value of the anti-KIT program exceeded its carrying amount.

uses. Due to the nature of IPR&D projects, the Company may experience future delays or failures to obtain regulatory approvals to conduct clinical trials, failures of such clinical trials or other failures to achieve a commercially viable product, and as a result, may recognize further impairment losses in the future.

Goodwill

~~There have been no~~The changes toin the carrying amount of goodwill ~~during~~for the nine months ended September 30, ~~2017.~~ 2018 were as follows:

	Goodwill
	(In thousands)
Balance at December 31, 2017	$	90,976
Goodwill Impairment	(90,976		)
Balance at September 30, 2018	$	—

The Company ~~performs an annual impairment test of goodwill as of July 1 each year. The Company tested~~evaluated goodwill for potential impairment asdue to the METRIC failure. The carrying amount of ~~July 1, 2017~~the Company was compared to the Company’s fair value. The Company’s fair value assessment reflected a number of significant management assumptions and ~~concluded~~estimates including the Company’s probability forecasts for pipeline assets, income taxes, capital expenditures and changes in working capital requirements. Changes in these assumptions and/or discount rates could materially impact the Company’s conclusions. Through this assessment, it was determined that the carrying amount of the Company exceeded its fair value by over $91.0 million. As such, the full goodwill asset was ~~not impaired.~~considered impaired and a charge of $91.0 million was recorded during the first quarter of 2018.

(6) Other Long-Term Liabilities

Other long-term liabilities include the following:

September 30, 2017

December 31, 2016

(In thousands)

Deferred Rent

$
669

$
398

Net Deferred Tax Liabilities related to IPR&D

22,854

28,054

Deferred Income from Sale of Tax Benefits

8,940

9,436

Accrued Lease Restructuring

854

1,154

Long-Term Severance

100

539

Contingent Milestones

44,000

44,200

Deferred Revenue

3,726

3,749

Total

81,143

87,530

Less Current Portion

(5,792
)
(4,826
)
Long-Term Portion

$
75,351

$
82,704

	September 30, 2018			December 31, 2017
	(In thousands)
Net Deferred Tax Liabilities Related to IPR&D (Note 12)	$	3,007		$	3,772
Deferred Income From Sale of Tax Benefits	6,402			6,756
Other	1,305			1,344
Contingent Milestones (Note 4)	15,432			43,400
Deferred Revenue (Note 11)	2,082			2,813
Total	28,228			58,085
Less Current Portion	(4,926		)	(6,566		)
Long-Term Portion	$	23,302		$	51,519

In November 2015, December 2014 ~~January 2014~~ and January ~~2013,~~2014, the Company received approval from the New Jersey Economic Development Authority and agreed to sell New Jersey tax benefits of $9.8 million, $1.9 million ~~$1.1 million~~ and ~~$0.8~~$1.1 million to an independent third party for $9.2 million, $1.8 million ~~$1.0 million~~ and ~~$0.8~~$1.0 million, respectively. Under the agreement, the Company must maintain a base of operations 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. The Company recognized $0.0 million and ~~$0.5~~$0.4 million in other income related to the sale of these tax benefits ~~for~~during the three and nine months ended September 30, ~~2017,~~2018, respectively, and $0.0 million and ~~$0.6~~$0.5 million during the three and nine months ended September 30, ~~2016,~~2017, respectively.

In December 2016, the Company decided not to occupy the 11,500 square feet of expansion space (“Needham Expansion”) at its Needham, Massachusetts facility. The Company agreed to lease the Needham Expansion in August 2015 and the term of the lease expires in July 2020. In October 2017, the Company entered into a sublease agreement for the Needham Expansion. In March 2017, the Company terminated its lease in Branford, CT and consolidated its Connecticut operations in its New Haven, CT facility. The Company recorded restructuring expense of $0.2 million to general and administrative expense related to the Branford, CT lease termination. The activity related to accrued lease restructuring for the nine months ended September 30, 2017 is presented below (in thousands):

Accrued Lease
Restructuring

Balance at December 31, 2016

$
1,154

Expense

170

Payments

(470
)
Balance at September 30, 2017

$
854

(7) Stockholders’ Equity

In May 2016, the Company ~~and~~entered into an agreement with Cantor Fitzgerald & Co. (“Cantor”~~) entered into a controlled equity offering sales agreement (“2016 Cantor Agreement”~~) to allow the Company to issue and sell shares of its common stock having an aggregate offering price of up to $60.0 million from time to time through Cantor, acting as agent. In November 2017, the Company filed a prospectus supplement registering the offer and sale of shares of common stock of up to an additional $75.0 million under the agreement with Cantor. During the nine months ended September 30, ~~2017,~~2018, the Company issued ~~11,326,363~~29,760,486 shares of ~~its~~ common stock under ~~the 2016~~this controlled equity offering sales agreement with Cantor ~~Agreement~~ resulting in net proceeds ~~to the Company~~ of ~~$32.6~~$25.5 million after deducting commission and offering expenses. At September 30, ~~2017,~~2018, the Company had ~~$11.7~~$41.3 million remaining in aggregate gross offering price available under the ~~2016~~ Cantor ~~Agreement.~~agreement. In October ~~2017,~~2018, the Company ~~completed sales under the 2016 Cantor Agreement and~~ issued ~~3,871,709~~3,884,597 shares of its common stock resulting in net proceeds to the Company of ~~$11.3~~$1.6 million.

(8) Restructuring Expenses

As a result of the METRIC failure and discontinuation of the Glemba program, the Company approved a reduction in its workforce to reduce operating costs and recorded severance expense of $1.2 million in the nine months ended September 30, 2018. At September 30, 2018, the Company recorded accrued severance of $0.2 million related to this workforce reduction.

(9) Stock-Based Compensation

A summary of stock option activity for the nine months ended September 30, ~~2017~~2018 is as follows:

	Shares		Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Term (In Years)	Shares		Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Term (In Years)
Options Outstanding at December 31, 2016	10,218,710		$	11.14	6.5
Options Outstanding at December 31, 2017						10,856,212		$	9.40	6.1
Granted	2,309,900		$	2.34		5,056,467		0.61
Exercised	—		$	—		(104,500	)	2.80
Canceled	(945,792	)	$	9.21		(2,568,090	)	8.76
Options Outstanding at September 30, 2017	11,582,818		$	9.54	5.9
Options Vested and Expected to Vest at September 30, 2017	11,460,583		$	9.59	5.8
Options Exercisable at September 30, 2017	7,360,799		$	11.05	4.1
Options Outstanding at September 30, 2018						13,240,089		6.22		7.4
Options Vested and Expected to Vest at September 30, 2018						12,884,023		6.36		7.3
Options Exercisable at September 30, 2018						6,190,301		10.97		5.2
Shares Available for Grant Under the 2008 Plan	7,780,663					5,096,110

The weighted average grant-date fair value of stock options granted during the three and nine month ~~period~~periods ended September 30, ~~2017~~2018 was ~~$1.57.~~$0.30 and $0.44, respectively. Stock-based compensation expense for the three and nine ~~months~~month periods ended September 30, ~~2017~~2018 and ~~2016~~2017 was recorded as follows:

	Three months ended September 30,				Nine months ended September 30,				Three months ended September 30,				Nine months ended September 30,
	2017		2016		2017		2016		2018		2017		2018		2017
	(In thousands)								(In thousands)				(In thousands)
Research and development	$	1,546	$	2,042	$	5,310	$	5,866	$	799	$	1,546	$	3,088	$	5,310
General and administrative	1,193		1,754		4,418		5,843		994		1,193		3,241		4,418
Total stock-based compensation expense	$	2,739	$	3,796	$	9,728	$	11,709	$	1,793	$	2,739	$	6,329	$	9,728

The fair ~~value~~values of employee and director stock options granted during the three and nine month periods ended September 30, ~~2017~~2018 and ~~2016~~2017 were valued using the Black-Scholes ~~option-pricing~~option pricing model with the following assumptions:

Three months ended September 30,

Nine months ended September 30,

2017

2016

2017

2016

Expected stock price volatility

76
%
76
%
76 — 77
%
70 — 77
%
Expected option term

6.0 years

6.0 years

6.0 years

6.0 years

Risk-free interest rate

2.0
%
1.4
%
2.0 — 2.3
%
1.4 — 1.6
%
Expected dividend yield

None

None

None

None

	Three months ended September 30,		Nine months ended September 30,
	2018	2017	2018	2017
Expected stock price volatility	85%	76%	73 – 85%	76 – 77%
Expected option term	6.0 Years	6.0 Years	6.0 Years	6.0 Years
Risk-free interest rate	2.8%	2.0%	2.8 – 3.0%	2.0 – 2.3%
Expected dividend yield	None	None	None	None

~~(9)~~(10) Accumulated Other Comprehensive Income

The changes in accumulated other comprehensive income, which is reported as a component of stockholders’ equity, for the nine months ended September 30, ~~2017~~2018 are summarized below:

Unrealized (Loss)
Gain on
Marketable
Securities

Foreign
Currency Items

Total

(In thousands)

Balance at December 31, 2016

$
(55
)
$
2,596

$
2,541

Other comprehensive gain

47

—

47

Balance at September 30, 2017

$
(8
)
$
2,596

$
2,588

	Unrealized Gain/(Loss) on Marketable Securities			Foreign Currency Items		Total
	(In thousands)
Balance at December 31, 2017	$	(32	)	$	2,596	$	2,564
Other comprehensive loss	18			—		18
Balance at September 30, 2018	$	(14	)	$	2,596	$	2,582

No amounts were reclassified out of accumulated other comprehensive income during the three or nine months ended September 30, ~~2017.~~2018.

~~(10)~~(11) Revenue

On January 1, 2018, the Company adopted a new revenue accounting standard, “Revenue from Contracts with Customers” (ASC 606). Upon adoption using the modified retrospective application, the Company recognized a $1.3 million decrease to accumulated deficit, a $0.8 million decrease in deferred revenue and $0.5 million increase in accounts receivable due to the cumulative impact of adopting ASC 606. This impact was driven by the acceleration of revenue using a percentage-of-completion method of accounting under ASC 606 for an open contract that had previously been accounted for using the Contingency Adjusted Performance Model (“CAPM”) under previous guidance.

Results for reporting periods beginning after January 1, 2018 are presented under ASC 606 while prior period amounts were not adjusted and continue to be reported in accordance with historic accounting under previous guidance. There was not a material impact to revenues as a result of applying ASC 606 for the three and nine month periods ended September 30, 2018, and there have not been significant changes to the Company’s business processes, systems or internal controls as a result of adopting the new standard. The Company expects revenue recognition to remain largely unchanged under the new standard.

~~Rockefeller University (Rockefeller)~~Revenue Recognition

~~In 2013,~~Revenues are recognized when performance obligations under agreements or contracts are satisfied, in an amount that reflects the consideration the Company ~~entered into an agreement,~~expects to be entitled to in exchange for those services.

The Company determines revenue recognition through the following steps:

· Identification of the contract, or contracts, with a customer;

· Identification of the performance obligations in the contract;

· Determination of the transaction price;

· Allocation of the transaction price to the performance obligations in the contract; and

· Recognition of revenue when, or as, ~~amended, with Rockefeller pursuant to which~~ the Company ~~performs~~satisfies a performance obligation.

Revenue for the Company has historically been derived from biopharmaceutical product development agreements with collaborative partners for the research and development ~~services~~of therapeutic drug candidates. The terms of the agreements may include nonrefundable signing and licensing fees, funding for ~~Rockefeller.~~research, development and manufacturing, milestone payments and royalties on any product sales derived from collaborations. The Company ~~bills Rockefeller quarterly for actual time~~assesses the multiple obligations typically within product development contracts to determine the distinct performance obligations and ~~direct~~how to allocate the arrangement consideration to each distinct performance obligation.

Under product development agreements, revenue is generally recognized using a cost-to-cost measure of progress. Revenue is recognized based on the costs incurred to date as a percentage of the total estimated costs to fulfill the contract. Incurred cost represents work performed, which corresponds with, and ~~records those amounts~~thereby best depicts, the transfer of control to the customer. Due to the nature of the work performed in these arrangements, the estimation of cost at completion is complex, subject to many variables, such as expected clinical trial costs, and requires significant judgements. Circumstances can arise that change original estimates of costs or progress toward completion. Any revisions to estimates are reflected in revenue on a cumulative catch-up basis in the ~~quarter~~period in which the change in circumstances became known.

Revenue for the Company is also derived from manufacturing and research and development arrangements. The Company owns and operates a cGMP manufacturing facility in Fall River, Massachusetts, to produce drug substance for its current and planned early-stage clinical trials. In order to utilize excess capacity, the Company has, from time to time, entered into contract manufacturing and research and development arrangements in which services are ~~performed.~~ provided on a time-and-material basis or at a negotiated fixed-price. Revenue from time-and-material contracts is generally recognized on an output basis as labor hours and/or direct expenses are incurred. Under fixed-price contracts, revenue is generally recognized on an output basis as progress is made toward completion of the performance obligations using surveys of performance completed to date.

Contract Assets and Liabilities

The Company classifies the right to consideration in exchange for products or services transferred to a client as either a receivable or a contract asset. A receivable is a right to consideration that is unconditional as compared to a contract asset which is a right to consideration that is conditional upon factors other than the passage of time. At January 1, 2018 and September 30, 2018, the Company’s right to consideration under all contracts was considered unconditional, and as such, there were no recorded ~~$0.3 million and $1.4 million~~contract assets.

The Company’s contract liabilities result from arrangements where the Company has received payment in advance of performance under the contract. These amounts are included as deferred revenue ~~related to~~within current portion of long-term liabilities on the ~~Rockefeller agreement~~condensed consolidated balance sheets. Revenue recognized from contract liabilities as of January 1, 2018 during the three and nine months ended September 30, ~~2017, respectively, and $1.1~~2018 was $0.0 million and ~~$1.8~~$1.5 million, ~~during~~respectively. Revenue expected to be recognized in the ~~three and nine months ended September 30, 2016, respectively.~~future from contract liabilities as performance obligations are satisfied are not expected to be material.

~~Bristol-Myers Squibb Company (BMS)~~Product Development and Licensing Revenue

~~In 2014, the Company~~The Company’s primary product development and licensing revenue is associated with a clinical collaboration agreement with BMS entered into ~~a clinical trial collaboration with BMS~~in 2014 to evaluate the safety, tolerability and preliminary efficacy of varlilumab and Opdivo®, BMS’s PD-1 immune checkpoint inhibitor, in a Phase 1/2 study. Under ~~the terms of~~ this ~~clinical trial collaboration,~~agreement, BMS made ~~a one-time~~an upfront payment to ~~the Company~~Celldex of $5.0 million and BMS and the Company amended the terms of the Company’s existing license agreement with Medarex, which was acquired by BMS, related to the Company’s CD27 program whereby certain future milestone payments were waived and future royalty rates were reduced that may have been due 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. 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 share development costs and that the Company will be responsible for conducting the ongoing Phase 1/2 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 its performance period under the BMS agreement would be 5 years. Accordingly, the $5.0 million up-front payment was initially recorded as deferred revenue and is being 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 Companyfunding for 50% of the external costs incurred by the Company in connection with the clinical trial. The ~~BMS payments are recognized as revenue under the CAPM. The~~ Company recorded ~~$0.9~~$0.1 million and ~~$2.1~~$2.7 million in revenue related to ~~the BMS~~this agreement during the three and nine months ended September 30, 2018, respectively.

Contract and Grants Revenue

In 2017, the Company entered into fixed-fee manufacturing and research and development arrangements with both the International AIDS Vaccine Initiative (IAVI) and Frontier Biotechnologies, Inc (Frontier). The Company recognized $0.1 million and $2.8 million in revenue under these agreements during the three and nine months ended September 30, 2018, respectively, and ~~$0.5~~$2.3 million and ~~$1.5~~$4.6 million during the three and nine months ended September 30, ~~2016, respectively.~~2017.

~~International AIDS Vaccine Initiative (IAVI)~~

In ~~2017,~~2013, the Company entered into an agreement, as amended, with ~~IAVI~~Rockefeller University pursuant to which the Company performs manufacturing and research and development ~~and manufacturing~~ services for ~~IAVI outlined under subsequently negotiated task orders. Revenue is recognized as services are performed under the negotiated task orders.~~Rockefeller University. The Company ~~recorded $1.7~~recognized $0.5 million and ~~$4.0~~$1.8 million in revenue for labor hours and direct costs incurred related to the ~~IAVI~~Rockefeller University agreement during the three and nine months ended September 30, 2018, respectively, and $0.3 million and $1.4 million during the three and nine months ended September 30, 2017, respectively.

~~Frontier Biotechnologies, Inc. (Frontier)~~

In 2017, the Company entered into an agreement with Frontier pursuant to which the Company performs research and development and manufacturing services for Frontier outlined under subsequently negotiated task orders. Revenue is recognized as services are performed under the negotiated task orders. The Company recorded $0.6 million in revenue related to the Frontier agreement during both the three and nine months ended September 30, 2017.

~~(11) 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 in exchange for all of the share and debt interests in Kolltan. The Company also agreed to issue an aggregate of 437,901 shares of its common stock, less tax withholdings, to certain former officers of Kolltan. During the nine months ended September 30, 2017, the Company issued 91,749 shares of its common stock and at September 30, 2017, the Company’s remaining obligation is to issue 125,123 shares of its common stock, less tax withholdings, related to this severance obligation. In addition, in the event that certain specified preclinical and clinical development milestones related to Kolltan’s development programs and/or Celldex’s development programs and certain commercial milestones related to Kolltan’s drug candidates are achieved, Celldex will be required to pay 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 of Celldex’s common stock or a combination of both, subject to provisions of the Merger Agreement.

The transaction was accounted for as a business combination with Celldex treated as the accounting acquirer. All of the assets acquired and liabilities assumed 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 was based on the acquisition-date fair value of the consideration transferred, which was calculated based on the closing price of the 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):

Fair 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

~~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 the aggregate consideration transferred and the fair value of assets acquired and liabilities assumed was allocated to goodwill. This goodwill relates to the potential synergies from the Kolltan Acquisition and deferred tax liabilities related to acquired IPR&D intangible assets. None of the goodwill is expected to be deductible for income tax purposes. The following table summarizes the fair values of the assets acquired and liabilities assumed at the acquisition date (in thousands):

Cash 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

The purchase price allocation has been prepared on a preliminary basis and is subject to change as additional information becomes available concerning the fair 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 than one year from the acquisition date.

~~Pro Forma Financial Information~~

If the operations of the Company and Kolltan were combined as of January 1, 2016, the unaudited pro forma net loss for the three and nine months ended September 30, 2016 would have been $35.5 million and $120.4 million, respectively, or $(0.30) and $(1.02) per share, respectively. The unaudited pro forma combined results are not necessarily indicative of the actual results that would have occurred had the acquisition been consummated at that date or of the future operations of the combined entities.

(12) Income Taxes

~~Massachusetts, New Jersey~~On December 22, 2017, the Tax Cuts and ~~Connecticut are~~Jobs Act (“TCJA”) was enacted and led to significant changes to U.S. tax law. Also on December 22, 2017, the ~~three states in which~~SEC staff issued SAB 118, allowing companies to record the effects of the TCJA on a provisional basis during a measurement period not to extend beyond one year of the enactment date. SAB 118 was codified into ASC 740 by ASU 2018-05.

The Company recognized an income tax benefit of $19.1 million related to implementing applicable provisions of the TCJA during the year ended December 31, 2017. In accordance with SAB 118, the Company ~~primarily operates or has operated and has income tax nexus.~~considered this adjustment to be a provisional amount based on the Company’s best estimates at December 31, 2017. The Company’s ~~wholly-owned subsidiary, Celldex Australia Pty Ltd, operates in Brisbane, Australia. The Company~~accounting for the tax effects of the TCJA is ~~not currently under examination by any jurisdictions for any tax year.~~complete as of September 30, 2018.

The Company has evaluated the positive and negative evidence bearing upon the realizability of its net deferred tax assets ~~which are comprised principally~~and considered its history of ~~net operating loss carryforwards, capitalized R&D expenditures and R&D tax credit carryforwards. The Company has determined~~losses, ultimately concluding that it is ~~more~~“more likely than ~~not~~not” that itthe Company will not recognize the benefits of federal, state and ~~state~~foreign deferred tax assets and, as ~~a result,~~such, has maintained a full valuation allowance ~~was maintained~~on its deferred tax assets as of September 30, 2018 and December 31, 2017.

A net deferred tax liability of $3.0 million and $3.8 million existed at September 30, ~~2017~~2018 and December 31, ~~2016 against the Company’s net deferred tax assets.~~

~~As of September 30,~~ 2017, ~~and December 31, 2016, the Company had $22.9 million and $28.1 million of deferred tax liabilities, net recorded on the balance sheet primarily associated with temporary differences~~respectively, related to the ~~Company’s~~temporary differences associated with the IPR&D ~~assets. The $5.2~~intangible assets acquired in previous business combinations and not deductible for tax purposes. As a result of the discontinuation of the Glemba program, the Company recorded a $0.8 million ~~decrease in deferred~~non-cash income tax ~~liabilities, net~~benefit during the ~~three~~first quarter of 2018.

Massachusetts, New Jersey, Connecticut and ~~nine months ended September 30, 2017 was due to~~Australia are the ~~partial impairment of~~jurisdictions in which the ~~anti-KIT program IPR&D assets.~~Company primarily operates or has operated and has income tax nexus. The Company is not currently under examination by these or any other jurisdictions for any tax year.

(13) 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 that has 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 the period plus additional weighted-average potentially dilutive common shares outstanding during the period when the effect is dilutive. The potentially dilutive common 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:

Nine months ended September 30,

2017

2016

Stock options

11,582,818

10,150,598

Restricted stock

96,668

60,000

11,679,486

10,210,598

	Nine Months Ended September 30,
	2018	2017
Stock Options	13,240,089	11,582,818
Restricted Stock	60,005	96,668
	13,300,094	11,679,486

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995: This report on Form 10-Q contains forward-looking statements 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, as amended, 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 and other factors, which may be beyond our control, and which may cause our actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. All statements other than statements of historical fact are statements 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 by us. 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 regulatory approval, commercialization of ~~glembatumumab vedotin (also referred to as CDX-011) and other~~our drug candidates and the growth of the markets for those 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 unable to raise the funds necessary to meet our liquidity needs, we may have to delay or discontinue the development of one or more programs, discontinue or delay ongoing or anticipated clinical trials, license out programs earlier than expected, raise funds at significant discount or on other unfavorable terms, if at all, or sell all or part of our business;

· our ability to negotiate strategic partnerships, where appropriate, for our ~~programs, which may include, glembatumumab vedotin;~~

· ~~our ability to realize the anticipated benefits from the acquisition of Kolltan and to operate the combined business efficiently;~~program assets;

· 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 by contract manufacturers, suppliers and partners, who may be the sole source of supply;

· 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 existing technology platforms to develop new drug candidates and expand our focus to broader markets for our existing targeted immunotherapeutics;

· our ability to ~~adapt~~regain compliance with applicable NASDAQ listing standards for continued listing of our ~~proprietary antibody-targeted technology, or APC Targeting Technology™,~~common stock on the NASDAQ Global Market;

· our ability to ~~develop new, safe~~realize the anticipated benefits and ~~effective therapeutics for oncology~~cost-savings from the restructuring we announced in April 2018;

· our ability to realize the anticipated benefits from the acquisition of Kolltan and ~~infectious disease indications;~~to operate the combined business efficiently;

· our ability to protect our intellectual property rights, including the ability to successfully defend patent oppositions filed against a European patent related to technology we use in varlilumab, and our ability to avoid intellectual property litigation, which can be costly and divert management time and attention; and

· the risk factors set forth elsewhere in this quarterly report on Form 10-Q and the factors listed under the headings “Business,” “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s annual report on Form 10-K for the year ended December 31, ~~2016~~2017 and other reports that we file with the Securities and Exchange Commission.

All forward-looking statements are expressly qualified in their entirety by this cautionary notice. You are cautioned not to place undue reliance on any forward-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 no obligation, and expressly disclaim any obligation, to update, revise or correct any of the forward-looking statements, whether as a result of new information, future events or otherwise. We have expressed our expectations, beliefs and projections in good faith, and we believe they have a reasonable basis. However, we cannot assure you that our expectations, beliefs or projections will result or be achieved or accomplished.

OVERVIEW

We are a biopharmaceutical company focused on the development and commercialization of ~~several immunotherapy technologies~~immunotherapies and other ~~cancer-targeting~~targeted biologics. Our drug candidates ~~including antibodies, antibody-drug conjugates and other protein-based therapeutics,~~ are derived from a broad set of complementary technologies which have the ability to engage the human immune system 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 study for 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 an immune modulating antibody that is designed to enhance a patient’s immune response against cancer. We established proof of principle in a Phase 1 study with varlilumab, which supported the initiation of combination studies in various indications. We also have a number of earlier stage drug candidates in clinical development, including CDX-3379, a human monoclonal antibody designed to block the activity of ErbB3 (HER3) in solid tumors; CDX-014, an antibody-drug conjugate targeting renal and ovarian cancers; CDX-1401, a targeted immunotherapeutic They are aimed at ~~antigen presenting cells, or APCs, for cancer indications; and, CDX-301, an immune cell mobilizing agent and dendritic cell growth factor. Our drug candidates address~~addressing market opportunities for which we believe current therapies are inadequate or non-existent.

We are ~~building~~focusing our efforts and resources on the continued research and development of:

· CDX-1140, an agonist human monoclonal antibody targeted to CD40, a key activator of immune response, currently in a Phase 1 dose-escalation study in multiple types of solid tumors;

· CDX-3379, a human monoclonal antibody designed to block the activity of ErbB3 (HER3), currently in an early Phase 2 study in advanced head and neck squamous cell cancer in combination with Erbitux®;

· CDX-301, a dendritic cell growth factor, currently being evaluated in a combination study with CDX-1140; and

· Varlilumab, an immune modulating antibody targeting CD27 designed to enhance a patient’s immune response against cancer that is currently completing a Phase 1/2 study in combination with Opdivo® in collaboration with Bristol-Myers Squibb Company (BMS).

We routinely work with external parties to collaboratively advance our drug candidates. In addition to Celldex-led studies, we also have an Investigator Initiated Research (IIR) program with seven studies ongoing with our prioritized drug candidates and additional studies currently under consideration.

In April 2018, we announced that our Phase 2b METRIC Study of glembatumumab vedotin in metastatic triple-negative breast cancer did not meet its primary endpoint. Based on this result, in the second quarter of 2018, we prioritized our pipeline and evaluated our operational and workforce needs to extend our financial resources and direct them to continued pipeline advancement. As previously disclosed, in line with this initiative and to conserve resources, we discontinued development of glembatumumab vedotin, CDX-014 and CDX-1401.

Our goal is to build a fully integrated, commercial-stage biopharmaceutical company that develops important therapies for patients with unmet medical needs. ~~Our~~We believe 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 reflects Celldex-sponsored clinical studies that we are actively pursuing at this time. All~~ Currently, all programs are ~~currently~~ fully owned by Celldex.

~~Product (generic)~~	~~Indication/Field~~	~~Status~~	~~Sponsor~~
~~Glembatumumab vedotin~~	~~Triple negative breast cancer~~	~~Phase 2b~~	~~Celldex~~
~~Glembatumumab vedotin~~	~~Metastatic melanoma (with varlilumab or CPI~~1)	~~Phase 2~~	~~Celldex~~
~~Varlilumab~~	~~Multiple solid tumors (with nivolumab)~~	~~Phase 2~~	~~Celldex~~2
~~CDX-3379~~	~~Head and neck squamous cell cancer (with cetuximab)~~	~~Phase 2~~3	~~Celldex~~
~~CDX-014~~	~~Renal cell carcinoma~~	~~Phase 1~~	~~Celldex~~
~~CDX-1140~~	~~Multiple solid tumors~~	~~Phase 1~~3	~~Celldex~~

1~~checkpoint inhibitor;~~ 2~~BMS collaboration;~~ 3~~expected to initiate by year-end 2017~~

We also routinely work with external parties, such as government agencies, to collaboratively advance our drug candidates. The following pipeline reflects clinical trials of our drug candidates being actively pursued by outside organizations. In addition to the studies listed below, we also have an Investigator Initiated Research (IIR) program with seven studies ongoing with our drug candidates and additional studies currently under consideration.

~~Product (generic)~~	~~Indication/Field~~	~~Status~~	~~Sponsor~~
~~Glembatumumab vedotin~~	~~Uveal melanoma~~	~~Phase 2~~	~~NCI (CRADA)~~
~~Glembatumumab vedotin~~	~~Squamous cell lung cancer~~	~~Phase 2~~	~~PrECOG, LLC~~
~~CDX-1401/CDX-301~~	~~Malignant melanoma~~	~~Phase 2~~	~~NCI (CRADA)~~
~~CDX-1401/atezolizumab/SGI-110~~	~~Ovarian cancer~~	~~Phase 1~~	~~NCI (CRADA)~~

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~~drug candidate. It is not unusual for the clinical development of these types of ~~product~~drug candidates to

each take five years or more, and for total development costs to exceed $100 million for each ~~product~~drug candidate. We estimate that clinical trials of the type we generally conduct are typically completed over the following timelines:

Clinical Phase		Estimated Completion 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~~drug candidate.

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

An element of our business strategy is to pursue the discovery, research and development of a broad portfolio of ~~product~~drug candidates. This is intended to allow us to diversify the risks associated with our research and development expenditures. To the extent we are unable to maintain a broad range of ~~product~~drug candidates, our dependence on the success of one or a few ~~product~~drug candidates increases.

Regulatory approval is required before we can market our ~~product~~drug 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 are 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~~drug candidates. In the event that third parties take over the clinical trial process for one of our ~~product~~drug 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 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, ~~2016,~~2017, we incurred an aggregate of ~~$422.1~~$470.9 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 nine months ended September 30, ~~2017~~2018 and ~~2016.~~2017. 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.

Nine Months Ended September 30,

2017

2016

(In thousands)

Glembatumumab vedotin

$
26,240

$
20,577

Varlilumab

11,956

22,777

Anti-KIT Program

3,223

—

CDX-3379

3,611

—

CDX-014

1,925

3,059

CDX-1401

617

3,804

CDX-301

1,058

3,402

CDX-1140

5,788

1,642

TAM Program

3,914

—

Rintega

1,429

14,624

Other Programs

12,946

8,283

Total R&D Expense

$
72,707

$
78,168

	Nine Months Ended September 30, 2018		Nine Months Ended September 30, 2017
	(In thousands)
CDX-1140	$	3,756	$	5,788
CDX-3379	2,935		3,611
CDX-301	1,616		1,058
Varlilumab	7,222		11,956
Anti-KIT Program	6,436		3,223
TAM Program	4,245		3,914
Glembatumumab vedotin	16,355		26,240
CDX-014	1,412		1,925
CDX-1401	420		617
Other Programs	10,845		14,375
Total R&D Expense	$	55,242	$	72,707

Clinical Development Programs

~~Glembatumumab Vedotin~~CDX-1140

~~Glembatumumab vedotin~~CDX-1140 is ~~an antibody-drug conjugate, or ADC, that consists of~~ a fully human agonist monoclonal antibody ~~CR011, linked~~targeted to CD40, a ~~potent cell-killing drug, monomethyl auristatin E, or MMAE. The CR011 antibody specifically targets glycoprotein NMB, referred to as gpNMB, that~~key activator of immune response, which is ~~over-expressed in a variety of cancers including breast cancer, melanoma, non-small cell lung cancer, uveal melanoma~~found on dendritic cells, macrophages and ~~osteosarcoma, among others. The ADC technology, comprised of MMAE and a stable linker system for attaching it to CR011, was licensed from Seattle Genetics, Inc.~~B cells and is also expressed on many cancer cells. Potent CD40 agonist antibodies have shown encouraging results in early clinical studies; however, systemic toxicity associated with broad CD40 activation has limited their dosing. CDX-1140 has unique properties relative to other CD40 agonist antibodies: potent agonist activity is independent of Fc receptor interaction, contributing to more consistent, controlled immune activation; CD40L binding is not blocked, leading to potential synergistic effects of agonist activity near activated T cells in lymph nodes and tumors; and the ~~same as that used~~antibody does not promote cytokine production in whole blood assays. CDX-1140 has shown direct anti-tumor activity in preclinical models of lymphoma. Preclinical studies of CDX-1140 clearly demonstrate strong immune activation effects and low systemic toxicity and support the ~~marketed product Adcetris~~®~~. The ADC is designed~~design of the Phase 1 study to ~~be stable in~~rapidly identify the ~~bloodstream. Following intravenous administration, glembatumumab vedotin targets~~dose for characterizing single-agent and binds to gpNMB, and upon internalization into the targeted cell, glembatumumab vedotin is designed to release MMAE from CR011 to produce a cell-killing effect. Glembatumumab vedotin is being studied across multiple indications in company-sponsored trials and in collaborative studies with external parties. The U.S. Food and Drug Administration, or FDA, has granted Fast Track designation to glembatumumab vedotin for the treatment of advanced, refractory/resistant gpNMB-expressing breast cancer. A companion diagnostic is in development for certain indications, and we expect that, if necessary, such a companion diagnostic must be approved by the FDA or certain other foreign regulatory agencies before glembatumumab vedotin may be commercialized in those indications.combination activity.

~~Treatment of Metastatic Breast Cancer:~~ ~~The~~We initiated a Phase ~~1/2~~1 study of ~~glembatumumab vedotin administered intravenously once every three weeks evaluated~~CDX-1140 in November 2017. This study is expected to enroll up to approximately 150 patients with recurrent, locally advanced or metastatic ~~breast cancer (MBC) who had received prior therapy (median of seven prior regimens). Results were published in the~~ ~~Journal of Clinical Oncology~~ ~~in September 2014.~~solid tumors and was recently amended to also include lymphoma. The study ~~began with a bridging phase~~is designed to ~~confirm~~determine the maximum tolerated dose, or MTD, during a dose-escalation phase (0.01 to 3.0 mg/kg once every four weeks until confirmed progression or intolerance) and ~~then expanded into~~to recommend a ~~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)~~for further study 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, the Phase 2 dose)~~subsequent expansion phase. The expansion is designed to further evaluate the ~~progression-free survival (PFS) rate at 12 weeks. The 1.88 mg/kg dose exhibited an acceptable~~tolerability and biologic effects of selected dose(s) of CDX-1140 in specific tumor types. Secondary objectives include assessments of safety ~~profile in this patient population with the most common adverse events being rash, neuropathy~~ and ~~fatigue. The primary anti-cancer~~tolerability, pharmacodynamics, pharmacokinetics, immunogenicity and additional measures of anti-tumor 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 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 reduced survival 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 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.

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 were allowed 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 in patient subsets with advanced, refractory breast cancers with high gpNMB expression (expression in at least 25% of tumor cells) and in patients with triple negative breast cancer. The OS and PFS of patients treated with glembatumumab vedotin were also observed to be greatest in patients with high gpNMB expression 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)~~

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.~~

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

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

In December 2013, we initiated METRIC, a randomized, controlled Phase 2b study of glembatumumab vedotin in patients with triple negative breast cancer that over-expresses gpNMB. Clinical trial study sites were opened to enrollment across the U.S., Canada, Australia and the European Union. The METRIC protocol was amended in late 2014 based on feedback fromincluding clinical ~~investigators conducting the study~~benefit rate. We believe that the ~~eligibility criteria~~potential for study entry were limiting their ability to enroll patients they felt were clinically appropriate. In addition, we had spoken to country-specific members of the European Medicines Agency, or EMA, and believed an opportunity existed to expand the study into the EU. The amendment expanded patient entry criteria to position it for the possibility of full marketing approval with global regulators, including the EMA, and to support improved enrollment in the study. The primary endpoint of the study is PFS, defined as the time from randomization to the earlier of disease progression or death due to any cause. PFS is an established 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 secondary endpoint of OS remained unchanged. Since implementation of these changes, both the FDA and central European regulatory authorities have reviewed the protocol design, and we believe the METRIC study could potentially support marketing approval in both the U.S. and Europe dependent upon data results and review.

~~Enrollment (n=327) in METRIC was completed in August 2017. The study calls for 203 progression events for evaluation of the primary endpoint, which~~CDX-1140 will be assessed based on an independent, central reading of patient scans. The sum of the data, including the secondary endpoints of response rate, overall survival, duration of response and safety, will be importantbest defined in ~~assessing clinical benefit. Based on the current rate of progression events in the study, the Company projects that topline primary endpoint data should be available~~combination studies with other immunotherapies or conventional cancer treatments. To this end, in the second quarter of ~~2018.~~

Efforts to ensure delivery of manufactured drug that is ready for commercialization and a companion diagnostic, including partnering with a diagnostic company, are underway. While we have made and continue to make progress on these fronts, we have made the decision to stage some of the more costly work in these areas to begin after we have received results from the study. While this step will extend the timeline to complete our regulatory filings, we believe this is the most prudent use of our funds as we seek to advance our pipeline overall.

~~Treatment of Metastatic Melanoma:~~ The Phase 1/2 open-label, multi-center, dose escalation study evaluated the safety, tolerability and pharmacokinetics of 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 MTD and resulting Phase 2 dose was determined to be 1.88 mg/kg administered intravenously once every three weeks. The study achieved its primary activity objective with 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. Glembatumumab vedotin was generally well tolerated, with the most frequent treatment-related adverse events being rash, fatigue, alopecia, pruritus, diarrhea and nausea. The 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 IV melanoma, and enrollment has been completed. In May 2016,2018, we amended the Phase 1 study protocol to ~~add a second cohort of patients to a glembatumumab vedotin and varlilumab combination arm to assess the potential clinical benefit of the combination and to~~also explore varlilumab’s potential biologic and immunologic effect when combined with an ADC, and enrollment has been completed. In November 2016, we amended the protocol to add a third cohort of patients evaluating glembatumumab vedotin in combination with an approved checkpoint inhibitor (i.e., nivolumab or pembrolizumab) following progression on the checkpoint inhibitor alone, and enrollment is ongoing. In September 2017, we amended the protocol again to add a fourth cohort of patients evaluating glembatumumab vedotinCDX-1140 in combination with CDX-301 ~~to assess the safety, tolerability~~ and ~~biologic activity of the combination. Following completion of this cohort and evaluation of available data, the protocol amendment also allows for the exploration of~~are considering additional cohorts. The primary endpoint for each cohort is ORR, except the fourth cohort which is assessing safety and tolerability. Secondary endpoints include analyses of PFS, duration of response, OS, retrospective investigation of whether the anti-cancer activity of glembatumumab vedotin is dependent upon the degree of gpNMB expression in tumor tissue and safety of both the monotherapy and combination regimens.combinations, including with varlilumab.

~~We presented mature~~Interim data from the single-agent cohort in an oral presentation at the 2017 American Society of Clinical Oncology Annual Meeting in June. The cohort enrolled 62 evaluable patients with unresectable stage IV melanoma. All patients hadPhase 1 study has been heavily pre-treated (median prior therapies = 3; range 1-8) and had progressed during or after checkpoint inhibitor therapy, and almost all patients had received both ipilimumab (n=58; 94%) and anti-PD-1/anti-PD-L1 (n=58; 94%) therapy. Twelve patients presented with BRAF mutation, and fifteen had prior treatment with BRAF or BRAF/MEK targeted agents. Median overall survival (OS) for all patients was 9.0 months (95% CI: 6.1, 13.0). As previously reported in October 2016, the primary endpoint of the cohort (threshold of 6 or more objective responses in 52 evaluable patients) was exceeded. 7 of 62 (11%) patients experienced a confirmed response, and an additional three patients also experienced single timepoint partial responses. Since data were reported in October 2016, one patient converted from a confirmed partial response to a confirmed complete response. The median duration of response was 6.0 months. A 52% disease control rate (patients without progression for greater than three months) was demonstrated, and median progression free survival (PFS) for all patients was 4.4 months. Consistent with previous studies in melanoma and breast cancer, rash was associated with greater clinical benefit. Patients who experienced rash in Cycle 1 experienced a 21% confirmed response rate, a more prolonged PFS with a median of 5.5 months (p=0.006; HR=0.39) and a more prolonged OS with a median of 15.8 months (p=0.026, HR=0.44). The safety profile was consistent with prior studies of glembatumumab vedotin with rash, neutropenia and neuropathy experienced as the most significant adverse events. Pre-treatment tumor tissue was available for 59 patients. All samples were gpNMB positive, and 78% of patients had tumors with 100% of their epithelial cells expressing gpNMB. Given both the high level of expression and the intensity of expression across this patient population, identifying a potential population for gpNMB enrichment is not feasible; therefore, all patients with metastatic melanoma could be evaluated as potential candidates for treatment with glembatumumab vedotin in future studies. We intend to conduct exploratory analyses of pre-entry skin biopsies in future patients to investigate potential predictors of response to glembatumumab vedotin, given the association of rash and outcome.

~~Data from the second cohort, combining glembatumumab vedotin and varlilumab, were~~ accepted for presentation on Friday, November 9, 2018 at the Society for Immunotherapy of ~~Cancer’s~~Cancer (SITC) ~~32nd~~ Annual ~~Meeting~~Meeting.

CDX-3379

CDX-3379 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 ~~November 2017. The cohort enrolled 34 patients with unresectable stage IV~~many cancers, including head and neck, thyroid, breast, lung and gastric cancers, as well as melanoma. All patients had been heavily pre-treated (median prior therapies = 3; range 1-8) and had progressed during or after checkpoint inhibitor (CPI) therapy (median prior CPI therapies = 2; range 1-4). Almost all patients had received ipilimumab (n=26; 76%) and/or anti-PD-1/anti-PD-L1 (n=34; 100%) therapy. Nine patients presented with BRAF mutation, and eleven had prior treatment with BRAF or BRAF/MEK targeted agents. Median PFSWe believe the proposed mechanism of action for ~~all patients was 2.6 months (95% CI: 1.4, 2.8),~~

and median overall survival (OS) for all patients was 6.4 months (95% CI: 3.2, 8.3). One of 31 patients eligible for response evaluation experienced a confirmed partial response (3%) and an additional two patients also experienced single timepoint partial responses. 52% of patients experienced stable disease (minimum of six or more weeks). A 19% disease control rate (patients without progression for greater than three months) was demonstrated. The safety profile was consistent with prior studies of glembatumumab vedotin and there was no evidence of additive toxicity associated with the combination. Biological effects of varlilumab were consistent with prior observations and did not appear to be impacted by the addition of an antibody-drug conjugate (ADC). Modest clinical benefitCDX-3379 sets it apart from other drugs in ~~the combination could be~~development in this class due to ~~multiple factors,~~its ability to block both ligand-independent and ligand-dependent ErbB3 signaling by binding to a unique epitope. It has a favorable pharmacologic profile, including a longer half-life and slower clearance relative to other drug candidates in this class. We believe CDX-3379 also has potential ~~lack of sensitivity~~ to ~~immunotherapy~~enhance anti-tumor activity and/or overcome resistance in ~~patients~~combination with checkpoint refractory disease, many of whom progressed so rapidly that they experienced a very short duration of varlilumab treatment (median 2 doses); a possible dearth of antigen presenting cells in tumors;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 ~~immune checkpoint molecules to remain unblocked without checkpoint inhibitor therapy. Planned future cohorts are designed to address some~~combination therapy with immuno-oncology approaches, even in refractory patients. CDX-3379 has been evaluated in three Phase 1 studies for the treatment of ~~these potential factors. No significant correlation between rash~~multiple solid tumors that express ErbB3 and ~~outcome was observed, but will continue to be monitored~~is currently being evaluated in ~~future cohorts.~~

~~Treatment of Other Indications:~~ ~~We have entered into~~ a ~~collaborative relationship with PrECOG, LLC, which represents a research network established by the Eastern Cooperative Oncology Group (ECOG), under which PrECOG, LLC, is conducting an open-label~~ Phase 1/2 study in ~~patients~~combination with ~~unresectable stage IIIB or IV, gpNMB-expressing,~~Erbitux in Erbitux-resistant, advanced ~~or metastatic~~head and neck squamous cell ~~carcinoma (SCC)~~carcinoma.

A Phase 1a/1b study of ~~the lung, who have progressed on prior platinum-based chemotherapy. This study opened to enrollment~~CDX-3379 was conducted in ~~April 2016 and is ongoing.~~solid tumors. The study ~~includes~~included a single-agent, dose-escalation ~~phase followed by a two-stage Phase 2~~ portion ~~(Simon two-stage design).~~and combination expansion cohorts. The ~~Phase 1,~~single-agent, dose-escalation portion of the study ~~is designed~~did not identify an MTD, and there were no dose limiting toxicities. Four combination arms across multiple tumor types were added to ~~assess~~evaluate CDX-3379 with several drugs that target EGFR, HER2 or BRAF. They include combinations with Erbitux® (n=16), Tarceva® (n=8), Zelboraf® (n=9) and Herceptin® (n=10). Patients had advanced disease and were generally heavily pretreated. Across the ~~safety~~combination arms, the most frequent adverse events were diarrhea, nausea, rash and ~~tolerability~~fatigue. Objective responses were observed in the Erbitux and Zelboraf combination arms. In the Erbitux arm, there was one durable complete response in a patient with head and neck cancer, who had been previously treated with Erbitux and was refractory. In the Zelboraf arm, there were two partial responses in patients who had lung cancer, one of ~~glembatumumab vedotin~~whom had been previously treated with Tafinlar® and was considered refractory, as well as an unconfirmed partial response in a patient with thyroid cancer. Initial data were presented at ~~varying dose levels.~~the 2016 American Society of Clinical Oncology (ASCO) Annual Meeting.

In April 2018, results from a window-of-opportunity study evaluating the effect of CDX-3379 on potential biomarkers in patients with head and neck squamous cell carcinoma (HNSCC) were presented at the American Association for Cancer Research (AACR) Annual Meeting. The study enrolled 12 patients with newly diagnosed HNSCC who received two doses of CDX-3379, at a two-week interval prior to tumor resection. CDX-3379 reduced phosphorylated ErbB3 (pErbB3) levels in 83% (10/12) of patient samples, with greater than or equal to 50% decreases in 58% of patients (7/12), which met the primary study objective. Stable disease was observed in 92% (11/12) of patients prior to surgery, and a patient with HPV-negative disease experienced significant tumor shrinkage (92% in primary tumor; 26% in metastatic lesion). CDX-3379 was well-tolerated, and no treatment-related adverse events were observed.

Preclinical data from the combination of CDX-3379 and Erbitux in xenograft models of head and neck squamous cell carcinoma were also presented at the AACR Annual Meeting in April 2018. Combining CDX-3379 and Erbitux inhibited tumor growth more potently than Erbitux alone. Mechanistic studies demonstrated a reduction of PD-L1 expression from the combination.

We have initiated an open-label Phase 2 study in combination with Erbitux in approximately 30 patients with human papillomavirus (HPV) negative, Erbitux-resistant, advanced head and neck squamous cell carcinoma who have previously been treated with an anti-PD1 checkpoint inhibitor, a population with limited options and a particularly poor prognosis. We opened the study to enrollment in November 2017. The study employs a two-stage design with an interim futility analysis following enrollment of the first 13 patients. Enrollment to the first stage of the Phase 2 ~~portion plans to enroll approximately 20~~study (n=13) is nearing completion with a number of patients still undergoing treatment and ~~if at least two patients achieve a partial~~not yet eligible for response ~~or complete response, a second stage may enroll an additional 15 patients.~~evaluation. The primary objective of 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.~~objective response rate. Secondary objectives include assessments of ~~the study include analyses~~clinical benefit response (CBR), duration of response (DOR), PFS and overall survival (OS), and 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,~~pharmacokinetics associated with the ~~National Cancer Institute, or NCI, under which NCI~~combination. CDX-3379 is ~~sponsoring a Phase 2 study of glembatumumab vedotin~~also being studied in uveal melanoma. The study is a single-arm, open-label study in patients with locally recurrent or metastatic uveal melanoma. The study has a two stage design with a pre-specified activity threshold necessary in the first stage to progress enrollment to the second stage. The primary outcome measure is ORR. Secondary outcome measures include change in gpNMB expression on tumor tissue via immunohistochemistry, safety, OS and PFS. Data from this study were presented at 9th World Congress of Melanoma in October of 2017. Two (6%) objective responses were observed in 31 patients to date and 35% of patients experienced stable disease greater than 100 days (median 5.5 months). The disease control rate (response rate + stable disease) for all patients on study was noteworthy at 61%. Median PFS was 3.2 months and median OS was 11.8 months. For patients who experienced either a partial response or stable disease, median PFS was 5.5 months and median OS has not yet been reached. The NCI is conducting exploratory immune correlates to provide insight into target saturation, antigen release and potential combination strategies.an investigator-sponsored study.

Varlilumab

Varlilumab is a fully human agonist monoclonal ~~agonist~~ antibody that binds to and activates CD27, a critical co-stimulatory molecule in the immune activation cascade. We believe varlilumab works primarily by stimulating T cells, an important component of a person’s immune system, to attack cancer cells. Restricted expression and regulation of CD27 enables varlilumab specifically to activate T cells, resulting in an enhanced immune response with the potential for a favorable safety profile. In preclinical studies, varlilumab has been shown to directly kill or inhibit the growth of CD27 expressing lymphomas and leukemias in in vitro and in vivo models. We have entered into license agreements with the 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 a safety profile and assess immunologic and clinical activity in patients with cancer, but we believe the 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 clinical trial 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,~~In an open-label Phase 1 study of varlilumab in patients with selected malignant solid tumors or hematologic cancers, ~~were presented at the Annual Meeting of the American Society of Clinical Oncology in June 2014. Varlilumab~~varlilumab demonstrated an acceptable safety profile and induced immunologic activity in patients that is consistent with both its proposed mechanism of action and data in preclinical models. A total of 90 patients ~~were dosed~~received varlilumab in the study at multiple clinical sites in the U.S. of which 55 patients were dosed in dose escalation cohorts (various solid and hematologic B- and T-cell tumors), and 35 patients were dosed in the expansion cohorts (melanoma, renal cell carcinoma and Hodgkin lymphoma) at 3 mg/kg. In both the solid tumor and hematologic ~~dose-escalations,~~dose escalations, the pre-specified maximum dose level (10 mg/kg) was reached without

identification of ~~a maximum tolerated dose.~~an MTD. The majority of adverse events, or AEs, related to treatment ~~have been~~were mild to moderate (Grade 1/2) in severity, ~~with only three serious AEs related to treatment reported. No~~and no significant immune-mediated adverse events ~~(colitis, hepatitis, etc.)~~ typically associated with checkpoint blockade ~~have been observed to date. Two~~were observed. Durable, multi-year clinical benefit was demonstrated in select patients initially experienced significant objective responses including a complete response in Hodgkin lymphoma (patient remains in remission at 2.8+ years without further anticancer therapy as of September 2016; patient no longer on study) and a partial response in renal cell carcinoma (continued at 2.5+ years without further anticancer therapy as of June 2017). A patient with renal cell carcinoma that experienced significant stable disease (4+ years) has achieved a single-time point partial response at 4.2+ years without additional ~~anticancer~~anti-cancer therapy. ~~Twelve patients experienced stable disease up to 14 months. As of June 2017, there are two patients continuing in long term follow-up.~~ Final results from the study in patients with solid tumors were published in the Journal of Clinical Oncology in April 2017.

Phase 1/2 Varlilumab/Opdivo® Combination Study: In 2014, we entered into a clinical trial collaboration with ~~Bristol-Myers Squibb~~BMS to evaluate the safety, tolerability and preliminary efficacy of varlilumab and Opdivo, ~~Bristol-Myers Squibb’s~~BMS’ PD-1 immune checkpoint inhibitor, in a Phase 1/2 study. Under the 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 our existing license agreement with Medarex (acquired by Bristol-Myers Squibb) related to our CD27 program whereby certain future milestone payments were waived 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 first negotiation 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 be responsible for conducting the Phase 1/2 study.

The Phase ~~1/2~~1 portion of the study was initiated in January 2015 and ~~is being~~ conducted in adult patients with multiple solid tumors to assess the safety and tolerability of varlilumab at varying doses when administered with ~~Opdivo,~~Opdivo. It was followed by a Phase 2 expansion to evaluate the activity of the combination in disease specific cohorts.

~~Data (n=36) from~~ Enrollment to the Phase 1 dose escalation portion of the study were presented in an oral presentation at the American Society of Clinical Oncology Annual Meeting in June 2017. The majority of patients had PD-L1 negative tumor at baseline and presented with stage IV, heavily-pretreated disease. 80% of patients enrolled presented with refractory or recurrent colorectal (n=21) or ovarian cancer (n=8), a population expected to have minimal response to checkpoint blockade. The primary objective of the Phase 1 portion of the study was to evaluate the safety and tolerability of the combination. The combination was well tolerated at all varlilumab dose levels tested 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 to correlate 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, was also noted. Notable disease control was also observed (stable disease or better for at least 3 months), considering the stage IV patient population contained mostly colorectal and ovarian cases (80%): 0.1 mg/kg varlilumab + 240 mg Opdivo: 1/5 (20%), 1 mg/kg varlilumab + 240 mg Opdivo: 5/15 (33%) and 10 mg/kg varlilumab + 240 mg Opdivo: 6/15 (40%).

Three partial responses (PR) were observed. A patient with PD-L1 negative, MMR proficient colorectal cancer, typically unlikely to respond to checkpoint blockade monotherapy, achieved a confirmed PR (95% decrease in target lesions) and, following completion of combination treatment, continues to receive treatment with Opdivo monotherapy at 22+ months. A patient with low PD-L1 (5% expression) squamous cell head and neck cancer achieved a confirmed PR (59% shrinkage) and experienced progression free survival of 6.7 months. A patient with PD-L1 negative ovarian cancer experienced a single timepoint PR (49% shrinkage) but discontinued treatment to a dose-limiting toxicity (immune hepatitis, an event known to be associated with checkpoint inhibition therapy). A subgroup analysis was conducted in patients with ovarian cancer based on an observed increase of PD-L1 and tumor-infiltrating lymphocytes in this patient population. In patients with paired baseline and on-treatment biopsies (n=13), only 15% were PD-L1 positive (> 1% tumor cells) at baseline compared to 77% during treatment (p=0.015). Patients with increased tumor PD-L1 expression and tumor CD8 T cells correlated with better clinical outcome with treatment (stable disease or better).

~~The~~ Phase 2 portion of the study ~~opened to enrollment~~was completed in ~~April 2016 and includes~~January 2018 with cohorts in colorectal cancer (n=~~18)~~21), ovarian cancer (n=~~54)~~58), head and neck squamous cell carcinoma (n=~~54)~~24), renal cell carcinoma (n=~~25)~~14) and glioblastoma (n=~~20)~~22). ~~Additional dosing schedules are being explored in ovarian cancer and in head and neck squamous cell carcinoma, increasing the overall size of the study compared to the original study design.~~ The primary objective of the Phase 2 cohorts is objective response rate, or ORR, except glioblastoma, where the primary objective is the rate of 12-month OS.

Data from the ovarian and colorectal cancer cohorts were presented in an oral presentation at the 2018 ASCO Annual Meeting. Sixty-six patients with ovarian cancer were treated in the study (8 patients in Phase 1; 58 patients in Phase 2). Patients had a median of three prior lines of therapy, 91% had Stage IV disease and 66% had PD-L1 negative tumors. The overall ~~survival. Secondary objectives include pharmacokinetic assessments, determining~~response rate was 14% (n=9; 7 confirmed, 2 unconfirmed) across 64 response-evaluable patients. For patients with paired tumor samples (n=24) from before and during treatment, increases in tumor expression of PD-L1 and CD8+ TIL levels were observed. These increases were associated with improved clinical outcome, including improved progression-free survival (PFS) and response rate.

Forty-two patients with colorectal cancer were treated in the ~~immunogenicity~~study (21 patients in Phase 1; 21 patients in Phase 2). Patients had a median of ~~varlilumab when given in combination~~four prior lines of therapy, 100% had Stage IV disease and 87% had PD-L1 negative tumors. One patient had disease that was MSI-high and 21 patients had disease that was MSI-low/mismatch repair (MMR) proficient; MSI status for the remaining 20 patients was unknown. One patient with ~~Opdivo and further assessing the anti-tumor activity of combination treatment. We plan to complete enrollment across all cohorts~~PD-L1 negative, MSI-high disease experienced a confirmed partial response in the Phase 2 study portion. Of note, a patient with PD-L1 negative disease, initially considered MMR proficient as determined by standard screening laboratory analysis, achieved a near complete response in the Phase 1 portion of the study, which continued at last follow-up at 35 months. This patient’s tumor had a high mutational burden and mutations in genes regulating DNA repair, which together likely contributed to the ~~first~~response. Disease control rate for the response-evaluable population was 20% (8/41).

In the second quarter of 2018, ~~and expect to work with BMS to present~~we reported preliminary data from the ~~study at a future medical meeting.~~

~~Anti-Kit Program: CDX-0158 and CDX-0159~~

KIT activation is implicated in many disease processes including some cancers, neurofibromatosis and mast cell-related diseases, including autoimmune disease. CDX-0158, a humanized monoclonal antibody, is a potent inhibitor of wildtype KIT in mast cells and has demonstrated preclinical activity versus the most common oncogenic KIT mutations found in human gastrointestinal stromal tumors (GIST) in model cell lines and in spontaneous canine mast cell tumors (an established model for mastocytoma). A Phase 1 dose escalation study in patients with advanced refractory GIST and other KIT positive tumors opened to enrollment in December 2015 to determine the maximum tolerated dose, recommend a dose for further study and characterize the safety profile. A total of 28 patients have been treated with doses up to 15 mg/kg with one patient currently continuing on treatment. Importantly, no evidence of myelosuppression (an effect commonly associated with KIT inhibition) was observed in this study. Approximately two-thirds of the patients on study had infusion reactions that were manageable with pre-medication and longer infusion times. The biomarker data showed evidence of dose-related KIT engagement, and two patients experienced partial metabolic responses on fluorodeoxyglucose (FDG)-PET scan; however, these PET responses were not associated with tumor shrinkage.

~~The infusion reactions are believed to be the result of CDX-0158 acting as an agonist on mast cells~~ ~~in vivo~~, where the antibody can be cross-linked by Fc receptors and cause mast cell degranulation. Given the infusion reactions, modifications have been introduced into the Fc portion of the CDX-0158 antibody to prevent these interactions, which should eliminate the potential for Fc receptor mediated agonist activity. This second-generation version, called CDX-0159, also includes modifications to increase the half-life of the antibody, giving it additional benefits over CDX-0158. Preclinical data to date with CDX-0159 have demonstrated equivalent KIT inhibition to CDX-0158, but unlike CDX-0158, CDX-0159 does not induce KIT activation when Fc receptors are used to cross-link the antibodies. CDX-0159 is being fully developed in-house with the intention of replacing CDX-0158 in clinical development. We expect manufacturing and IND-enabling efforts for CDX-0159 will be completed in 2018.

~~CDX-3379~~

CDX-3379 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 many cancers, including head and neck, thyroid, breast, lung and gastric cancers, as well as melanoma. We believe the proposed mechanism of action for CDX-3379 sets it 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 a unique epitope. It has a favorable pharmacologic profile, including a longer half-life and slower clearance relative to other drug candidates in this class. CDX-3379 also 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.

A Phase 1a/1b study was conducted, including a single-agent, dose-escalation portion and combination expansion cohorts. Data from the dose-escalation portion, which completed enrollment in September 2015, and initial data from the expansion cohorts (enrollment ongoing at the time) were presented at the American Society of Clinical Oncology Annual Meeting in June 2016. The single-agent, dose-escalation portion of the study did not identify an MTD, and there were no dose limiting toxicities. The most common adverse events included rash and diarrhea and were predominantly grade 1 or 2. Four combination arms across multiple 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, the most frequent adverse events were diarrhea, nausea, rash and fatigue. Objective responses were observed in the Erbitux and Zelboraf combination arms. In the Erbitux 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 the Zelboraf arm, there were two partial responses in patients who had lung cancer, one of whom had been previously treated with Tafinlar® ~~and was considered refractory. We have finalized plans for advancement into an open-label Phase 2 study in approximately 30 patients with recurrent/metastatic~~ head and neck squamous cell ~~cancer who are refractory to Erbitux (cetuximab). We anticipate initiating this study~~carcinoma (HNSCC) and renal cell carcinoma (RCC) cohorts. Twenty-seven patients with HNSCC were treated in the ~~fourth quarter of 2017. The primary objective of the~~ study is objective response rate. Second objectives include assessments of clinical benefit response (CBR), duration of response (DOR), PFS and OS, and safety and pharmacokinetics associated with the combination.

~~CDX-1401~~

~~CDX-1401, developed from our APC Targeting Technology, is an NY-ESO-1-antibody fusion protein for immunotherapy~~(3 patients 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 for efficient delivery to dendritic cells. Delivery of tumor-specific proteins directly to dendritic cells Phase 1; 24 patients in ~~vivo~~ ~~elicits potent, broad, anti-tumor immune responses across populations with different genetic~~

backgrounds. In humans, NY-ESO-1 has been detected in 20% to 30% of melanoma, lung, esophageal, liver, gastric, ovarian and bladder cancers, and up to 70% of synovial sarcomas, thus representing a broad opportunity. CDX-1401 is being developed for the treatment of malignant melanoma and a variety of solid tumors which express the cancer antigen NY-ESO-1. 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 TLR agonists (resiquimod and/or poly-ICLC) in 45 patients with advanced malignancies refractory to all available therapies. Results were published in ~~Science Translational Medicine~~ ~~in April 2014. Sixty percent of patients~~2). Patients had ~~confirmed NY-ESO expression in archived tumor samples. Thirteen patients maintained stable disease for up to 13.4 months with~~ a median of ~~6.7 months. Treatment indicates an acceptable safety profile to date,~~two prior lines of therapy, 96% had Stage IV disease, 63% had PD-L1 negative tumors and ~~there were no dose limiting toxicities. A variety of immune activation parameters were observed. Humoral responses were elicited in both NY-ESO-1~~52% had HPV positive and negative patients. NY-ESO-1-specific T cell 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 that treatment 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 within 3 months of CDX-1401, 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 one complete response, which compares favorably to thetumors. The overall response rate ~~of 11% previously reported~~was 15% (n=4 confirmed) across 27 response-evaluable patients. In this small sample size, no correlation between PDL-1 status and clinical outcome was observed. Given the changing treatment paradigm in ~~metastatic melanoma patients treated with single-agent Yervoy. In addition, two~~renal cell carcinoma, only fourteen patients with ~~non-small cell lung cancer received an investigational checkpoint blockade within two months~~RCC were treated in the study, all in Phase 2. All patients had experienced prior angiogenic therapy, with a range of ~~completing treatment with CDX-1401,~~1 to 4 prior treatments, 100% had Stage IV disease and ~~both achieved partial responses. Together with Roche, we are supporting an investigator initiated study~~50% had PD-L1 negative tumors. 39% of ~~CDX-1401 in combination with Tecentriq~~® ~~(atezolizumab; anti-PD-L1) in~~ patients ~~with lung cancer.~~experienced stable disease.

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 malignant melanoma byData from the Cancer Immunotherapy Trials Network (CITN) under a CRADA with the Cancer Therapy Evaluation Program 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 the study 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, and initial results were presentedGBM cohort has been accepted for presentation on Saturday, November 17, 2018 at the ~~2016 American~~ Society ~~of Clinical Oncology (ASCO)~~for Neuro-oncology (SNO) Annual Meeting. The data confirmed that CDX-1401 is capable of driving NY-ESO-1 immunity and further demonstrated the potential of CDX-301 as a combination agent for enhancing tumor specific immune responses. The NCI and CITN are planning to enroll additional cohorts to investigate alternative regimens of CDX-301.

~~In September 2017, a randomized, open-label Phase 1/2 study~~Future development of ~~CDX-1401~~varlilumab is focused on inclusion in internal combination ~~with atezolizumab and SGI-110 opened to enrollment~~studies, including potentially in ~~recurrent ovarian, fallopian tube, or primary peritoneal cancer. This study is being conducted under a CRADA with~~ the NCI Division of Cancer Treatment and Diagnosis and is designed to determine the activity of atezolizumab alone, atezolizumab plus SGI-110 and atezolizumab plus SGI-110 plus CDX-1401. The primary outcome of theongoing Phase 1 ~~dose escalation study is safety~~trial of CDX-1140, and only evaluates atezolizumab alone and in combination with SGI-110. The Phase 2 portion of the study is expected to add CDX-1401. The primary outcome of the Phase 2 portion of the study is a comparison of PFS between the three cohorts.

~~Other studies are being considered through investigator-sponsored and collaborative agreements.~~several external investigator-initiated studies.

CDX-301

CDX-301, a recombinant FMS-like tyrosine kinase 3 ligand, or Flt3L, is a hematopoietic cytokine that uniquely expands dendritic cells and hematopoietic stem cells, and in combination with other agents tomay potentiate ~~the~~ anti-tumor ~~response.~~responses. Depending on the setting, cells expanded by CDX-301 promote either enhanced or permissive immunity. ~~CDX-301 is in clinical development for multiple cancers, in combination with vaccines, adjuvants and other treatments that release tumor antigens.~~ We licensed CDX-301 from Amgen Inc. ~~in March 2009~~ and believe CDX-301 may hold significant opportunity for synergistic development in combination with other proprietary molecules in our ~~portfolio.~~portfolio, as well as with approved or investigational therapies for the treatment of cancer.

A Phase 1 study of CDX-301 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 has an acceptable safety profile to date and can mobilize dendritic cell and hematopoietic stem cell ~~(HSC)~~ populations in healthy volunteers.

At The study was published in the ~~2016 ASCO Annual Meeting, initial results from~~journal Bone Marrow Transplantation in 2015.

CDX-301 is being used as a priming agent to potentially increase the number of cells available to respond to CDX-1140 in the ongoing Phase ~~2 study~~1 trial of ~~CDX-1401~~CDX-1140. CDX-301 is also in clinical development for multiple cancers in ongoing and planned investigator-sponsored and collaborative studies, including in combination with ~~CDX-301 in malignant melanoma were presented~~treatments that ~~further demonstrated the value of CDX-301~~release tumor antigens, such as a combination agent for enhancing tumor specific immune responses. The Phase 2 study was conducted by the Cancer Immunotherapy Trials Network, or CITN, under a CRADA with the Cancer Therapy Evaluation Program of the NCI. Based on these results 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.radiation therapy.

~~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 several cancers, 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 Seattle Genetics’ proprietary technology. The ADC is designed to 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 anti-tumor activity in preclinical models of ovarian and renal cancers.

In July 2016, we announced 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 of the study is evaluating cohorts of patients receiving increasing doses of CDX-014 to determine the maximum tolerated dose and a recommended dose for Phase 2 study. We anticipate expanding the Phase 1 study to encompass additional TIM-1 expressing tumor types and alternate dosing regimens. The Phase 2 portion of the study plans to enroll approximately 25 patients to assess the anti-tumor activity of CDX-014 at the recommended dose in advanced renal cell carcinoma as measured by objective response rate. Secondary objectives include safety and tolerability, pharmacokinetics, immunogenicity and additional measures of anti-tumor activity.

~~CDX-1140~~

CDX-1140 is a fully human antibody targeted to CD40, a key activator of immune response which is found on dendritic cells, macrophages and B cells and is also expressed on many cancer cells. Potent CD40 agonist antibodies have shown encouraging results in early clinical studies; however, systemic toxicity associated with broad CD40 activation has limited their dosing. CDX-1140 has unique properties relative to other CD40 agonist antibodies: potent agonist activity is independent of Fc receptor interaction, contributing to more consistent, controlled immune activation; CD40L binding is not blocked, leading to potential synergistic effects of agonist activity near activated T cells in lymph nodes and tumors; and the antibody does not promote cytokine production in whole blood assays. CDX-1140 has shown direct anti-tumor activity in preclinical models of lymphoma.

Preclinical data, including the IND-enabling toxicology study of CDX-1140, were accepted for presentation at the Society for Immunotherapy of Cancer’s (SITC) 32nd Annual Meeting in November 2017. This toxicology study of CDX-1140 clearly demonstrates strong immune activation effects and low systemic toxicity. The No Observable Adverse Effect Level (NOAEL) for CDX-1140 was determined to be 10 mg/kg in this study. The data support the design of the Phase 1 study of CDX-1140 to rapidly identify the dose for characterizing single-agent and combination activity. The Company believes that the potential for CDX-1140 will be best defined in combination studies with other immunotherapies or conventional cancer treatments.

We plan to initiate a Phase 1 study of CDX-1140 by year-end 2017. This study, which is expected to enroll up to approximately 105 patients with recurrent, locally advanced or metastatic solid tumors, is designed to determine the maximum tolerated dose during a dose-escalation phase (0.01 to 3.0 mg/kg once every four weeks until confirmed progression or intolerance) and to recommend a dose level for further study in a subsequent expansion phase. The expansion is designed to further evaluate the tolerability and biologic effects of selected dose(s) of CDX-1140 in specific tumor types. Secondary objectives include assessments of safety and tolerability, pharmacodynamics, pharmacokinetics, immunogenicity and additional measures of anti-tumor activity, including clinical benefit rate.

CRITICAL ACCOUNTING POLICIES

See Note 23 to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for information regarding ~~newly-adopted~~newly adopted and recent accounting pronouncements. See also Note 2 to our financial statements included in our Annual Report on Form 10-K for the year ended December 31, ~~2016~~2017 for a discussion of our critical accounting policies. There have been no material changes to such critical accounting ~~policies.~~policies except for the adoption of the updated revenue recognition standard on January 1, 2018. We believe our most critical accounting policies include accounting for business combinations, revenue recognition, ~~impairment of~~intangible and long-lived assets, research and development expenses and stock-based compensation expense.

RESULTS OF OPERATIONS

Three Months Ended September 30, ~~2017~~2018 Compared with Three Months Ended September 30, ~~2016~~2017

	Three Months Ended September 30,						Increase/ (Decrease)			Increase/ (Decrease)		Three Months Ended September 30,						Increase/ (Decrease)			Increase/ (Decrease)
	2017			2016			$			%		2018			2017			$			%
	(In thousands)											(In thousands)
Revenue:
Revenues:
Product Development and Licensing Agreements	$	1,238		$	493		$	745		151	%	$	131		$	1,238		$	(1,107	)	(89	)%
Contracts and Grants	2,686			1,727			959			56	%	810			2,686			(1,876		)	(70	)%
Total Revenue	$	3,924		$	2,220		$	1,704		77	%	$	941		$	3,924		$	(2,983	)	(76	)%
Operating Expense:
Operating Expenses:
Research and Development	21,915			25,009			(3,094		)	(12	)%	11,918			21,915			(9,997		)	(46	)%
General and Administrative	5,346			6,950			(1,604		)	(23	)%	3,722			5,346			(1,624		)	(30	)%
In-Process Research and Development Impairment	13,000			—			13,000			n/a
Intangible Asset Impairment												—			13,000			(13,000		)	(100	)%
Gain on Fair Value Remeasurement of Contingent Consideration	(4,600		)	—			4,600			n/a		(6,935		)	(4,600		)	2,335			51	%
Amortization of Acquired Intangible Assets	224			254			(30		)	(12	)%	—			224			(224		)	(100	)%
Total Operating Expense	35,885			32,213			3,672			11	%	8,705			35,885			(27,180		)	(76	)%
Operating Loss	(31,961		)	(29,993		)	1,968			7	%	(7,764		)	(31,961		)	(24,197		)	(76	)%
Investment and Other Income, Net	398			395			3			1	%	521			398			123			31	%
Net Loss Before Income Tax Benefit	(31,563		)	(29,598		)	1,965			7	%	$	(7,243	)	$	(31,563	)	$	(24,320	)	(77	)%
Income Tax Benefit	5,200			—			5,200			n/a		—			5,200			(5,200		)	(100	)%
Net Loss	$	(26,363	)	$	(29,598	)	$	(3,235	)	(11	)%	(7,243		)	(26,363		)	(19,120		)	(73	)%

Net Loss

The ~~$3.2~~$19.1 million decrease in net loss for the three months ended September 30, ~~2017,~~2018, as compared to the three months ended September 30, ~~2016,~~2017, was primarily the result of a decrease in intangible asset impairment expense and a decrease in research and development and general and administrative expenses, the gain on fair value remeasurement of contingent consideration and the income tax benefit recognized offset by the in-process research and development impairment.expenses.

Revenue

The ~~$0.7~~$1.1 million ~~increase~~decrease in product development and licensing agreements revenue for the three months ended September 30, ~~2017,~~2018, as compared to the three months ended September 30, ~~2016,~~2017, was primarily due to ~~an increase~~a decrease in ~~reimburseable clinical trial expenses from~~revenue related to our BMS ~~associated with the Phase 1/2 study of varlilumab and Opdivo~~®~~, BMS’s PD-1 immune checkpoint inhibitor.~~agreement. The ~~$1.0~~$1.9 million ~~increase~~decrease in contracts and grants revenue for the three months ended September 30, ~~2017,~~2018, as compared to the three months ended September 30, ~~2016,~~2017, was primarily related to a decrease in services performed under our ~~IAVI and Frontier agreements pursuant to which we perform~~contract manufacturing and ~~R&D services for IAVI~~research and ~~Frontier.~~development agreement with the International AIDS Vaccine Initiative.

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, (iv) license fees and (v) product development expenses associated with our ~~product~~drug candidates as follows:

Three Months Ended
September 30,

Increase/
(Decrease)

Increase/
(Decrease)

2017

2016

$

%

(In thousands)

Personnel

$
8,933

$
8,940

$
(7
)
n/a

Laboratory Supplies

1,230

1,114

116

10
%
Facility

2,056

1,537

519

34
%
License Fees

162

942

(780
)
(83
)%
Product Development

7,316

10,697

(3,381
)
(32
)%

	Three Months Ended September 30,				Increase/ (Decrease)
	2018		2017		$			%
	(In thousands)
Personnel	$	5,810	$	8,933	$	(3,123	)	(35	)%
Laboratory Supplies	886		1,230		(344		)	(28	)%
Facility	1,819		2,056		(237		)	(12	)%
License Fees	56		162		(106		)	(65	)%
Product Development	1,764		7,316		(5,552		)	(76	)%

Personnel expenses primarily include salary, benefits, stock-based compensation and payroll ~~taxes and were relatively consistent~~taxes. The $3.1 million decrease in personnel expenses for the three months ended September 30, ~~2017,~~2018, as compared to the three months ended September 30, ~~2016. Increases~~2017, was primarily due to a decrease in ~~salary expenses were offset by~~headcount and lower ~~stock based~~stock-based compensation expense. We expect personnel expenses to remain relatively consistent over the next twelve months, although there may be fluctuations on a quarterly basis.

Laboratory supplies expenses include laboratory materials and supplies, services, and other related expenses incurred in the development of our technology. The ~~$0.1~~$0.3 million ~~increase~~decrease in laboratory ~~supplies expense~~supply expenses for the three months ended September 30, ~~2017,~~2018, as compared to the three months ended September 30, ~~2016,~~2017, was primarily due to ~~higher~~lower laboratory ~~services expenses.~~materials and supplies purchases. We expect laboratory supplies ~~expense~~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 ~~$0.5~~$0.2 million ~~increase~~decrease in facility expenses for the three months ended September 30, ~~2017,~~2018, as compared to the three months ended September 30, ~~2016,~~2017, was primarily due to ~~the addition of the New Haven facility that we acquired with the Kolltan Acquisition and higher~~lower depreciation ~~expense of $0.3 million.~~ expense. We expect facility expenses to remain relatively consistent over the next twelve months, although there may be fluctuations on a quarterly basis.

License ~~fees expense includes~~fee expenses include annual license maintenance fees and milestone payments due upon the achievement of certain development, regulatory and/or commercial milestones. The ~~$0.8~~$0.1 million decrease in license fee expenses for the three months ended September 30, ~~2017,~~2018, as compared to the three months ended September 30, ~~2016,~~2017, was due to the timing of certain development and/or regulatory milestones achieved by our drug candidates. We expect license ~~fees~~fee expense 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 ~~$3.4~~$5.6 million decrease in product development expenses for the three months ended September 30, ~~2017,~~2018, as compared to the three months ended September 30, ~~2016,~~2017, was primarily ~~the result~~due to a decrease in clinical trial expenses of ~~decreases~~$3.2 million and a decrease in ~~varlilumab~~ contract manufacturing ~~and clinical trials~~ expenses of ~~$1.7~~$1.9 million ~~and $1.0 million, respectively.~~. We expect product development expenses to remain relatively consistent over the next twelve months, although there may be fluctuations on a quarterly basis.

General and Administrative Expense

The $1.6 million decrease in general and administrative expenses for the three months ended September 30, ~~2017,~~2018, as compared to the three months ended September 30, ~~2016,~~ 2017, was primarily due to ~~lower commercial planning costs of $0.7 million~~a decrease in headcount and lower ~~stock-based compensation of $0.6 million.~~legal expense and marketing expense. We expect general and administrative ~~expense~~expenses to remain relatively consistent over the next twelve months, although there may be fluctuations on a quarterly basis.

~~In-Process Research and Development Impairment~~

We recorded a non-cash impairment charge of $13.0 million on the anti-KIT program IPR&D assets acquired from Kolltan during the three months ended September 30, 2017. This impairment charge was related to changes in projected development and regulatory timelines regarding the anti-KIT program.

Gain on Fair Value Remeasurement of Contingent Consideration

The ~~$4.6~~$6.9 million gain on fair value remeasurement of contingent consideration for the three months ended September 30, ~~2017~~2018 was primarily due to ~~a reduction in fair value attributed to~~lower probability that milestones related to our anti-KIT ~~program. This gain was partially offset~~program would be triggered by ~~losses related to changes in discount rates and~~ the passage of time affecting remaining milestones. See Note 3 to the financial statements included herein for a discussion of the contingent consideration that may be payable related to the Kolltan Acquisition.Company’s current anti-KIT program development.

Amortization Expense

~~Amortization expenses~~The decrease in amortization expense for the three months ended September 30, ~~2017 were relatively consistent with~~2018, as compared to the three months ended September 30, ~~2016. We expect amortization expense~~2017, was the result of ~~acquired~~impairing the remaining balance of our intangible assets subject to ~~remain consistent over~~amortization during the ~~next twelve months.~~first quarter of 2018 due to the discontinuation of the Glemba program.

Investment and Other Income, Net

~~Investment~~The $0.1 million increase in investment and other income, net for the three months ended September 30, ~~2017 was consistent with~~2018, as compared to the three months ended September 30, ~~2016.~~2017, was primarily due to higher interest rates on fixed income investments. We anticipate investment income to decrease over the next twelve months ~~primarily~~ due to lower levels of cash and investment balances.

~~Income Tax Benefit~~

The income tax benefit relates to a $5.2 million decrease in deferred tax liabilities, net during the three months ended September 30, 2017. This decrease was due to the partial impairment of the anti-KIT program IPR&D assets.

Nine Months Ended September 30, ~~2017~~2018 Compared with Nine Months Ended September 30, ~~2016~~2017

	Nine Months Ended September 30,						Increase/ (Decrease)			Increase/ (Decrease)		Nine Months Ended September 30,						Increase/ (Decrease)			Increase/ (Decrease)
	2017			2016			$			%		2018			2017			$			%
	(In thousands)											(In thousands)
Revenue:
Revenues:
Product Development and Licensing Agreements	$	2,488		$	1,551		$	937		60	%	$	2,792		$	2,488		$	304		12	%
Contracts and Grants	6,799			3,362			3,437			102	%	4,982			6,799			(1,817		)	(27	)%
Total Revenue	$	9,287		$	4,913		$	4,374		89	%	$	7,774		$	9,287		$	(1,513	)	(16	)%
Operating Expense:
Operating Expenses:
Research and Development	72,707			78,168			(5,461		)	(7	)%	55,242			72,707			(17,465		)	(24	)%
General and Administrative	19,109			24,049			(4,940		)	(21	)%	14,936			19,109			(4,173		)	(22	)%
In-Process Research and Development Impairment	13,000			—			13,000			n/a
Goodwill Impairment												90,976			—			90,976			n/a
Intangible Asset Impairment												18,677			13,000			5,677			44	%
Gain on Fair Value Remeasurement of Contingent Consideration	(200		)	—			200			n/a		(27,968		)	(200		)	27,768			139	%
Amortization of Acquired Intangible Assets	672			760			(88		)	(12	)%	224			672			(448		)	(67	)%
Total Operating Expense	105,288			102,977			2,311			2	%	152,087			105,288			46,799			44	%
Operating Loss	(96,001		)	(98,064		)	(2,063		)	(2	)%	(144,313		)	(96,001		)	48,312			50	%
Investment and Other Income, Net	1,611			1,841			(230		)	(12	)%	1,767			1,611			156			10	%
Net Loss Before Income Tax Benefit	(94,390		)	(96,223		)	(1,833		)	(2	)%	(142,546		)	(94,390		)	48,156			51	%
Income Tax Benefit	5,200			—			5,200			n/a		765			5,200			(4,435		)	(85	)%
Net Loss	$	(89,190	)	$	(96,223	)	(7,033		)	(7	)%	$	(141,781	)	$	(89,190	)	$	52,591		59	%

Net Loss

The ~~$7.0~~$52.6 million ~~decrease~~increase in net loss for the nine months ended September 30, ~~2017,~~2018, as compared to the nine months ended September 30, ~~2016,~~2017, was primarily the result of anthe non-cash charges related to fully impairing our goodwill asset and Glemba-related intangible assets. This increase ~~in contracts~~was partially offset by the gain on fair value remeasurement of contingent consideration and ~~grants revenue,~~ a decrease in ~~general and administrative and~~ research and development ~~expenses and the income tax benefit recognized offset by the in-process research and development impairment.~~expenses.

Revenue

The ~~$0.9~~$0.3 million increase in product development and licensing agreements revenue for the nine months ended September 30, ~~2017,~~2018, as compared to the nine months ended September 30, ~~2016,~~2017, was primarily due to an increase in ~~reimburseable clinical trial expenses~~revenue related to our BMS agreement. The ~~$3.4~~$1.8 million ~~increase~~decrease in contracts and grants revenue for the nine months ended September 30, ~~2017,~~2018, as compared to the nine months ended September 30, ~~2016,~~2017, was primarily related to a decrease in services performed under our ~~IAVI~~contract manufacturing and ~~Frontier agreements executed in 2017.~~research and development agreement with International AIDS Vaccine Initiative.

Research and Development Expense

Nine Months Ended
September 30,

Increase/
(Decrease)

Increase/
(Decrease)

2017

2016

$

%

(In thousands)

Personnel

$
28,079

$
26,551

$
1,528

6
%
Laboratory Supplies

3,541

2,774

767

28
%
Facility

6,649

4,421

2,228

50
%
License Fees

479

1,381

(902
)
(65
)%
Product Development

26,965

36,950

(9,985
)
(27
)%

	Nine Months Ended September 30,				Increase/ (Decrease)
	2018		2017		$			%
	(In thousands)
Personnel	$	22,586	$	28,079	$	(5,493	)	(20	)%
Laboratory Supplies	3,354		3,541		(187		)	(5	)%
Facility	5,901		6,649		(748		)	(11	)%
License Fees	214		479		(265		)	(55	)%
Product Development	16,689		26,965		(10,276		)	(38	)%

Personnel expenses primarily include salary, benefits, stock-based compensation and payroll taxes. The ~~$1.5~~$5.5 million ~~increase~~decrease in personnel expenses for the nine months ended September 30, ~~2017,~~2018, as compared to the nine months ended September 30, ~~2016,~~2017, was primarily due to ~~an increase~~a decrease in ~~salaries~~headcount and lower stock-based compensation expense partially offset by severance expense of $1.0 million.

Laboratory supplies expenses include laboratory materials and ~~headcount~~supplies, services, and other related toexpenses incurred in the ~~Kolltan acquisition.~~

development of our technology. The ~~$0.8~~$0.2 million ~~increase~~decrease in laboratory ~~supplies expense~~supply expenses for the nine months ended September 30, ~~2017,~~2018, as compared to the nine months ended September 30, ~~2016,~~2017, was primarily due to ~~higher manufacturing supply~~lower laboratory materials and supplies purchases.

Facility expenses include depreciation, amortization, utilities, rent, maintenance and other related expenses incurred at our facilities. The ~~$2.2~~$0.7 million ~~increase~~decrease in facility expenses for the nine months ended September 30, ~~2017,~~2018, as compared to the nine months ended September 30, ~~2016~~,2017, was primarily due to ~~the addition of our New Haven facility that we acquired with the Kolltan acquisition and higher~~lower depreciation ~~expense of $1.3 million. In March 2017, the Company terminated its lease in Branford, CT and consolidated its Connecticut operations in its New Haven facility.~~expense.

License fee expenses include annual license maintenance fees and milestone payments due upon the achievement of certain development, regulatory and/or commercial milestones. The ~~$0.9~~$0.3 million decrease in license ~~fees expense~~fee expenses for the nine months ended September 30, ~~2017,~~2018, as compared to the nine months ended September 30, ~~2016~~,2017, was due to the timing of certain development and/or regulatory milestones achieved by our drug candidates.

Product development expenses include clinical investigator site fees, external trial monitoring costs, data accumulation costs, contracted research and outside clinical drug product manufacturing. The ~~$10.0~~$10.3 million decrease in product development expenses for the nine months ended September 30, ~~2017,~~2018, as compared to the nine months ended September 30, ~~2016,~~2017, was primarily ~~the result~~due to a decrease in clinical trial expenses of ~~(i) decreases~~$5.8 million and a decrease in ~~varlilumab and Rintega~~ contract manufacturing expenses of ~~$6.8~~$3.2 million and $2.5 million, respectively, partially offset by an increase in glembatumumab vedotin contract manufacturing expenses of $2.6 million and (ii) decreases in Rintega and varlilumab clinical trial costs of $5.1 million and $1.9 million, respectively, partially offset by increases in glembatumumab vedotin, anti-KIT and CDX-3379 clinical trial costs of $3.3 million..

General and Administrative Expense

The ~~$4.9~~$4.2 million decrease in general and administrative expenses for the nine months ended September 30, ~~2017,~~2018, as compared to the nine months ended September 30, ~~2016,~~ 2017, was primarily due to ~~lower commercial planning costs of $3.1 million~~a decrease in headcount and lower stock-based compensation ~~of $1.4 million.~~

~~In-Process Research~~expense and ~~Development Impairment~~

We recorded a non-cash impairment charge of $13.0 million on the anti-KIT program IPR&D assets acquired from Kolltan during the nine months ended September 30, 2017. This impairment charge was related to changes in projected development and regulatory timelines regarding the anti-KIT program.marketing expense.

Gain on Fair Value Remeasurement of Contingent Consideration

The ~~$0.2~~$28.0 million gain on fair value remeasurement of contingent consideration for the nine months ended September 30, ~~2017~~2018 was due to ~~a reduction in fair value attributed to~~discontinuation of the Glemba and CDX-014 programs, updated assumptions for the varlilumab program, and lower probability that milestones related to our anti-KIT program ~~partially offset~~would be triggered by ~~losses related to changes in discount rates and~~ the ~~passage of time affecting remaining milestones.~~Company’s current anti-KIT program development.

Amortization Expense

~~Amortization expenses~~The decrease in amortization expense for the nine months ended September 30, ~~2017 were relatively consistent~~2018, as compared to the nine months ended September 30, ~~2016.~~2017, was the result of impairing the remaining balance of our intangible assets subject to amortization during the first quarter of 2018 due to the discontinuation of the Glemba program.

Investment and Other Income, Net

The $0.2 million ~~decrease~~increase in investment and other income, net for the nine months ended September 30, ~~2017,~~2018, as compared to the nine months ended September 30, ~~2016,~~2017, was primarily due to ~~lower levels of cash and investment balances.~~higher interest rates on fixed income investments.

~~Income Tax Benefit~~

The deferred income tax benefit relates to a $5.2 million decrease in deferred tax liabilities, net during the nine months ended September 30, 2017. This decrease was due to the partial impairment of the anti-KIT program IPR&D assets.

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 in money market mutual funds with commercial banks and financial institutions. We maintain cash balances with financial institutions in excess of insured limits. We do 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 investment policy 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; and consulting, legal and other professional fees. To date, the primary sources of cash flows from operations have been payments received from our collaborative partners and from government ~~entities.~~entities and payments received for contract manufacturing and research and development services provided by us. The timing of any new contract manufacturing and research and development agreements, 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 September 30, ~~2017,~~2018, our principal sources of liquidity consisted of cash, cash equivalents and marketable securities of ~~$140.5~~$105.6 million. We have had recurring losses and incurred a ~~net~~ loss of ~~$89.2~~$141.8 million for the nine months ended September 30, ~~2017.~~2018. Net cash used in operations for the nine months ended September 30, ~~2017~~2018 was ~~$80.4~~$59.8 million. We believe that the cash, cash equivalents and marketable securities at September 30, ~~2017,~~2018, combined with the ~~$11.3 million in net~~anticipated proceeds from future sales of our common stock under the Cantor agreement, ~~during October 2017,~~ are sufficient to meet estimated working capital requirements and fund planned operations through ~~2018; however, this~~2020. This could be impacted if we elected to pay Kolltan contingent ~~consideration related to the Kolltan acquisition,~~milestones, if any, in cash.

During the next twelve months, we will take further steps to raise additional capital to meet our liquidity needs. Our capital raising activities 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 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, and our 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 further collaborative relationships. Additional equity financings may be dilutive to our stockholders; debt financing, if available, may involve significant cash payment obligations and covenants that restrict our ability to operate as a business; and licensing or strategic collaborations may result in royalties or other terms which reduce our economic potential from products under development. Our ability to continue funding our planned operations into and beyond twelve months from the issuance date is also dependent on the timing and manner of payment of future contingent milestones from the Kolltan acquisition, in the event that we achieve the drug candidate milestones related to those payments. We may decide to pay those milestone payments in cash, shares of our common stock or a combination thereof. If we are unable to raise the funds necessary to meet our liquidity needs, we may have to delay or discontinue the development of one or more programs, discontinue or delay ongoing or anticipated 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 part of our business.

On May 29, 2018, we received a written notice from the Listing Qualifications department of The NASDAQ Stock Market (the “Notice”) indicating that we are not in compliance with the $1.00 Minimum Bid Price requirement set forth in NASDAQ Listing Rule 5450(a)(1) for continued listing on the NASDAQ Global Market. If we do not regain compliance with Listing Rule 5450(a)(1) by November 26, 2018, we intend to apply to transfer to the NASDAQ Capital Market where we should be afforded an additional 180-day period in which to regain compliance, provided that (i) we meet the applicable market value of publicly held shares requirement for continued listing and all other applicable requirements for initial listing on the NASDAQ Capital Market (except for the bid price requirement) based on our most recent public filings and market information and (ii) we notify NASDAQ of our intent to cure the bid price requirement deficiency prior to the completion of the second 180-day compliance period by effecting a reverse stock split, if necessary. At our 2018 Annual Meeting of Stockholders, our stockholders approved a proposal to grant discretionary authority to our board of directors to amend our certificate of incorporation to effect a reverse split of our outstanding shares of common stock within a range of one share of common stock for every ten shares of common stock to one share of common stock for every fifteen shares of common stock, with the exact reverse split ratio to be decided and publicly announced by the board of directors prior to the effective time of the amendment to the Company’s certificate of incorporation.

Operating Activities

Net cash used in operating activities was $59.8 million for the nine months ended September 30, 2018 as compared to $80.4 million for the nine months ended September 30, ~~2017 as compared to $92.7 million for the nine months ended September 30, 2016.~~2017. The decrease in net cash used in operating activities was primarily due to ~~a decrease~~decreases in ~~net loss of $7.0 million~~both general and ~~changes in operating assets~~administrative and ~~liabilities.~~research and development expenses. We expect that cash used in operating activities will ~~decrease~~remain relatively consistent over the next twelve months, although there may be fluctuations on a quarterly basis.

We have incurred and will continue to incur significant costs in the area of research and development, including preclinical studies and clinical trials, as our drug candidates are developed. We plan to spend significant amounts to progress our current drug candidates through the clinical trial and commercialization process as well as to develop additional drug candidates. As our drug candidates progress through the clinical trial process, we may be obligated to make significant milestone payments.

Investing Activities

Net cash provided by investing activities was $26.5 million for the nine months ended September 30, 2018 as compared to $59.9 million for the nine months ended September 30, ~~2017 as compared to $41.1 million for the nine months ended September 30, 2016.~~2017. The ~~increase~~decrease in net cash provided by investing activities was primarily due to net sales and maturities of marketable securities for the nine months ended September 30, ~~2017~~2018 of ~~$61.4~~$26.8 million as compared to ~~$45.0~~$61.4 million for the nine months ended September 30, ~~2016.~~2017.

Financing Activities

Net cash provided by financing activities was $25.9 million for the nine months ended September 30, 2018 as compared to $32.8 million for the nine months ended September 30, ~~2017 as compared to $11.2 million for the nine months ended September 30, 2016.~~2017. Net proceeds from stock issuances pursuant to employee benefit plans were ~~$0.2~~$0.4 million during the nine months ended September 30, ~~2017~~2018 as compared to ~~$0.5~~$0.2 million for the nine months ended September 30, ~~2016.~~2017.

In May 2016, we entered into ~~a controlled equity offering sales~~an agreement with Cantor Fitzgerald & Co. (“Cantor”) to allow us to issue and sell shares of our common stock having an aggregate offering price of up to $60.0 million from time to time through Cantor, acting as agent. In November 2017, we filed a prospectus supplement registering the offer and sale of shares of common stock of up to an additional $75.0 million under the agreement with Cantor. During the nine months ended September 30, ~~2017 and 2016,~~2018, we issued ~~11,326,363 and 2,395,949~~29,760,486 shares ~~respectively,~~ of ~~our~~ common stock under this controlled equity offering sales agreement with Cantor resulting in net proceeds ~~to us~~ of ~~$32.6~~$25.5 million ~~and $10.7 million, respectively,~~ after deducting commission and offering expenses. At September 30, 2018, we had $41.3 million remaining in aggregate gross offering price available under the Cantor agreement. In October 2018, we issued 3,884,597 shares of its common stock resulting in net proceeds to us of $1.6 million.

~~AGGREGATE CONTRACTUAL OBLIGATIONS~~Aggregate Contractual Obligations

The disclosures relating to our contractual obligations reported in our Annual Report on Form 10-K for the year ended December 31, ~~2016~~2017 which was filed with the SEC on March ~~14, 2017~~7, 2018 have not materially changed since we filed that report.

OFF-BALANCE SHEET ARRANGEMENTS

We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined under SEC rules.

Item 3. 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 until it is used to fund operations, including our research and development activities. None of these market-risk sensitive instruments are held for trading purposes. We invest 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 corporate bonds that meet high credit quality standards, as specified in our investment policy. Our investment policy seeks to manage these assets to achieve our goals of preserving principal and maintaining adequate liquidity. Because of the short-term nature of these investments, we do not believe we have material exposure due to market 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 consolidated balance sheet of cash and cash equivalents, accounts receivables and accounts payable approximates fair value at September 30, ~~2017~~2018 due to the short-term maturities of these instruments.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures.

As of September 30, ~~2017,~~2018, we evaluated, with the participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of our disclosure controls 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 that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of September 30, ~~2017.~~2018. Our disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed 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’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting.

There were no changes in our internal control over financial reporting during the quarter ended September 30, ~~2017~~2018 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

Item 1A. Risk Factors

~~In addition to the other information set forth~~Any investment in ~~this report,~~our business involves a high degree of risk. Before making an investment decision, you should carefully consider the ~~factors discussed~~information we include in ~~Part I, “Item 1A. Risk Factors”~~this Quarterly Report on Form 10-Q, including the risks described below and our condensed financial statements and accompanying notes, and the additional information in the other reports we file with the Securities and Exchange Commission along with the risks described in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016, which could materially affect our business, financial condition or future results.~~ 2017.

The risks described below and in our Annual Report on Form 10-K may not be the only risks facing the Company. Additional risks and uncertainties not currently known to the Company or that the Company currently deems to be immaterial also may materially adversely affect the Company’s business, financial condition and/or operating results.

~~There were~~Except as set forth below, there have been no material changes to the risk factors previously disclosed and included in our Annual Report on Form 10-K ~~filed with the Securities and Exchange Commission on March 14, 2017.~~

~~Item 5.~~~~Other Information~~

~~On November 1, 2017, we determined that we should record a non-cash partial impairment charge of $13.0 million~~ for the ~~three months~~fiscal year ended ~~September 30,~~December 31, 2017 ~~related to~~and as updated in our anti-KIT program. The anti-KIT program was acquired as part of our acquisition of Kolltan Pharmaceuticals, Inc.in the fourth quarter of 2016. We determined that changes in projected development and regulatory timelines related to the anti-KIT program constituted a triggering event that required us to evaluate the intangible asset for impairment. The time periods to receive approvals from the FDA and other regulatory agencies are subject to uncertainty and therefore we will continue to evaluate the development progress for the anti-KIT program and monitor the remaining $27.0 million intangible asset for further impairment. See Note 5 to the consolidated financial statements included elsewhere in this quarterly report on Form 10-Q for ~~further discussion~~the quarter ended June 30, 2018.

We are not currently in compliance with the continued listing requirements for NASDAQ. If the price of our common stock continues to trade below $1.00 per share for a sustained period or we do not meet other continued listing requirements, our common stock may be delisted from the NASDAQ Global Market, which could affect the market price and liquidity for our common stock and reduce our ability to raise additional capital.

Our common stock is listed on the NASDAQ Global Market. In order to maintain that listing, we must satisfy minimum financial and other requirements including, without limitation, a requirement that our closing bid price be at least $1.00 per share. On May 29, 2018, we received a written notice from NASDAQ indicating that we are not in compliance with the minimum bid price requirement for continued listing on the NASDAQ Global Market. We have until November 26, 2018 to regain compliance. We can regain compliance if at any time prior to November 26, 2018 the bid price of our common stock closes at or above $1.00 per share for a minimum of ten consecutive business days.

If we fail to regain compliance with the minimum bid price requirement by November 26, 2018, we may apply to transfer to The NASDAQ Capital Market where we should be afforded an additional 180-day period to regain compliance provided that (i) we meet the applicable market value of publicly held shares requirement for continued listing and all other applicable requirements for initial listing on the NASDAQ Capital Market (except for the bid price requirement) based on our most recent public filings and market information and (ii) we notify NASDAQ of our intent to cure the bid price requirement deficiency prior to the completion of the second 180-day compliance period by effecting a reverse stock split, if necessary. At our annual meeting of stockholders in June 2018, our stockholders approved a proposal to grant discretionary authority to our board of directors to amend our certificate of incorporation to effect a reverse split of our outstanding shares of common stock within a range of one share of common stock for every ten shares of common stock to one share of common stock for every fifteen shares of common stock, with the exact reverse split ratio to be decided and publicly announced by the board of directors prior to the effective time of the amendment to our certificate of incorporation. We intend to monitor the closing bid price of our common stock and consider our available options to resolve our noncompliance with the minimum bid price requirement. No determination regarding our response has been made at this ~~impairment charge.~~time. There can be no assurance that we will be able to regain compliance with the minimum bid price requirement or we will otherwise be in compliance with other NASDAQ listing criteria. If we fail to regain compliance with the minimum bid requirement or to meet the other applicable continued listing requirements for the NASDAQ Global Market in the future and NASDAQ determines to delist our common stock, the delisting could adversely affect the market price and liquidity of our common stock and reduce our ability to raise additional capital. In addition, if our common stock is delisted from NASDAQ and the trading price remains below $5.00 per share, trading in our common stock might also become subject to the requirements of certain rules promulgated under the Exchange Act, which require additional disclosure by broker-dealers in connection with any trade involving a stock defined as a “penny stock” (generally, any equity security not listed on a national securities exchange or quoted on NASDAQ that has a market price of less than $5.00 per share, subject to certain exceptions).

Item 6. Exhibits

The exhibits filed as part of this quarterly report on Form 10-Q are listed in the exhibit index ~~immediately preceding the exhibits~~included herewith and are incorporated by reference herein.

EXHIBIT INDEX

Exhibit No.		Description
~~3.1~~		Third Restated Certificate of Incorporation of the Company, incorporated by reference to Exhibit 3.1 of the Company’s Registration Statement on Form S-4 (Reg. No. 333-59215), filed July 16, 1998 with the Securities and Exchange Commission.

~~3.2~~		Certificate of Amendment of Third Restated Certificate of Incorporation of the Company, incorporated by reference to Exhibit 3.1 of the Company’s Registration Statement on Form S-4 (Reg. No. 333-59215), filed July 16, 1998 with the Securities and Exchange Commission.

~~3.3~~		Second Certificate of Amendment of Third Restated Certificate of Incorporation of the Company, incorporated by reference to Exhibit 3.2 of the Company’s Registration Statement on Form S-4 (Reg. No. 333-59215), filed July 16, 1998 with the Securities and Exchange Commission.

~~3.4~~		Third Certificate of Amendment of Third Restated Certificate of Incorporation of the Company, incorporated by reference to Exhibit 3.1 of the Company’s Quarterly Report on Form 10-Q, filed May 10, 2002 with the Securities and Exchange Commission.

~~3.5~~		Fourth Certificate of Amendment of Third Restated Certificate of Incorporation of the Company, incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K, filed on March 11, 2008 with the Securities and Exchange Commission.

~~3.6~~		Fifth Certificate of Amendment of Third Restated Certificate of Incorporation of the Company, incorporated by reference to Exhibit 3.2 of the Company’s Current Report on Form 8-K, filed on March 11, 2008 with the Securities and Exchange Commission.

~~3.7~~		Sixth Certificate of Amendment of Third Restated Certificate of Incorporation of the Company, incorporated by reference to Exhibit 3.7 of the Company’s Quarterly Report on Form 10-Q, filed November 10, 2008 with the Securities and Exchange Commission.

~~10.1~~		Employment Agreement, dated October 3, 2017, by and between Margo Heath-Chiozzi and Celldex Therapeutics., Inc., incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K, filed on October 3, 2017 with the Securities and Exchange Commission.

*31.1		Certification of President and Chief Executive Officer

*31.2		Certification of Senior Vice President and Chief Financial Officer

**32.1		Section 1350 Certifications

*101		XBRL Instance Document.

*101		XBRL Taxonomy Extension Schema Document.

*101		XBRL Taxonomy Extension Calculation Linkbase Document.

*101		XBRL Taxonomy Extension Definition Linkbase Document.

*101		XBRL Taxonomy Extension Label Linkbase Document.

*101		XBRL Taxonomy Extension Presentation Linkbase Document.

~~Filed herewith.~~

* Filed herewith.

**Furnished herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	CELLDEX THERAPEUTICS, INC.

	BY:

	/s/ ANTHONY S. MARUCCI
Dated: November 7, ~~2017~~2018	Anthony S. Marucci
	President and Chief Executive Officer
	(Principal Executive Officer)

	/s/ SAM MARTIN
Dated: November 7, ~~2017~~2018	Sam Martin
	Senior Vice President and Chief Financial Officer
	(Principal Financial and Accounting Officer)

3531

Delaware		No. 13-3191702
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

Large accelerated filer o		Accelerated filer x

Non-accelerated filer o		Smaller reporting company ox
~~(Do not check if a smaller reporting company)~~		Emerging growth company o

	As of September 30, 2017		Level 1		Level 2		Level 3
	(In thousands)
Assets:
Money market funds and cash equivalents	$	42,032	$	—	$	42,032	$	—
Marketable securities	85,795		—		85,795		—
	$	127,827	$	—	$	127,827	$	—

Liabilities:
Kolltan acquisition contingent consideration	$	44,000	$	—	$	—	$	44,000
	$	44,000	$	—	$	—	$	44,000

	Other Long-Term Liabilities: Contingent Consideration
Balance at December 31, 2016	$	44,200
Fair value adjustments included in operating expenses	(200		)
Balance at September 30, 2017	$	44,000

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(In thousands)
September 30, 2017
Marketable securities
U.S. government and municipal obligations
Maturing in one year or less	$	13,725	$	5	$	(3	)	$	13,727
Maturing after one year through three years	—		—		—			—
Total U.S. government and municipal obligations	$	13,725	$	5	$	(3	)	$	13,727
Corporate debt securities
Maturing in one year or less	$	72,078	$	3	$	(13	)	$	72,068
Maturing after one year through three years	—		—		—			—
Total corporate debt securities	$	72,078	$	3	$	(13	)	$	72,068
Total marketable securities	$	85,803	$	8	$	(16	)	$	85,795

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

	Accrued Lease Restructuring
Balance at December 31, 2016	$	1,154
Expense	170
Payments	(470		)
Balance at September 30, 2017	$	854

Fair 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

Cash 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

	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	%