Better Buy: NantKwest, Inc. vs. Celldex Therapeutics, Inc.
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A match-up between NantKwest, Inc. (NASDAQ: NK) and Celldex Therapeutics, Inc. (NASDAQ: CLDX) might qualify for a biotech version of the TV showThe Biggest Loser. NantKwest has lost over 60% of its value in 2016. Celldex's shares have plunged nearly 80%. Which of these big biotech losers has the best chance of becoming a winner again? Here's how NantKwest and Celldex stack up against each other.
The case for NantKwest
A key factor behind NantKwest's terrible stock performance this year related to turnover at the CFO position. Angela Wilson assumed the CFO role in November 2015 only to leave in January 2016. That change was followed by a restatement of some of the company's 2015 results due to multiple errors in preparing quarterly filings.
There are two primary reasons for investors to consider NantKwest, though. One is the track record of its CEO,Patrick Soon-Shiong. The well-known surgeon and scientist performed the first encapsulated islet stem cell transplant in a diabetic patient in the U.S. He founded two companies that later sold to larger acquirers, with the most recent being the 2010 sale of Abraxis Bioscience to Celgene for $3.7 billion.
The other main reason for investors to like NantKwest is the promise of its technology. NantKwest focuses on using natural killer (NK) immune cells to fight cancer. These NK cells seek out abnormal cells like cancer cells and destroy them. The problem is that NK cells expressKiller Inhibitory Receptors (KIR), which cancer cells can use to escape being destroyed. NantKwest's technology modifies the NK cells so that they don't express KIRs.
NantKwest's high-affinity natural killer (haNK)cells go one step further. These modified cells express a"high-affinity" variant ofspecialized receptor CD-16 to bind more effectively to antibodies. The biotech also is developing target-activated natural killer (taNK) cells that use chimeric antigen receptors (CARs) to target specific cancer cells.
Could NantKwest be on to something big? I think so. The main drawback, however, is that most of the biotech's development is still in pre-clinical stage. NantKwest has one clinical study in progress, a phase 2 trial of its activated natural killer cells in treating a rare type of skin cancer known as Merkel cell carcinoma.
In the meantime, the biotech should be able to go for a while before needing to raise more money. NantKwest reported cash, cash equivalents, and marketable securities of nearly $214 million at the end of June.
The case for Celldex
Making the case for buying Celldex would have been much easier prior to March 2016. That's when the biotech announced it was discontinuing a phase 3 study of lead candidate Rintega. The brain cancer drug simply didn't prove to be effective. Celldex's shares cratered on the news.
The loss of Rintega left a gaping hole in Celldex's pipeline. At one point, some analysts thought the drug could reach peak annual sales of over $1 billion.Success for Rintega is now out of the question, but the biotech does have other promising drugs in development.
Glembatumumab vedotin (called glemba for short) is now Celldex's lead pipeline candidate. Five clinical trials involving glemba are currently in progress, including three investigator-sponsored trials. The most important for Celldex is a registrational phase 2 study of the drug for treating triple negative breast cancer. This study compares glemba against Roche's Xeloda.
Varlilumab (also known as varli) is in a phase 2 study in combination with Bristol-Myers Squibb'sOpdivo in treating multiple solid tumors. Celldex also has three phase 1 studies of the drug in combination with other therapies.
Investigator-sponsored trials are also under way for a couple of other Celldex's drugs. CDX-1401 is in a phase 2 study in combination with CDX-301 in treating metastatic melanoma. It's also in a phase 1 study in combination with Incyte's epacadostatin treating ovarian, fallopian tube, and primary peritoneal carcinoma. CDX-301 is part of another investigator-sponsored trial targeting treatment of B-cell lymphomas as well.
Adding in another phase 1 candidate (CDX-014) gives Celldex a pretty deep pipeline for a small clinical-stage biotech. Celldex reported cash, cash equivalents, and marketable securities of over $220 million as of June 30. That should be enough to keep development and operations rolling for a while, although the biotech hinted at another public offering in its second-quarter comments.
Better buy
NantKwest's market cap currently stands at around $540 million, while Celldex's market cap is only around $340 million. But Celldex has more pipeline candidates that are further along in development, and gets the nod as the better buy.
However, I am intrigued by NantKwest's natural killer cell platform. I like the company's prospects over the long run.Patrick Soon-Shiong doesn't fail often and probably won't with his latest biotech venture.Celldex, though, still has a lot going for it despite the setback with Rintega. After the stock's huge drop, I think there's a good chance thatCelldex will see better days in the future.
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Keith Speights owns shares of Celgene. The Motley Fool owns shares of and recommends Celgene. The Motley Fool has the following options: short October 2016 $95 puts on Celgene. 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.