Celldex Therapeutics, Inc. - Quarter Report: 2020 June (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

For the quarterly period ended June 30, 2020

OR

Commission File Number: 000-15006

CELLDEX THERAPEUTICS, INC.

(Exact name of registrant as specified in its charter)

Perryville III Building, 53 Frontage Road, Suite 220, Hampton, New Jersey 08827

(Address of principal executive offices) (Zip Code)

(908) 200-7500

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

As of July 31, 2020, 39,126,448 shares of common stock, $.001 par value per share, were outstanding.

CELLDEX THERAPEUTICS, INC.

FORM 10-Q

For the Quarterly Period Ended June 30, 2020

Table of Contents

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)

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)

See accompanying notes to unaudited condensed consolidated financial statements

CELLDEX THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW

(Unaudited)

(In thousands)

See accompanying notes to unaudited condensed consolidated financial statements

CELLDEX THERAPEUTICS, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

June 30, 2020

(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. 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, 2019, which are included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 26, 2020. 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, 2020.

At June 30, 2020, the Company had cash, cash equivalents and marketable securities of $206.9 million. The Company has had recurring losses and incurred a loss of $23.7 million for the six months ended June 30, 2020. Net cash used in operations for the six months ended June 30, 2020 was $23.3 million. The Company believes that the cash, cash equivalents and marketable securities at August 6, 2020 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 may take further steps to raise additional capital to meet its long-term liquidity needs including, 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. Although the Company has been successful in raising capital in the past, 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 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.

In December 2019, a novel strain of coronavirus, now referred to as COVID-19, surfaced in Wuhan, China. The virus continues to spread globally, has been declared a pandemic by the World Health Organization and has spread to hundreds of countries, including the United States. The impact of this pandemic has been and will likely continue to be extensive in many aspects of society, which has resulted in and will likely continue to result in significant disruptions to the global economy, as well as businesses and capital markets around the world. In an effort to halt the outbreak of COVID-19, various states, including New Jersey, Massachusetts and Connecticut, where the Company has office, research and manufacturing facilities, have placed significant restrictions on travel and many businesses have announced extended closures which could adversely impact our operations. To date, the Company has not experienced significant delays or disruptions in planned and ongoing preclinical and clinical trials, manufacturing or shipping. Potential impacts to our business include delays in planned and ongoing preclinical and clinical trials including enrollment of patients, disruptions in time and resources provided by independent clinical investigators, contract research organizations, other third-party service providers, temporary closures of our facilities, disruptions or restrictions on our employees’ ability to travel, and delays in manufacturing and/or shipments to and from third party suppliers and contract manufacturers for APIs and drug product. Any prolonged negative impacts to our business could materially impact our operating results and could lead to impairments of our Intangible (IPR&D) assets with a carrying value of $45.2 million at June 30, 2020.

(2) Significant Accounting Policies

The significant accounting policies used in preparation of these condensed consolidated financial statements on Form 10-Q for the three and six months ended June 30, 2020 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, 2019, except as it relates to the adoption of new accounting standards during the first six months of 2020 as discussed below.

Newly Adopted Accounting Pronouncements

On January 1, 2020, the Company adopted a new accounting standard that modifies certain disclosure requirements for fair value measurements. For instance, the Company is required to disclose weighted average information for significant unobservable inputs for all Level 3 fair value measurements. The adoption of this new guidance did not have a material impact on the Company’s consolidated financial statements and related disclosures. Refer to Note 3 for the disclosures related to the Company’s level 3 fair value measurements.

On January 1, 2020, the Company adopted a new accounting standard that clarifies the interaction between the accounting guidance for collaborative arrangements and revenue from contracts with customers. The amendments clarify that certain transactions between collaborative arrangement participants should be accounted for as revenue under ASC 606, when the collaborative arrangement participant is a customer in the context of a unit of account. The adoption of this standard did not have a material impact on our consolidated financial statements, as we have no arrangements within the scope of ASC 808.

Recent Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the 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 June 2016, the FASB issued guidance on the Measurement of Credit Losses on Financial Instruments. The guidance requires that credit losses be reported using an expected losses model rather than the incurred losses model that is currently used, and establishes additional disclosures related to credit risks. For available-for-sale debt securities with unrealized losses, the standard now requires allowances to be recorded instead of reducing the amortized cost of the investment. This standard will be effective for the Company on January 1, 2023. We are currently evaluating the potential impact that this standard may have on the Company’s consolidated financial 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:

The Company’s financial assets consist mainly of money market funds, 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 six months ended June 30, 2020 (in thousands):

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, was primarily an income approach. 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. As of June 30, 2020, the weighted average discount rate used in calculating the fair value of contingent consideration was 11.6% (with a range of 11.5% to 12.2%) and the weighted average amount of time until the conditions of the milestone payments are met was 3 years.

During the three and six months ended June 30, 2020, the Company recorded a $5.1 million and $4.9 million gain on fair value remeasurement of contingent consideration, respectively, primarily due to updated assumptions for CDX-3379 related milestones due to the discontinuation of the CDX-3379 program and the passage of time. During the three and six months ended June 30, 2019, the Company recorded a $1.0 million gain and $0.5 million loss on fair value remeasurement of contingent consideration, respectively, primarily due to changes in discount rates and the passage of time. The assumptions related to determining the fair value of contingent consideration include a significant amount of judgment, and any changes in the underlying estimates could have a material impact on the amount of contingent consideration adjustment recorded in any given period.

The Company did not have any transfers in or out of Level 3 assets or liabilities during the six months ended June 30, 2020.

(4)  Marketable Securities

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

The Company holds investment-grade marketable securities, and none were in a continuous unrealized loss position for more than twelve months as of June 30, 2020 and December 31, 2019. 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 $0.2 million in accrued interest at June 30, 2020 and December 31, 2019.

(5)  Intangible Assets

At June 30, 2020 and December 31, 2019, the Company recorded indefinite-lived intangible assets of $45.2 million and $48.7 million, respectively. Indefinite-lived intangible assets consist of acquired in-process research and development (“IPR&D”) related to the development of CDX-3379, the anti-KIT program (including CDX-0159) and the TAM program. The Company evaluated the CDX-3379 IPR&D asset for potential impairment as a result of the discontinuation of the CDX-3379 program. The Company concluded that the CDX-3379 IPR&D asset was fully impaired, and a non-cash impairment charge of $3.5 million was recorded for the three months ended June 30, 2020. CDX-0159 is in Phase 1 development and the TAM program is in preclinical development. As of June 30, 2020, none of the Company’s IPR&D assets had reached technological feasibility nor did any have alternative future uses.

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. 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.

(6) Other Assets

In 2016, the Company entered into a research and collaboration agreement with an undisclosed private company to access novel technologies and paid $3.5 million to support research activities and make an investment in the private company. The Company recorded $1.8 million to other assets related to this investment and $1.7 million was recorded to research and development expense over the term of the research activities. The stock of the private company does not have a readily determinable fair value, and therefore it is measured at cost less impairment, if any. Based on information received in April 2019, it was determined that there was a deterioration of the private company’s financial condition due to a working capital deficiency and an inability to secure additional funding as of March 31, 2019. Therefore, the Company concluded that the investment was impaired, and a non-cash impairment charge of $1.8 million was recorded during the first quarter of 2019. The Company assesses the private company’s financial condition on a quarterly basis. There was no change in the value of the investment during the six months ended June 30, 2020.

(7) Other Long-Term Liabilities

Other long-term liabilities include the following:

In November 2015, the Company received approval from the New Jersey Economic Development Authority and agreed to sell New Jersey tax benefits of $9.8 million to an independent third party for $9.2 million. 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 in other income related to the sale of these tax benefits during the three and six months ended June 30, 2020 and $0.0 million and $0.2 million during the three and six months ended June 30, 2019, respectively.

(8) Stockholders’ Equity

In May 2016, the Company entered into a controlled equity offering sales agreement (the “Cantor Agreement”) with Cantor Fitzgerald & Co. (“Cantor”) to allow the Company to issue and sell shares of its common stock from time to time through Cantor, acting as agent. During the six months ended June 30, 2020, the Company issued 6.7 million shares of common stock pursuant to the Cantor Agreement resulting in net proceeds of $25.3 million after deducting commission and offering expenses. At June 30, 2020, the Company had $18.3 million remaining in aggregate gross offering price available under a prospectus supplement filed pursuant to the agreement.

During the three months ended June 30, 2020, the Company issued 15,384,614 shares of its common stock in an underwritten public offering resulting in net proceeds to the Company of $141.4 million, after deducting underwriting fees and offering expenses.

The changes in Stockholders’ Equity during the three and six months ended June 30, 2020 and 2019 are summarized below:

(9)  Stock-Based Compensation

A summary of stock option activity for the six months ended June 30, 2020 is as follows:

The weighted average grant-date fair value of stock options granted during the three and six month period ended June 30, 2020 was $7.96 and $7.95, respectively. Stock-based compensation expense for the three and six months ended June 30, 2020 and 2019 was recorded as follows:

The fair values of employee and director stock options granted during the three and six months ended June 30, 2020 and 2019 were valued using the Black-Scholes option pricing model with the following assumptions:

(10) Accumulated Other Comprehensive Income

The changes in accumulated other comprehensive income, which is reported as a component of stockholders’ equity, for the six months ended June 30, 2020 are summarized below:

No amounts were reclassified out of accumulated other comprehensive income during the six months ended June 30, 2020.

(11)  Revenue

Product Development and Licensing Revenue

The Company entered into an agreement with Rockefeller University in September 2013, as amended, (the “Rockefeller Agreement”) pursuant to which the Company performs manufacturing and development services for Rockefeller University for their portfolio of antibodies against HIV. This portfolio was licensed to Gilead Sciences in January 2020 from Rockefeller University (“Rockefeller Transaction”). Pursuant to the Rockefeller Agreement, the Company received an upfront payment of $1.8 million as a result of the Rockefeller Transaction which was recorded to revenue during the first quarter of 2020. The Company is eligible to receive additional payments from Rockefeller University if this portfolio progresses through clinical and commercial development.

Contract and Grants Revenue

The Company has entered into the Rockefeller Agreement and an agreement with Duke University pursuant to which the Company performs manufacturing and research and development services on a time-and-materials basis or at a negotiated fixed-price. The Company recognized $0.2 million and $0.5 million in revenue under these agreements during the three and six months ended June 30, 2020, respectively, and $0.4 million and $1.5 million during the three and six months ended June 30, 2019, respectively.

Contract Assets and Liabilities

At December 31, 2019 and June 30, 2020, the Company’s right to consideration under all contracts was considered unconditional, and as such, there were no recorded contract assets. At December 31, 2019 and June 30, 2020, the Company had $0.3 million in contract liabilities recorded. Revenue recognized from contract liabilities as of December 31, 2019 during the three and six months ended June 30, 2020 was $0.0 million and $0.1 million, respectively.

(12)  Income Taxes

The Company has evaluated the positive and negative evidence bearing upon the realizability of its net deferred tax assets and considered its history of losses, ultimately concluding that it is “more likely than not” that the Company will not recognize the benefits of federal, state and foreign deferred tax assets and, as such, has maintained a full valuation allowance on its deferred tax assets as of June 30, 2020 and December 31, 2019.

The net deferred tax liability of $2.8 million and $3.0 million at June 30, 2020 and December 31, 2019, respectively, relates to the temporary differences associated with the IPR&D intangible assets acquired in previous business combinations and is not deductible for tax purposes. During the quarter ended June 30, 2020, a $0.2 million non-cash income tax benefit was recorded related to the impairment of the CDX-3379 IPR&D asset.

Massachusetts, New Jersey, New York and Connecticut are the jurisdictions in which the 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. In periods in which the Company reports a net loss, there is no difference between basic and diluted net loss per share because dilutive shares of common stock are not assumed to have been issued as their effect is anti-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:

(14) Kolltan Acquisition

On November 29, 2016, the Company acquired all of the share and debt interests of Kolltan Pharmaceuticals, Inc. (“Kolltan”), a clinical-stage biopharmaceutical company, in exchange for 1,217,200 shares of the Company’s common stock plus contingent consideration in the form of development, regulatory approval and sales-based milestones (“Kolltan Milestones”) of up to $172.5 million. The Kolltan Milestone payments, if any, 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. Certain Kolltan Milestones have been abandoned consistent with the provisions of the Merger Agreement and, because of this, as of June 30, 2020, the Company believes that the adjusted amount we may be required to pay for future consideration is up to $107.5 million contingent upon the achievement of the Kolltan Milestones.

In October 2019, the Company received a letter from the representative of Kolltan’s former stockholders notifying the Company that it objected to the Company’s abandonment of certain Kolltan Milestones relating to development, regulatory approval and sales-based milestones. The Company disagrees with their objection and believes their objection to be without merit. The Company is continuting to discuss with the representative of Kolltan’s former stockholders potential amendments to the Merger Agreement with respect to the Kolltan Milestones. There can be no assurances that an amendment to the Merger Agreement will be completed on terms acceptable to the Company or at all. At this time, the Company is unable to reasonably assess the ultimate outcome of the Company’s disagreement with the representative of Kolltan’s former stockholders over its objection to the Company’s abandonment of certain Kolltan Milestones or determine an estimate of potential losses, if any.

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:

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 immunotherapies and other targeted biologics. Our drug candidates are derived from a broad set of human and bispecific antibodies which have the ability to engage the human immune system and/or directly inhibit tumors to treat specific types of cancer or other diseases. They are aimed at addressing market opportunities for which we believe current therapies are inadequate or non-existent.

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

We are discontinuing development of CDX-3379, an ErbB3 inhibitor, and directing the resources allocated to this program to expanded development of CDX-0159 and other assets in our pipeline. CDX-3379 was in an exploratory study designed to evaluate of the utility of biomarkers for patient selection in the treatment of cetuximab-refractory head and neck squamous cell carcinoma.

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 multiple studies ongoing with our drug candidates.

Our goal is to build a fully integrated, commercial-stage biopharmaceutical company that develops important therapies for patients with unmet medical needs. 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. Currently, all programs are fully owned by Celldex.

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 drug candidate. It is not unusual for the clinical development of these types of drug candidates to each take five years or more, and for total development costs to exceed $100 million for each drug candidate. We estimate that clinical trials of the type we generally conduct are typically completed over the following timelines:

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:

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

An element of our business strategy is to pursue the discovery, research and development of a broad portfolio of 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 drug candidates, our dependence on the success of one or a few drug candidates increases.

Regulatory approval is required before we can market our 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 demonstrate that our product candidates 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 drug candidates. In the event that third parties take over the clinical trial process for one of our 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, 2019, we incurred an aggregate of $408.2 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 six months ended June 30, 2020 and 2019. 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.

Clinical Development Programs

CDX-0159

CDX-0159 is a humanized monoclonal antibody that specifically binds the receptor tyrosine kinase KIT and potently inhibits its activity. KIT is expressed in a variety of cells, including mast cells, and its activation by its ligand SCF regulates mast cell growth, differentiation, survival, chemotaxis and degranulation. In certain inflammatory diseases, such as chronic spontaneous urticaria (CSU), also known as chronic idiopathic urticaria (CIU) and chronic inducible urticarias (CIndUs), mast cell degranulation plays a central role in the onset and progression of the disease.

CDX-0159 is designed to block KIT activation by disrupting both SCF binding and KIT dimerization. Celldex believes that by targeting KIT, CDX-0159 may be able to inhibit mast cell activity and decrease mast cell numbers to provide potential clinical benefit in mast cell related diseases.

 We recently completed a randomized, double-blind, placebo-controlled, single ascending dose escalation Phase 1a study of CDX-0159 in healthy subjects (n=32; 8 subjects per cohort, 6 CDX-0159; 2 placebo). Subjects received a single intravenous infusion of CDX-0159 at 0.3, 1.0, 3.0, or 9.0 mg/kg or placebo. The objectives of the study included safety and tolerability, pharmacokinetics (PK) and pharmacodynamics (tryptase and stem cell factor) and immunogenicity. Tryptase is an enzyme synthesized and secreted almost exclusively by mast cells and decreases in plasma tryptase levels are believed to reflect a systemic reduction in mast cell burden in both healthy volunteers and in disease. Data from the study were featured in a late breaking presentation at the European Academy of Allergy and Clinical Immunology (EAACI) Annual Congress 2020 in June. CDX-0159 demonstrated a favorable safety profile as well as profound and durable reductions of plasma tryptase, consistent with systemic mast cell suppression.

These data support expansion of the CDX-0159 program into mast cell driven diseases, including initially studies in forms of chronic urticaria (CU) given the central role mast cells are known to play in the etiology of CU. Celldex plans to initiate Phase 1b studies of CDX-0159 this fall in patients with chronic spontaneous urticaria (CSU) and chronic inducible urticaria (CIndU), diseases where mast cell degranulation plays a central role in the onset and progression of the disease. The prevalence of CSU and CIndU is approximately 0.5-1% of the total population or up to 1 to 3 million patients in the United States alone (Weller et al. 2010. Hautarzt. 61(8), Bartlett et al. 2018. DermNet. Org). CSU presents as itchy hives, angioedema or both for at least six weeks without a specific trigger; multiple episodes can play out over years or even decades. About 50% of patients with CSU achieve symptomatic control with antihistamines or leukotriene receptor antagonists. Omalizumab, an IgE inhibitor, provides relief for roughly half of the remaining antihistamine/leukotriene refractory patients. Consequently, there is a need for additional therapies. CIndUs are forms of urticaria that have an attributable cause or trigger associated with them, typically resulting in hives or wheals. Celldex is exploring cold-induced and dermographism (scratch-induced) urticarias. Celldex is also exploring additional mast cell driven diseases for future development.

CDX-1140

CDX-1140 is a fully human agonist monoclonal 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 studies of CDX-1140 clearly demonstrate strong immune activation effects and low systemic toxicity and support the design of the Phase 1 study to identify the dose for characterizing single-agent and combination activity.

We initiated a Phase 1 study of CDX-1140 in November 2017. This study is expected to enroll up to approximately 220 patients with recurrent, locally advanced or metastatic solid tumors and B cell lymphomas. The study is designed to 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 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. We believe that the potential for CDX-1140 will be best defined in combination studies with other immunotherapies or conventional cancer treatments.

In support of this, the Phase 1 study protocol also allows for the exploration of CDX-1140 in combination with CDX-301 at a fixed dose of CDX-301 and escalating doses of CDX-1140. Dendritic cells, which express CD40, are often rare or missing from the tumor microenvironment and are critical for initiating anti-tumor immunity. 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 may potentiate anti-tumor responses. CDX-301 is being utilized as a priming agent in this study to increase the number of dendritic cells in blood and tissue available for CDX-1140 activation. CDX-1140 should, in turn, activate and mature the dendritic cells, an important step for enhancing anti-tumor immune responses.

Interim data from this ongoing study were presented at the Society for Immunotherapy of Cancer’s (SITC) 34th Annual Meeting in November 2019. CDX-1140 monotherapy dose escalation in the study is complete and the maximum tolerated dose and recommended Phase 2 dose was defined as 1.5 mg/kg every four weeks. CDX-1140 monotherapy and combination with CDX-301 was generally well tolerated, with mostly grade 1 or grade 2 drug related adverse events reported. Two patients out of six experienced pneumonitis as dose limiting toxicities (DLTs) in the CDX-1140 3.0 mg/kg monotherapy cohort. There were no DLTs observed in the CDX-301 combination cohorts up to 0.72 mg/kg CDX-1140. A cohort of CDX-1140 at 1.5 mg/kg plus CDX-301, which was ongoing at the time of data release, has subsequently completed dose escalation with no DLTs observed; therefore, the recommended dose of CDX-1140 in combination with CDX-301 is 1.5mg/kg.

As of the cut-off date for data reporting for SITC, 62 patients with advanced refractory solid tumors or lymphoma were enrolled and 38 patients had pre- and post-treatment scans available. Patients were heavily pretreated (median of 4 prior therapies) and per protocol were required to have received all standard of care treatments prior to study entry. CDX-1140 demonstrated clinical and biological activity in the study.

Potent pharmacological effects associated with immune activation were also observed, including transient induction of inflammatory cytokines and chemokines associated with dendritic cell and T cell activation at higher dose levels. Similar activation was observed with each cycle of therapy. Peripheral blood immune cells had upregulated immune activation markers and CDX-301 markedly increased the number of dendritic cells and was associated with higher IL-12p40 induction, a key molecule for inducing anti-tumor T cell responses.

CDX-1140 monotherapy expansion cohorts in HNSCC, renal cell carcinoma and gastroesophageal adenocarcinoma have been added to the study, along with a combination cohort of CDX-1140 and CDX-301 in HNSCC. In addition, we have prioritized a cohort to evaluate CDX-1140 in combination with KEYTRUDA^® (pembrolizumab), Merck’s anti-PD-1 therapy, under a clinical trial collaboration agreement with Merck (known as MSD outside of the U.S. and Canada). The cohort is designed to characterize the safety, pharmacodynamics and activity of CDX-1140 in combination with pembrolizumab in patients refractory to PD1/PDL1 treatment. Enrollment is ongoing. We also plan to initiate a cohort in combination with standard of care chemotherapy in patients with previously untreated metastatic pancreatic cancer later this year. The Company is exploring additional combination cohorts with mechanisms that we believe could be complementary or synergistic with CDX-1140.

CDX-527

CDX-527 is the first candidate from Celldex’s bispecific antibody platform. Bispecifics provide opportunities to engage two independent pathways involved in controlling immune responses to tumors. CDX-527 uses Celldex’s proprietary highly active anti-PD-L1 and CD27 human antibodies to couple CD27 co-stimulation with blockade of the PD-L1/PD-1 pathway to help prime and activate anti-tumor T cell responses through CD27 costimulation, while preventing PD-1 inhibitory signals that subvert the immune response.

Celldex’s prior clinical experience with combining CD27 activation and PD-1 blockade provide the rationale for linking these two pathways into one molecule. Preclinical data presented at the SITC 34th Annual Meeting in November 2019 demonstrated that CDX-527 is more potent at T cell activation and anti-tumor immunity than the combination of parental monoclonal antibodies.

Later this year, Celldex plans to initiate a Phase 1 dose-escalation study in up to ~90 patients with advanced or metastatic solid tumors that have progressed during or after standard of care therapy to be followed by tumor-specific expansion cohorts. The study is designed to determine the maximum tolerated dose, or MTD, during a dose-escalation phase and to recommend a dose level for further study in the subsequent expansion phase. The expansion is designed to further evaluate the tolerability, biologic and anti-tumor effects of selected dose level(s) of CDX-527 in specific tumor types.

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. ErbB3 is expressed in many cancers, including head and neck, thyroid, breast, lung and gastric cancers, as well as melanoma. CDX-3379 was recently evaluated in a Phase 2 open-label exploratory study in combination with Erbitux in patients with human papillomavirus (HPV) negative, Erbitux-resistant, advanced HNSCC who have previously been treated with an anti-PD1 checkpoint inhibitor, a population with limited options and a particularly poor prognosis.

The study was initially designed as a Simon two-stage design with an interim futility analysis following enrollment of the first 13 patients. According to the study design, if at least one patient achieved an objective response in the first stage, enrollment could progress to the second stage. The primary endpoint of the study was objective response rate (ORR). Secondary endpoints included assessments of clinical benefit response (CBR), duration of response (DOR), progression-free survival (PFS), overall survival (OS), and safety and pharmacokinetics associated with the combination. Enrollment to the first stage of the Phase 2 study (n=15) was completed and interim data were presented at the 2019 ASCO Annual Meeting in June. A durable confirmed complete response (11+ months) and an unconfirmed partial response (uPR) in a patient that had not received cetuximab were observed; 7 patients experienced stable disease (47%; includes uPR). CDX-3379 in combination with cetuximab was generally associated with target-mediated adverse events of diarrhea and rash and dose reductions and/or delays to the combination therapy in the majority of patients were contemplated to have potentially impacted the magnitude of anti-tumor activity in the study. The analysis presented at ASCO also suggested that observed antitumor activity with CDX-3379 across the Phase 1 and Phase 2 studies might be associated with somatic mutations in the FAT1 and NOTCH1-3 genes—genes associated with tumor suppression.

Based on these biomarker observations and the clinical activity observed in the Phase 2 study, the study was amended and expanded to add an additional 30 patients to allow for an evaluation of the utility of biomarkers for patient selection. Enrollment of the first 15 patients in this expansion cohort was recently completed. One patient experienced an ongoing objective response (7%) and 5 (33%) patients experienced stable disease on at least one tumor assessment. Consistent with the first cohort, the combination of CDX-3379 and cetuximab appears to result in synergistic toxicity with target mediated adverse events of diarrhea and rash. While diarrhea prophylaxis implemented in second cohort appeared to have been effective in ameliorating severity of symptoms it did not decrease the frequency and the incidence of severe rash increased, resulting in dose reductions and/or delays to the combination therapy in the majority of patients. When considered together, the emerging clinical activity data is not adequate to justify the significant toxicity of the combination and the results do not support continued development of the combination, regardless of pending biomarker data. As a result, Celldex is discontinuing development of CDX-3379 and the resources allocated to this program will be focused on expanded development of CDX-0159 and additional assets in our pipeline.

CRITICAL ACCOUNTING POLICIES

See Note 2 to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for information regarding 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, 2019 for a discussion of our critical accounting policies. There have been no material changes to such critical accounting policies. We believe our most critical accounting policies include accounting for contingent consideration, revenue recognition, intangible and long-lived assets, research and development expenses and stock-based compensation expense.

RESULTS OF OPERATIONS

Three Months Ended June 30, 2020 Compared with Three Months Ended June 30, 2019

Net Loss

The $0.7 million decrease in net loss for the three months ended June 30, 2020, as compared to the three months ended June 30, 2019, was primarily the result of an increase in the gain on fair value remeasurement of contingent consideration, partially offset by the increase in non-cash intangible asset impairment expense.

Revenue

The $0.2 million decrease in product development and licensing agreements revenue for the three months ended June 30, 2020, as compared to the three months ended June 30, 2019, was primarily due to a decrease in revenue under the Rockefeller Agreement. The $0.3 million decrease in contracts and grants revenue for the three months ended June 30, 2020, as compared to the three months ended June 30, 2019, was primarily related to a decrease in services performed under our manufacturing and research and development agreement with Duke University. We expect revenue to remain relatively consistent over the next twelve months, although there may be fluctuations on a quarterly basis.

Research and Development Expense

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

Personnel expenses primarily include salary, benefits, stock-based compensation and payroll taxes. The $0.2 million decrease in personnel expenses for the three months ended June 30, 2020, as compared to the three months ended June 30, 2019, was primarily due to lower 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 $0.5 million decrease in laboratory supply expenses for the three months ended June 30, 2020, as compared to the three months ended June 30, 2019, was primarily due to lower laboratory materials and supplies purchases. We expect laboratory supplies expenses to remain relatively consistent over the next twelve months, although there may be fluctuations on a quarterly basis.

Facility expenses include depreciation, amortization, utilities, rent, maintenance and other related expenses incurred at our facilities. The $0.2 million increase in facility expenses for the three months ended June 30, 2020, as compared to the three months ended June 30, 2019, was primarily due to higher variable lease expense, including common area maintenance and utilities, in the second quarter of 2020. We expect facility expenses to decrease over the next twelve months as a result of the consolidation our Massachusetts lab and manufacturing facilities in the second quarter of 2020. In July 2020, we extended the term of its Fall River lease through July 2023.

Product development expenses include clinical investigator site fees, external trial monitoring costs, data accumulation costs, contracted research and outside clinical drug product manufacturing. The $0.2 million increase in product development expenses for the three months ended June 30, 2020, as compared to the three months ended June 30, 2019, was primarily due to an increase in contract manufacturing and clinical trial expenses of $0.4 million, partially offset by a decrease in contract research expenses of $0.2 million. We expect product development expenses to increase over the next twelve months, although there may be fluctuations on a quarterly basis.

General and Administrative Expense

The $0.4 million decrease in general and administrative expenses for the three months ended June 30, 2020, as compared to the three months ended June 30, 2019, was primarily due to lower stock-based compensation expense. We expect general and administrative expenses to remain relatively consistent over the next twelve months, although there may be fluctuations on a quarterly basis.

Intangible Asset Impairment

We evaluated the CDX-3379 IPR&D asset for potential impairment as a result of the discontinuation of the CDX-3379 program. We concluded that the CDX-3379 IPR&D asset was fully impaired, and a non-cash impairment charge of $3.5 million was recorded for the three months ended June 30, 2020.

Gain on Fair Value Remeasurement of Contingent Consideration

The $5.1 million gain on fair value remeasurement of contingent consideration for the three months ended June 30, 2020 was primarily due to updated assumptions for CDX-3379 related milestones due to the discontinuation of the CDX-3379 program. The $1.0 million gain on fair value remeasurement of contingent consideration for the three months ended June 30, 2019 was primarily due to changes in discount rates and the passage of time.

Investment and Other Income, Net

The $0.4 million decrease in investment and other income, net for the three months ended June 30, 2020, as compared to the three months ended June 30, 2019, was primarily due to lower levels of cash and investment balances. We anticipate investment income to increase over the next twelve months due to higher levels of cash and investment balances and higher other income related to our sale of New Jersey tax benefits.

Income Tax Benefit

During the quarter ended June 30, 2020, a $0.2 million non-cash income tax benefit was recorded related to the impairment of the CDX-3379 IPR&D asset.

Six Months Ended June 30, 2020 Compared with Six Months Ended June 30, 2019

Net Loss

The $5.4 million decrease in net loss for the six months ended June 30, 2020, as compared to the six months ended June 30, 2019, was primarily the result of an increase in the gain on fair value remeasurement of contingent consideration and a decrease in non-cash other asset impairment expense, partially offset by an increase in intangible asset impairment expense.

Revenue

The $2.0 million increase in product development and licensing agreements revenue for the six months ended June 30, 2020, as compared to the six months ended June 30, 2019, was primarily due to the $1.8 million received from the Rockefeller Transaction. The $1.1 million decrease in contracts and grants revenue for the six months ended June 30, 2020, as compared to the six months ended June 30, 2019, was primarily related to a decrease in services performed under our manufacturing and research and development agreement with Duke University.

Research and Development Expense

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

Personnel expenses primarily include salary, benefits, stock-based compensation and payroll taxes. The $0.3 million decrease in personnel expenses for the six months ended June 30, 2020, as compared to the six months ended June 30, 2019, was primarily due to lower stock-based compensation expense.

Laboratory supplies expenses include laboratory materials and supplies, services, and other related expenses incurred in the development of our technology. The $0.2 million increase in laboratory supply expenses for the six months ended June 30, 2020, as compared to the six months ended June 30, 2019, was primarily due to higher laboratory materials and supplies purchases.

Facility expenses include depreciation, amortization, utilities, rent, maintenance and other related expenses incurred at our facilities. Facility expenses for the six months ended June 30, 2020 were consistent with the six months ended June 30, 2019.

Product development expenses include clinical investigator site fees, external trial monitoring costs, data accumulation costs, contracted research and outside clinical drug product manufacturing. The $0.3 million increase in product development expenses for the six months ended June 30, 2020, as compared to the six months ended June 30, 2019, was primarily due to an increase in clinical trial and contract manufacturing expenses of $0.9 million, partially offset by a decrease in contract research expenses of $0.6 million.

General and Administrative Expense

The $1.6 million decrease in general and administrative expenses for the six months ended June 30, 2020, as compared to the six months ended June 30, 2019, was primarily due to lower stock-based compensation expense.

Intangible Asset Impairment

We evaluated the CDX-3379 IPR&D asset for potential impairment as a result of the discontinuation of the CDX-3379 program. We concluded that the CDX-3379 IPR&D asset was fully impaired, and a non-cash impairment charge of $3.5 million was recorded for the three months ended June 30, 2020.

Other Asset Impairment

We concluded that the Company’s investment in an undisclosed private company was impaired as a result of a deterioration in the private company’s financial condition and recorded a non-cash impairment charge of $1.8 million during the first quarter of 2019.

Gain on Fair Value Remeasurement of Contingent Consideration

The $4.9 million gain on fair value remeasurement of contingent consideration for the six months ended June 30, 2020 was primarily due to updated assumptions for CDX-3379 related milestones due to the discontinuation of the CDX-3379 program and the passage of time. The $0.5 million loss on fair value remeasurement of contingent consideration for the six months ended June 30, 2019 was primarily due to changes in discount rates and the passage of time.

Investment and Other Income, Net

The $0.8 million decrease in investment and other income, net for the six months ended June 30, 2020, as compared to the six months ended June 30, 2019, was primarily due to lower levels of cash and investment balances and lower other income related to our sale of New Jersey tax benefits.

Income Tax Benefit

During the quarter ended June 30, 2020, a $0.2 million non-cash income tax benefit was recorded related to the impairment of the CDX-3379 IPR&D asset.

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 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 June 30, 2020, our principal sources of liquidity consisted of cash, cash equivalents and marketable securities of $206.9 million. We have had recurring losses and incurred a loss of $23.7 million for the six months ended June 30, 2020. Net cash used in operations for the six months ended June 30, 2020 was $23.3 million. We believe that the cash, cash equivalents and marketable securities at June 30, 2020 are sufficient to meet estimated working capital requirements and fund planned operations through 2023. This could be impacted if we elected to pay Kolltan contingent milestones, if any, in cash.

During the next twelve months, we may take further steps to raise additional capital to meet our long-term liquidity needs including, 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. Although we have been successful in raising capital in the past, 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 long-term 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.

Operating Activities

Net cash used in operating activities was $23.3 million for the six months ended June 30, 2020 as compared to $24.3 million for the six months ended June 30, 2019. The decrease in net cash used in operating activities was primarily due to a decrease in general and administrative expenses and an increase in cash received related to product development and licensing agreements. We expect that cash used in operating activities will 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 used in investing activities was $86.6 million for the six months ended June 30, 2020 as compared to net cash provided by investing activities of $8.3 million for the six months ended June 30, 2019. The increase in net cash used in investing activities was primarily due to net purchases of marketable securities for the six months ended June 30, 2020 of $85.4 million as compared to net sales and maturities of marketable securities of $8.8 million for the six months ended June 30, 2019.

Financing Activities

Net cash provided by financing activities was $166.7 million for the six months ended June 30, 2020 as compared to $11.4 million for the six months ended June 30, 2019.

During the six months ended June 30, 2020, we issued 6.7 million shares of common stock under our Cantor Agreement resulting in net proceeds of $25.3 million after deducting commission and offering expenses. At June 30, 2020, we had $18.3 million remaining in aggregate gross offering price available under the agreement.

During the three months ended June 30, 2020, the Company issued 15,384,614 shares of its common stock in an underwritten public offering resulting in net proceeds to the Company of $141.4 million, after deducting underwriting fees and offering expenses.

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, 2019 which was filed with the SEC on March 26, 2020 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. 

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 approximate fair value at June 30, 2020 due to the short-term maturities of these instruments.

Evaluation of Disclosure Controls and Procedures.

As of June 30, 2020, 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 June 30, 2020. 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 June 30, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2019, which could materially affect our business, financial condition or future results. The risks described 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 no material changes to the risk factors previously disclosed in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 26, 2020.

On August 4, 2020, we determined that a non-cash impairment charge of $3.5 million should be recorded for the three months ended June 30, 2020 related to our CDX-3379 program. The CDX-3379 program was acquired as part of our acquisition of Kolltan Pharmaceuticals, Inc. in the fourth quarter of 2016. We determined that the discontinuation of development of CDX-3379 constituted a triggering event that required us to evaluate the intangible asset for impairment. See Note 5 to the consolidated financial statements included elsewhere in this quarterly report on Form 10-Q for further discussion of this impairment charge.

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

EXHIBIT INDEX

*       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.