Why Celldex Therapeutics Stock Reversed Course in November

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What happened

Shares of the struggling small-cap biotech Celldex Therapeutics (NASDAQ: CLDX) finally showed some signs of life in November. Specifically, the biotech's stock rose by a healthy 27.6% last month, according to data from S&P Global Market Intelligence. Even so, the drugmaker's shares are still down by 14.4% year to date.

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Celldex's stock got a boost last month from its third-quarter earnings release, where the company announced the initiation of two new clinical trials to assess CDX-3379 in recurrent head and neck squamous cell cancer and CDX-1140 in solid tumors. The company also restated that its lead clinical candidate glembatumumab vedotin -- or glemba for short -- remains on track to produce top-line data for its ongoing mid-stage study in triple negative breast cancer (TNBC) sometime in the second-quarter of 2018.

So what

Celldex's decision to advance these early- and mid-stage clinical candidates is a major development for one key reason: It lowers the risk of its share price absolutely cratering in the event that glemba misses the mark in TNBC altogether or the data simply won't warrant an accelerated regulatory filing.

Now what

Celldex's decision to aggressively develop its broader clinical pipeline, however, does have a serious downside. Namely, new clinical trials will almost certainly ramp up the company's cash burn rate by a substantial margin moving forward. That's especially unwelcome news at this stage, given that Celldex is already losing around $26 million per quarter, and the company exited the third quarter with only $140.5 million in cash, cash equivalents, and marketable securities. In other words, Celldex is probably going to be forced to raise a large sum of capital next year -- that is, if it wants to remain an independent entity following glemba's top-line readout.

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George Budwell has no position in any of the stocks mentioned. The Motley Fool recommends Celldex Therapeutics. The Motley Fool has a disclosure policy.