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**UNITED STATES**

**SECURITIES AND EXCHANGECOMMISSION**

**Washington, D.C. 20549**

 

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**FORM 10-Q**

** **

**x****           QUARTERLY REPORTPURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF1934**

 

**For the quarterly period ended June 30, 2009**

 

**OR**

 

**o****              TRANSITION REPORTPURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF1934**

** **

**Commission File Number:  0-15006**

** **

**CELLDEX THERAPEUTICS, INC.**

(Exactname of registrant as specified in its charter)

 

| **Delaware**                                                     | ** ** | **No. 13-3191702**              |
|------------------------------------------------------------------|------------|--------------------------------------|
| (State or other jurisdiction of incorporation or   organization) |       | (I.R.S. Employer Identification No.) |

 

**119 Fourth Avenue, Needham, Massachusetts 02494**

(Address of principal executive offices) (Zip Code)

 

**(781) 433-0771**

(Registrant’s telephone number, including area code)

 

Indicate by checkmark whether the registrant (1) has filed all reports required to be filedby Section 13 or 15(d) of the Securities Exchange Act of 1934 duringthe preceding 12 months (or for such shorter period that the registrantwas required to file such reports), and (2) has been subject to suchfiling requirements for the past 90 days. Yes x  No o

 

Indicate by check mark whether the registranthas submitted electronically and posted on its corporate Web site, if any,every Interactive Data File required to be submitted and posted pursuant to Rule 405of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (orfor such shorter period that the registrant was required to submit and postsuch files).  Yes o  No o

 

Indicateby check mark whether the registrant is a large accelerated filer, anaccelerated filer, a non-accelerated filer, or a smaller reporting company. Seethe definitions of “large accelerated filer,” “accelerated filer” and “smallerreporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

| Large accelerated filer  o                     |   | Accelerated filer x          |
|------------------------------------------------|--------|-----------------------------------|
|                                           |   |                              |
| Non-accelerated filer o                        |   | Smaller reporting  company o |
| (Do not check if a  smaller reporting company) |   |                              |

 

Indicate by check markwhether the registrant is a shell company (as defined in Rule 12b-2 of theExchange Act).Yes * *oNo x

 

As of August 3,2009, 15,879,475 shares of common stock, $.001 par value per share, wereoutstanding.

 

 

 

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**CELLDEX THERAPEUTICS, INC.**

 

**FORM 10-Q**

**Quarter Ended June 30, 2009**

**Table of Contents**

** **
| ** **                                                                                                       | **Page**   |
|------------------------------------------------------------------------------------------------------------------|------------|
| **Part I—Financial  Information**                                                                      | ** ** |
|                                                                                                             |       |
| Item 1. Unaudited  Financial Statements.                                                                         |       |
|                                                                                                             |       |
| Condensed  Consolidated Balance Sheets at June 30, 2009 and December 31, 2008                          | 3          |
|                                                                                                             |       |
| Condensed  Consolidated Statements of Operations for the Three and Six Months Ended  June 30, 2009 and 2008 | 4          |
|                                                                                                             |       |
| Condensed  Consolidated Statements of Cash Flows for the Six Months Ended June 30,  2009 and 2008           | 5          |
|                                                                                                             |       |
| Notes  to Unaudited Condensed Consolidated Financial Statements                                                  | 6          |
|                                                                                                             |       |
| Item  2. Management’s Discussion and Analysis of Financial Condition and Results of  Operations.            | 24         |
|                                                                                                             |       |
| Item  3. Quantitative and Qualitative Disclosures About Market Risk.                                             | 35         |
|                                                                                                             |       |
| Item 4.  Controls and Procedures.                                                                                | 35         |
| ** **                                                                                                       | ** ** |
| **Part II — Other  Information**                                                                       | ** ** |
|                                                                                                             |       |
| Item 1. Legal  Proceedings.                                                                                      | 36         |
|                                                                                                             |       |
| Item 1A. Risk  Factors.                                                                                          | 36         |
|                                                                                                             |       |
| Item 6. Exhibits.                                                                                                | 40         |
|                                                                                                             |       |
| Signatures                                                                                                       | 41         |
|                                                                                                             |       |
| Exhibit Index                                                                                               | 42         |

 

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**PART I—FINANCIAL INFORMATION**

 

**Item 1. Unaudited Financial Statements**

 

**CELLDEXTHERAPEUTICS, INC.**

**CONDENSEDCONSOLIDATED BALANCE SHEETS**

**(Unaudited)**

 

**(Inthousands, except share and per share amounts)**

 
| ** **                                                                                                                                                                             | ** ** | **June 30,  2009** | ** ** | **December 31,  2008** | ** ** |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------|------------|-----------------------------|------------|
| **ASSETS**                                                                                                                                                                             | ** ** | ** **              | ** ** | ** **                  | ** ** |
| Current Assets:                                                                                                                                                                        |       |                    |       |                        |       |
| Cash and Cash Equivalents                                                                                                                                                              |       | $                       | 31,633     |                        | $          | 44,257 |   |
| Accounts and Other Receivables                                                                                                                                                         |       | 1,013                   |       | 1,827                       |       |
| Prepaid and Other Current Assets                                                                                                                                                       |       | 863                     |       | 992                         |       |
| Total Current Assets                                                                                                                                                                   |       | 33,509                  |       | 47,076                      |       |
|                                                                                                                                                                                   |       |                    |       |                        |       |
| Property and Equipment, Net                                                                                                                                                            |       | 12,551                  |       | 13,567                      |       |
| Intangible Assets, Net                                                                                                                                                                 |       | 2,036                   |       | 2,473                       |       |
| Other Assets                                                                                                                                                                           |       | 6,316                   |       | 6,677                       |       |
| Total Assets                                                                                                                                                                           |       | $                       | 54,412     |                        | $          | 69,793 |   |
| ** **                                                                                                                                                                             | ** ** | ** **              | ** ** | ** **                  | ** ** |
| **LIABILITIES AND STOCKHOLDERS’  EQUITY**                                                                                                                                         | ** ** | ** **              | ** ** | ** **                  | ** ** |
| Current Liabilities:                                                                                                                                                                   |       |                    |       |                        |       |
| Accounts Payable                                                                                                                                                                       |       | $                       | 1,375      |                        | $          | 2,154 |   |
| Accrued Expenses                                                                                                                                                                       |       | 3,024                   |       | 3,841                       |       |
| Payable Due Medarex                                                                                                                                                                    |       | 2,957                   |       | 2,957                       |       |
| Current Portion of Deferred Revenue                                                                                                                                                    |       | 5,279                   |       | 4,931                       |       |
| Current Portion of Long-Term Liabilities                                                                                                                                               |       | 221                     |       | 218                         |       |
| Total Current Liabilities                                                                                                                                                              |       | 12,856                  |       | 14,101                      |       |
|                                                                                                                                                                                   |       |                    |       |                        |       |
| Deferred Revenue                                                                                                                                                                       |       | 36,227                  |       | 36,489                      |       |
| Other Long-Term Liabilities                                                                                                                                                            |       | 1,026                   |       | 1,069                       |       |
| Total Liabilities                                                                                                                                                                      |       | 50,109                  |       | 51,659                      |       |
|                                                                                                                                                                                   |       |                    |       |                        |       |
| Commitments and Contingent Liabilities (Note 9)                                                                                                                                        |       |                    |       |                        |       |
|                                                                                                                                                                                   |       |                    |       |                        |       |
| Stockholders’ Equity:                                                                                                                                                             |       |                    |       |                        |       |
| Convertible Preferred Stock, $.01 Par Value;  3,000,000 Shares Authorized; No Shares Issued and Outstanding at  June 30, 2009 and December 31, 2008                          |       | —                  |       | —                      |       |
| Common Stock, $.001 Par Value; 297,000,000 Shares  Authorized; 15,877,993 and 15,789,756 Shares Issued and Outstanding at  June 30, 2009 and December 31, 2008, respectively |       | 16                      |       | 16                          |       |
| Additional Paid-In Capital                                                                                                                                                             |       | 139,253                 |       | 136,661                     |       |
| Accumulated Other Comprehensive Income                                                                                                                                                 |       | 2,591                   |       | 2,606                       |       |
| Accumulated Deficit                                                                                                                                                                    |       | (137,557                | )          | (121,149                    | )          |
| Total Stockholders’ Equity                                                                                                                                                        |       | 4,303                   |       | 18,134                      |       |
| Total Liabilities and Stockholders’ Equity                                                                                                                                        |       | $                       | 54,412     |                        | $          | 69,793 |   |

 

See accompanying notes to unaudited condensed consolidated financialstatements

 

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**CELLDEXTHERAPEUTICS, INC.**

**CONDENSEDCONSOLIDATED STATEMENTS OF OPERATIONS**

**(Unaudited)**

 

**(Inthousands, except per share amounts)**

 
| ** **                                                                    | ** ** | **Three Months Ended** | ** ** | **Six Months Ended** | ** ** |
|-------------------------------------------------------------------------------|------------|----------------------------------|------------|--------------------------------|------------|
| ** **                                                                    | ** ** | **June 30,  2009**          | ** ** | **June 30,  2008**        | ** ** | **June 30,  2009** | ** ** | **June 30,  2008** | ** ** |
| **REVENUE:**                                                                  | ** ** | ** **                       | ** ** | ** **                     | ** ** | ** ** | ** ** | ** ** | ** ** |
| Product Development and Licensing Agreements                                  |       | $                                | 1,497      |                           | $          | 871 |   | $ | 2,999 |   | $ | 990 |   |
| Contracts and Grants                                                          |       | —                           |       | 254                            |       | 139 |   | 282 |   |
| Product Royalties                                                             |       | 1,188                            |       | 837                            |       | 3,279 |   | 837 |   |
|                                                                          |       |                             |       |                           |       |   |   |   |   |
| Total Revenue                                                                 |       | 2,685                            |       | 1,962                          |       | 6,417 |   | 2,109 |   |
| ** **                                                                    | ** ** | ** **                       | ** ** | ** **                     | ** ** | ** ** | ** ** | ** ** | ** ** |
| **OPERATING EXPENSE:**                                                        | ** ** | ** **                       | ** ** | ** **                     | ** ** | ** ** | ** ** | ** ** | ** ** |
| Research and Development                                                      |       | 7,802                            |       | 7,612                          |       | 16,488 |   | 12,117 |   |
| General and Administrative                                                    |       | 3,511                            |       | 4,606                          |       | 6,851 |   | 7,620 |   |
| Gain on Sale of Assets                                                        |       | —                           |       | —                         |       | (604 | ) | — |   |
| Charge for In-Process Research and Development                                |       | —                           |       | —                         |       | — |   | 14,756 |   |
| Amortization of Acquired Intangible Assets                                    |       | 95                               |       | 104                            |       | 191 |   | 153 |   |
|                                                                          |       |                             |       |                           |       |   |   |   |   |
| Total Operating Expense                                                       |       | 11,408                           |       | 12,322                         |       | 22,926 |   | 34,646 |   |
|                                                                          |       |                             |       |                           |       |   |   |   |   |
| Operating Loss                                                                |       | (8,723                           | )          | (10,360                        | )          | (16,509 | ) | (32,537 | ) |
|                                                                          |       |                             |       |                           |       |   |   |   |   |
| Investment and Other Income, Net                                              |       | 18                               |       | 99                             |       | 101 |   | 146 |   |
|                                                                          |       |                             |       |                           |       |   |   |   |   |
| Net Loss                                                                      |       | $                                | (8,705     | )                              | $          | (10,261 | ) | $ | (16,408 | ) | $ | (32,391 | ) |
|                                                                          |       |                             |       |                           |       |   |   |   |   |
| Basic and Diluted Net Loss Per Common Share (See  Note 2)                     |       | $                                | (0.55      | )                              | $          | (0.67 | ) | $ | (1.04 | ) | $ | (2.56 | ) |
|                                                                          |       |                             |       |                           |       |   |   |   |   |
| Shares Used in Calculating Basic and Diluted Net  Loss per Share (See Note 2) |       | 15,834                           |       | 15,227                         |       | 15,826 |   | 12,677 |   |

 

See accompanying notes tounaudited condensed consolidated financial statements

 

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**CELLDEXTHERAPEUTICS, INC.**

**CONDENSEDCONSOLIDATED STATEMENTS OF CASH FLOWS**

**(Unaudited)**

 

**(Inthousands)**

 
| ** **                                                                                 | ** ** | **Six Months Ended** | ** ** |
|--------------------------------------------------------------------------------------------|------------|--------------------------------|------------|
| ** **                                                                                 | ** ** | **June 30,  2009**        | ** ** | **June 30,  2008** | ** ** |
| **Cash Flows from Operating  Activities:**                                                 | ** ** | ** **                     | ** ** | ** ** | ** ** |
| Net Loss                                                                                   |       | $                              | (16,408    | ) | $ | (32,391 | ) |
| Adjustments to Reconcile Net Loss to Net Cash (Used  in) Provided by Operating Activities: |       |                           |       |   |   |
| Depreciation and Amortization                                                              |       | 1,336                          |       | 1,061 |   |
| Amortization of Intangible Assets                                                          |       | 191                            |       | 153 |   |
| (Gain) loss on Sale or Disposal of Assets                                                  |       | (599                           | )          | 7 |   |
| Stock-Based Compensation Expense                                                           |       | 1,864                          |       | 2,439 |   |
| In-Process Research and Development                                                        |       | —                         |       | 14,756 |   |
| Changes in Operating Assets and Liabilities:                                               |       |                           |       |   |   |
| Accounts and Other Receivables                                                             |       | 814                            |       | (1,367 | ) |
| Prepaid and Other Current Assets                                                           |       | 129                            |       | (4,136 | ) |
| Other Assets                                                                               |       | 361                            |       | — |   |
| Accounts Payable and Accrued Expenses                                                      |       | (1,346                         | )          | 5,859 |   |
| Deferred Revenue                                                                           |       | 86                             |       | 39,553 |   |
| Other Long-Term Liabilities                                                                |       | 50                             |       | 31 |   |
|                                                                                       |       |                           |       |   |   |
| Net Cash (Used in) Provided by Operating Activities                                        |       | (13,522                        | )          | 25,965 |   |
| ** **                                                                                 | ** ** | ** **                     | ** ** | ** ** | ** ** |
| **Cash Flows from Investing  Activities:**                                                 | ** ** | ** **                     | ** ** | ** ** | ** ** |
| Cash Acquired in the Acquisition of AVANT, Net of  Transaction Costs                       |       | —                         |       | 10,750 |   |
| Restricted Cash Deposits                                                                   |       | —                         |       | (1 | ) |
| Acquisition of Property and Equipment                                                      |       | (325                           | )          | (397 | ) |
| Proceeds from Sale or Disposal of Assets                                                   |       | 850                            |       | 229 |   |
|                                                                                       |       |                           |       |   |   |
| Net Cash Provided by Investing Activities                                                  |       | 525                            |       | 10,581 |   |
| ** **                                                                                 | ** ** | ** **                     | ** ** | ** ** | ** ** |
| **Cash Flows from Financing  Activities:**                                                 | ** ** | ** **                     | ** ** | ** ** | ** ** |
| Net Proceeds from Stock Issuances                                                          |       | 478                            |       | 10,867 |   |
| Related Party Loan Due to Medarex                                                          |       | —                         |       | 191 |   |
| Payments of Other Long-Term Liabilities                                                    |       | (90                            | )          | (78 | ) |
| ** **                                                                                 | ** ** | ** **                     | ** ** | ** ** | ** ** |
| Net Cash Provided by Financing Activities                                                  |       | 388                            |       | 10,980 |   |
| ** **                                                                                 | ** ** | ** **                     | ** ** | ** ** | ** ** |
| Effect of Exchange Rate Changes on Cash and Cash  Equivalents                              |       | (15                            | )          | (56 | ) |
| ** **                                                                                 | ** ** | ** **                     | ** ** | ** ** | ** ** |
| Net (Decrease) Increase in Cash and Cash  Equivalents                                      |       | (12,624                        | )          | 47,470 |   |
| ** **                                                                                 | ** ** | ** **                     | ** ** | ** ** | ** ** |
| Cash and Cash Equivalents at Beginning of Period                                           |       | 44,257                         |       | 4,910 |   |
|                                                                                       |       |                           |       |   |   |
| Cash and Cash Equivalents at End of Period                                                 |       | $                              | 31,633     |   | $ | 52,380 |   |
|                                                                                       |       |                           |       |   |   |
| **Supplemental Disclosure of  Non-Cash Flow Information**                                  | ** ** | ** **                     | ** ** | ** ** | ** ** |
| Shares Received in Exchange in the Acquisition of  AVANT                                   |       | $                              | —     |   | $ | 46,252 |   |
| Shares Issued to Medarex in Settlement of a Payable                                        |       | $                              | —     |   | $ | 3,039 |   |
| Shares Issued to Executive Officers                                                        |       | $                              | 250        |   | $ | — |   |

 

See accompanying notes to unaudited condensed consolidated financialstatements

 

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**CELLDEXTHERAPEUTICS, INC.**

**Notesto Unaudited Condensed Consolidated Financial Statements**

**June 30,2009**

 

**(1)****                               ****Basis of Presentation**

 

The accompanyingunaudited condensed consolidated financial statements have been prepared by CelldexTherapeutics, Inc. (the “Company” or “Celldex”) in accordance with accounting principlesgenerally accepted in the United States of America (“U.S. GAAP”) and reflectthe operations of the Company and its wholly-owned subsidiaries. Allintercompany transactions have been eliminated in consolidation.

 

These interim financialstatements do not include all the information and footnotes required by U.S.GAAP for annual financial statements and should be read in conjunction with theaudited financial statements for the year ended December 31, 2008, whichare included in the Company’s Annual Report on Form 10-K filed with theSecurities and Exchange Commission (“SEC”) on March 2, 2009.  In the opinion of management, the interimfinancial statements reflect all normal recurring adjustments necessary tofairly state the Company’s financial position and results of operations for theinterim periods presented.  The year-endconsolidated balance sheet data presented for comparative purposes was derivedfrom audited financial statements, but does not include all disclosuresrequired by U.S. GAAP.

 

The results of operationsfor the interim periods are not necessarily indicative of the results ofoperations to be expected for any future interim period or the fiscal yearending December 31, 2009.

 

*Merger between AVANT and Celldex Research*

 

On March 7, 2008, the Company (formerly known as AVANTImmunotherapeutics, Inc.) (“AVANT”) merged with and into Celldex ResearchCorporation (formerly known as Celldex Therapeutics, Inc.) (“CelldexResearch”), a privately-held company, (the “AVANT Merger”). Effective October 1,2008, the Company changed its name from AVANT Immunotherapeutics, Inc. toCelldex Therapeutics, Inc.

 

The AVANT Merger was accounted for using the purchase method ofaccounting and was treated as an acquisition by Celldex Research of AVANT, withCelldex Research being considered the accounting acquirer based on theapplication of criteria specified in Statement of Financial AccountingStandards (“SFAS”) No. 141, *BusinessCombination,* (“SFAS 141”), even though AVANT was the issuer ofcommon stock and the surviving legal entity in the transaction. Under thepurchase method of accounting, the deemed purchase price was allocated to AVANT’sunderlying tangible and identifiable intangible assets acquired and liabilitiesassumed based upon the respective fair value of each with any excess deemedpurchase price allocated to goodwill. The valuation analysis conducted by theCompany determined that the fair value of assets acquired and the fair value ofliabilities assumed by Celldex Research exceeded the purchase price for AVANT,resulting in negative goodwill of approximately $6.0 million. Inaccordance with SFAS 141, the negative goodwill has been allocated to allof the acquired assets that were non-financial and non-current assets,including property and equipment, identifiable intangible assets, andin-process research and development.

 

Because Celldex Research was determined to be the acquirer foraccounting purposes, the historical financial statements of Celldex Researchbecame the historical financial statements of the Company as of the closing ofthe AVANT Merger. Accordingly, the financial statements of the Company prior tothe AVANT Merger reflect the financial position, results of operations and cashflows of Celldex Research, which during the historical periods presented in theaccompanying consolidated financial statements, was then majority-owned byMedarex, Inc. (“Medarex”). Following the AVANT Merger, the financialstatements reflect the financial position, results of operation and cash flowsof the combined companies. The results of operations of AVANT are included inthe results of operations of the Company beginning March 8, 2008.Accordingly, except as otherwise discussed below, this report reflects thefinancial condition, results of operations and liquidity of the combinedcompanies at June 30, 2009 and for the period from the AVANT Merger throughJune 30, 2009.

 

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*Merger Agreement between the Company and CuraGen*

 

On May 29,2009, the Company and CuraGen Corporation (“CuraGen”), a public company,announced that their boards of directors unanimously approved a definitivemerger agreement dated May 28, 2009 (the “CuraGen Merger Agreement”) underwhich CuraGen will merge with and into the Company in a stock for stocktransaction (the “CuraGen Merger”). Under the terms of the CuraGen MergerAgreement, each issued and outstanding share of CuraGen common stock will beconverted into shares of the Company based on an exchange ratio as described inthe CuraGen Merger Agreement (the “CuraGen Exchange Ratio”).  In addition, each option to purchase CuraGencommon stock issued under the CuraGen 2007 Stock Plan that is outstanding onthe closing date will be assumed by the Company and will thereafter constitutean option to acquire the number of shares of the Company’s common stock afterapplying the CuraGen Exchange Ratio.  TheCuraGen Merger Agreement provides for certain termination rights for both theCompany and CuraGen and under specified circumstances, the Company or CuraGenmay be required to pay a termination fee of $3.5 million to the other party.The transaction remains subject to the Company’s and CuraGen’s shareholderapprovals and the satisfaction of customary closing conditions. The transactionis expected to close in the third quarter of 2009.

 

*Capital Requirements*

 

The Company’s cash and cash equivalents at June 30, 2009 were$31.6 million. Its working capital at June 30, 2009 was $20.7 million. TheCompany incurred a loss of $8.7 million and $16.4 million for the three and sixmonths ended June 30, 2009, respectively. Net cash used in operations forthe six months ended June 30, 2009 was $13.5 million. The Company believesthat without the CuraGen Merger, the cash inflows from existing grants andcollaborations, interest income on invested funds and its current cash and cashequivalents at June 30, 2009 will be sufficient to meet estimated workingcapital requirements and fund planned operations for at least the next twelvemonths. The working capital requirements of the Company are dependent onseveral factors including, but not limited to, the costs associated withresearch and development programs, preclinical and clinical studies,manufacture of clinical materials, the scope of collaborative arrangements andpotential transaction costs incurred in connection with the CuraGenMerger.  The Company’s capitalrequirements will be affected if the Company’s and CuraGen’s shareholdersapprove the CuraGen Merger and the CuraGen Merger is consummated.  At June 30, 2009, CuraGen reported intheir Form 10-Q filed with the SEC on August 5, 2009 cash and investments of$76.0 million, working capital of $73.8 million, and 4% convertiblesubordinated debt due in February 2011 of $14.1 million.

 

During the remainder of 2009, the Company may take further steps toraise additional capital to meet its long-term liquidity needs including, butnot limited to, the licensing of technology programs with existing or newcollaborative partners, possible business combinations, or the issuance ofcommon stock via private placements or public offerings. While the Companycontinues to seek capital through a number of means, there can be no assurancethat additional financing will be available on acceptable terms, if at all,particularly in light of the recent disruptions in the financial markets andthe Company’s negotiating position in capital-raising efforts may worsen asexisting resources are used. There is also no assurance that the Company willbe able to enter into further collaborative relationships. Additional equityfinancing may be dilutive to the Company’s stockholders; debt financing, ifavailable, may involve significant cash payment obligations and covenants thatrestrict the Company’s ability to operate as a business; and licensing orstrategic collaborations may result in royalties or other terms that reduce theCompany’s economic potential from products under development. If the Company isunable to raise the funds necessary to meet its long-term liquidity needs, itmay have to (i) delay or discontinue the development of programs, (ii) licenseout programs earlier than expected, (iii) raise funds at significantdiscount or on other unfavorable terms, or (iv) sell all or a part of theCompany.

 

**(2)****                              ****Significant Accounting Policies**

 

*BusinessCombinations*

 

On January 1, 2009,the Company adopted SFAS Statement No. 141 (Revised 2007), *Business Combinations*(“SFAS 141(R)”), which applies toacquisitions that are completed after January 1, 2009, including thepending CuraGen Merger.  On April 1,2009, the Financial Accounting Standards Board (“FASB”) issued Staff Position (“FSP”)FAS 141(R)-1, *Accounting for Assets Acquired and LiabilitiesAssumed in a Business Combination That Arise from Contingencies,*whichamends and clarifies SFAS 141(R), to address application issues regarding 

 

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the initial recognitionand measurement, subsequent measurement and accounting, and disclosure ofassets and liabilities arising from contingencies in a business combination.

 

Under SFAS 141(R), theCompany assigns the value of the consideration transferred to acquire abusiness to the tangible assets and identifiable intangible assets acquired andliabilities assumed on the basis of their fair values at the date ofacquisition.  The Company assesses thefair value of assets, including intangible assets such as in-process researchand development (“IPR&D”) assets, using a variety of methods includingpresent-value models.  Each asset andliability is measured at fair value in accordance with SFAS No. 157, *Fair Value Measurements* (“SFAS 157”), from theperspective of a market participant. In accordance with SFAS 141(R),transaction costs associated with the transaction are expensed as incurred.

 

Priorto the adoption of SFAS 141(R), the Company expensed the fair value ofIPR&D to research and development expense as of the acquisition date inaccordance with SFAS 141.

 

*IntangibleAssets*

 

Intangibleassets acquired in a business combination initially are recorded at fair valueand accounted for in accordance with SFAS No. 142, *Goodwill andOther Intangible Assets* (“SFAS 142”), as amended by SFAS141(R).  Intangible assets which havealternative future uses are amortized on a straight-line basis over theirestimated useful life. The determination of the amortization periodinvolves estimates and judgments on management’s part. Any significant changesin the Company’s estimates or assumptions could impact the carrying value ofacquired intangible assets.

 

In accordance with SFAS 141(R), indefinite-lived intangible assets such asIPR&D assets initially are recorded at fair value until either the projectunderlying them is completed or the assets become impaired. If a project iscompleted, the carrying value of the related intangible asset is amortized overthe remaining estimated life of the asset beginning in the period in which theproject is completed. If a project becomes impaired or is abandoned, thecarrying value of the related intangible asset is written down to its fairvalue and an impairment charge is taken in the period in which the impairmentoccurs.

 

The method used toestimate the fair values of IPR&D assets is determined by estimatingthe costs to develop the acquired technology into commercially viable products,estimating the resulting net cash flows from the projects, and discounting thenet cash flows to present value. The revenue and costs projections used tovalue IPR&D were, as applicable, reduced based on the probability ofdeveloping a new drug. Additionally, the projections considered the relevantmarket sizes and growth factors, expected trends in technology, and the natureand expected timing of new product introductions by the Company and the Company’scompetitors. The resulting net cash flows from such projects are based onmanagement’s estimates of revenues, cost of sales, operating expenses, andincome taxes from such projects. The rates utilized to discount the net cashflows to their present value were commensurate with the stage of development ofthe projects and uncertainties in the economic estimates used in theprojections described above.

 

If these projects are not successfully developed, the operations of theCompany may be adversely affected in future periods. Additionally, the value ofother acquired intangible assets may become impaired. The Company believes thatthe assumptions used in the Company’s IPR&D analysis were reasonable at thetime of the respective acquisition. No assurance can be given, however, thatthe underlying assumptions used to estimate expected project revenues,development costs or profitability, or the events associated with suchprojects, will transpire as estimated.

 

*Impairmentof Long-Lived Assets*

 

The Company evaluates the recoverability of its long-lived assets,primarily property and equipment and intangible assets, when circumstances indicate that an event ofimpairment may have occurred in accordance with SFAS No. 144, *Accounting for the Impairment or Disposal ofLong-Lived Assets* (“SFAS 144”). Determination of recoverability is based on anestimate of undiscounted future cash flows resulting from the use of the assetand its eventual disposition. In the event that such cash flows are notexpected to be sufficient to recover the carrying amount of the assets, theassets are written-down to their estimated fair values.

 

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*RevenueRecognition*

 

The Company accounts for revenue arrangements that include multipledeliverables in accordance with Emerging Issues Task Force (“EITF”) No. 00-21,*Accounting for Revenue Arrangements withMultiple Deliverables* (“EITF 00-21”). EITF 00-21 addresseshow to determine whether an arrangement involving multiple deliverablescontains more than one unit of accounting. In applying the guidance, revenuearrangements with multiple deliverables can only be considered as separateunits of accounting if (i) the delivered item has value to the customer ona standalone basis, (ii) there is objective and reliable evidence of thefair value of the undelivered items and (iii) the arrangement includes ageneral right of return relative to the delivered item, delivery or performanceof the undelivered items is considered probable and substantially in thecontrol of the vendor. If these criteria are not met, the revenue elements mustbe considered a single unit of accounting for purposes of revenue recognition.

 

Payments received to fund certain research activities are recognized asrevenue in the period in which the research activities are performed. Paymentsreceived in advance that are related to future performance are deferred andrecognized as revenue when the research projects are performed.

 

The Company has entered into various license and development agreementswith pharmaceutical and biotechnology companies. The terms of the agreementstypically include non-refundable license fees, funding of research anddevelopment, payments based upon achievement of certain milestones androyalties on net product sales. Non-refundable license fees are recognized ascontract and license fee revenue when the Company has a contractual right toreceive such payments, provided that (i) a contractual arrangement exists,(ii) the contract price is fixed or determinable, (iii) thecollection of the resulting receivable is reasonably assured and (iv) theCompany has no further performance obligations under the license agreement.Upfront non-refundable fees associated with license and development agreementswhere the Company has continuing performance obligations under the terms of theagreement are recorded as deferred revenue and recognized as revenue over theestimated service period as the Company completes its obligations. Where theCompany’s level of effort is relatively constant over the performance period orno other pattern is estimable, the revenue is recognized on a straight-linebasis. Revenue is limited to the lesser of the cumulative amount of paymentsreceived or the cumulative amount of revenue earned, as determined using thestraight-line basis, as of the period ending date. If the estimated serviceperiod is subsequently modified, the period over which the upfront fee isrecognized is modified accordingly on a prospective basis. The determination ofthe performance period involves judgment on management’s part. Funding ofresearch and development is recognized as revenue over the term of theapplicable contract as costs are incurred related to that contract.

 

Milestone payments are recognized as revenue upon the achievement ofmutually agreed milestones, provided that (i) the milestone event issubstantive and its achievement is not reasonably assured at the inception ofthe agreement, and (ii) there is no continuing performance obligationsassociated with the milestone payment. Revenues from milestone payments relatedto arrangements under which the Company has continuing performance obligationsare recognized as revenue upon achievement of the milestone only if all of thefollowing conditions are met: (i) the milestone payments arenon-refundable; (ii) achievement of the milestone was not reasonablyassured at the inception of the arrangement; (iii) substantive effort isinvolved in achieving the milestone; and, (iv) the amount of the milestoneis reasonable in relation to the effort expended or the risk associated withachievement of the milestone. If any of these conditions are not met, themilestone payments are deferred and recognized as revenue over the term of thearrangement as the Company completes its performance obligations.

 

The Company has capitalized and deferred costs incurred in connectionwith the one-time signing and upfront payment (the initial deliverable)received with respect to a multiple deliverable arrangement. If there is deemeda single unit of accounting for such an arrangement, the capitalized deferredcosts are amortized over the expected performance period of the arrangement.

 

Revenue from contracts and grants, including U.S. government grantsunder Small Business Innovation Research (“SBIR”), is recognized as theservices are performed and recorded as effort is expended on the contracted workand billed to the government or the Company’s contractual partner. Productroyalty revenue consists of payments received from licensees for a portion ofsales proceeds from products that utilize the Company’s licensed technologiesand are recognized when the amount of and basis for such royalty payments arereported to the Company in accurate and appropriate form and in accordance withthe related license agreement. Payments received 

 

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inadvance of activities being performed are recorded as deferred revenue. Anysignificant changes in the Company’s estimates or assumptions could impact itsrevenue recognition.

 

*Researchand Development Expenses*

 

Researchand development costs, including internal and contract research costs, areexpensed as incurred. Research and development expenses consist mainly ofclinical trial costs, manufacturing of clinical material, toxicology and otherstudies, salaries, depreciation, technology access fees, royalty fees,including the cost of Rotarix® royalty revenues retained by the Company, andfunding of outside research. Prior to the adoption of SFAS 141(R), the Companyexpensed the fair value of IPR&D to research and development expense as ofthe acquisition date in accordance with SFAS 141.

 

*IncomeTaxes*

 

The Company accounts for income taxes in accordance with the provisionsof SFAS No. 109, *Accounting For IncomeTaxes* (“SFAS 109”).  TheCompany uses the asset and liability method to account for income taxes,including the recognition of deferred tax assets and deferred tax liabilitiesfor the anticipated future tax consequences attributable to differences betweenfinancial statement amounts and their respective tax bases. Quarterly, theCompany reviews its deferred tax assets for recovery. A valuation allowance isestablished when the Company believes that it is more likely than not that itsdeferred tax assets will not be realized. Changes in valuation allowances fromperiod to period are included in the Company’s tax provision in the period ofchange.

 

The Companyrecords uncertain tax positions in the financial statements only if it is morelikely than not that the uncertain tax position will be sustained uponexamination by the taxing authorities in accordance with FASB Interpretation (“FIN”)No. 48, *Accounting for Uncertain TaxPositions*(“FIN 48”).

 

*Net LossPer Share*

 

The Company computes and reports earnings per share in accordance withthe provisions of SFAS No. 128, *EarningsPer Share*(“SFAS 128”). The computations of basic and dilutedloss per common share are based upon the weighted average number of commonshares outstanding and potentially dilutive securities. Potentially dilutivesecurities include stock options at June 30, 2009. Options to purchase2,719,983 and 1,810,751 shares of common stock were not included in the June 30,2009 and 2008 computation of diluted net loss per share, respectively, becauseinclusion of such shares would have an anti-dilutive effect on net loss pershare.

 

*Stock-BasedCompensation*

 

The Company records stock-based compensation expense in accordance withSFAS No. 123 (revised 2004), *Share-BasedPayment* (“SFAS 123(R)”) for all stock-based awards made toemployees and directorsbased on the estimated fair values of the stock-based awards expected to vest at the grant date and isadjusted, if necessary, to reflect actual forfeitures.  Compensation expense for allstock-based awards to employees and directorsis recognized using the straight-line methodover the term of vesting or performance.

 

The Company records stock-based compensation expense for options issuedto non-employees in accordance with SFAS 123(R) and EITF Issue No. 96-18,*Accounting for Equity Instruments That AreIssued to Other Than Employees for Acquiring, or in Conjunction with Selling,Goods or Services*. The fair value of stock options issued tonon-employees is re-measuredduring the vesting terms resulting in periodic adjustments to stock-basedcompensation expense.

 

*SubsequentEvents*

 

Effective April 1,2009, the Company adopted SFAS No. 165, *SubsequentEvents*(“SFAS 165”)which establishes general standards of accounting for and disclosure of eventsthat occur after the balance sheet date but before financial statements areissued. The adoption of SFAS 165 only impacted the Company’s disclosuresand did not impact the Company’s financial statements or results of operations.The Company evaluated all events or 

 

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transactions thatoccurred after June 30, 2009 up through August 7, 2009, the date theCompany issued these financial statements. During this period the Company didnot have any material recognizable subsequent events.

 

*Use ofEstimates*

 

The preparation of the financial statements in conformity with U.S.GAAP requires management to make estimates and use assumptions that affect the reported amounts ofassets and liabilities and the disclosure of contingent assets and liabilitiesat the dates of the financial statements and the reported amounts of revenuesand expenses during the reporting period.  Actual results could differ from thoseestimates.

 

*RecentAccounting Pronouncements*

 

**EITF 07-1:**  On January 1, 2009, the Company adopted EITF 07-01,*Accounting for Collaborative Arrangements Related tothe Development and Commercialization of Intellectual Property* (“EITF 07-01”),which prescribes the accounting for collaborations existing after January 1, 2009. EITF 07-01requires certain transactions between collaborators to be recorded in theincome statement on either a gross or net basis within expenses when certaincharacteristics exist in the collaboration relationship. The adoption of EITF 07-1 did not have amaterial impact on the Company’s financial condition or results of operationsas it relates to any joint operating activities under current collaborations.The Company will have to evaluate the impact of EITF 07-01 on futurecollaborations that the Company may enter into.

 

**FSP No. FAS 142-3:**  On January 1, 2009, the Company adoptedFSP No. FAS 142-3, *Determinationof the Useful Life of Intangible Assets* (“FSP FAS 142-3”). FSPFAS 142-3 amends the factors that should be considered in developingrenewal or extension assumptions used to determine the useful life of arecognized intangible asset under SFAS 142. The intent of FSPFAS 142-3 is to improve the consistency between the useful life of arecognized intangible under SFAS 142 and the period of expected cash flows usedto measure fair value of the asset under SFAS 141(R) and other U.S.GAAP. The adoption of FSP FAS 142-3 did not have a material impact on theCompany’s financial condition or results of operations.

 

**EITF 03-6-1:**  On January 1, 2009, the Company adoptedFSP No. EITF 03-6-1, *“DeterminingWhether Instruments Granted in Share-Based Payment Transactions AreParticipating Securities”* (“FSP EITF 03-6-1”). FSPEITF 03-6-1 addresses whether instruments granted in share-based paymenttransactions are participating securities prior to vesting and, therefore, needto be included in the earnings allocation in computing earnings per share (EPS)under the two-class method described in paragraphs 60 and 61 ofSFAS 128. The guidance applies to the calculation of EPS underSFAS 128 for share-based payment awards with rights to dividends ordividend equivalents. FSP EITF 03-6-1 clarifies that unvested share-basedpayment awards that contain nonforfeitable rights to dividends or dividendequivalents (whether paid or unpaid) are participating securities and shall beincluded in the computation of EPS pursuant to the two class method. FSPEITF 03-6-1 requires all prior-period EPS data presented to be adjustedretrospectively (including interim financial statements, summaries of earningsand selected financial data). The adoption of FSP EITF 03-6-1 did not havea material impact on the Company’s financial condition or results ofoperations.

 

**FSP FAS 107-1:**On April 1, 2009, the Company adoptedFSB No. 107-1and Accounting Principles Board Opinion No. 28-1, *“InterimDisclosures about Fair Value of Financial Instruments”*(“FSP FAS 107-1”).  FSP FAS 107-1 requires disclosures about fairvalues of financial instruments in interim and annual financial statements.Prior to the issuance of FSP FAS 107-1, disclosures about fair values offinancial instruments were only required to be disclosed annually.  The adoption of FSP FAS 107-1 only impactedthe Company’s disclosures and did not affect the Company’s financial conditionor results of operations.

 

**SFAS 168:**  In June 2009, the FASB issued SFAS No. 168,*“FASB Accounting Standards Codification” and theHierarchy of Generally Accepted Accounting Principles*(“SFAS 168”). SFAS 168 replaces SFAS No. 162,*The Hierarchy of Generally AcceptedAccounting Principles*, and establishes only two levels of U.S. GAAP,authoritative and nonauthoritative. The FASB Accounting Standards Codification(the “Codification”) will become the source of authoritative, nongovernmentalGAAP, except for rules and interpretive releases of the SEC, which aresources of authoritative GAAP for SEC registrants. All other nongrandfathered,non-SEC accounting literature not included in the Codification will becomenonauthoritative. SFAS 168 is effective for financial statements for interim 

 

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or annual reportingperiods ending after September 15, 2009.  The Company will begin touse the new guidelines and numbering system prescribed by the Codification whenreferring to U.S. GAAP in the third quarter of fiscal 2009.  As theCodification was not intended to change or alter existing U.S. GAAP, SFAS 168will not have any impact on the Company’s financial statements orresults of operations.

 

**(3)****                              ****ComprehensiveLoss**

 

For the three andsix months ended June 30, 2009 and 2008, comprehensive loss was asfollows:

 
| ** **                                     | ** ** | **Three months ended June 30,** | ** ** | **Six months ended June 30,** | ** ** |
|------------------------------------------------|------------|-----------------------------------------------------|------------|---------------------------------------------------|------------|
| ** **                                     | ** ** | **2009**                                            | ** ** | **2008**                                          | ** ** | **2009** | ** ** | **2008** | ** ** |
| ** **                                     | ** ** | **(In thousands)**                                  | ** ** |
| Net loss                                       |       | $                                                   | (8,705     | )                                                 | $          | (10,261 | ) | $ | (16,408 | ) | $ | (32,391 | ) |
| Other comprehensive loss:                      |       |                                                |       |                                              |       |   |   |   |   |
| Unrealized equity investment loss              |       | —                                              |       | (147                                              | )          | — |   | (208 | ) |
| Unrealized foreign exchange translation losses |       | (3                                                  | )          | (5                                                | )          | (15 | ) | (56 | ) |
| Total other comprehensive loss                 |       | (3                                                  | )          | (152                                              | )          | (15 | ) | (264 | ) |
| Total comprehensive loss                       |       | $                                                   | (8,708     | )                                                 | $          | (10,413 | ) | $ | (16,423 | ) | $ | (32,655 | ) |

 

**(4)****                              ****FairValue Measurements**

 

On January 1, 2008, the Company adopted SFAS No. 157 which established a framework formeasuring the fair value of assets and liabilities pursuant to U.S. GAAP andexpanded the required disclosure regarding assets and liabilities that aremeasured at fair value. SFAS 157 became applicable to the Company’sfinancial assets and liabilities on January 1, 2008 and became applicableto the Company’s nonfinancial assets and liabilities on January 1, 2009.

 

SFAS 157 defines fair value as the exchange price that would bereceived for an asset or paid to transfer a liability (an exit price) in theprincipal or most advantageous market for the asset or liability in an orderlytransaction between market participants on the measurement date. Marketparticipants are buyers and sellers in the principal market that are (i) independent,(ii) knowledgeable, (iii) able to transact, and (iv) willing totransact.

 

SFAS 157 requires the use of valuation techniques that areconsistent with the market approach, the income approach and/or the cost approach.The market approach uses prices and other relevant information generated bymarket transactions involving identical or comparable assets and liabilities.The income approach uses valuation techniques to convert future amounts, suchas cash flows or earnings, to a single present amount on a discounted basis.The cost approach is based on the amount that currently would be required toreplace the service capacity of an asset (replacement cost). Valuationtechniques should be consistently applied. SFAS 157 also establishes afair value hierarchy which requires an entity to maximize the use of observableinputs, where available, and minimize the use of unobservable inputs whenmeasuring fair value. The standard describes three levels of inputs that may beused to measure fair value:

 
| **Level 1** |   | Quoted  prices in active markets for identical assets or liabilities. The Company’s  Level 1 assets consist of cash equivalents. As of June 30, 2009 and  December 31, 2008, the Company held cash equivalents of $31.4 million  and $43.5 million in money market funds, respectively.                                                                                                               |
|------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|             |   |                                                                                                                                                                                                                                                                                                                                                                                                                      |
| **Level 2** |   | Observable  inputs other than Level 1 prices, such as quoted prices for similar  assets or liabilities; quoted prices in markets that are not active; or other  inputs that are observable or can be corroborated by observable market data  for substantially the full term of the assets or liabilities. The Company had  no Level 2 assets or liabilities at June 30, 2009 and  December 31, 2008. |
|             |   |                                                                                                                                                                                                                                                                                                                                                                                                                      |
| **Level 3** |   | Unobservable  inputs that are supported by little or no market activity and that are  significant to the fair value of the assets or liabilities. The Company had  no Level 3 assets or liabilities at June 30, 2009 and  December 31, 2008.                                                                                                                                                               |

 

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The Company’s financial instruments consist mainly of cash and cashequivalents, short-term accounts receivable, accounts payable and debtobligations. Short-term accounts receivable and accounts payable are reflectedin the accompanying consolidated financial statements at cost, whichapproximates fair value due to the short-term nature of these instruments.Based on current market interest rates available to the Company for long-termliabilities with similar terms and maturities, the Company believes the fairvalue of the loan payable and note payable approximates its carrying value at June 30,2009.

 

**(5)****                              ****Stock-BasedCompensation**

 

At June 30, 2009, the Company had two stock-based compensationplans: the 2004 Employee Stock Purchase Plan (the “2004 ESPP Plan”) and the2008 Stock Option and Incentive Plan (the “2008 Plan”).

 

*Employee Stock PurchasePlan*

 

All full time employees of the Company are eligible to participate inthe 2004 ESPP Plan. A total of 12,500 shares of common stock are reserved forissuance under the 2004 ESPP Plan. Under the 2004 ESPP Plan, each participatingemployee may contribute up to 15% of his or her compensation to purchase up to100 shares of common stock per year in any six-month offering period and maywithdraw from the offering at any time before stock is purchased. Participationterminates automatically upon termination of employment. The purchase price pershare of common stock in an offering is 85% of the lower of its fair marketvalue at either the beginning of the offering period or the applicable exercisedate.

 

Thecurrent purchase period began on January 1, 2009.  During the six months ended June 30, 2009, theCompany issued 1,497 shares under the 2004 ESPP Plan. There were no sharesissued under the 2004 ESPP Plan during the six months ended June 30, 2008or for three months ended June 30, 2009 and 2008. At June 30,2009, 8,388 shares were available for issuance under the 2004 ESPP Plan.

 

*Employee Stock Option andIncentive Plan*

 

The 2008 Plan permits the granting of incentive stock options (intendedto qualify as such under Section 422A of the Internal Revenue Code of1986, as amended), non-qualified stock options, stock appreciation rights, performanceshare units, restricted stock and other awards of restricted stock in lieu ofcash bonuses to employees, consultants and outside directors.

 

The 2008 Plan allows for a maximum of 1,500,000 shares of common stockto be granted prior to October 19, 2017. The Company’s board of directorsdetermines the term of each option, option price, and number of shares forwhich each option is granted and the rate at which each option vests. Optionsgenerally vest over a period not to exceed four years. The term of each optioncannot exceed ten years (five years for options granted to holders of more than10% of the voting stock of the Company) and the exercise price of stock optionscannot be less than the fair market value of the common stock at the date ofgrant (110% of fair market value for incentive stock options granted to holdersof more than 10% of the voting stock of the Company). The 2008 Plan alsoprovides for discretionary grants of non-qualified stock options tonon-employee directors. Vesting of all employee and non-employee director stockoption awards is accelerated upon a change in control as defined in the 2008Plan.

 

In connection with the AVANT Merger, the Company assumed theobligations of Celldex Research under Celldex Research’s 2005 Equity IncentivePlan (the “Celldex Research 2005 Plan”) and each outstanding option to purchaseCelldex Research common stock (a “Celldex Research Stock Option”) granted underthe Celldex Research 2005 Plan. Each Celldex Research Stock Option assumed bythe Company is deemed to constitute an option to acquire, on the same terms andconditions as were applicable under the Celldex Research 2005 Plan, shares ofthe Company’s common stock that have been adjusted consistent with the ratio atwhich the Company’s common stock was issued in exchange for Celldex Research’scommon stock in the AVANT Merger. As of March 7, 2008, the Company assumedoptions to acquire 1,446,913 shares of its common stock at a weighted averageexercise price of $8.35. The Celldex Research Stock Options generally vest overa two-to four-year period and the term of each option cannot exceed ten yearsfrom the date of grant. No additional awards will be issued under the CelldexResearch 2005 Plan.

 

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A summary of stock option activity under the 2008 Plan and the CelldexResearch 2005 Plan for the six months ended June 30, 2009 is as follows:

 
| ** **                                                                                     | ** ** | **Shares** | ** ** | **Weighted  Average  Exercise  Price  Per Share** | ** ** | **Weighted  Average  Remaining  Contractual  Term (In Years)** | ** ** |
|------------------------------------------------------------------------------------------------|------------|------------|------------|--------------------------------------------------------|------------|--------------------------------------------------------------------------|------------|
| Outstanding at January 1, 2009                                                            |       | 2,070,993  |       | $                                                      | 8.39       |                                                                     | 8.7        |   |
| Granted                                                                                        |       | 713,075    |       | 8.50                                                   |       |                                                                     |       |
| Exercised                                                                                      |       | (57,400    | )          | 8.16                                                   |       |                                                                     |       |
| Canceled/forfeited                                                                             |       | (6,685     | )          | 8.42                                                   |       |                                                                     |       |
| Expired                                                                                        |       | —     |       | —                                                 |       |                                                                     |       |
|                                                                                           |       |       |       |                                                   |       |                                                                     |       |
| Outstanding at June 30, 2009                                                              |       | 2,719,983  |       | $                                                      | 8.43       |                                                                     | 8.2        |   |
|                                                                                           |       |       |       |                                                   |       |                                                                     |       |
| Options Vested and Expected to Vest at  June 30, 2009                                     |       | 2,515,607  |       | $                                                      | 8.43       |                                                                     | 8.2        |   |
| Options Exercisable at June 30, 2009                                                      |       | 1,536,310  |       | 8.49                                                   |       | 8.1                                                                      |       |
| Options Available for Grant                                                                    |       | 137,828    |       |                                                   |       |                                                                     |       |
| Weighted Average Fair Value of Options Granted  During the six months ended June 30, 2009 |       | $          | 5.33       |                                                   |       |                                                                     |       |   |
|                                                                                                |            |            |            |                                                        |            |                                                                          |            |  |  |

 

The aggregate intrinsic value of options outstanding at June 30,2009 was $0.1 million.

 

*Shares Issued to Executive Officers*

 

In January 2009, the Company granted29,340 shares of common stock from the 2008 Plan to its executive officers. Thevalue of these shares was $0.3 million on the grant date.

 

*Valuation and Expenses Information*

 

The following table summarizes stock-based compensation expense relatedto employee and non-employee stock options and employee stock purchases for thethree and six months ended June 30, 2009 and 2008, respectively:

 
| ** **                                             | ** ** | **Three months ended June 30,** | ** ** | **Six months ended June 30,** | ** ** |
|--------------------------------------------------------|------------|-----------------------------------------------------|------------|---------------------------------------------------|------------|
| ** **                                             | ** ** | **2009**                                            | ** ** | **2008**                                          | ** ** | **2009** | ** ** | **2008** | ** ** |
| ** **                                             | ** ** | **(In  thousands)**                                 | ** ** |
| Research and development                               |       | $                                                   | 421        |                                              | $          | 577 |   | $ | 821 |   | $ | 1,558 |   |
| General and administrative                             |       | 330                                                 |       | 239                                               |       | 1,043 |   | 881 |   |
| Total stock-based compensation expense                 |       | $                                                   | 751        |                                              | $          | 816 |   | $ | 1,864 |   | $ | 2,439 |   |
|                                                   |       |                                                |       |                                              |       |   |   |   |   |
| Impact on basic and diluted net loss per common  share |       | $                                                   | (0.05      | )                                                 | $          | (0.05 | ) | $ | (0.12 | ) | $ | (0.19 | ) |

 

In connection with the AVANT Merger, the Company accounted for theexchange of Celldex Research Stock Options into options to acquire shares ofthe Company’s common stock as a modification under the provisions ofSFAS 123(R). The modification affected a total of 15 employees, includingmembers of the Celldex Research board of directors. The total incrementalcompensation cost resulting from the modifications was $2.6 million, ofwhich $0.9 million was related to vested awards and was recognizedimmediately as stock-based compensation during the three months ended March 31,2008.

 

As of June 30, 2009, total compensation cost related to non-vestedemployee and non-employee director stock options not yet recognized was $4.6 million,net of estimated forfeitures, which is expected to be recognized as expenseover a weighted average period of 2.9 years. The total fair value of employeeand non-employee director stock options vested during the three and six monthsended June 30, 2009 was $0.6 million and $1.9 million, respectively.

 

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The fair values of employee and non-employee stock options and employeestock purchases granted during the three and six months ended June 30,2009 and 2008 were valued using the Black-Scholes option-pricing model with thefollowing assumptions:

 
| ** **                                                | ** ** | **Three months ended June 30,** | ** ** | **Six months ended June 30,** | ** ** |
|-----------------------------------------------------------|------------|-----------------------------------------------------|------------|---------------------------------------------------|------------|
| ** **                                                | ** ** | **2009**                                            | ** ** | **2008**                                          | ** ** | **2009** | ** ** | **2008** | ** ** |
| Expected stock price volatility (employees)               |       | 68                                                  | %          | 60                                                | %          | 68 | % | 60 | % |
| Expected stock price volatility (non-employee  directors) |       | —                                              |       | 59                                                | %          | — |   | 59 | % |
| Expected stock price volatility (2004 ESPP)               |       | —                                              |       | —                                            |       | 98 | % | — |   |
| Expected option term (employees)                          |       | 6.1 years                                           |       | 4.8 years                                         |       | 6.1-6.3 years |   | 3-6 years |   |
| Expected option term (non-employee directors)             |       | —                                              |       | 4.0 years                                         |       | — |   | 4-6 years |   |
| Expected term (2004 ESPP)                                 |       | —                                              |       | —                                            |       | 0.5 years |   | — |   |
| Risk-free interest rate (options)                         |       | 2.8                                                 | %          | 3.2                                               | %          | 1.9-2.8 | % | 1.8-3.2 | % |
| Risk-free interest rate (2004 ESPP)                       |       | —                                              |       | —                                            |       | 0.28 | % | — |   |
| Expected dividend yield                                   |       | None                                                |       | None                                              |       | None |   | None |   |

 

The Company calculatesthe expected term using the simplified method for “plain-vanilla” stock optionsin accordance with SEC Staff Accounting Bulletin No. 110 (“SAB 110”).  The simplified method estimates the expectedterm as the mid-point between the vesting date and the expiration date.  The Company uses its daily historical stockprice volatility consistent with the expected term of grant as the basis forits expected volatility assumption in accordance with SFAS 123(R).

 

The risk-free interest rate is based upon on the yield of U.S. Treasury securitiesconsistent with the expected term of the option. The dividend yieldassumption is based on the Company’s history of zero dividend payouts andexpectation that no dividends will be paid in the foreseeable future.  Forfeitures were estimated based onhistorical experience by applying a ten and zero percent forfeiture rate toemployee and non-employee director stock option awards granted during the threeand six months ended June 30 2009, respectively.

 

**(6)****                                ****Gainon Sale of****IntangibleAsset**

 

At December 31, 2008, the Company had recorded $0.3 million inintangible assets related to the Megan poultry vaccines as a long-lived assetto be disposed of by sale due to the Company’s negotiations with Lohmann AnimalHealth International (“LAHI”).  On January 9,2009, the Company entered into a purchase agreement (“LAHI Agreement”) to sellits poultry vaccines assets to LAHI. Under the LAHI Agreement, LAHI paid anupfront fee of $0.9 million and agreed to pay potential milestonepayments.  The Company recorded a gain of$0.6 million related to the LAHI Agreement based on the upfront fee less thenet book value of the related asset.

 

**(7)****                                ****Income Taxes**

 

Effective with the AVANT Merger, the Company became a combined groupfor tax reporting purposes.  As a resultof the AVANT Merger, all of the prior tax attributes of the combined group willcarry forward for potential future use subject to potential limitations.

 

Massachusetts and New Jersey are the two states in which the Companyprimarily operates or has operated and has income tax nexus. Open federal andstate return years subject to examination by major tax jurisdictions includethe tax years ended December 31, 2005, 2006, 2007 and 2008 (which has notyet been filed). Carryforward attributes that were generated prior to 2005 maystill be adjusted upon examination by the Internal Revenue Service if theyeither have been or will be used in a future period. The Company is currentlynot under examination by the Internal Revenue Service or any otherjurisdictions for any tax years.

 

The Company has evaluated the positive and negative evidence bearingupon the realizability of its net deferred tax assets, which are comprisedprincipally of net operating loss carryforwards, capitalized R&Dexpenditures and R&D tax credit carryforwards. The Company has determinedthat it is more likely than not that it will not recognize the benefits offederal and state deferred tax assets and, as a result, a full valuationallowance was maintained at June 30, 2009 and December 31, 2008.

 

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**(8)****                                ****Significant Revenue Arrangements**

 

A summary of the Company’s significant revenue contracts andarrangements follows:

 

*GlaxoSmithKline plc (“Glaxo”) and Paul RoyaltyFund II, L.P. (“PRF”)*

 

In 1997, the Company entered into an agreement with Glaxo tocollaborate on the development and commercialization of the Company’s oralrotavirus strain and Glaxo assumed responsibility for all subsequent clinicaltrials and all other development activities. The Company’s licensed-in therotavirus strain that was used to develop Glaxo’s Rotarix® rotavirus vaccine in1995 and owes a license fee of 30% to Cincinnati Children’s Hospital MedicalCenter (“CCH”) on net royalties received from Glaxo. The Company is obligatedto maintain a license with CCH with respect to the Glaxo agreement. Alllicensing fees are included in research and development expense. The term ofthe Glaxo agreement is through the expiration of the last of the relevantpatents covered by the agreement, although Glaxo may terminate the agreementupon 90 days prior written notice.

 

In May 2005, the Company entered into an agreement whereby anaffiliate of PRF purchased an interest in the net royalties the Company willreceive on worldwide sales of Rotarix®. Under the PRF agreement, the Companyretained 50% of Glaxo milestone payments beginning on the effective date of theagreement with PRF, with 70% and 30% of the remaining balance payable to PRFand CCH, respectively. The Company’s retained interests in Rotarix® netroyalties which were not sold to PRF are recorded as product royalty revenueand a corresponding amount that is payable to CCH is recorded as royaltyexpense, which is included in research and development expense.  Product royalty revenue and royalty expenserelated to the Company’s retained interests in Rotarix® was $1.2 million and$3.2 million for the three and six months ended June 30, 2009,respectively, and $0.8 million for the three and six months ended June 30,2008.

 

On April 3, 2008, Rotarix® received FDA market approval for theprevention of rotavirus gastroenteritis in infants, which triggered a$1.5 million milestone payment to the Company from Glaxo, 50% of which theCompany has retained under its agreement with PRF.  During the three months ended June 30,2008, the Company also recorded $0.2 million in revenue and an offsettingamount in royalty expense for the payable due to CCH for its portion of theGlaxo milestone. The market launch of Rotarix® by Glaxo in the U.S. marketduring the three months ended September 30, 2008 resulted in a$10 million milestone payment to the Company from PRF, which the Companyreceived on October 1, 2008. As of March 31, 2008, the Companyrecorded the expected present value of the $10 million milestone paymentdue from PRF of $9.1 million, the purchase accounting value assigned to the PRFmilestone payment at the time of the AVANT Merger. During the three monthsended September 30, 2008, the Company recognized the balance of $0.9million as other income in the condensed consolidated statement of operations.The Company has received $60 million in total milestone payments under thePRF agreement. No additional milestone payments are due from PRF under theagreement.

 

Royalty rates on Rotarix® escalate from 7% to 10% based on net productsales in countries that have valid patent protection. These royalty rates arediscounted by 30% for “non-patent” countries (primarily international markets).In September 2006, the Company received notice from Glaxo that Glaxo wouldbegin paying royalties on sales of Rotarix® vaccine at the lower of the tworoyalty rates under their 1997 license agreement. Glaxo’s decision to pay thelower royalty rate (which is 70% of the full rate) is based upon Glaxo’sassertion that Rotarix® is not covered by the patents Glaxo licensed from theCompany in Australia and certain European countries. The Company is currentlyevaluating the basis for Glaxo’s action and the Company’s potential remedies.  If Glaxo’s position stands, the royalties towhich PRF is entitled will no longer be limited by a $27.5 million annualthreshold, which the Company projected may have been reached in later years assales of Rotarix® increased. Irrespective of Glaxo’s position, the Company willstill retain approximately 65% of the royalties on worldwide sales of Rotarix®once PRF receives 2.45 times the aggregate cash payments of $60 million itmade to the Company, though the potential amount of such residual royalties willbe lower if Glaxo’s position stands.

 

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*Pfizer Inc. (“Pfizer”) License and DevelopmentAgreement*

 

On April 16, 2008, the Company and Pfizer entered into a Licenseand Development Agreement (the “Pfizer Agreement”) under which Pfizer wasgranted an exclusive worldwide license to a therapeutic cancer vaccinecandidate, CDX-110, in Phase 2 development for the treatment ofglioblastoma multiforme. The Pfizer Agreement also gives Pfizer exclusiverights to the use of EGFRvIII vaccines in other potential indications. Underthe Pfizer Agreement, Pfizer made an upfront payment to the Company of$40 million and made a $10 million equity investment in the Company.Pfizer will fund all development costs for these programs. The Company is alsoeligible to receive potential milestone payments exceeding $390 millionfor the successful development and commercialization of CDX-110 and additionalEGFRvIII vaccine products, as well as royalties on any product sales. ThePfizer Agreement became effective after clearance under the Hart-Scott-RodinoAntitrust Improvements Act of 1976 (as amended) on May 19, 2008.

 

On May 27, 2008, the Company received $10 million from Pfizerin exchange for 781,250 shares of the Company’s common stock having a fairvalue of $10.9 million, or $13.91 per share, on that date. The $0.9 millionover the amount received from Pfizer was recorded as a reduction to deferredrevenue of the $40 million upfront payment received from Pfizer on June 18,2008.

 

The Company has applied the provisions of EITF 00-21 anddetermined that its performance obligations under this collaboration should beaccounted for as a single unit of accounting. The Company’s deliverables underthis collaboration primarily include an exclusive license to its CDX-110product candidate and its EGFRvIII technologies, research and developmentservices as required under the collaboration and participation in the jointclinical development committee. The Company has estimated that its performanceperiod under the collaboration will be 9.5 years based on an assessment ofthe period over which the Company will have met its performance obligations underthe collaboration. Revenue, including research and development reimbursements,is being recognized on a straight-line basis over this period using theContingency Adjusted Performance Model (“CAPM”). The $40 million upfrontpayment, less the $0.9 million in excess fair value for the Company’s commonstock discussed above, was recorded as deferred revenue and is being amortizedover the 9.5-year performance period at a rate of $1.0 million per quarter.

 

The agreement also provides for reimbursement by Pfizer of all costsincurred by the Company in connection with the collaboration since theeffective date. The Company invoices Pfizer monthly for its reimbursable costsand records the invoiced amount as deferred revenue. These deferred revenueamounts are amortized to revenue over the expected 9.5-year performance periodon a straight-line basis using the CAPM model. The Company incurred andinvoiced Pfizer reimbursable costs related to the Pfizer collaboration of $1.1million and $2.6 million for the three and six months ended June 30, 2009,respectively, and $1.4 million for the three and six months ended June 30,2008.

 

The Company recorded product development and licensing agreementsrevenue under the Pfizer Agreement as follows:

 
| ** **                 | ** ** | **Three months ended June 30,** | ** ** | **Six months ended June 30,** | ** ** |
|----------------------------|------------|-----------------------------------------------------|------------|---------------------------------------------------|------------|
| ** **                 | ** ** | **2009**                                            | ** ** | **2008**                                          | ** ** | **2009** | ** ** | **2008** | ** ** |
| ** **                 | ** ** | **(In thousands)**                                  | ** ** |
| Up-front portion           |       | $                                                   | 1,030      |                                              | $          | 492 |   | $ | 2,060 |   | $ | 492 |   |
| Reimbursable costs portion |       | 297                                                 |       | 25                                                |       | 569 |   | 25 |   |
|                       |       | $                                                   | 1,327      |                                              | $          | 517 |   | $ | 2,629 |   | $ | 517 |   |

 

At June 30, 2009, the Company had total deferred revenue of $41.1million related to the Pfizer Agreement.

 

In connection with the Pfizer Agreement as discussed further inNote 9, the Company paid a total of $6.9 million in sublicense fees toDuke University and Thomas Jefferson University.  The Company recorded these deferredsublicense fees to other assets in the condensed consolidated balance sheetsand is amortizing them over the 9.5-year performance period at a rate of $0.2million per quarter.  At June 30,2009, the unamortized balance of deferred costs was $6.1 million.

 

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*Pfizer Animal Health Agreement*

 

The Company entered into a licensing agreement in December 2000with Pfizer’s Animal Health Division whereby Pfizer has licensed Megan’stechnology for the development of animal health and food safety vaccines. Underthe agreement, the Company may receive additional milestone payments of up to$3 million based upon attainment of specified milestones. The Company mayreceive royalty payments on eventual product sales. The term of this agreementis through the expiration of the last of the patents covered by the agreement.The Company has no obligation to incur any research and development costs inconnection with this agreement.

 

*Rockefeller University (“Rockefeller”) and GatesGrand Challenge Award*

 

The Company is collaborating on the development of  a vaccine, CDX-2401, aimed at providingprotection from infection with HIV, the virus known to cause AIDS. This programis in a Bill & Melinda Gates Foundation funded partnership withcollaborators at Rockefeller and the Aaron Diamond AIDS Research Center, whohave shown in model systems that protective immunity can be induced with such avaccine. Preclinical studies and manufacturing development are in progress andpayments to the Company are made on a time and materials basis.  The Company recognized grant revenue fromRockefeller of $0.1 million for the six months ended June 30, 2009 and$0.2 million for the three and six months ended June 30, 2008.  The Company recognized no grant revenue fromRockefeller for the three months ended June 30, 2009.  At June 30, 2009, the Company had totaldeferred revenue of $0.3 million related to the Rockefeller arrangement.

 

*Vaccine Technologies, Inc. (“VTI”)*

 

On January 12, 2009, the Company entered into a license agreementwith VTI under which the Company granted a worldwide exclusive license to VTIto develop and commercialize the Company’s CholeraGarde® and ETEC vaccineprograms. Financial terms of the agreement with VTI included an upfront licensefee and provide for milestone payments and royalties on net sales of licensedproducts during the term of the agreement.

 

**(9)**                                 Collaboration Agreements

** **

The Company has entered into licensing agreements with severaluniversities and research organizations. Under the terms of these agreements,the Company has received licenses or options to license technology, specifiedpatents or patent applications.  The Company’s licensing and developmentcollaboration agreements generally provide for royalty payments equal tospecified percentages of product sales, annual license maintenance fees andcontinuing patent prosecution costs.  Inaddition, the Company has committed to make potential future milestone paymentsto third parties of up to approximately $121 million as part of ourvarious collaborations including licensing and development programs. Paymentsunder these agreements generally become due and payable only upon achievementof certain developmental, regulatory and/or commercial milestones.  Nonrefundable license feeexpense was $0.1 million and $0.3 million for the three months ended June 30,2009 and 2008 and $0.4 million and $0.3 million for the six months ended June 30,2009 and 2008, respectively.

 

*Medarex, Inc. (“Medarex”)*

 

Medarex, a related party to the Company, owns approximately 18.6% ofthe Company’s outstanding common stock at June 30, 2009.  The Company and Medarex have entered into thefollowing agreements, each of which was approved by a majority of itsindependent directors who did not have an interest in the transaction. Theseagreements include:

 

·                  An Assignment and LicenseAgreement, as amended, (“Assignment and License Agreement”) that provides forthe assignment of certain patent and other intellectual property rights and alicense to certain Medarex technology;

 

·                  A Research andCommercialization Agreement, as amended, (“Research and CommercializationAgreement”) that provides the Company with certain rights to obtain exclusivecommercial licenses to proprietary monoclonal antibodies raised against certainantigens; and

 

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·                  A Master Services Agreement,that sets forth Medarex’s agreement to provide the Company with certainservices to be mutually agreed upon, which may include, among others, clinicaland regulatory assistance.

 

Under the terms of the Assignment and License Agreement and Researchand Commercialization Agreement, the Company may be required to pay licensefees and milestone payments to Medarex with respect to the development of anyproducts containing such licensed antibodies. These fees and milestones maytotal up to $7 to $10 million per licensed antibody if a productcontaining such licensed antibody receives approval from the FDA and/orequivalent foreign agencies.  Potentialfuture milestone payments may or may not be triggered, vary in size and are generally payable only uponachievement of certain clinical and regulatory milestones.  No licensed antibody is currently in clinicaldevelopment.

 

The Company may also be required to pay royalties on any product salescontaining licensed antibodies. The royalties will be payable on acountry-by-country and product-by-product basis until the date which is thelater of: (i) the expiration of the last-to-expire of the Medarex patentscovering the product in such country or (ii) the tenth anniversary of thefirst commercial sale of a product in such country. The Company will also beresponsible for the payment of any royalties, license fees and milestone andother payments due to third parties if the Company licenses any additionaltechnology in order to commercialize such products.  To date, the Company has not made any royaltypayments on sales of any products and believes it is at least a number of yearsaway from selling any products that would require the Company to make any suchroyalty payments. Whether the Company will be obligated to make milestone orroyalty payments in the future is subject to the success of the Company’sproduct development efforts and, accordingly, is inherently uncertain.

 

The Company and Medarex entered into a settlement and mutual releaseagreement on October 19, 2007, whereby the parties agreed to a settlementwith respect to a disputed return of capital related to certain unsuccessfulinitial public offering costs that were funded by Medarex on behalf of theCompany in prior years. The Company issued to Medarex 351,692 shares of theCompany’s common stock equal in value to $3.0 million, based on the per shareprice of $8.64 set on the second trading day prior to the closing date of theAVANT Merger. Both parties have agreed to mutual releases under the settlementand mutual release agreement.

 

The Company has a payable due Medarex related to the Master ServicesAgreement of $3.0 million at June 30, 2009 and December 31, 2008.

 

*Rockefeller University**(“Rockefeller”)*

 

On November 1, 2005, the Company and Rockefeller entered into alicense agreement for the exclusive worldwide rights to human DEC-205 receptor,with the right to sublicense the technology. The license grant is exclusive exceptthat Rockefeller may use and permit other nonprofit organizations to use thehuman DEC-205 receptor patent rights for educational and research purposes. Inaddition, the Company acknowledges that Rockefeller has granted Howard HughesMedical Institute (“HHMI”) a paid-up, nonexclusive, irrevocable license to usethe patent rights, biological materials, and technical information for HHMI’sresearch purposes, but with no right to sublicense. The Company may also berequired to pay royalties on any product sales. The royalties will be payableon a country-by-country and licensed product-by-licensed product basis untilthe date which is the later of (i) the expiration of the last to expire ofthe patents covering the licensed product in such country or (ii) tenyears following the first commercial sale of a licensed product in suchcountry.

 

The Company may be required to pay license fees and milestone paymentsto Rockefeller with respect to development of the human DEC-205 receptor. Thesefees and milestones may total up to $2 million to $4 million perproduct candidate that receives approval from the FDA and equivalent foreignagencies.

 

*Duke University Brain Tumor Cancer Center of DukeUniversity (“Duke”)*

 

On September 1, 2006, the Company and Duke entered into a licenseagreement that gave the Company access and reference to the clinical datagenerated by Duke and its collaborators in order for the Company to generateits own filing with the FDA relating to its CDX-110 product.

 

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The Company may be required to pay license fees and milestone paymentsto Duke with respect to development of the CDX-110 product. These fees andmilestones may total up to $1.2 million if CDX-110 receives approval fromthe FDA and equivalent foreign agencies. The Company may also be required topay royalties upon approval of CDX-110. The royalties will be payable on acountry-by-country and licensed product-by-licensed product basis until thedate of the expiration of the last to expire of the patents covering thelicensed product in such country.

 

In connection with the Pfizer Agreement discussed in Note 8, theCompany determined that $2.4 million was payable to Duke as a sublicense fee.As provided for under the Duke license, the Company chose to pay 50% of thisamount to Duke in the form of 81,512 shares of the Company’s common stock in October 2008.

 

*LudwigInstitute for Cancer Research**(“Ludwig”)*

 

On October 20, 2006, the Company and Ludwig entered into anagreement for the nonexclusive rights to six cancer tumor targets for use incombination with the Company’s APC Targeting Technology. The term of theagreement is for ten years. Under the Ludwig license, the Company agreed to payan annual license fee until such antigens enter a randomized Phase 1clinical trial.  In addition, the Companymay be required to pay license fees and milestone payments to Ludwig for theuse of the cancer targets in combination with the Company’s technology. Thefees and milestones may total up to $1.5 million to $2.5 million on aproduct candidate that receives approval from the FDA and equivalent foreignagencies. The Company may also be required to pay royalties upon approval ofany product candidate. The royalties will be payable on a country-by-countryand licensed product-by-licensed product basis until the date of the expirationof the last to expire of the patents covering the licensed product in such country.

 

*Alteris Therapeutics, Inc.(“Alteris”)*

 

In October 2005, the Company completed the acquisition ofAlteris.  The Company may be required topay Alteris up to $5.0 million upon obtaining the first approval forcommercial sale of an EGFRvIII product.

 

*ThomasJefferson University (“TJU”)*

 

In February 2003, the Company entered into three exclusive licenseagreements with TJU.  Under theselicenses, the Company will be obligated to pay TJU milestone payments which maytotal up to $3 million for the first licensed product developed during theterm of the license agreements, an annual license fee, patent and otherexpenses associated with licenses, as well as royalties on net sales oflicensed products during the term of the license agreements. In the event thatTJU provides notice of default and the default is not cured within 60 daysof such notice, TJU may terminate the license agreements.

 

In connection with the Pfizer Agreement discussed in Note 8, theCompany amended its licenses with TJU to add additional sublicensing rights andpaid $4.5 million in sublicense fees to TJU in 2008.

 

*3M Company (“3M Company”)*

 

On June 11, 2008, the Company and 3M Company entered into alicense agreement for the exclusive worldwide rights to access 3M Company’sproprietary Immune Response Modifier, ResiquimodTM, (and additional Toll-LikeReceptor 7/8 agonists (“TLR”)) for clinical study with the Company’sproprietary APC Targeting Technology, for use as vaccine adjuvants, with theright to sublicense the technology.

 

The Company paid 3M Company a one-time upfront license fee which wascharged to research and development expense during the three months ended June 30,2008. The Company may be required to pay annual license fees and milestonepayments to 3M Company with respect to development of ResiquimodTM. The Companymay also be required to pay royalties upon approval of any product candidate.The royalties will be payable on a country-by-country and licensedproduct-by-licensed product basis until the date of the expiration of the lastto expire of the patents covering the licensed product in such country.

 

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*Universityof Southampton, UK (“Southampton”)*

 

In November 2008, the Company entered into an Exclusive Patent andKnow-How License Agreement with Southampton to develop human antibodies towardsCD27, a potentially important target for immunotherapy of various cancers. CD27is a critical molecule in the activation pathway of lymphocytes, is downstreamfrom CD40, and may provide a novel way to regulate the immune responses. Inpreclinical models, antibodies to CD27 have been shown to mediate anti-tumoreffects alone, and may be particularly effective in combination with theCompany’s other immunotherapies.

 

The Company paid Southampton a one-time upfront license fee which wascharged to research and development expense during the three months ended December 31,2008. The Company may be required to pay annual license fees and milestonepayments to Southampton with respect to development of CD27. The Company mayalso be required to pay royalties upon approval of any product candidate. Theroyalties will be payable on a country-by-country and licensedproduct-by-licensed product basis until the date of the expiration of the lastto expire of the patents covering the licensed product in such country.

 

*Amgen*

 

In March 2009,the Company entered into a license agreement with Amgen to expandits Precision Targeted Immunotherapy Platform by acquiring exclusive rights toFMS-like tyrosine kinase 3 ligand (Flt3L) and CD40 ligand (CD40L).  Flt3L and CD40L areimmune modulating molecules that increase the numbers and activity of immunecells that control immune responses.  TheCompany paid Amgen a one-time upfront license fee which was charged to researchand development expense in the three months ended March 31, 2009. TheCompany may be required to pay milestone and royalty payments to Amgen withrespect to development and commercialization of Flt3L and CD40L.

 

**(10)****                         ****Severance Arrangements**

 

Dr. Ronald C.Newbold, former Senior Vice President, Business Development, resigned from hisposition effective March 1, 2009 pursuant to the provision of hisemployment agreement that deems a resignation within the year following achange of control (in this case, the AVANT Merger) as a termination resultingfrom a change of control.  In accordancewith Dr. Newbold’s employment agreement, the Company recorded severance expenseduring the three months ended March 31, 2009 of $0.4 million.  In addition, the Company recorded stock-basedcompensation expense during the three months ended March 31, 2009 of $0.4million related to the acceleration of vesting of options to purchase 107,485shares of Company common stock as provided for under Dr. Newbold’semployment agreement.

 

The Company and Dr. Una S. Ryan, former President and ChiefExecutive Officer of the Company, executed a separation agreement effective July 16,2008 (the “Separation Agreement”) setting forth such terms regarding Dr. Ryan’sseparation from the Company.  Pursuant tothe Separation Agreement, the Company recorded severance expense during thethree months ended June 30, 2008 of $1.4 million.  The Separation Agreement also provided forthe vesting of options to purchase 153,125 shares of Company common stock(of the options to purchase 612,500 shares of Company common stock which hadbeen granted to Dr. Ryan on March 7, 2008). The remainder of Dr. Ryan’soptions terminated as of July 16, 2008. The Company recorded stock-based compensation expense of$1.3 million to general and administrative expense related to theacceleration of vesting of options in July 2008, when the criteria forestablishing a grant date under SFAS 123(R) were met.

 

**(11)****                         ****AVANT Merger**

 

As part of theAVANT Merger, the Company acquired the CDX-1135, cholera, ETEC, typhoid feverand cholesterol management vaccine programs. In January 2009, the Company out-licensed its cholera and ETECvaccine programs to VTI and no longer expects to incur significant costs onthese projects. The Company is presently seeking partners for its typhoid feverand cholesterol management vaccine programs to complete the clinicaldevelopment and commercialization of these projects. The Company does notexpect to incur significant resources on these programs going forward. TheCompany is continuing the development of CDX-1135 and expects to incurapproximately $6.3 million to move this project to the point of potentiallyout-licensing it to a third party. 

 

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Estimated revenues fromthe typhoid-ETEC-cholera vaccine, the cholesterol management vaccine, andCDX-1135 are expected to be generated beginning in 2014, 2015 and 2014,respectively.

 

***Safe Harbor Statement under thePrivate Securities Litigation Reform Act of 1995:***  This report on Form 10-Q containsforward-looking statements made pursuant to the safe harbor provisions of thePrivate Securities Litigation Reform Act of 1995 under Section 27A of theSecurities Act of 1933, as amended, and Section 21E of the SecuritiesExchange Act of 1934, as amended. Forward-looking statements include statementswith respect to our beliefs, plans, objectives, goals, expectations,anticipations, assumptions, estimates, intentions and future performance, andinvolve known and unknown risks, uncertainties and other factors, which may bebeyond our control, and which may cause our actual results, performance orachievements to be materially different from future results, performance orachievements expressed or implied by such forward-looking statements. Allstatements other than statements of historical fact are statements that couldbe forward-looking statements. You can identify these forward-lookingstatements 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 actualresults to differ materially from those expressed in any forward-lookingstatement made by us. These factors include, but are not limited to:

 

·                  our ability to raisesufficient capital on terms acceptable to us, or at all;

 

·                  failure of our or CuraGen’sstockholders to approve the CuraGen Merger;

 

·                  our or CuraGen’s inabilityto satisfy the closing conditions of, and to consummate, the CuraGen Merger;

 

·                  our ability to successfullyintegrate our and CuraGen’s businesses, to integrate our and CuraGen’s businesswithout causing  delays in the researchand development necessary to select drug development candidates and/or delaysin clinical trials, and to operate the combined business efficiently;

 

·                  our ability to adapt our APCTargeting TechnologyTM to develop new, safe and effective vaccines againstoncology and infectious disease indications;

 

·                  our ability to adapt ourvectoring systems to develop new, safe and effective orally administeredvaccines against disease causing agents;

 

·                  our ability to successfullycomplete product research and further development, including animal,preclinical and clinical studies, and commercialization of CDX-110, CDX-1307,Ty800, CDX-1135 (formerly TP10), CDX-1401 and other products and the growth ofthe markets for those product candidates;

 

·                  the cost, timing, scope andresults of ongoing safety and efficacy trials of CDX-110, CDX-1307, Ty800,CDX-1135 (formerly TP10), CDX-1401 and other preclinical and clinical testing;

 

·                  the ability to negotiatestrategic partnerships or other disposition transactions for our non-coreprograms, including CETi;

 

·                  our ability to managemultiple clinical trials for a variety of product candidates at differentstages of development;

 

·                  the strategies and businessplans of our partners, such as Pfizer’s plans for CDX-110, GlaxoSmithKline’splans with respect to Rotarix® and Vaccine Technologies’ plans concerning theCholeraGarde® (Peru-15) and ETEC E. coli vaccines, which are not within ourcontrol, and our ability to maintain strong, mutually beneficial relationshipswith those partners;

 

·                  our ability to developtechnological capabilities and expand our focus to broader markets forvaccines;

 

·                  the availability, cost,delivery and quality of clinical and commercial grade materials produced ourown manufacturing facility or supplied by contract manufacturers and partners;

 

·                  the timing, cost anduncertainty of obtaining regulatory approvals for product candidates;

 

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·                  our ability to develop andcommercialize products before competitors that are superior to the alternativesdeveloped by such competitors;

 

·                  the validity of our patentsand our ability to avoid intellectual property litigation, which can be costlyand divert management time and attention; and

 

*·**                 *the factorslisted under *the headings “Business,” “RiskFactors” and Management’s Discussion and Analysis of Financial Condition andResults of Operations” in the Company’s annual report on Form 10-K for theyear ended December 31, 2008 and other reports that Celldex files with theSecurities and Exchange Commission**.*

 

All forward-looking statements are expressly qualified in theirentirety by this cautionary notice. You are cautioned not to place unduereliance on any forward-looking statements, which speak only as of the date ofthis report or the date of the document incorporated by reference into thisreport. We have no obligation, and expressly disclaim any obligation, toupdate, revise or correct any of the forward-looking statements, whether as aresult of new information, future events or otherwise. We have expressed ourexpectations, beliefs and projections in good faith and we believe they have areasonable basis. However, we cannot assure you that our expectations, beliefsor projections will result or be achieved or accomplished.

 

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**Item 2. ****Management’sDiscussion and Analysis of Financial Condition and Results of Operations**

 

**OVERVIEW**

 

We are a biopharmaceutical company that uses novel applications ofimmunology to develop products for the prevention and treatment of diseases.Using our Precision Targeted Immunotherapy Platform, we are developing a broadportfolio of vaccines, therapeutic antibodies and other targetedimmunotherapeutics addressing a wide range of applications including oncology,inflammatory and infectious diseases. These include therapeutic cancervaccines, monoclonal antibodies, single-dose, oral vaccines that protectagainst important disease-causing infectious agents and a treatment to reducecomplement-mediated tissue damage. We are advancing a robust pipeline ofclinical and preclinical product candidates, the most advanced of which are fortreatment of various cancers. Our lead programs are therapeutic cancer vaccinesdesigned to instruct the patient’s immune system to recognize and destroycancer cells.

 

Our strategy is to demonstrate proof-of-concept for our productcandidates before leveraging their value through partnerships or, inappropriate situations, continuing late stage development ourselves.Demonstrating proof-of-concept for a product candidate generally involvesbringing it through Phase 1 clinical trials and one or more Phase 2clinical trials so that we are able to demonstrate, based on human trials, goodsafety data for the product candidate and some data indicating itseffectiveness. Our current collaborations encompass the commercialization of anoral human rotavirus vaccine, the development of oral cholera, typhoid fever,ETEC and HIV vaccines, and a therapeutic brain cancer vaccine. Our productcandidates address large market opportunities for which we believe currenttherapies are inadequate or non-existent.

 

We are targeting our efforts where we can add the greatest value to thedevelopment of our products and technologies. We out-license technology and programs that do not match our developmentfocus or where we lack sufficient resources for the technology’s or program’sefficient development or where certain uses of the technology are outside ofour focus.  Our goal is to demonstrateclinical proof-of-concept for each product, and then seek excellent partners tohelp see those products through to commercialization. We thus leverage thevalue of our technology portfolio through corporate, governmental andnon-governmental partnerships. This approach allows us to maximize the overallvalue of our technology and product portfolio while best ensuring theexpeditious development of each individual product.

 

*Merger between AVANT and Celldex*

 

On March 7, 2008, we (formerly known as AVANT Immunotherapeutics, Inc.)(“AVANT”) merged with and into Celldex Research Corporation (formerly known asCelldex Therapeutics, Inc.) (“Celldex Research”), a privately-heldcompany, (the “AVANT Merger”).  EffectiveOctober 1, 2008, we changed our name from AVANT Immunotherapeutics, Inc.to Celldex Therapeutics, Inc.

 

The AVANT Merger was accounted for using the purchase method ofaccounting and was treated as an acquisition by Celldex Research of AVANT eventhough AVANT was the issuer of common stock and the surviving legal entity inthe transaction.  Because CelldexResearch was determined to be the acquirer for accounting purposes, thehistorical financial statements of Celldex Research became our historicalfinancial as of the closing of the AVANT Merger. Accordingly, our financialstatements prior to the AVANT Merger reflect the financial position, results ofoperations and cash flows of Celldex Research, which during the historicalperiods presented in the accompanying consolidated financial statements, wasthen majority-owned by Medarex, Inc. (“Medarex”). Following the AVANTMerger, the financial statements reflect the financial position, results ofoperation and cash flows of the combined companies. The results of operationsof AVANT are included in our results of operations beginning March 8,2008.

 

*Merger Agreement between us and CuraGen*

 

On May 29,2009, we and CuraGen Corporation (“CuraGen”), a public company, announced thatour and CuraGen’s boards of directors unanimously approved a definitive mergeragreement dated May 28, 2009 (the “CuraGen Merger Agreement”) under whichCuraGen will merge with and into us in a stock for stock transaction (the“CuraGen Merger”). Under the terms of the CuraGen Merger Agreement, each issuedand outstanding share of 

 

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CuraGen common stock willbe converted into our shares based on an exchange ratio as described in theCuraGen Merger Agreement.  The CuraGenMerger Agreement provides for certain termination rights for both us andCuraGen and under specified circumstances, we or CuraGen may be required to paya termination fee of $3.5 million to the other party. The transaction remainssubject to our and CuraGen’s shareholder approvals and the satisfaction ofcustomary closing conditions. The transaction is expected to close in the thirdquarter of 2009.

 

**CURRENT PROGRAMS AND PARTNERSHIPS**

 

Our products arederived from a broad set of complementary technologies which have the abilityto utilize the human immune system and enable the creation of preventative andtherapeutic agents. We are using these technologies to develop vaccines andtargeted immunotherapeutics that prevent or treat cancer and disease caused byinfectious organisms, and treatment vaccines that modify undesirable activityby the body’s own proteins or cells. A number of our immunotherapeutic andvaccine product candidates are in various stages of clinical trials. We expectthat a large percentage of our research and development expenses will beincurred in support of our current and future clinical trial programs.

 

Below is a tableof our currently active programs:

 
| **Technology**         | ** **   | **Product**        | ** **   | **Indication/Field**                                      | ** **   | **Partner**             | ** **   | **Status**     |
|------------------------|--------------|--------------------|--------------|-----------------------------------------------------------|--------------|-------------------------|--------------|----------------|
|                   |         |               |         |                                                      |         |                    |         |           |
| **ONCOLOGY**           |         | CDX-110            |         | Glioblastoma  multiforme                                  |         | Pfizer                  |         | Phase  2b      |
|                   |         | CDX-1307           |         | Colorectal,  bladder, pancreas, ovarian and breast tumors |         | —                  |         | Phase  1       |
|                   |         | CDX-1401           |         | Multiple  solid tumors                                    |         | —                  |         | Preclinical    |
|                   |         | CDX-1127           |         | Immuno-modulation,  multiple tumors                       |         | —                  |         | Preclinical    |
| ** **             | ** **   | ** **         | ** **   | ** **                                                | ** **   | ** **              | ** **   | ** **     |
| **INFLAMMATORY**       |         | CDX-1135           |         | Transplantation                                           |         | —                  |         | Phase 1/2 |
| **DISEASE**            |         | (formerly  TP10)   |         | Renal  disease                                            |         | —                  |         | Preclinical    |
|                   |         | CDX-1189           |         | Renal  disease                                            |         | —                  |         | Preclinical    |
| ** **             | *** *** | ** **         | *** *** | ** **                                                | *** *** | ** **              | *** *** | ** **     |
| **INFECTIOUS DISEASE** |         | CholeraGarde® |         | Cholera                                                   |         | Vaccine  Technologies   |         | Phase 2b  |
|                   |         | ETEC               |         | Enterotoxigenic *E coli* infection                        |         | Vaccine  Technologies   |         | Phase  1       |
|                   |         | Ty800              |         | Typhoid  fever                                            |         | —                  |         | Phase 2   |
|                   |         | CDX-2401           |         | HIV                                                       |         | Rockefeller  University |         | Preclinical    |
|                   |         |               |         |                                                      |         |                    |         |           |
| **MARKETED PRODUCTS**  |         | Rotarix®      |         | Rotavirus infection                                       |         | GlaxoSmithKline         |         | Marketed       |

 

The expenditures that will be necessary to execute our business planare subject to numerous uncertainties. Completion of clinical trials may takeseveral years or more, and the length of time generally varies substantiallyaccording to the type, complexity, novelty and intended use of a productcandidate. It is not unusual for the clinical development of these types ofproduct candidates to each take five years or more, and for total developmentcosts to exceed $100 million for each product candidate. Our estimatesthat clinical trials of the type we generally conduct are typically completedover the following timelines:

 
| **Clinical Phase** | ** ** | **Estimated  Completion  Period** | ** ** |
|--------------------|------------|-----------------------------------|------------|
| Phase 1       |       | 1 - 2 Years                       |       |
| Phase 2       |       | 1 - 5 Years                       |       |
| Phase 3       |       | 1 - 5 Years                       |       |

 

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The duration and the cost of clinical trials may vary significantlyover the life of a project as a result of differences arising during theclinical trial protocol, including, among others, the following:

 

·                  the number of patients thatultimately participate in the trial;

 

·                  the duration of patientfollow-up that seems appropriate in view of results;

 

·                  the number of clinical sitesincluded in the trials;

 

·                  the length of time requiredto enroll suitable patient subjects; and

 

·                  the efficacy and safetyprofile of the product candidate.

 

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

 

An element of our business strategy is to pursue the research anddevelopment of a broad portfolio of product candidates. This is intended toallow us to diversify the risks associated with our research and developmentexpenditures. As a result, we believe our future capital requirements and ourfuture financial success are not substantially dependent on any one productcandidate. To the extent we are unable to maintain a broad range of product candidates,our dependence on the success of one or a few product candidates increases.

 

Regulatory approval is required before we can market our productcandidates as therapeutic or vaccine products. In order to proceed tosubsequent clinical trial stages and to ultimately achieve regulatory approval,the regulatory agency must conclude that our clinical data is safe andeffective. Historically, the results from preclinical testing and earlyclinical trials (through Phase 2) have often not been predictive of resultsobtained in later clinical trials. A number of new drugs, biologics andvaccines have shown promising results in early clinical trials, butsubsequently failed to establish sufficient safety and efficacy data to obtainnecessary regulatory approvals.

 

Furthermore, our business strategy includes the option of entering intocollaborative arrangements with third parties to complete the development andcommercialization of our product candidates. In the event that third partiestake over the clinical trial process for one of our product candidates, theestimated completion date would largely be under control of that third partyrather than us. We cannot forecast with any degree of certainty whichproprietary products, if any, will be subject to future collaborativearrangements, in whole or in part, and how such arrangements would affect ourdevelopment plan or capital requirements. Our programs may also benefit fromsubsidies, grants, contracts or government or agency-sponsored studies thatcould reduce our development costs.

 

As a result of the uncertainties discussed above, among others, we areunable to estimate the duration and completion costs of our research anddevelopment projects or when, if ever, and to what extent it will receive cashinflows from the commercialization and sale of a product. Our inability tocomplete our research and development projects in a timely manner or ourfailure to enter into collaborative agreements, when appropriate, couldsignificantly increase our capital requirements and could adversely impact ourliquidity. These uncertainties could force us to seek additional, externalsources of financing from time to time in order to continue with our businessstrategy. Our inability to raise additional capital, or to do so on termsreasonably acceptable to us, would jeopardize the future success of ourbusiness.

 

During the pastfive years through December 31, 2008, we incurred an aggregate of$55.6 million in research and development expenses.  The following table indicates the amountincurred for each of our significant research programs and for other identifiedresearch and development activities during the year ended December 31,2008 and the six months ended June 30, 2009 and 2008. The amountsdisclosed in the following table reflect direct research and development costs,license fees associated with the underlying technology and an allocation ofindirect research and development costs to each program. Prior to 2008, theprivately-held Celldex Research did not maintain records that allowed forquantification of research and development expenses by project.

 

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| ** **                                          | ** ** | **Six Months Ended June 30,** | ** ** | **December 31,** | ** ** |
|-----------------------------------------------------|------------|------------------------------------|------------|------------------|------------|
| ** **                                          | ** ** | **2009**                           | ** ** | **2008**         | ** ** | **2008** | ** ** |
| ** **                                          | ** ** | **(In thousands)**                 | ** ** |
| *Oncology:*                                         |       |                               |       |             |       |   |   |
| CDX-110                                             |       | $                                  | 2,907      |             | $          | 4,766 |   | $ | 8,072 |   |
| CDX-1307                                            |       | 3,949                              |       | 1,025            |       | 3,446 |   |
| CDX-1401                                            |       | 3,056                              |       | 1,534            |       | 5,562 |   |
| CDX-1127                                            |       | 339                                |       | 621              |       | 1,040 |   |
|                                                |       |                               |       |             |       |   |   |
| *Inflammatory Disease:*                             |       |                               |       |             |       |   |   |
| CDX-1135                                            |       | 234                                |       | 90               |       | 159 |   |
| CDX-1189                                            |       | 207                                |       | 18               |       | 104 |   |
|                                                |       |                               |       |             |       |   |   |
| *Infectious Disease:*                               |       |                               |       |             |       |   |   |
| Bacterial  Vaccines (CholeraGarde®/ETEC/Ty800) |       | 112                                |       | 1,349            |       | 1,481 |   |
| CDX-2401                                            |       | 829                                |       | 283              |       | 830 |   |
|                                                |       |                               |       |             |       |   |   |
| *Marketed Products:*                                |       |                               |       |             |       |   |   |
| Rotarix®                                       |       | 3,237                              |       | 992              |       | 3,260 |   |
|                                                |       |                               |       |             |       |   |   |
| *Other Programs:*                                   |       | 1,618                              |       | 1,439            |       | 2,393 |   |
| Total R&D Expense                               |       | $                                  | 16,488     |             | $          | 12,117 |   | $ | 26,347 |   |

 

**Cancer Vaccine Development Programs**

 

*CDX-110:*  Our lead clinical development program,CDX-110, is a peptide-based immunotherapy that targets the tumor specificmolecule called EGFRvIII, a functional variant of the naturally expressedepidermal growth factor receptor (“EGFR”), a protein which has been wellvalidated as a target for cancer therapy. Unlike EGFR, EGFRvIII is not presentin normal tissues, and has been shown to be a transforming oncogene that candirectly contribute to the cancer cell growth. EGFRvIII is commonly present in glioblastoma multiforme, or GBM, themost common and aggressive form of brain cancer, and has also been observed invarious other cancers such as breast, ovarian, prostate, colorectal, and head &neck cancer.

 

On April 16, 2008, we and Pfizer Inc. (“Pfizer”) entered into aLicense and Development Agreement (the “Pfizer Agreement”) under which Pfizerwas granted an exclusive worldwide license to CDX-110. The Pfizer Agreementalso gives Pfizer exclusive rights to the use of EGFRvIII vaccines in otherpotential indications. Pfizer funds all development costs for theseprograms.  We and Pfizer are currentlypursuing the development of CDX-110 for GBM therapy and plan to expand theclinical development into other cancers through additional clinical studies.The FDA has granted orphan drug designation for CDX-110 for the treatment ofEGFRvIII expressing GBM as well as fast track designation.

 

We initiated a Phase 2b/3 randomized study (ACT III) ofCDX-110 combined with standard of care, temozolomide, versus standard of carealone in patients with GBM in over 30 sites throughout the United States.  In December 2008, we announced anamendment to convert the ACT III study to a single-arm Phase 2 clinicaltrial in which all patients will receive CDX-110 in combination withtemozolomide. We expect to enroll approximately 60 patients. The decision,which follows the recommendation of the Independent Data Monitoring Committee,was based on the observation that the majority of patients randomized to thecontrol (standard of care) arm withdrew from this open-label study after beingrandomized to the control arm. Patients currently participating on the controlarm of the study will be offered the option to receive treatment with CDX-110.Under this amendment, the ACT III study will provide a multi-center,non-randomized dataset for CDX-110 in patients with newly diagnosed GBM. Thesedata will provide important additional information that can be used to betterdesign the future development of CDX-110.

 

*CDX-1307:*  Our lead APC Targeting TechnologyTM productcandidate, CDX-1307, is in development for the treatment of epithelial tumorssuch as colorectal, pancreatic, bladder, ovarian and breast cancers. CDX-1307 

 

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targetsthe beta chain of human chorionic gonadotropin, known as hCG-Beta, which is anantigen often found in epithelial tumors. The presence of hCG-Beta in thesecancers correlates with a poor clinical outcome, suggesting that this moleculemay contribute to tumor growth. Normal adult tissues have minimal expression ofhCG-Beta; therefore, targeted immune responses are not expected to generatesignificant side effects.

 

We are completing two Phase 1 studies at multiple centers that aredesigned to explore safety and dose/effect relationships via two administrationroutes—intradermal (ID), a traditional vaccine route that allows efficientaccess to local dermal dendritic cells and intravenous (IV), a novel systemicapproach to vaccination that might target a much larger population of dendriticcells. In both studies, there are dose escalations of CDX-1307 alone andCDX-1307 with the adjuvant GM-CSF (known to increase mannose receptorexpression on dendritic cells). At the highest dose levels planned, additionalimmune system modulators (Toll-Like Receptor Agonists, or TLR agonists) havebeen added to determine what effect they have in augmenting an immune response.Patients with an assortment of different tumor types that are known to expresshCG-Beta are being accrued with retrospective analysis for hCG-Beta expression.A four dose regimen is utilized with the possibility of retreatment if patientsdemonstrate tumor regression or stable disease.

 

Over seventy (70) patients with epithelial cancers have beentreated in the Phase 1 clinical trials and more than half have evidence ofhCG-Beta expression by their tumor. The immunotherapy has been well toleratedwith only minor adverse events observed (reddening at the injection site).Analysis of the initial cohorts with GM-CSF have revealed that several patientsdeveloped good humoral responses to hCG-Beta, and some have demonstratedenhancement of circulating hCG-Beta-specific CD8 T cells. Thus, we areencouraged that CDX-1307 is providing similar results as predicted in thepreclinical studies. In addition, seven patients with breast, colorectal orpancreatic cancers experienced disease stabilization from 2.2 to over 6.5months.   The safety of CDX-1307 incombination with defined immune system modulators is now being evaluated withintent to enter Phase 2 clinical research around year-end 2009.

 

*CDX-1401:*  Our second APC Targeting Technology productcandidate, CDX-1401, is a fusion protein consisting of a fully human monoclonalantibody with specificity for the dendritic cell receptor, DEC-205, linked tothe NY-ESO-1 tumor antigen. In humans, NY-ESO-1 is one of the most immunogenictumor antigens and has been detected in 20-30% of cancers, thus representing abroad opportunity. This product is intended to selectively deliver the NY-ESO-1antigen to APCs for generating robust immune responses against cancer cellsexpressing NY-ESO-1. Unlike CDX-1307, which targets the mannose receptor expressingdendritic cells, CDX-1401 is the first APC product targeting DEC-205 expressingdendritic cells. We are developing CDX-1401 for the treatment of malignantmelanoma and a variety of solid tumors which express the proprietary cancerantigen NY-ESO-1, which we licensed from the Ludwig Institute for CancerResearch in 2006. We believe that preclinical studies have shown that CDX-1401is effective for activation of human T-cell responses against NY-ESO-1. An INDhas been filed and we expect to begin enrollment in the third quarter of 2009in a Phase 1 study with a combination regimen, including TLRs, formultiple tumors that express NY-ESO-1.

 

*CDX-1127:*  We have entered into a License Agreement withthe University of Southampton, UK, to develop human antibodies to CD27, apotentially important target for immunotherapy of various cancers. Inpreclinical models, antibodies to CD27 alone have been shown to mediateanti-tumor effects, and may be particularly effective in combination with otherimmunotherapies. CD27 is a critical molecule in the activation pathway oflymphocytes. It is downstream from CD40, and may provide a novel way toregulate the immune responses. Engaging CD27 with the appropriate monoclonalantibody has proven highly effective at promoting anti-cancer immunity in mousemodels. We are currently evaluating new human monoclonal antibodies inpreclinical models.

 

**InflammatoryDisease Development Programs**

 

*CDX-1135 (formerly TP10):*  CDX-1135 is a molecule that inhibits a partof the immune system called the complement system. The complement system is aseries of proteins that are important initiators of the body’s acuteinflammatory response against disease, infection and injury. Excessivecomplement activation also plays a role in some persistent inflammatoryconditions. CDX-1135 is a soluble form of naturally occurring ComplementReceptor 1 that effectively inhibits the activation of the complement cascadein animal models and in human clinical trials. We believe that regulating thecomplement system could have therapeutic and prophylactic applications inseveral 

 

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acuteand chronic conditions, including organ transplantation, multiple sclerosis,rheumatoid arthritis, age-related macular degeneration (“AMD”), atypicalHemolytic Uremic Syndrome (“aHUS”), Paroxysmal Nocturnal Hemaglobinuria (“PNH”),and myasthenia gravis. We are currently defining the most appropriate clinicaldevelopment path for CDX-1135 and are focusing on rare disease conditions ofunregulated complement activation as the fastest route to FDA approval.

 

*CDX-1189:*  We are developing therapeutic humanantibodies to a signaling molecule known as CD89 or Fca receptor type I (FcaRI). CD89 is expressed bysome white blood cells and leukemic cell lines, and has been shown to beimportant in controlling inflammation and tumor growth in animal models. Wehave proprietary, fully human antibodies to CD89 in preclinical development.Depending upon the specific antibody used, anti-CD89 antibodies can either beactivating and thus stimulate immune responses, or down-regulating and act asan anti-inflammatory agent.

 

**InfectiousDisease Development Programs**

 

*CholeraGarde® and ETEC Vaccine:*  In January 2009, we entered into alicense agreement with Vaccine Technologies, Inc. (“VTI”) under which wegranted a worldwide exclusive license to VTI to develop and commercialize ourCholeraGarde® and ETEC vaccine programs. Financial terms of the agreement withVTI included an upfront license fee and provide for milestone payments androyalties on net sales of licensed products during the term of the agreement.

 

*Ty800 Typhoid Fever Vaccine:*  We have developed an oral vaccine to offerrapid, single-dose protection against *Salmonellatyphi*, the cause of typhoid fever. Ty800 is targeted for both thetravelers’ market and global health needs. Results from our Phase 2 trial of Ty800 showed that thesingle-dose, oral vaccine was well tolerated and immunogenic, demonstratingthat the desired immune response was achieved. Incidence of reactogenicitysymptoms and adverse events post-vaccination were similar to placebo.

 

*CDX-2401:*  We are also using our APC TargetingTechnologyTM to develop vaccines against infectious disease. The lead program isCDX-2401, an APC Targeting prophylactic vaccine, aimed at providing protectionfrom infection with HIV, the virus known to cause AIDS. This program is in aBill & Melinda Gates Foundation funded partnership with collaboratorsat Rockefeller University in New York City, who have shown in model systemsthat protective immunity can be induced with such a vaccine. Preclinicalstudies and manufacturing development are in progress and our collaboratorsplan to file an IND for Phase 1 clinical studies in the second half of2009.

 

**MarketedProducts**

 

*Rotavirus Vaccine:*  Rotavirus is a major cause of diarrhea andvomiting in infants and children. In 1997, we licensed our oral rotavirusstrain to GlaxoSmithKline (“Glaxo”). Glaxo gained approval for its rotavirus vaccine, Rotarix®, in Mexico in July 2004,which represented the first in a series of worldwide approvals and commerciallaunches for the product leading up to the approval in Europe in 2006 and inthe U.S. in 2008.  We licensed-in therotavirus strain in 1995 and owe a license fee of 30% to Cincinnati Children’sHospital Medical Center (“CCH”) on net royalties received from Glaxo. In May 2005,we entered into an agreement whereby an affiliate of Paul Royalty Fund (“PRF”)purchased an interest in the milestone payments and net royalties that wereceive on the development and worldwide sales of Rotarix®.  We have received a total of $60 millionin milestone payments under the PRF agreement. No additional milestone paymentsare due from PRF under the agreement.

 

In September 2006, we received notice from Glaxo that Glaxo wouldbegin paying royalties on sales of Rotarix® vaccine at the lower of two royaltyrates under their 1997 license agreement. Glaxo’s decision to pay the lowerroyalty rate (which is 70% of the full rate) is based upon Glaxo’s assertionthat Rotarix® is not covered by the patents Glaxo licensed from us in Australiaand certain European countries.  We are currentlyevaluating the basis for Glaxo’s action and our potential remedies.  If Glaxo’s position stands, the royalties towhich PRF is entitled will no longer be limited by a $27.5 million annualthreshold, which we projected may have been reached in later years as sales ofRotarix® increased. Irrespective of Glaxo’s position, we will still retainapproximately 65% of the royalties on worldwide sales of Rotarix® once PRFreceives 2.45 times the aggregate cash payments of $60 million it made tous, though the potential amount of such residual royalties will be lower ifGlaxo’s position stands.

 

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## **CRITICAL ACCOUNTING POLICIES**

##  

Our critical accountingpolicies are more fully described in Note 1 to our consolidated financialstatements included in our Annual Report on Form 10-K for the year ended December 31,2008.  We consider our most criticalaccounting policies include revenue recognition for agreements entered intowith various collaborators, the amortization policy for acquired intangibleassets, the estimates of costs incurred and assumptions made in recordingaccrued clinical research and contract manufacturing costs and assumptions madein calculating the fair value of stock-based compensation expense.

 

**RESULTS OF OPERATIONS**

 

Our financial statements prior to the AVANT Merger reflect thefinancial position, results of operations and cash flows of Celldex Research.Following the AVANT Merger, our financial statements reflect the financialposition, results of operation and cash flows of the combined companies.  The expected trends in our results ofoperations below will be affected if our and CuraGen’s shareholders approve theCuraGen Merger and the CuraGen Merger is consummated.  If the CuraGen Merger closes, we expect ouroperating expenses will increase as we develop the CuraGen product candidatesand incur severance and transaction costs and that our interest expense andinvestment income will increase due to CuraGen’s debt and cash balances.

 

**Three Months Ended****June 30****, 2009 Compared****withThree Months Ended June 30****, 2008**

 
| ** **                                   | ** ** | ** **                           | ** ** | ** **     | ** ** | **Increase/**  | ** ** | **Increase/** | ** ** |
|----------------------------------------------|------------|--------------------------------------|------------|----------------|------------|----------------|------------|---------------|------------|
| ** **                                   | ** ** | **Three Months Ended June 30,** | ** ** | **(Decrease)** | ** ** | **(Decrease)** | ** ** |
| ** **                                   | ** ** | **2009**                             | ** ** | **2008**       | ** ** | **$**          | ** ** | **%**         | ** ** |
| ** **                                   | ** ** | **(In thousands)**                   | ** ** |
| Revenue:                                     |       |                                 |       |           |       |           |       |          |       |
| Product Development and Licensing Agreements |       | $                                    | 1,497      |           | $          | 871            |       | $             | 626        |   | 72 | % |
| Contracts and Grants                         |       | —                               |       | 254            |       | (254           | )          | (100          | )%         |
| Product Royalties                            |       | 1,188                                |       | 837            |       | 351            |       | 42            | %          |
| Total Revenue                                |       | $                                    | 2,685      |           | $          | 1,962          |       | $             | 723        |   | 37 | % |
| Operating Expense:                           |       |                                 |       |           |       |           |       |          |       |
| Research and Development                     |       | 7,802                                |       | 7,612          |       | 190            |       | 2             | %          |
| General and Administrative                   |       | 3,511                                |       | 4,606          |       | (1,095         | )          | (24           | )%         |
| Amortization of Acquired Intangible Assets   |       | 95                                   |       | 104            |       | (9             | )          | (9            | )%         |
| Total Operating Expense                      |       | 11,408                               |       | 12,322         |       | (914           | )          | (7            | )%         |
| Operating Loss                               |       | (8,723                               | )          | (10,360        | )          | (1,637         | )          | (16           | )%         |
| Investment and Other Income, Net             |       | 18                                   |       | 99             |       | (81            | )          | (82           | )%         |
| Net Loss                                     |       | $                                    | (8,705     | )              | $          | (10,261        | )          | $             | (1,556     | ) | (15 | )% |

 

*Net Loss**:** *The $1.6million decrease in our net loss for the three months ended June 30, 2009compared to the three months ended June 30, 2008 was primarily the resultof increased revenues and lower general and administrative expenses.  Our net loss of $0.55 per share for the threemonths ended June 30, 2009 was lower than the $0.67 per share for thethree months ended June 30, 2008 due to our lower net loss and an increasein weighted average shares outstanding.

 

*Revenue**:** *The $0.6million increase in our product development and licensing agreement revenue forthe three months ended June 30, 2009 was primarily due to an increase of$0.8 million in Pfizer related revenue. The $0.3 million decrease in our contract and grant revenue for thethree months ended June 30, 2009 was primarily due to us deferring $0.3million in revenue related to our CDX-2401 program during the three monthsended June 30, 2009.  The $0.4million increase in our product royalty revenue for the three months ended June 30,2009 was related to our retained interests in Rotarix® net royalties which werenot sold to PRF and which is equal to the amount payable to CCH and recognizedin research and development expense by us.

 

*Research and DevelopmentExpense: *Research and development expenses consist primarily of(i) personnel expenses, (ii) laboratory supply expenses relating tothe development of our technology, (iii) facility 

 

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expenses relatedto our three facilities, (iv) product development expenses associated withour product candidates, and (v) license fees on in-licensed technologiesand royalty fees on out-licensed programs as follows:

 
| ** **          | ** ** | ** **                           | ** ** | ** **     | ** ** | **Increase/**  | ** ** | **Increase/** | ** ** |
|---------------------|------------|--------------------------------------|------------|----------------|------------|----------------|------------|---------------|------------|
| ** **          | ** ** | **Three Months Ended June 30,** | ** ** | **(Decrease)** | ** ** | **(Decrease)** | ** ** |
| ** **          | ** ** | **2009**                             | ** ** | **2008**       | ** ** | **$**          | ** ** | **%**         | ** ** |
| ** **          | ** ** | **(In thousands)**                   | ** ** |
| Personnel           |       | $                                    | 2,515      |           | $          | 2,344          |       | $             | 171        |   | 7 | % |
| Laboratory Supplies |       | 640                                  |       | 459            |       | 181            |       | 39            | %          |
| Facility            |       | 1,125                                |       | 1,228          |       | (103           | )          | (8            | )%         |
| Product Development |       | 1,748                                |       | 1,370          |       | 378            |       | 28            | %          |
| License and Royalty |       | 1,487                                |       | 1,754          |       | (267           | )          | (15           | )%         |
|                     |            |                                      |            |                |            |                |            |               |            |  |  |  |

 

Personnel expenses primarily include salary, benefits, stock-basedcompensation, payroll taxes and recruiting costs.  The $0.2 million increase in our personnel expenses for thethree months ended June 30, 2009 was primarily due to higher headcountoffset by a decrease of $0.2 million in stock-based compensation expense. Weexpect personnel expenses to increase during the remainder of 2009 as wecontinue to develop our clinical pipeline, add new product candidates to ourpreclinical programs and increase our research and development activities.

 

Laboratory supply expenses include laboratory materials and supplies,services, and other related expenses incurred in the development of ourtechnology.  The $0.2 million increase in our laboratory supply expensesfor the three months ended June 30, 2009 was primarily due to increasedresearch, preclinical and manufacturing activities as a result of the continueddevelopment of our product candidates. We expect supply expenses to increaseduring the remainder of 2009 as a result of increased research and developmentactivities.

 

Facility expenses include depreciation, amortization, utilities, rent,maintenance, and other related expenses incurred at our three facilities(Phillipsburg, NJ and Needham and Fall River, MA).  The $0.1 million decrease in our facility expenses for thethree months ended June 30, 2009 was primarily due to lower depreciationand amortization expenses.  We expectfacility expenses to increase during the remainder of 2009 as a result ofcontinued capital expansion.

 

Product development expenses include clinical investigator site fees,external trial monitoring costs, data accumulation costs, contracted researchand outside clinical drug product manufacturing.  The $0.4 million increase in our product development expensesfor the three months ended June 30, 2009 was primarily due to expansion ofour clinical trials for CDX-110 and CDX-1307. We expect product developmentexpenses related to clinical trials to decrease during the remainder of 2009due to the transfer of clinical management of our CDX-110 program toPfizer.  This decrease will be partiallyoffset by an increase in clinical trial expenses related to our CDX-1307 andCDX-1401 programs.

 

License and royaltyexpenses relate to license fees on in-licensed technologies and royalty fees onout-licensed programs.  The $0.3 milliondecrease in our license and royalty expenses for the three months ended June 30,2009 was primarily due to sublicense expense incurred during the three monthsended June 30, 2008 relating to our TJU collaboration. We expect licenseand royalty expenses to increase during the remainder of 2009.

 

*General and Administrative**Expense:** *The $1.1million decrease in our general and administrative expenses for the threemonths ended June 30, 2009 was primarily due to the $1.4 million inseverance expense incurred during the three months ended June 30, 2008related to our former President and Chief Executive Officer.  The effect of this decrease was partiallyoffset by an increase in consultant and legal expense of $0.4 million duringthe three months ended June 30, 2009 primarily related to the CuraGenMerger.  We expect general andadministrative expense to increase during the remainder of 2009 as we incur transactioncosts related to the CuraGen Merger and add infrastructure to support ourtherapeutic product pipeline and new product candidates.

 

*Amortization**Expense:** *We expectamortization expense of acquired intangible assets to remain relativelyconsistent during the remainder of 2009 due to the estimated lives of ouracquired intangible assets.

 

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*Investment and Other Income, Net:* The $0.1 million decrease in our investment and other income, net forthe three months ended June 30, 2009 was primarily due to lower averagecash balances and lower average interest rates in 2009. We anticipateinvestment income to decrease during the remainder of 2009 due to theutilization of cash in the normal course of operations.

 

**Six Months Ended****June 30****, 2009 Compared****withSix Months Ended June 30****, 2008**

 
| ** **                                     | ** **   | ** **                         | ** **   | ** **     | ** ** | **Increase/**  | ** ** | **Increase/** | ** ** |
|------------------------------------------------|--------------|------------------------------------|--------------|----------------|------------|----------------|------------|---------------|------------|
| ** **                                     | ** **   | **Six Months Ended June 30,** | ** **   | **(Decrease)** | ** ** | **(Decrease)** | ** ** |
| ** **                                     | ** **   | **2009**                           | ** **   | **2008**       | ** ** | **$**          | ** ** | **%**         | ** ** |
| *** ***                                   | *** *** | **(In thousands)**                 | *** *** |
| Revenue:                                       |         |                               |         |           |       |           |       |          |       |
| Product Development and Licensing Agreements   |         | $                                  | 2,999        |           | $          | 990            |       | $             | 2,009      |   | 203 | % |
| Contracts and Grants                           |         | 139                                |         | 282            |       | (143           | )          | (51           | )%         |
| Product Royalties                              |         | 3,279                              |         | 837            |       | 2,442          |       | 292           | %          |
| Total Revenue                                  |         | $                                  | 6,417        |           | $          | 2,109          |       | $             | 4,308      |   | 204 | % |
| Operating Expense:                             |         |                               |         |           |       |           |       |          |       |
| Research and Development                       |         | 16,488                             |         | 12,117         |       | 4,371          |       | 36            | %          |
| General and Administrative                     |         | 6,851                              |         | 7,620          |       | (769           | )          | (10           | )%         |
| Gain on Sale of Assets                         |         | (604                               | )            | —         |       | (604           | )          | n/a           |       |
| Charge for In-Process Research and Development |         | —                             |         | 14,756         |       | (14,756        | )          | (100          | )%         |
| Amortization of Acquired Intangible Assets     |         | 191                                |         | 153            |       | 38             |       | 25            | %          |
| Total Operating Expense                        |         | 22,926                             |         | 34,646         |       | (11,720        | )          | (34           | )%         |
| Operating Loss                                 |         | (16,509                            | )            | (32,537        | )          | (16,028        | )          | (49           | )%         |
| Investment and Other Income, Net               |         | 101                                |         | 146            |       | (45            | )          | (31           | )%         |
| Net Loss                                       |         | $                                  | (16,408      | )              | $          | (32,391        | )          | $             | (15,983    | ) | (49 | )% |

 

*Net Loss:* The $16.0 million decrease in our net loss for the six months ended June 30,2009 compared to the six months ended June 30, 2008 was primarily theresult of a decrease in charges for acquired in-process research anddevelopment combined with increased revenue, partially offset by increasedresearch and development expenses.  Ournet loss of $1.04 per share for the six months ended June 30, 2009 waslower than the $2.56 per share for the six months ended June 30, 2008 dueto our lower net loss and an increase in weighted average shares outstanding.

 

*Revenue: *The $2.0 million increase in our product developmentand licensing agreement revenue for the six months ended June 30, 2009 wasprimarily due to an increase of $2.1 million in Pfizer related revenue.  The $0.1 decrease in our contract and grantrevenue for the six months ended June 30, 2009 was primarily due to usdeferring $0.3 million in revenue related to our CDX-2401 program during thethree months ended June 30, 2009. The $2.4 million increase in our product royalty revenue for the sixmonths ended June 30, 2009 was primarily related to our retained interestsin Rotarix® net royalties which were not sold to PRF and which is equal to theamount payable to CCH and recognized in research and development expense by us.

 
| ** **                             | ** **   | ** **                         | ** **   | ** **     | ** ** | **Increase/**  | ** ** | **Increase/** | ** ** |
|----------------------------------------|--------------|------------------------------------|--------------|----------------|------------|----------------|------------|---------------|------------|
| ** **                             | ** **   | **Six Months Ended June 30,** | ** **   | **(Decrease)** | ** ** | **(Decrease)** | ** ** |
| **Research and Development  Expense:** | ** **   | **2009**                           | ** **   | **2008**       | ** ** | **$**          | ** ** | **%**         | ** ** |
| *** ***                           | *** *** | **(In thousands)**                 | *** *** |
| Personnel                              |         | $                                  | 5,057        |           | $          | 4,414          |       | $             | 643        |   | 15 | % |
| Laboratory Supplies                    |         | 1,236                              |         | 798            |       | 438            |       | 55            | %          |
| Facility                               |         | 2,373                              |         | 1,854          |       | 519            |       | 28            | %          |
| Product Development                    |         | 3,225                              |         | 2,440          |       | 785            |       | 32            | %          |
| License and Royalty                    |         | 4,025                              |         | 1,760          |       | 2,265          |       | 129           | %          |
|                                        |              |                                    |              |                |            |                |            |               |            |  |  |  |

 

The $0.6 millionincrease in our personnelexpenses for the six months ended June 30, 2009 was primarily due tosignificantly higher headcount as a result of the AVANT Merger offset by adecrease of $0.7 million in stock-based compensation expense.

 

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The $0.4 millionincrease in ourlaboratory supply expenses for the six months ended June 30, 2009 wasprimarily due to increased research, preclinical and manufacturing activitiesas a result of the continued development of our product candidates.

 

The $0.5 millionincrease in our facilityexpenses for the six months ended June 30, 2009 was primarily due to thecombination of expenses for three facilities as a result of the AVANT Merger.

 

The $0.8 millionincrease in our productdevelopment expenses for the six months ended June 30, 2009 was primarilydue to expansion of our clinical trials for CDX-110 and CDX-1307.

 

The $2.3 million increasein our license and royalty expenses for the six months ended June 30, 2009was primarily due to higher CCH royalty fee expense.

 

*General and Administrative**Expense:** *The $0.8 milliondecrease in our general and administrative expenses for the six months ended June 30,2009 was primarily due to the $1.4 million in severance expense incurred duringthe six months ended June 30, 2008 primarily related to our formerPresident and Chief Executive Officer. The effect of this decrease was partially offset by $0.7 million inseverance expense, including related non-cash stock-based compensation expense,incurred during the six months ended June 30, 2009 related to our formerSVP, Business Development.

 

*Amortization**Expense:** *Theincrease in our amortization expense of acquired intangible assets for the sixmonths ended June 30, 2009 was primarily due to the intangible assetsacquired in connection with the AVANT Merger.

 

*Investment and Other Income, Net:* The decrease in our investment and other income, net for the six monthsended June 30, 2009 was primarily due to lower average interest rates in2009. The effect of this decrease was partially offset by higher average cashbalances in 2009.

 

**LIQUIDITY AND CAPITAL RESOURCES**

 

Our liquidity will be affected if our and CuraGen’s shareholdersapprove the CuraGen Merger and the CuraGen Merger is consummated.  At June 30, 2009, CuraGen reported intheir Form 10-Q filed with the SEC on August 5, 2009 cash and investmentsof $76.0 million, working capital of $73.8 million, and 4% convertiblesubordinated debt due in February 2011 of $14.1 million.

 

At June 30, 2009,our principal sources of liquidity consisted of cash and cash equivalents of$31.6 million. Our working capital at June 30, 2009 was $20.7 million. Weincurred a loss of $8.7 million and $16.4 million for the three and six monthsended June 30, 2009, respectively. Net cash used in operations for the sixmonths ended June 30, 2009 was $13.5 million.  We believe that without the CuraGen Merger,the cash inflows from existing grants and collaborations, interest income oninvested funds and our current cash and cash equivalents at June 30, 2009are sufficient to meet estimated working capital requirements fund plannedoperations for at least the next twelve months.

 

Our cash equivalents arehighly liquid investments with a maturity of three months or less at the dateof purchase and consist primarily of investments in money market mutual fundswith commercial banks and financial institutions. We maintain cash balanceswith financial institutions in excess of insured limits. We do not anticipateany losses with respect to such cash balances.

 

The use of our cash flows for operations has primarily consisted ofsalaries and wages for our employees, facility and facility-related costs forour offices, laboratories and manufacturing facility, fees paid in connectionwith preclinical studies, clinical studies, contract manufacturing, laboratorysupplies and services, consulting, legal and other professional fees. To date,and for the foreseeable future, the primary sources of cash flows fromoperations have been payments received from our collaborative partners and fromgovernment entities. The timing of any new collaboration agreements, governmentcontracts or grants and any payments under these agreements, contracts orgrants cannot be easily predicted and may vary significantly from quarter toquarter.

 

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In 2009, we may take further steps to raise additional capital to meetour long-term liquidity needs including, but not limited to, the licensing oftechnology programs with existing or new collaborative partners, possiblebusiness combinations, or the issuance of common stock via private placementsor public offerings. While we may continue to seek capital through a number ofmeans, there can be no assurance that additional financing will be available onacceptable terms, if at all, particularly in light of the recent disruptions inthe financial markets and our negotiating position in capital-raising effortsmay worsen as existing resources are used. There is also no assurance that wewill be able to enter into further collaborative relationships. Additionalequity financing may be dilutive to our stockholders; debt financing, ifavailable, may involve significant cash payment obligations and covenants thatrestrict our ability to operate as a business; and licensing or strategiccollaborations may result in royalties or other terms which reduce our economicpotential from products under development. If we are unable to raise the fundsnecessary to meet our long-term liquidity needs, we may have to delay ordiscontinue the development of programs, license out programs earlier thanexpected, raise funds at significant discount or on other unfavorable terms, orsell all or part of us.

 

*Cash Flows from Operating Activities*

 

Net cash used in operating activities was $13.5 million for the sixmonths ended June 30, 2009 compared to net cash provided by operatingactivities of $26.0 million for the six months ended June 30, 2008. Theincrease in net cash used in operating activities was primarily due to Pfizer’sup-front payment of $40 million received during the six months ended June 30,2008.  We expect that cash used inoperations will continue to increase in 2009 as we continue to develop ourtherapeutic product pipeline and bring forward new product candidates intoclinical development. If the CuraGen Merger closes, we expect our cash used inoperating activities will increase as we develop the CuraGen product candidatesand incur severance, transaction and interest costs, partially offset by anincrease in investment income.

 

We have incurred and will continue to incur significant costs in thearea of research and development, including preclinical and clinical trials, asour product candidates are developed. We plan to spend significant amounts toprogress our current product candidates through the clinical trial andcommercialization process as well as to develop additional product candidates.As our product candidates progress through the clinical trial process, we maybe obligated to make significant milestone payments. We also expect to incurfuture facility costs as a result of continued capital expansion, renovationsand replacements. We expect our general and administrative costs to increase aswe expand our administrative and business development activities. Furthermore,we expect investment income to decrease as we fund future operations andcapital expenditures from our cash reserves.

 

*Cash Flows from Investing Activities*

 

Net cash provided by investing activities was $0.5 million for the sixmonths ended June 30, 2009 compared to $10.6 million for the six monthsended June 30, 2008. The decrease in net cash provided by investingactivities was primarily due to the AVANT Merger in 2008.  We expect to incur future facility cost as aresult of continued capital expansion, renovation and replacements.  Our investment in capital equipment isdiscretionary and there may be significant fluctuations on a quarterly basis.

 

*Cash Flows from Financing Activities*

 

Net cash provided by financing activities was $0.4 million for the sixmonths ended June 30, 2009 compared to $11.0 million for the six monthsended June 30, 2008. The decrease in net cash provided by financingactivities was primarily due to Pfizer’s one-time $10 million equity investmentduring the six months ended June 30, 2008.

 

*Other Liquidity Matters*

 

Under the Pfizer Agreement, Pfizer made an upfront payment$40 million, an equity investment of $10.0 million and will fund alldevelopment costs for the licensed programs. We are also eligible to receivepotential milestone payments exceeding $390.0 million for the successfuldevelopment and commercialization of CDX-110 and additional EGFRvIII vaccineproducts, as well as royalties on any product sales.

 

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**AGGREGATE CONTRACTUAL OBLIGATIONS**

 

Except as set forthbelow, the disclosures relating to our contractual obligations reported in ourAnnual Report on Form 10-K for the year ended December 31, 2008 whichwas filed with the SEC on March 2, 2009 have not materially changed sincewe filed that report.

 

We have committedto make potential future milestone payments to third parties of up toapproximately $121 million as part of our various collaborations includinglicensing and development programs. Payments under these agreements generallybecome due and payable only upon achievement of certain developmental,regulatory and/or commercial milestones. Because the achievement of thesemilestones had not occurred as of June 30, 2009, such contingencies havenot been recorded in our financial statements. We expect to incur approximately$0.9 million of milestone payments during the remainder of 2009.

 

In May 2009, we signed the CuraGen Merger Agreement.  Under the terms of the CuraGen Merger Agreement, eachissued and outstanding share of CuraGen common stock will be converted into ourshares based on an exchange ratio as described in the CuraGen MergerAgreement.  The CuraGen Merger Agreementprovides for certain termination rights for both us and CuraGen and underspecified circumstances, we or CuraGen may be required to pay a termination feeof $3.5 million to the other party. The transaction remains subject to our andCuraGen’s shareholder approvals and the satisfaction of customary closingconditions. The transaction is expected to close in the third quarter of 2009.

 

**Item 3.        ****Quantitativeand Qualitative Disclosures about Market Risk**

 

We ownfinancial instruments that are sensitive to market risk as part of ourinvestment portfolio. Our investment portfolio is used to preserve our capitaluntil it is used to fund operations, including our research and developmentactivities. None of these market-risk sensitive instruments are held fortrading purposes. We invest our cash primarily in money market mutual funds.These investments are evaluated quarterly to determine the fair value of theportfolio. From time to time, we invest in marketable securities. Thesemarketable securities only include securities with active secondary or resalemarkets to help insure liquidity. We have implemented investment policiesregarding the amount and credit ratings of investments. Because of theshort-term nature of these investments, we do not believe we have materialexposure due to market risk. The impact to our financial position and resultsof operations from likely changes in interest rates is not material.

 

We donot utilize derivative financial instruments. The carrying amounts reflected inthe consolidated balance sheet of cash and cash equivalents, accountsreceivables and accounts payable approximates fair value at June 30, 2009due to the short-term maturities of these instruments.

 

**Item 4.         Controlsand Procedures**

 

*Evaluationof Disclosure Controls and Procedures.*

 

We maintaindisclosure controls and procedures that are designed to provide reasonableassurance that information required to be disclosed by us in our reports thatwe file and submit under the Securities Exchange Act of 1934, as amended (the “ExchangeAct”), is recorded, processed, summarized, and reported within time periodsspecified by the SEC’s rules and forms, and that such information isaccumulated and communicated to our management, including our Chief ExecutiveOfficer and Chief Financial Officer, as appropriate to allow timely decisionsregarding required disclosure.

 

As required by Rule 13a-15under the Exchange Act, as of June 30, 2009, we carried out an evaluationunder the supervision and with the participation of our management, includingour Chief Executive Officer and Chief Financial Officer, of the effectivenessof the design and operation of our disclosure controls and procedures as of thethree months ended June 30, 2009.

 

Based upon thatevaluation, our Chief Executive Officer and Chief Financial Officer haveconcluded that our disclosure controls and procedures were effective as of June 30,2009.

 

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*Changesin Internal Control Over Financial Reporting.*

 

There was nochange in our internal control over financial reporting (as defined in Rules 13a-15(f) and15d-15(f) under the Exchange Act) that occurred during the three monthsended June 30, 2009 that has materially affected, or is reasonably likelyto materially affect, our internal control over financial reporting.

 

*Remediationof the Material Weakness*

 

As disclosed inour  2009 Form 10-Q for the three months ended March 31, 2009, weadded personnel to our accounting staff with appropriate levels of experienceto remediate the aforementioned material weakness.  As of June 30,2009, the additional personnel and the resulting improvements in our internalcontrols have been in place for a sufficient period of time such that we haveconcluded that the material weakness disclosed in our 2008 Annual Report on Form 10-Krelated to the insufficient level of experience within our accountingdepartment has been remediated.  We have evaluated the remediation measuredescribed above in connection with the execution of our quarterly disclosurecontrols and procedures as of June 30, 2009.

 

**PART II — OTHERINFORMATION**

 

## **Item 1.         Legal Proceedings**

##  

Following the announcement of the proposed acquisitionby Celldex of CuraGen, a putative class action complaint, *Margaret Capps v. Timothy Shannon, et al.*,was filed in the Connecticut Superior Court, Judicial District of New Haven, onJune 9, 2009. A second putative class action complaint, *Cheryl Smith v. CuraGen Corporation, et al.*,was filed in the Court of Chancery of the State of Delaware on June 15,2009. Both lawsuits (the “Actions”) purport to be brought on behalf of allpublic stockholders of CuraGen, and name CuraGen, all of its directors,Celldex, and Cottrell Merger Sub as defendants. The complaints allege, amongother things, that the merger consideration to be paid to CuraGen stockholdersin the merger is unfair and undervalues CuraGen. In addition, the complaintsallege that CuraGen’s directors violated their fiduciary duties by, among otherthings, failing to maximize stockholder value and failing to engage in a fairsale process. The Plaintiffs in the Actions also sought to add claims thatCuraGen’s directors breached their fiduciary duty of disclosure by makingpurportedly misleading and incomplete disclosures in the preliminary proxystatement concerning the merger. The complaints also allege that CuraGen andCelldex aided and abetted the alleged breaches of fiduciary duties by CuraGen’sdirectors.

 

On July 21, 2009, the attorneys for the partiesin the Actions executed a memorandum of understanding (the “MOU”) pursuant towhich such Actions will be dismissed with prejudice, subject to final courtapproval of the settlement in the MOU. CuraGen agreed to make certain revisionsto the joint proxy statement/prospectus as part of the agreement among theparties to settle the Actions and agreed to pay attorneys’ fees and expenses asawarded by the court (which payment of attorneys’ fees and expenses isexpressly conditioned on, among things, the closing of the merger). Thesettlement of the Actions, subject to court approval, will result in adismissal of all merger-related claims against CuraGen’s Board of Directors,CuraGen and Celldex. The MOU resolves the allegations by the plaintiffs againstthe defendants in connection with the proposed acquisition, and includes noadmission of wrongdoing. The settlement outlined in the MOU is subject to,among other things, (i) drafting and execution of a formal stipulation ofsettlement and such other documentation as may be required to obtain finalcourt approval of the settlement, (ii) consummation of the merger, (iii) finalcourt approval of the settlement and entry of a final order and judgment by thecourt providing for such release language as is contained in the settlementdocuments, and (iv) the entry of orders dismissing the Actions withprejudice on the merits.

 

## **Item 1A.      Risk Factors**

##  

In addition to the otherinformation set forth in this report, you should carefully consider the factorsdiscussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-Kfor the year ended December 31, 2008, which could materially affect ourbusiness, financial condition or future results. The risks described in ourAnnual Report on Form 10-K may not be the only risks facing us. Additionalrisks and uncertainties not currently known to us or that we currently deems tobe immaterial also may materially adversely affect our business, financial conditionand/or operating results.

 

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Except for risk factorsrelating to the CuraGen Merger set forth below, there were no material changesto the risk factors previously disclosed in our Annual Report on Form 10-Kfiled with the Securities and Exchange Commission on March 2, 2009.

 

**Becausecertain of the components of the exchange ratio will fluctuate prior to closing,CuraGen’s and Celldex’s stockholders cannot be certain of the value of theCuraGen Merger consideration or their percentage ownership of the combinedcompany following the CuraGen Merger.**

 

Uponcompletion of the CuraGen Merger, each share of CuraGen common stock will beconverted into the right to receive a number of shares of Celldex’s commonstock in accordance with an exchange ratio calculated based upon a formuladescribed in the CuraGen Merger Agreement. Because the exchange ratio formulais based in part on CuraGen’s net cash and related resources at the time of theclosing, as well as the average market price of Celldex’s stock over a periodof time prior to the closing, it will be impossible to determine at the time ofthe CuraGen and Celldex stockholder meetings the precise value of the mergerconsideration payable in respect of each share of CuraGen common stock, thenumber of shares of Celldex common stock that will be issued pursuant to themerger, or the percentage of the combined company that will be owned by formerCuraGen stockholders immediately after the effective time of the merger.However, the merger agreement provides that, to the extent the exchange ratioformula would require Celldex to issue shares of its common stock pursuant to theCuraGen Merger (including shares issued upon exercise of CuraGen in-the-moneyoptions assumed by Celldex in the CuraGen Merger) equal to more than 58% of thesum of the total number of shares of Celldex common stock outstandingimmediately after the effective time of the CuraGen Merger (which numberincludes the shares of CuraGen common stock outstanding immediately prior tothe effective time of the CuraGen Merger that are converted into shares ofCelldex common stock in the CuraGen Merger) plus the maximum number of sharesof Celldex common stock issuable upon exercise of CuraGen in-the-money optionsassumed by Celldex in the CuraGen Merger, the exchange ratio will become fixedso that Celldex will issue pursuant to the CuraGen Merger shares constituting 58%of such number of shares. Similarly, the CuraGen Merger Agreement providesthat, to the extent the exchange ratio would require Celldex to issue shares ofCelldex’s common stock pursuant to the CuraGen Merger (including shares issuedupon exercise of CuraGen in-the-money options assumed by Celldex in the CuraGenMerger) equal to less than 32.5% of the sum of the total number of shares ofCelldex common stock outstanding immediately after the effective time of theCuraGen Merger (which number includes the shares of CuraGen common stockoutstanding immediately prior to the effective time of the CuraGen Merger thatare converted into shares of Celldex common stock in the CuraGen Merger) plusthe maximum number of shares of Celldex common stock issuable upon exercise ofCuraGen in-the-money options assumed by Celldex in the CuraGen Merger, theexchange ratio will become fixed so that Celldex will issue shares pursuant tothe CuraGen Merger constituting 32.5% of such number of shares.

 

NeitherCelldex nor CuraGen is permitted to terminate the CuraGen Merger Agreement orre-solicit the vote of its stockholders solely because of changes in the marketprices of either company’s stock or CuraGen’s net cash and related resources atclosing. There will be no adjustment to the exchange ratio formula for changesin the market price of shares of CuraGen or Celldex common stock. Stock pricechanges may result from a variety of factors, including general market andeconomic conditions, changes in Celldex’s or CuraGen’s business, operations andprospects, and regulatory considerations. Many of these factors are beyondCelldex’s and CuraGen’s control.  Youshould obtain current market quotations for shares of Celldex common stock andfor shares of CuraGen common stock.

 

**Each ofCelldex and CuraGen will be subject to business uncertainties and contractualrestrictions while the CuraGen Merger is pending.**

 

Uncertaintyabout the effect of the CuraGen Merger on employees and customers may have anadverse effect on CuraGen and consequently on Celldex. These uncertainties mayimpair CuraGen’s ability to attract, retain and motivate key personnel untilthe merger is consummated, and could cause customers and others that deal withCuraGen to seek to change existing business relationships with CuraGen.Retention of certain employees may be challenging during the pendency of theCuraGen Merger, as certain employees may experience uncertainty about theirfuture roles with Celldex. If key employees depart because of issues relatingto the uncertainty and difficulty of integration or a desire not to remain withCelldex, Celldex’s business following the CuraGen Merger could be harmed. Inaddition, the CuraGen Merger Agreement restricts each of CuraGen and Celldexfrom making certain acquisitions and taking other specified actions until themerger occurs without the consent of the other party. These

 

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restrictionsmay prevent each of Celldex and CuraGen from pursuing attractive businessopportunities that may arise prior to the completion of the CuraGen Merger.

 

**If weare not successful in integrating CuraGen’s organization, we may not be able tooperate efficiently after the CuraGen Merger, which may harm the value of ourcommon stock.**

 

Achievingthe benefits of the CuraGen Merger will depend in part on the successfulintegration of CuraGen’s operations and personnel in a timely and efficientmanner. The integration process requires coordination of different development,regulatory, manufacturing and commercial teams, and involves the integration ofsystems, applications, policies, procedures, business processes and operations.This may be difficult and unpredictable because of possible cultural conflictsand different opinions on scientific and regulatory matters. If we cannotsuccessfully integrate CuraGen’s operations and personnel, we may not realizethe expected benefits of the CuraGen Merger.

 

**IntegratingCuraGen’s organization may divert management’s attention away from ouroperations.**

 

Successfulintegration of CuraGen’s operations, products and personnel may place asignificant burden on our management and internal resources. The diversion ofmanagement’s attention and any difficulties encountered in the transition andintegration process could result in delays in the clinical trial programs ofCuraGen and/or Celldex and could otherwise harm our business, financialcondition and operating results.

 

**Weexpect to incur significant costs integrating Celldex and CuraGen into a singlebusiness.**

 

Weexpect to incur significant costs integrating CuraGen’s operations, productsand personnel. These costs may include costs for:

 

·          employeeredeployment or relocation;

·          conversion ofinformation systems;

·          combiningdevelopment, regulatory, manufacturing and commercial teams and processes;

·          reorganizationof facilities; and

·          relocation ordisposition of excess equipment.

 

**If one ormore of our products cannot be shown to be safe and effective in clinicaltrials, is not approvable or not commercially successful, then the benefits ofthe merger may not be realized.**

 

Thecombined company will have four products in clinical development and twoproducts scheduled to enter clinical testing in 2010. All of these productsmust be rigorously tested in clinical trials, and shown to be safe andeffective before the U.S. Food and Drug Administration, or its foreigncounterparts, will consider them for approval. Failure to demonstrate that oneor more of the products is safe and effective, or significant delays indemonstrating safety and efficacy, could diminish the benefits of the merger.All of these products must be approved by a government authority such as theU.S. Food and Drug Administration before they can be commercialized. Failure ofone or more of the products to obtain such approval, or significant delays inobtaining such approval, could diminish the benefits of the merger. Once approvedfor sale, the products must be successfully commercialized. Failure tocommercialize successfully one or more of the products could diminish thebenefits of the CuraGen Merger.

 

**Failureto complete the CuraGen Merger could negatively impact the stock price and thefuture business and financial results of Celldex.**

 

Ifthe CuraGen Merger is not completed, the ongoing businesses of Celldex may beadversely affected and, without realizing any of the benefits of havingcompleted the merger, Celldex will be subject to a number of risks, includingthe following:

 

·          Celldex may berequired to pay CuraGen a termination fee of $3,500,000 if the CuraGen MergerAgreement is terminated under certain circumstances;

 

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·          Celldex will berequired to pay certain costs relating to the merger, whether or not theCuraGen Merger is completed; and

·          mattersrelating to the CuraGen Merger (including integration planning) may requiresubstantial commitments of time and resources by Celldex management, whichcould otherwise have been devoted to other opportunities that may have beenbeneficial to Celldex as an independent company.

 

Celldexalso could be subject to litigation related to any failure to complete theCuraGen Merger. If the CuraGen Merger is not completed, these risks maymaterialize and may adversely affect Celldex’s business, financial results andstock price.

 

**Celldexstockholders will have a reduced ownership and voting interest after theCuraGen Merger and will exercise less influence over management of the combinedcompany.**

 

Celldexmay issue shares of common stock in the merger equal to more than 50% of thetotal number of shares of Celldex common stock outstanding immediately afterthe CuraGen Merger. Regardless of the actual number of shares of Celldex commonstock issued, after the effective time of the CuraGen Merger, Celldexstockholders will own in the aggregate a significantly smaller percentage ofthe combined company than they currently own. Immediately after the effectivetime of the CuraGen Merger, Celldex’s current stockholders will own between 42%and 67.5% of the combined company. Consequently, Celldex stockholders, as ageneral matter, may have less influence over the management and policies of thecombined company than they currently exercise over the management and policiesof Celldex.

 

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## **Item 6.         Exhibits**

 
| 2.1    |   | Agreement and Plan of  Merger, dated as of May 28, 2009, by and among Celldex  Therapeutics, Inc., CuraGen Corporation and Cottrell Merger  Sub, Inc. incorporated by reference to Exhibit 2.1 of the Company’s  Current Report on Form 8-K filed May 29, 2009 with the Securities  and Exchange Commission.                                                         |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3.1    |   | Third  Restated Certificate of Incorporation of the Company, incorporated by  reference to Exhibit 3.1 of the Company’s Registration Statement on  Form S-4 (Reg. No. 333-59215), filed July 16, 1998 with the  Securities and Exchange Commission.                                                                                                                            |
| 3.2    |   | Certificate  of Amendment of Third Restated Certificate of Incorporation of the Company,  incorporated by reference to Exhibit 3.1 of the Company’s Registration  Statement on Form S-4 (Reg. No. 333-59215), filed July 16,  1998 with the Securities and Exchange Commission.                                                                                                |
| 3.3    |   | Second  Certificate of Amendment of Third Restated Certificate of Incorporation of  the Company, incorporated by reference to Exhibit 3.2 of the Company’s  Registration Statement on Form S-4 (Reg. No. 333-59215), filed  July 16, 1998 with the Securities and Exchange Commission.                                                                                         |
| 3.4    |   | Third  Certificate of Amendment of Third Restated Certificate of Incorporation of the  Company, incorporated by reference to Exhibit 3.1 of the Company’s  Quarterly Report on Form 10-Q, filed May 10, 2002 with the  Securities and Exchange Commission.                                                                                                                          |
| 3.5    |   | Fourth  Certificate of Amendment of Third Restated Certificate of Incorporation  of the Company, incorporated by reference to Exhibit 3.1 of the  Company’s Current Report on Form 8-K, filed on March 11, 2008 with  the Securities and Exchange Commission.                                                                                                                  |
| 3.6    |   | Fifth  Certificate of Amendment of Third Restated Certificate of Incorporation  of the Company, incorporated by reference to Exhibit 3.2 of the  Company’s Current Report on Form 8-K, filed on March 11, 2008 with  the Securities and Exchange Commission.                                                                                                                   |
| 3.7    |   | Sixth  Certificate of Amendment of Third Restated Certificate of Incorporation of  the Company, incorporated by reference to Exhibit 3.7 of the Company’s  Quarterly Report on Form 10-Q, filed November 10, 2008 with the  Securities and Exchange Commission.                                                                                                                     |
| 4.3    |   | Amendment  No. 2 to Shareholder Rights Agreement dated November 5, 2004,  between the Company and Computershare Trust Company, N.A. (formerly EquiServe  Trust Company, N.A.), as Rights Agent, incorporated by reference to  Exhibit 10.1 of the Company’s Registration Statement on  Form 8-A1G/A, filed on March 7, 2008 with the Securities and Exchange  Commission. |
| *31.1  |   | Certification  of President and Chief Executive Officer                                                                                                                                                                                                                                                                                                                                                 |
| *31.2  |   | Certification  of Senior Vice President and Chief Financial Officer                                                                                                                                                                                                                                                                                                                                     |
| **32.1 |   | Section 1350  Certifications                                                                                                                                                                                                                                                                                                                                                                       |

 

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|      | *  | Filed  herewith.     |
|--------------------------|----|----------------------|
|                | ** | Furnished  herewith. |

 

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**SIGNATURES**

 

Pursuant to therequirements of the Securities Exchange Act of 1934, the registrant has dulycaused this report to be signed on its behalf by the undersigned thereunto dulyauthorized.

 
| ** **                  | ** ** | **CELLDEX  THERAPEUTICS, INC.**                               |
|-----------------------------|------------|---------------------------------------------------------------|
|                        |       |                                                          |
|                        |       | BY:                                                           |
|                        |       |                                                          |
|                        |       | /s/  ANTHONY S. MARUCCI                                       |
| Dated:  August 7, 2009 |       | Anthony  S. Marucci                                           |
|                        |       | President  and Chief Executive Officer                        |
|                        |       | (Principal  Executive Officer)                                |
|                        |       |                                                          |
|                        |       | /s/  AVERY W. CATLIN                                          |
| Dated:  August 7, 2009 |       | Avery  W. Catlin                                              |
|                        |       | Senior  Vice President, Treasurer and Chief Financial Officer |
|                        |       | (Principal  Financial and Accounting Officer)                 |

 

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**EXHIBIT INDEX**

 
| **Exhibit  No.** | ** ** | **Description**                                                                                                                                                                                                                                                                                                                                                                                             |
|------------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 2.1              |       | Agreement and Plan of  Merger, dated as of May 28, 2009, by and among Celldex  Therapeutics, Inc., CuraGen Corporation and Cottrell Merger  Sub, Inc. incorporated by reference to Exhibit 2.1 of the Company’s  Current Report on Form 8-K filed May 29, 2009 with the Securities  and Exchange Commission.                                                             |
| 3.1              |       | Third  Restated Certificate of Incorporation of the Company, incorporated by  reference to Exhibit 3.1 of the Company’s Registration Statement on  Form S-4 (Reg. No. 333-59215), filed July 16, 1998 with the  Securities and Exchange Commission.                                                                                                                                |
| 3.2              |       | Certificate  of Amendment of Third Restated Certificate of Incorporation of the Company,  incorporated by reference to Exhibit 3.1 of the Company’s Registration  Statement on Form S-4 (Reg. No. 333-59215), filed July 16,  1998 with the Securities and Exchange Commission.                                                                                                    |
| 3.3              |       | Second  Certificate of Amendment of Third Restated Certificate of Incorporation of  the Company, incorporated by reference to Exhibit 3.2 of the Company’s  Registration Statement on Form S-4 (Reg. No. 333-59215), filed  July 16, 1998 with the Securities and Exchange Commission.                                                                                             |
| 3.4              |       | Third  Certificate of Amendment of Third Restated Certificate of Incorporation of  the Company, incorporated by reference to Exhibit 3.1 of the Company’s  Quarterly Report on Form 10-Q, filed May 10, 2002 with the  Securities and Exchange Commission.                                                                                                                              |
| 3.5              |       | Fourth  Certificate of Amendment of Third Restated Certificate of Incorporation of  the Company, incorporated by reference to Exhibit 3.1 of the Company’s  Current Report on Form 8-K, filed on March 11, 2008 with the  Securities and Exchange Commission.                                                                                                                           |
| 3.6              |       | Fifth  Certificate of Amendment of Third Restated Certificate of Incorporation of  the Company, incorporated by reference to Exhibit 3.2 of the Company’s  Current Report on Form 8-K, filed on March 11, 2008 with the  Securities and Exchange Commission.                                                                                                                            |
| 3.7              |       | Sixth  Certificate of Amendment of Third Restated Certificate of Incorporation of  the Company, incorporated by reference to Exhibit 3.7 of the Company’s  Quarterly Report on Form 10-Q, filed November 10, 2008 with the  Securities and Exchange Commission.                                                                                                                         |
| 4.3              |       | Amendment  No. 2 to Shareholder Rights Agreement dated November 5, 2004,  between the Company and Computershare Trust Company, N.A. (formerly EquiServe  Trust Company, N.A.) as Rights Agent, incorporated by reference  to Exhibit 10.1 of the Company’s Registration Statement on  Form 8-A1G/A, filed on March 7, 2008 with the Securities and  Exchange Commission. |
| *31.1            |       | Certification  of President and Chief Executive Officer                                                                                                                                                                                                                                                                                                                                                     |
| *31.2            |       | Certification  of Senior Vice President and Chief Financial Officer                                                                                                                                                                                                                                                                                                                                         |
| **32.1           |       | Section 1350  Certifications                                                                                                                                                                                                                                                                                                                                                                           |

 

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|   | *  | Filed  herewith.     |
|--------|----|----------------------|
|   | ** | Furnished  herewith. |

 

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