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AstraZeneca plc (ADR) (AZN), Pfizer Inc. (PFE): Celldex Therapeutics, Inc. (CLDX) Is Still a Buy

There has been a significant rally in the share price of Celldex Therapeutics, Inc. (NASDAQ:CLDX) recently. The stock is still showing positive momentum due to strong data on its drug trials. This positive data makes the company an attractive target for big pharmaceutical players like Pfizer Inc. (NYSE:PFE) and AstraZeneca plc (NYSE:AZN) . I believe that the positive momentum will continue and that Celldex Therapeutics, Inc. (NASDAQ:CLDX) is still a buy despite recent rallies.

AstraZeneca plc (ADR) (NYSE:AZN)

Celldex Therapeutics, Inc. (NASDAQ:CLDX)

Celldex is a biopharmaceutical involved in the development and commercialization of novel oncology therapeutics. The company focuses on the treatment of cancer and other difficult to treat ailments with its antibody precession targeted immunotherapy platform. It currently has seven candidates in various stages of clinical development. The lead candidate is Rindopepimut, which is a targeted immunotherapeutic for the treatment of front-line glioblastoma. The drug is currently undergoing two clinical trials, ReACT trial in Phase and Act IV Registration trail in Phase III. Another major candidate is CDX-011, which is currently in late stage Phase II for treatment of breast cancer.

Quarterly Results

The market was expecting Celldex Therapeutics, Inc. (NASDAQ:CLDX) to report EPS of $-0.25 but the company missed by 8%, blaming the earnings miss on higher than expected R&D expense. Royalty payments also saw an increase and were responsible for the higher than expected revenues of $3.65 million. All earnings misses result in a negative market sentiment, but this earnings miss doesn’t impact the long term valuations of the stock because the long term value of the company is tied to its pipeline.

CDX-301

Celldex released positive data for its candidate CDX-301 on Feb 14. The market has responded positively to this announcement, and the stock has appreciated approximately 40% since then. According to disclosures,

The final results from this study are consistent with previous clinical experience and demonstrate that CDX-301 is well-tolerated and can effectively mobilize hematopoietic stem cell populations as a single agent in healthy volunteers.’

The Rally

The recent rally in the stock price of Celldex has been primarily due to positive investor sentiment on CDX-301Phase I data released by the company last month. The data showed that test patients who took the drug saw an increase in CD34+ and dendritic cells. This is positive information for improvement in transplant outcomes.

In November the company announced positive Phase II data for rindopepimut. The survival data from three Phase II studies showed benefit as compared to independent control datasets. According to company disclosures,

‘In the multi-center Phase 2 ACT III study, the median overall survival is 24.6 months from diagnosis (21.8 months from study entry) and overall survival is 26% at three years. In the Phase 2 ACT II study, the median overall survival is 24.4 months from diagnosis (20.5 months from study entry) and overall survival is 23% at three years. In the Phase 2 ACTIVATE study, the median overall survival is 24.6 months from diagnosis (20.4 months from study entry) and overall survival is 33% at three years.’

The company has also announced positive data in the Phase II Emerge study for its breast cancer candidate CDX-011. The drug attacks the GPNMB protein, which is primarily responsible for the migration, invasion and metastasis of the cancer. The results, according to company disclosures,

‘confirm preliminary findings reported in May and establish proof of principle with evidence of higher activity in patient subgroups with high GPNMB expression (expression in e25% of tumor cells), including those with triple negative disease.’

Bottom Line

The mean sell side target price for Celldex is $15.6, an upside of approximately 30% based on the current price. At a market capitalization of approximately $900 million, the company is also a good acquisition target. There is a big patent gap in the market because a number of big pharmaceutical players are facing sales declines due to expiring patents. Discovery of a drug is a pretty long and expensive process. This makes small companies with promising candidates, such as Celldex, an attractive acquisition target.

Pfizer Inc. (NYSE:PFE) and AstraZeneca plc (NYSE:AZN) could be interested in a small cap company like Celldex. Pfizer is facing patent expiry on Lipitor and AstraZeneca is facing generic competition to its star drug Seroquel IR. The new CEO of AstraZeneca, Pascal Soriot is trying to turn around the falling sales of AstraZeneca plc (NYSE:AZN) by focusing on new drug candidates.

The weak pipeline of the company increases the likelihood that the company might be interested in acquiring a small company like Celldex Therapeutics, Inc. (NASDAQ:CLDX) with a market cap under $1 billion. In a recent strategic shift the company has also decided to focus on three key areas: cardiovascular, cancer and metabolism disorders. Pfizer Inc. (NYSE:PFE) already has a pretty strong oncology pipeline with leading candidate PD-0332991 in Phase II trials for the treatment of breast cancer. According to sell side estimates, the drug can have a peak sales potential of approximately $5 billion.

The article Celldex Is Still a Buy originally appeared on Fool.com and is written by Mohsin Saeed.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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