Why Celldex Therapeutics, Inc. Stock Sank 28.1% in August

By Markets Fool.com

Image source: Getty Images.

Continue Reading Below

What happened

Shares of Celldex Therapeutics, Inc. (NASDAQ: CLDX), clinical-stage biopharmaceutical company developing targeted cancer therapies, fell 28.1% in August according to data from S&P Global Market Intelligence. Unexpected delays in its lead candidate's pivotal trial was the culprit.

CLDX data by YCharts.

So what

Continue Reading Below

Celldex Therapeutics finished the second quarter with $220.1 million in cash, cash equivalents, and marketable securities, which should be enough to see it through 2018.A combination of factors spooked the market:

  • Celldex Therapeutics is having difficulty enrolling triple-negative breast cancer patients into a trial designed to support an application for its lead candidate, Glemba. These patients' tumors lack three surface proteins that existing therapies target. With more than 330 ongoing studies in this population, finding 300 triple negative patients who also overexpress Glemba's target protein, gpNMB, is proving troublesome.
  • Celldex is actively enrolling seven clinical trials and anticipates adding new studies before the end of the year. With another six investigator-sponsored or collaborative studies under way, this might be the busiest company on the market without a product to sell. Its work ethic is commendable, but so much activity makes predicting near-term cash flows a guessing game.
  • In May, the company entered an agreement with Cantor Fitzgerald that requires the financial institution to purchase newly issued Celldex shares at the market price upon the company's request, up to a maximum of $60 million, in return for a modest 3% commission on each sale.Issuing new shares shrinks existing investors' slice of any potential profits. The severity of the dilution depends on the market price and the amount of capital Celldex might require.

Now what

Between the beginning of the deal and the end of July, Celldex issued about 1.70 million shares, raising $7.7 million in the process, and the company can request Cantor to purchase up to $52 million more.With 100.55 million shares outstanding, exhausting the remaining $52 millionwould lead to a 14% dilution at the company's recent stock price of $3.71 per share.

In addition to the pivotal trial in triple-negative breast cancer, Glemba is in four other studies, and Celldex plans on presenting results from a single-agent study in melanoma patients this October. Highly positive results would probably lift the stock -- and lower the potential dilutive effect of issuing shares to fund its extensive clinical-stage pipeline. Success isn't guaranteed, though, which makes the potential dilutive effect impossible to measure.

A secret billion-dollar stock opportunity
The world's biggest tech company forgot to show you something, but a few Wall Street analysts and the Fool didn't miss a beat: There's a small company that's powering their brand-new gadgets and the coming revolution in technology. And we think its stock price has nearly unlimited room to run for early, in-the-know investors! To be one of them, just click here.

Cory Renauer has no position in any stocks mentioned. You can follow Cory on Twitter @TMFang4apples or connect with him on LinkedIn for more healthcare industry insight.

The Motley Fool recommends Celldex Therapeutics. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.