**Table of Contents**

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**UNITED STATES**

**SECURITIES AND EXCHANGECOMMISSION**

**Washington, D.C. 20549**

** **

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**FORM 10-Q**

** **

| **x**  | **QUARTERLY  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE  ACT OF 1934** |
|--------|---------------------------------------------------------------------------------------------------------|
|   |                                                                                                    |
|   | **For the quarterly period ended  September 30, 2009**                                             |
|   |                                                                                                    |
|   | **OR**                                                                                                  |
|   |                                                                                                    |
| **o**  | **TRANSITION REPORT PURSUANT TO  SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |

** **

**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 November 2,2009, 31,602,188 shares of common stock, $.001 par value per share, wereoutstanding.

 

 

 

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**CELLDEX THERAPEUTICS, INC.**

 

**FORM 10-Q**

**Quarter Ended September 30,2009**

**Table of Contents**

 
| ** **                                                                                                            | ** ** | **Page**   |
|-----------------------------------------------------------------------------------------------------------------------|------------|------------|
| **Part I—Financial Information**                                                                            | ** ** | ** ** |
|                                                                                                                  |       |       |
| Item 1. Unaudited Financial Statements.                                                                               |       |       |
|                                                                                                                  |       |       |
| Condensed Consolidated Balance Sheets at  September 30, 2009 and December 31, 2008                          |       | 3          |
|                                                                                                                  |       |       |
| Condensed Consolidated Statements of Operations for  the Three and Nine Months Ended September 30, 2009 and 2008 |       | 4          |
|                                                                                                                  |       |       |
| Condensed Consolidated Statements of Cash Flows for the  Nine Months Ended September 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.                  |       | 19         |
|                                                                                                                  |       |       |
| Item 3. Quantitative and Qualitative Disclosures About  Market Risk.                                                  |       | 32         |
|                                                                                                                  |       |       |
| Item 4. Controls and Procedures.                                                                                      |       | 32         |
| ** **                                                                                                            | ** ** | ** ** |
| **Part II  — Other Information**                                                                            | ** ** | ** ** |
|                                                                                                                  |       |       |
| Item  1. Legal Proceedings.                                                                                           |       | 33         |
|                                                                                                                  |       |       |
| Item  1A. Risk Factors.                                                                                               |       | 34         |
|                                                                                                                  |       |       |
| Item 4. Submission of Matters to a Vote of Security  Holders.                                                         |       | 34         |
|                                                                                                                  |       |       |
| Item 6. Exhibits.                                                                                                     |       | 35         |
|                                                                                                                  |       |       |
| Signatures                                                                                                            |       | 36         |
|                                                                                                                  |       |       |
| Exhibit Index                                                                                                    |       | 37         |

 

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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)**

 
| ** **                                                                                                                                                                                  | ** ** | **September 30,  2009** | ** ** | **December 31,  2008** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------------|------------|-----------------------------|------------|
| **ASSETS**                                                                                                                                                                                  | ** ** | ** **                   | ** ** | ** **                  | ** ** |
| Current Assets:                                                                                                                                                                             |       |                         |       |                        |       |
| Cash and Cash Equivalents                                                                                                                                                                   |       | $                            | 25,985     |                        | $          | 44,257 |   |
| Accounts and Other Receivables                                                                                                                                                              |       | 1,091                        |       | 1,827                       |       |
| Prepaid and Other Current Assets                                                                                                                                                            |       | 934                          |       | 992                         |       |
| Total Current Assets                                                                                                                                                                        |       | 28,010                       |       | 47,076                      |       |
|                                                                                                                                                                                        |       |                         |       |                        |       |
| Property and Equipment, Net                                                                                                                                                                 |       | 12,015                       |       | 13,567                      |       |
| Intangible Assets, Net                                                                                                                                                                      |       | 1,941                        |       | 2,473                       |       |
| Other Assets                                                                                                                                                                                |       | 6,136                        |       | 6,677                       |       |
| Total Assets                                                                                                                                                                                |       | $                            | 48,102     |                        | $          | 69,793 |   |
| ** **                                                                                                                                                                                  | ** ** | ** **                   | ** ** | ** **                  | ** ** |
| **LIABILITIES AND STOCKHOLDERS’  EQUITY**                                                                                                                                              | ** ** | ** **                   | ** ** | ** **                  | ** ** |
| Current Liabilities:                                                                                                                                                                        |       |                         |       |                        |       |
| Accounts Payable                                                                                                                                                                            |       | $                            | 1,153      |                        | $          | 2,154 |   |
| Accrued Expenses                                                                                                                                                                            |       | 4,402                        |       | 3,841                       |       |
| Payable Due Medarex                                                                                                                                                                         |       | 2,957                        |       | 2,957                       |       |
| Current Portion of Deferred Revenue                                                                                                                                                         |       | 5,366                        |       | 4,931                       |       |
| Current Portion of Long-Term Liabilities                                                                                                                                                    |       | 229                          |       | 218                         |       |
| Total Current Liabilities                                                                                                                                                                   |       | 14,107                       |       | 14,101                      |       |
|                                                                                                                                                                                        |       |                         |       |                        |       |
| Deferred Revenue                                                                                                                                                                            |       | 35,246                       |       | 36,489                      |       |
| Other Long-Term Liabilities                                                                                                                                                                 |       | 989                          |       | 1,069                       |       |
| Total Liabilities                                                                                                                                                                           |       | 50,342                       |       | 51,659                      |       |
|                                                                                                                                                                                        |       |                         |       |                        |       |
| Commitments and Contingent Liabilities (Note 9)                                                                                                                                             |       |                         |       |                        |       |
|                                                                                                                                                                                        |       |                         |       |                        |       |
| Stockholders’ (Deficit) Equity:                                                                                                                                                        |       |                         |       |                        |       |
| Convertible Preferred Stock, $.01 Par Value;  3,000,000 Shares Authorized; No Shares Issued and Outstanding at  September 30, 2009 and December 31, 2008                          |       | —                       |       | —                      |       |
| Common Stock, $.001 Par Value; 297,000,000 Shares  Authorized; 15,879,475 and 15,789,756 Shares Issued and Outstanding at  September 30, 2009 and December 31, 2008, respectively |       | 16                           |       | 16                          |       |
| Additional Paid-In Capital                                                                                                                                                                  |       | 139,882                      |       | 136,661                     |       |
| Accumulated Other Comprehensive Income                                                                                                                                                      |       | 2,593                        |       | 2,606                       |       |
| Accumulated Deficit                                                                                                                                                                         |       | (144,731                     | )          | (121,149                    | )          |
| Total Stockholders’ (Deficit) Equity                                                                                                                                                   |       | (2,240                       | )          | 18,134                      |       |
| Total Liabilities and Stockholders’ Equity                                                                                                                                             |       | $                            | 48,102     |                        | $          | 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** | ** ** | **Nine Months Ended** | ** ** |
|-------------------------------------------------------------------------------|------------|----------------------------------|------------|---------------------------------|------------|
| ** **                                                                    | ** ** | **September 30,  2009**     | ** ** | **September 30,  2008**    | ** ** | **September 30,  2009** | ** ** | **September 30,  2008** | ** ** |
| **REVENUE:**                                                                  | ** ** | ** **                       | ** ** | ** **                      | ** ** | ** ** | ** ** | ** ** | ** ** |
| Product Development and Licensing Agreements                                  |       | $                                | 1,339      |                            | $          | 1,245 |   | $ | 4,338 |   | $ | 2,236 |   |
| Contracts and Grants                                                          |       | 799                              |       | 138                             |       | 939 |   | 419 |   |
| Product Royalties                                                             |       | 1,892                            |       | 975                             |       | 5,170 |   | 1,812 |   |
|                                                                          |       |                             |       |                            |       |   |   |   |   |
| Total Revenue                                                                 |       | 4,030                            |       | 2,358                           |       | 10,447 |   | 4,467 |   |
| ** **                                                                    | ** ** | ** **                       | ** ** | ** **                      | ** ** | ** ** | ** ** | ** ** | ** ** |
| **OPERATING EXPENSE:**                                                        | ** ** | ** **                       | ** ** | ** **                      | ** ** | ** ** | ** ** | ** ** | ** ** |
| Research and Development                                                      |       | 7,241                            |       | 6,626                           |       | 23,729 |   | 18,743 |   |
| General and Administrative                                                    |       | 3,850                            |       | 4,206                           |       | 10,701 |   | 11,825 |   |
| Gain on Sale of Assets                                                        |       | —                           |       | —                          |       | (604 | ) | — |   |
| Charge for In-Process Research and Development                                |       | —                           |       | —                          |       | — |   | 14,756 |   |
| Amortization of Acquired Intangible Assets                                    |       | 95                               |       | 104                             |       | 286 |   | 257 |   |
|                                                                          |       |                             |       |                            |       |   |   |   |   |
| Total Operating Expense                                                       |       | 11,186                           |       | 10,936                          |       | 34,112 |   | 45,581 |   |
|                                                                          |       |                             |       |                            |       |   |   |   |   |
| Operating Loss                                                                |       | (7,156                           | )          | (8,578                          | )          | (23,665 | ) | (41,114 | ) |
|                                                                          |       |                             |       |                            |       |   |   |   |   |
| Investment and Other (Expense) Income, Net                                    |       | (18                              | )          | 922                             |       | 83 |   | 1,067 |   |
|                                                                          |       |                             |       |                            |       |   |   |   |   |
| Net Loss                                                                      |       | $                                | (7,174     | )                               | $          | (7,656 | ) | $ | (23,582 | ) | $ | (40,047 | ) |
|                                                                          |       |                             |       |                            |       |   |   |   |   |
| Basic and Diluted Net Loss Per Common Share (See  Note 2)                |       | $                                | (0.45      | )                               | $          | (0.49 | ) | $ | (1.49 | ) | $ | (2.92 | ) |
|                                                                          |       |                             |       |                            |       |   |   |   |   |
| Shares Used in Calculating Basic and Diluted Net  Loss per Share (See Note 2) |       | 15,879                           |       | 15,708                          |       | 15,844 |   | 13,695 |   |

 

See accompanying notes tounaudited condensed consolidated financial statements

 

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**CELLDEXTHERAPEUTICS, INC.**

**CONDENSEDCONSOLIDATED STATEMENTS OF CASH FLOWS**

**(Unaudited)**

 

**(Inthousands)**

 
| ** **                                                                                 | ** ** | **Nine Months Ended** | ** ** |
|--------------------------------------------------------------------------------------------|------------|---------------------------------|------------|
| ** **                                                                                 | ** ** | **September 30,  2009**    | ** ** | **September 30,  2008** | ** ** |
| **Cash Flows from Operating  Activities:**                                                 | ** ** | ** **                      | ** ** | ** ** | ** ** |
| Net Loss                                                                                   |       | $                               | (23,582    | ) | $ | (40,047 | ) |
| Adjustments to Reconcile Net Loss to Net Cash (Used  in) Provided by Operating Activities: |       |                            |       |   |   |
| Depreciation and Amortization                                                              |       | 1,955                           |       | 1,771 |   |
| Amortization of Intangible Assets                                                          |       | 286                             |       | 257 |   |
| (Gain) loss on Sale or Disposal of Assets                                                  |       | (567                            | )          | 308 |   |
| Stock-Based Compensation Expense                                                           |       | 2,482                           |       | 4,286 |   |
| In-Process Research and Development                                                        |       | —                          |       | 14,756 |   |
| Changes in Operating Assets and Liabilities:                                               |       |                            |       |   |   |
| Accounts and Other Receivables                                                             |       | 736                             |       | (11,311 | ) |
| Prepaid and Other Current Assets                                                           |       | 58                              |       | 9,591 |   |
| Other Assets                                                                               |       | 541                             |       | (3,777 | ) |
| Accounts Payable and Accrued Expenses                                                      |       | (190                            | )          | 1,427 |   |
| Deferred Revenue                                                                           |       | (808                            | )          | 39,664 |   |
| Other Long-Term Liabilities                                                                |       | 63                              |       | 61 |   |
|                                                                                       |       |                            |       |   |   |
| Net Cash (Used in) Provided by Operating Activities                                        |       | (19,026                         | )          | 16,986 |   |
| ** **                                                                                 | ** ** | ** **                      | ** ** | ** ** | ** ** |
| **Cash Flows from Investing  Activities:**                                                 | ** ** | ** **                      | ** ** | ** ** | ** ** |
| Cash Acquired in AVANT Merger, Net of Transaction  Costs                                   |       | —                          |       | 10,750 |   |
| Restricted Cash Deposits                                                                   |       | —                          |       | (1 | ) |
| Acquisition of Property and Equipment                                                      |       | (440                            | )          | (1,278 | ) |
| Proceeds from Sale or Disposal of Assets                                                   |       | 850                             |       | 489 |   |
|                                                                                       |       |                            |       |   |   |
| Net Cash Provided by Investing Activities                                                  |       | 410                             |       | 9,960 |   |
| ** **                                                                                 | ** ** | ** **                      | ** ** | ** ** | ** ** |
| **Cash Flows from Financing  Activities:**                                                 | ** ** | ** **                      | ** ** | ** ** | ** ** |
| Net Proceeds from Stock Issuances                                                          |       | 489                             |       | 10,867 |   |
| Related Party Loan Due to Medarex                                                          |       | —                          |       | 160 |   |
| Payments of Other Long-Term Liabilities                                                    |       | (132                            | )          | (136 | ) |
| ** **                                                                                 | ** ** | ** **                      | ** ** | ** ** | ** ** |
| Net Cash Provided by Financing Activities                                                  |       | 357                             |       | 10,891 |   |
| ** **                                                                                 | ** ** | ** **                      | ** ** | ** ** | ** ** |
| Effect of Exchange Rate Changes on Cash and Cash  Equivalents                              |       | (13                             | )          | (50 | ) |
| ** **                                                                                 | ** ** | ** **                      | ** ** | ** ** | ** ** |
| Net (Decrease) Increase in Cash and Cash  Equivalents                                      |       | (18,272                         | )          | 37,787 |   |
| ** **                                                                                 | ** ** | ** **                      | ** ** | ** ** | ** ** |
| Cash and Cash Equivalents at Beginning of Period                                           |       | 44,257                          |       | 4,910 |   |
|                                                                                       |       |                            |       |   |   |
| Cash and Cash Equivalents at End of Period                                                 |       | $                               | 25,985     |   | $ | 42,697 |   |
|                                                                                       |       |                            |       |   |   |
| **Supplemental Disclosure of  Non-Cash Flow Information**                                  | ** ** | ** **                      | ** ** | ** ** | ** ** |
| Shares Received in Exchange in the AVANT Merger                                            |       | $                               | —     |   | $ | 46,252 |   |
| Shares Issued to Medarex in Settlement of a Payable                                        |       | $                               | —     |   | $ | 3,039 |   |
| Future Amounts Payable to Licensors                                                        |       | $                               | —     |   | $ | 2,817 |   |
| Shares Issued to Executive Officers                                                        |       | $                               | 250        |   | $ | — |   |

 

See accompanying notes to unaudited condensed consolidated financialstatements

 

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**CELLDEX THERAPEUTICS, INC.**

**Notes to Unaudited Condensed Consolidated FinancialStatements**

**September 30,2009**

 

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

 

Theaccompanying unaudited condensed consolidated financial statements have beenprepared by Celldex Therapeutics, Inc. (the “Company” or “Celldex”)in accordance withaccounting principles generally accepted in the United States of America (“U.S.GAAP”) and reflect the operations of the Company and its wholly-ownedsubsidiaries. All intercompany transactions have been eliminatedin consolidation.

 

Theseinterim financial statements do not include all the information and footnotesrequired by U.S. GAAP for annual financial statements and should be read inconjunction with the audited financial statements for the year ended December 31,2008, which are included in the Company’s Annual Report on Form 10-K filedwith the Securities 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.

 

Theresults of operations for the interim periods are not necessarily indicative ofthe results of operations to be expected for any future interim period or thefiscal year ending December 31, 2009.

 

*Merger between AVANT and CelldexResearch*

 

On March 7, 2008, theCompany (formerly known as AVANT Immunotherapeutics, Inc.) (“AVANT”)merged with and into Celldex Research Corporation (formerly known as CelldexTherapeutics, Inc.) (“Celldex Research”), a privately-held company, (the “AVANTMerger”). Effective October 1, 2008, the Company changed its name fromAVANT Immunotherapeutics, Inc. to Celldex Therapeutics, Inc.

 

The AVANT Merger wasaccounted for using the former purchase method of accounting and was treated asan acquisition by Celldex Research of AVANT, with Celldex Research beingconsidered the accounting acquirer even though AVANT was the issuer of commonstock and the surviving legal entity in the transaction. Under the formerpurchase 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.  The negative goodwill was allocated to all ofthe acquired assets that were non-financial and non-current assets, includingproperty and equipment, identifiable intangible assets, and in-process researchand development.

 

Because Celldex Research wasdetermined to be the acquirer for accounting purposes, the historical financialstatements of Celldex Research became the historical financial statements ofthe Company as of the closing of the AVANT Merger. Accordingly, the financialstatements of the Company prior to the AVANT Merger reflect the financialposition, results of operations and cash flows of Celldex Research, whichduring the historical periods presented in the accompanying consolidatedfinancial statements, was then majority-owned by Medarex, Inc. (“Medarex”).Following the AVANT Merger, the financial statements reflect the financialposition, results of operation and cash flows of the combined companies. Theresults of operations of AVANT are included in the results of operations of theCompany beginning March 8, 2008. Accordingly, except as otherwisediscussed below, this report reflects the financial condition, results ofoperations and liquidity of the combined companies at September 30, 2009and for the period from the AVANT Merger through September 30, 2009.

 

*Merger between the Company andCuraGen*

 

As more fully discussed in Note 12, on October 1,2009, CuraGen Corporation (“CuraGen”), a former publicly-traded company, mergedwith a wholly-owned subsidiary of the Company (the “CuraGen Merger”) in 

 

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accordancewith a definitive merger agreement dated May 28, 2009 (the “CuraGen MergerAgreement”). Accordingly, the results of operations of CuraGen will beincluded in the results of operations of the Company beginning October 1,2009.

 

*Capital Requirements*

 

The Company’s cash and cashequivalents at September 30, 2009 were $26.0 million. Its working capitalat September 30, 2009 was $13.9 million. The Company incurred a loss of$7.2 million and $23.6 million for the three and nine months ended September 30,2009, respectively. Net cash used in operations for the nine months ended September 30,2009 was $19.0 million.  The Companybelieves that the cash and investments acquired in the CuraGen Merger, the cashinflows from existing grants and collaborations, interest income on investedfunds and the cash and cash equivalents at September 30, 2009 will besufficient to meet estimated working capital requirements and fund plannedoperations for at least the next twelve months. The working capital requirementsof the Company are dependent on several factors including, but not limited to,the costs associated with research and development programs, preclinical andclinical studies, manufacture of clinical materials, the scope of collaborativearrangements.  At September 30,2009, CuraGen had cash and investments of $70.3 million and 4% convertiblesubordinated debt due in February 2011 of $12.5 million.

 

During the next twelve totwenty-four months, the Company may take steps to raise additional capital tomeet its long-term liquidity needs including, but not limited to, the licensingof technology programs with existing or new collaborative partners, possiblebusiness combinations, or the issuance of common stock via private placementsor public offerings. While the Company continues to seek capital through anumber of means, there can be no assurance that additional financing will beavailable on acceptable terms, if at all, particularly in light of the recentdisruptions in the financial markets and the Company’s negotiating position incapital-raising efforts may worsen as existing resources are used. There isalso no assurance that the Company will be able to enter into furthercollaborative relationships. Additional equity financing may be dilutive to theCompany’s stockholders; debt financing, if available, may involve significantcash payment obligations and covenants that restrict the Company’s ability tooperate as a business; and licensing or strategic collaborations may result inroyalties or other terms that reduce the Company’s economic potential fromproducts under development. If the Company is unable to raise the fundsnecessary to meet its long-term liquidity needs, it may have to (i) delayor discontinue the development of programs, (ii) license out programsearlier than expected, (iii) raise funds at significant discount or onother unfavorable terms, or (iv) sell all or a part of the Company.

 

**(2)****                              ****Significant AccountingPolicies**

 

The significantaccounting policies used in preparation of these condensed consolidatedfinancial statements for the nine months ended September 30, 2009 areconsistent with those discussed in Note 1 to the consolidated financialstatements in our Annual Report on Form 10-K for the year ended December 31,2008, except for the adoption of new accounting standards during the first ninemonths of 2009 as discussed below.

 

*BusinessCombinations*

 

On January 1,2009, the Company adopted the new acquisition method of accounting for businesscombinations which applies to acquisitions that are completed after January 1,2009, including the CuraGen Merger.  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 from the perspective of a marketparticipant. Transaction costs associated with the acquisition are expensed asincurred.

 

For acquisitions completed prior to January 1,2009, including the AVANT Merger, the Company expensed the fair value ofIPR&D to research and development expense as of the acquisition date and includedtransaction costs associated with the business combination as part of the costof the acquired company.

 

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*Subsequent Events*

 

The Company evaluated all events or transactions thatoccurred after September 30, 2009 up through November 6, 2009, the datethe Company issued these financial statements.

 

*Recent Accounting Pronouncements*

 

On January 1, 2009, theCompany adopted the following new U.S. GAAP accounting standards all of whichdid not have a materialimpact on the Company’s financial condition or results of operations:

 

·              For collaborations existing after January 1, 2009, certaintransactions between collaborators are recorded in the income statement oneither a gross or net basis within expenses when certain characteristics existin the collaboration relationship;

 

·             Certain new factors should be considered indeveloping renewal or extension assumptions used to determine the useful lifeof a recognized intangible asset so that the useful life of a recognizedintangible asset is consistent with the period of estimated cash flows used tomeasure fair value of the asset;

 

·              Determine whether instruments granted in share-basedpayment transactions are participating securities prior to vesting and,therefore, need to be included in the earnings allocation in computing earningsper share (“EPS”) under the two-class method. The new accounting standard (i) applies to the calculation of EPSfor share-based payment awards with rights to dividends or dividendequivalents, (ii) clarifies that unvested share-based payment awards thatcontain nonforfeitable rights to dividends or dividend equivalents (whetherpaid or unpaid) are participating securities and shall be included in thecomputation of EPS pursuant to the two class method and (iii) requires allprior-period EPS data presented to be adjusted retrospectively (includinginterim financial statements, summaries of earnings and selected financialdata); and

 

·             Disclose the fair values of financial instruments in interim and annualfinancial statements. Prior to the issuance of the new accounting standard,disclosures about fair values of financial instruments were only required to bedisclosed annually.

 

On July 1, 2009, theCompany adopted theFinancial Accounting Standards Board (“FASB”) Accounting Standards Codification(the “Codification”) which is 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. As the Codification was not intended to change or alterexisting U.S. GAAP, the Codification did not have any impact on the Company’sfinancial statements or results of operations.

 

In August 2009,the FASB issued a new U.S. GAAP accounting standard that provides clarificationthat in circumstances in which a quoted price in an active market for theidentical liability is not available, a reporting entity is required to measurefair value using one or more of the following methods: 1) a valuationtechnique that uses a) the quoted price of the identical liability whentraded as an asset or b) quoted prices for similar liabilities or similarliabilities when traded as assets and/or 2) a valuation technique that isconsistent with the principles of an income approach or market approach. Thestandard also clarifies that when estimating the fair value of a liability, areporting entity is not required to adjust to include inputs relating to theexistence of transfer restrictions on that liability. The Company is requiredto adopt this standard on October 1, 2009 and does not expect the adoptionwill have a material impact on its financial position or results of operations;however, this standard may impact the Company in future periods.

 

In October 2009, theFASB issued a new U.S. GAAP accounting standard which amends existing revenuerecognition accounting guidance to provide accounting principles andapplication guidance on whether multiple deliverables exist, how thearrangement should be separated, and the consideration allocated. This guidanceeliminates the requirement to establish objective evidence of fair value ofundelivered products and services and instead provides for separate revenuerecognition based upon management’s estimate of the selling price for anundelivered item when 

 

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there is no other means to determine the fair value ofthat undelivered item. The existing guidance previously required that the fairvalue of the undelivered item be the price of the item either sold in aseparate transaction between unrelated third parties or the price charged foreach item when the item is sold separately by the vendor. This was difficult todetermine when the product was not individually sold because of its uniquefeatures. Under the existing guidance if the fair value of all of the elements inthe arrangement was not determinable, then revenue was deferred until all ofthe items were delivered or fair value was determined. The Company expects toadopt the standard on January 1, 2010 on a prospective basis.  The Company is currently evaluating thepotential impact of this standard on its financial position and results ofoperations.

 

**(3)****                          ****ComprehensiveLoss and Net Loss Per Share**

 

For the three and nine months ended September 30,2009 and 2008, comprehensive loss was as follows:

 
| ** **                                           | ** ** | **Three months ended September 30,** | ** ** | **Nine months ended September 30,** | ** ** |
|------------------------------------------------------|------------|----------------------------------------------------------|------------|---------------------------------------------------------|------------|
| ** **                                           | ** ** | **2009**                                                 | ** ** | **2008**                                                | ** ** | **2009** | ** ** | **2008** | ** ** |
| ** **                                           | ** ** | **(In thousands)**                                       | ** ** |
| Net loss                                             |       | $                                                        | (7,174     | )                                                       | $          | (7,656 | ) | $ | (23,582 | ) | $ | (40,047 | ) |
| Other comprehensive loss:                            |       |                                                     |       |                                                    |       |   |   |   |   |
| Unrealized foreign  exchange translation gain (loss) |       | 2                                                        |       | 6                                                       |       | (13 | ) | (50 | ) |
| Total other comprehensive  loss                      |       | 2                                                        |       | 6                                                       |       | (13 | ) | (50 | ) |
| Total comprehensive loss                             |       | $                                                        | (7,172     | )                                                       | $          | (7,650 | ) | $ | (23,595 | ) | $ | (40,097 | ) |

 

The computations of basicand diluted loss per common share are based upon the weighted average number ofcommon shares outstanding and potentially dilutive securities. Potentiallydilutive securities include stock options at September 30, 2009. Optionsto purchase 2,695,480 and 2,046,427 shares of common stock were not included inthe September 30, 2009 and 2008 computation of diluted net loss per share,respectively, because inclusion of such shares would have an anti-dilutiveeffect on net loss per share.

 

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

 

Fair value measurement isthe exchange price that would be received for an asset or paid to transfer aliability (an exit price) in the principal or most advantageous market for theasset or liability in an orderly transaction between market participants on themeasurement date. Market participants are buyers and sellers in the principalmarket that are (i) independent, (ii) knowledgeable, (iii) ableto transact, and (iv) willing to transact.

 

The Company uses a fairvalue hierarchy for theCompany’s assets and liabilities that are measured at fair value on a recurringbasis as of September 30, 2009 and December 31, 2008.  This fair value hierarchymaximizes the use of observable inputs, where available, and minimizes the useof unobservable inputs when measuring fair value. The following are the threelevels of inputs that may be used 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  September 30, 2009 and December 31, 2008, the Company held cash  equivalents of $22.1 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  September 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  September 30, 2009 and December 31, 2008.                                                                                                                                                               |

 

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The Company’s financialinstruments consist mainly of cash and cash equivalents, short-term accountsreceivable, accounts payable and debt obligations. Short-term accountsreceivable and accounts payable are reflected in the accompanying consolidatedfinancial statements at cost, which approximates fair value due to theshort-term nature of these instruments. Based on current market interest ratesavailable to the Company for long-term liabilities with similar terms andmaturities, the Company believes the fair value of the loan payable and notepayable approximates its carrying value at September 30, 2009.

 

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

 

At September 30, 2009,the Company had two stock-based compensation plans: the 2004 Employee StockPurchase Plan (the “2004 ESPP Plan”) and the 2008 Stock Option and IncentivePlan (the “2008 Plan”).

 

*Employee Stock Purchase Plan*

 

All full time employees ofthe Company are eligible to participate in the 2004 ESPP Plan. A total of12,500 shares of common stock are reserved for issuance under the 2004 ESPPPlan. Under the 2004 ESPP Plan, each participating employee may contribute upto 15% of his or her compensation to purchase up to 100 shares of common stockper year in any six-month offering period and may withdraw from the offering atany time before stock is purchased. Participation terminates automatically upontermination of employment. The purchase price per share of common stock in anoffering is 85% of the lower of its fair market value at either the beginningof the offering period or the applicable exercise date.

 

Duringthe three and nine months ended September 30, 2009, the Company issued1,482 and 2,979 shares under the 2004 ESPP Plan, respectively. There were noshares issued under the 2004 ESPP Plan during the nine months ended September 30,2008.  At September 30, 2009,6,906 shares were available for issuance under the 2004 ESPP Plan.

 

*Employee Stock Option and Incentive Plan*

 

The 2008 Plan permits thegranting of incentive stock options (intended to qualify as such under Section 422Aof the Internal Revenue Code of 1986, as amended), non-qualified stock options,stock appreciation rights, performance share units, restricted stock and otherawards of restricted stock in lieu of cash bonuses to employees, consultantsand outside directors.

 

The 2008 Plan allows for amaximum of 1,500,000 shares of common stock to be granted prior to October 19,2017. The Company’s board of directors determines the term of each option,option price, and number of shares for which each option is granted and therate at which each option vests. Options generally vest over a period not toexceed four years. The term of each option cannot exceed ten years (five yearsfor options granted to holders of more than 10% of the voting stock of theCompany) and the exercise price of stock options cannot be less than the fairmarket value of the common stock at the date of grant (110% of fair marketvalue for incentive stock options granted to holders of more than 10% of thevoting stock of the Company). The 2008 Plan also provides for discretionarygrants of non-qualified stock options to non-employee directors. Vesting of allemployee and non-employee director stock option awards is accelerated upon achange in control as defined in the 2008 Plan.

 

In connection with the AVANTMerger, the Company assumed the obligations of Celldex Research under CelldexResearch’s 2005 Equity Incentive Plan (the “Celldex Research 2005 Plan”) andeach outstanding option to purchase Celldex Research common stock (a “CelldexResearch Stock Option”) granted under the Celldex Research 2005 Plan. EachCelldex Research Stock Option assumed by the Company is deemed to constitute anoption to acquire, on the same terms and conditions as were applicable underthe Celldex Research 2005 Plan, shares of the Company’s common stock that havebeen adjusted consistent with the ratio at which the Company’s common stock wasissued in exchange for Celldex Research’s common stock in the AVANT Merger. Asof March 7, 2008, the Company assumed options to acquire 1,446,913 sharesof its common stock at a weighted average exercise price of $8.35. The CelldexResearch Stock Options generally vest over a two-to four-year period and theterm of each option cannot exceed ten years from the date of grant. Noadditional awards will be issued under the Celldex Research 2005 Plan.

 

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A summary of stock optionactivity under the 2008 Plan and the Celldex Research 2005 Plan for the ninemonths ended September 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                                                                                              |       | 714,325    |       | 8.50                                                   |       |                                                                     |       |
| Exercised                                                                                            |       | (57,400    | )          | 8.16                                                   |       |                                                                     |       |
| Canceled/forfeited                                                                                   |       | (32,013    | )          | 8.75                                                   |       |                                                                     |       |
| Expired                                                                                              |       | (425       | )          | 8.16                                                   |       |                                                                     |       |
|                                                                                                 |       |       |       |                                                   |       |                                                                     |       |
| Outstanding at September 30,  2009                                                              |       | 2,695,480  |       | $                                                      | 8.42       |                                                                     | 7.2        |   |
|                                                                                                 |       |       |       |                                                   |       |                                                                     |       |
| Options Vested and  Expected to Vest at September 30, 2009                                      |       | 2,497,869  |       | $                                                      | 8.43       |                                                                     | 7.1        |   |
| Options Exercisable at  September 30, 2009                                                      |       | 1,602,023  |       | 8.47                                                   |       | 6.4                                                                      |       |
| Options Available for  Grant                                                                         |       | 145,143    |       |                                                   |       |                                                                     |       |
| Weighted Average Fair  Value of Options Granted During the nine months ended September 30, 2009 |       | $          | 5.33       |                                                   |       |                                                                     |       |   |
|                                                                                                      |            |            |            |                                                        |            |                                                                          |            |  |  |

 

The aggregate intrinsicvalue of options outstanding at September 30, 2009 was $12,918.

 

*SharesIssued to Executive Officers*

 

In January 2009, theCompany granted 29,340 shares of common stock from the 2008 Plan to itsexecutive officers. The value of these shares was $0.3 million on the grantdate.

 

*Valuationand Expenses Information*

 

The following tablesummarizes stock-based compensation expense related to employee andnon-employee stock options and employee stock purchases for the three and ninemonths ended September 30, 2009 and 2008, respectively:

 
| ** **                                             | ** ** | **Three months ended September 30,** | ** ** | **Nine months ended September 30,** | ** ** |
|--------------------------------------------------------|------------|----------------------------------------------------------|------------|---------------------------------------------------------|------------|
| ** **                                             | ** ** | **2009**                                                 | ** ** | **2008**                                                | ** ** | **2009** | ** ** | **2008** | ** ** |
| ** **                                             | ** ** | **(In thousands)**                                       | ** ** |
| Research and development                               |       | $                                                        | 248        |                                                    | $          | 272 |   | $ | 1,068 |   | $ | 1,830 |   |
| General and administrative                             |       | 371                                                      |       | 1,574                                                   |       | 1,414 |   | 2,456 |   |
| Total stock-based  compensation expense                |       | $                                                        | 619        |                                                    | $          | 1,846 |   | $ | 2,482 |   | $ | 4,286 |   |
|                                                   |       |                                                     |       |                                                    |       |   |   |   |   |
| Impact on basic and  diluted net loss per common share |       | $                                                        | (0.04      | )                                                       | $          | (0.12 | ) | $ | (0.16 | ) | $ | (0.31 | ) |

 

In connection with the AVANTMerger, the Company accounted for the exchange of Celldex Research StockOptions into options to acquire shares of the Company’s common stock as amodification. 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 September 30,2009, total compensation cost related to non-vested employee and non-employeedirector stock options not yet recognized was $4.0 million, net of estimatedforfeitures, which is expected to be recognized as expense over a weightedaverage period of 2.8 years. The total fair value of employee and non-employeedirector stock options vested during the three and nine months ended September 30,2009 was $0.4 million and $2.3 million, respectively.

 

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The fair values of employeeand non-employee stock options and employee stock purchases granted during thethree and nine months ended September 30, 2009 and 2008 were valued usingthe Black-Scholes option-pricing model with the following assumptions:

 
| ** **                                                | ** ** | **Three months ended September 30,** | ** ** | **Nine months ended September 30,** | ** ** |
|-----------------------------------------------------------|------------|----------------------------------------------------------|------------|---------------------------------------------------------|------------|
| ** **                                                | ** ** | **2009**                                                 | ** ** | **2008**                                                | ** ** | **2009** | ** ** | **2008** | ** ** |
| Expected stock price  volatility (employees)              |       | 68                                                       | %          | 59                                                      | %          | 68 | % | 55-67 | % |
| Expected stock price  volatility (non-employee directors) |       | —                                                   |       | 61                                                      | %          | — |   | 57-67 | % |
| Expected stock price  volatility (2004 ESPP)              |       | 90                                                       | %          | —                                                  |       | 90 | % | — |   |
| Expected option term  (employees)                         |       | 6.1 years                                                |       | 4.8 years                                               |       | 6.1 years |   | 3.0-6.0 years |   |
| Expected option term  (non-employee directors)            |       | —                                                   |       | 2.7–5.3 years                                      |       | — |   | 2.7-6.0 years |   |
| Expected term (2004 ESPP)                                 |       | 0.5 years                                                |       | —                                                  |       | 0.5 years |   | — |   |
| Risk-free interest rate  (options)                        |       | 3.4                                                      | %          | 2.8-3.3                                                 | %          | 1.8–3.4 | % | 1.8-3.3 | % |
| Risk-free interest rate  (2004 ESPP)                      |       | 0.3                                                      | %          | —                                                  |       | 0.3 | % | — |   |
| Expected dividend yield                                   |       | None                                                     |       | None                                                    |       | None |   | None |   |

 

The Companycalculates the expected term using the simplified method for “plain-vanilla”stock options.  The simplified methodestimates the expected term as the mid-point between the vesting date and theexpiration date.  The Company uses itsdaily historical stock price volatility consistent with the expected term ofgrant as the basis for its expected volatility assumption.  The risk-free interest rate is based upon onthe yield of U.S. Treasury securities consistent with the expected term ofthe option. The dividend yield assumption is based on the Company’s history ofzero dividend payouts and expectation that no dividends will be paid in theforeseeable future.  During the three andnine months ended September 30 2009, forfeitures were estimated based onhistorical experience by applying a ten and zero percent forfeiture rate toemployee and non-employee director stock option awards granted, respectively.

 

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

 

At December 31, 2008,the Company had recorded $0.3 million in intangible assets related to the Meganpoultry vaccines as a long-lived asset to be disposed of by sale due to theCompany’s negotiations with Lohmann Animal Health International (“LAHI”).  On January 9, 2009, the Company enteredinto a purchase agreement (“LAHI Agreement”) to sell its poultry vaccinesassets to LAHI. Under the LAHI Agreement, LAHI paid an upfront fee of $0.9million and agreed to pay potential milestone payments.  The Company recorded a gain of $0.6 millionrelated to the LAHI Agreement based on the upfront fee less the net book valueof the related asset.

 

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

 

Effective with the AVANTMerger, the Company became a combined group for tax reporting purposes.  As a result of the AVANT Merger, all of theprior tax attributes of the combined group will carry forward for potentialfuture use subject to potential limitations.

 

Massachusetts and New Jerseyare the two states in which the Company primarily operates or has operated andhas income tax nexus. Open federal and state return years subject toexamination by major tax jurisdictions include the tax years ended December 31,2006, 2007 and 2008. Carryforward attributes that were generated prior to 2006may still 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 evaluatedthe positive and negative evidence bearing upon the realizability of its netdeferred tax assets, which are comprised principally of net operating losscarryforwards, capitalized R&D expenditures and R&D tax creditcarryforwards. The Company has determined that it is more likely than not thatit will not recognize the benefits of federal and state deferred tax assetsand, as a result, a full valuation allowance was maintained at September 30,2009 and December 31, 2008.

 

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

 

A summary of the Company’ssignificant revenue contracts and arrangements follows:

 

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

 

In 1997, the Company enteredinto an agreement with Glaxo to collaborate on the development andcommercialization of the Company’s oral rotavirus strain and Glaxo assumedresponsibility for all subsequent clinical trials and all other developmentactivities. The Company’s licensed-in the rotavirus strain that was used todevelop Glaxo’s Rotarix® rotavirus vaccine in 1995 and owes a license fee of30% to Cincinnati Children’s Hospital Medical Center (“CCH”) on net royaltiesreceived from Glaxo. The Company is obligated to maintain a license with CCHwith respect to the Glaxo agreement. All licensing fees are included inresearch and development expense. The term of the Glaxo agreement is throughthe expiration of the last of the relevant patents covered by the agreement,although Glaxo may terminate the agreement upon 90 days prior writtennotice.

 

In May 2005, theCompany entered into an agreement whereby an affiliate of PRF purchased aninterest in the net royalties the Company will receive on worldwide sales ofRotarix®. Under the PRF agreement, the Company retained 50% of Glaxo milestonepayments beginning on the effective date of the agreement with PRF, with 70%and 30% of the remaining balance payable to PRF and CCH, respectively. TheCompany’s retained interests in Rotarix® net royalties which were not sold toPRF are recorded as product royalty revenue and a corresponding amount that ispayable to CCH is recorded as royalty expense, which is included in researchand development expense.  Product royaltyrevenue and royalty expense related to the Company’s retained interests inRotarix® was $1.9 million and $0.9 million for the three months ended September 30,2009 and 2008 and $5.1 million and $1.7 million for the nine months ended September 30,2009 and 2008, respectively.

 

On April 3, 2008,Rotarix® received FDA market approval for the prevention of rotavirusgastroenteritis in infants, which triggered a $1.5 million milestonepayment to the Company from Glaxo, 50% of which the Company has retained underits agreement with PRF.  During the threemonths ended June 30, 2008, the Company also recorded $0.2 million inrevenue and an offsetting amount in royalty expense for the payable due to CCHfor its portion of the Glaxo milestone. The market launch of Rotarix® by Glaxoin the U.S. market during the three months ended September 30, 2008resulted in a $10 million milestone payment to the Company from PRF, whichthe Company received on October 1, 2008. As of March 31, 2008, the Companyrecorded the estimated fair value of the $10 million milestone payment duefrom 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 product sales in countries that have validpatent protection. These royalty rates are discounted by 30% for “non-patent”countries (primarily international markets). In September 2006, theCompany received notice from Glaxo that Glaxo would begin paying royalties onsales of Rotarix® vaccine at the lower of the two royalty rates under their1997 license agreement. Glaxo’s decision to pay the lower royalty rate (whichis 70% of the full rate) is based upon Glaxo’s assertion that Rotarix® is notcovered by the patents Glaxo licensed from the Company in Australia and certainEuropean countries. The Company is currently evaluating the basis for Glaxo’saction and the Company’s potential remedies. If Glaxo’s position stands, the royalties to which PRF is entitled willno longer be limited by a $27.5 million annual threshold, which theCompany projected may have been reached in later years as sales of Rotarix®increased. Irrespective of Glaxo’s position, the Company 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 tothe Company, though the potential amount of such residual royalties will belower if Glaxo’s position stands.

 

*Pfizer Inc. (“Pfizer”) License andDevelopment Agreement*

 

On April 16, 2008, theCompany and Pfizer entered into a License and Development Agreement (the “PfizerAgreement”) under which Pfizer was granted an exclusive worldwide license to atherapeutic cancer vaccine candidate, CDX-110, in Phase 2 development forthe treatment of glioblastoma multiforme. The Pfizer Agreement

 

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also gives Pfizer exclusive rights to the use ofEGFRvIII vaccines in other potential indications. Under the 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 alldevelopment costs for these programs. The Company is also eligible to receivepotential milestone payments exceeding $390 million for the successfuldevelopment and commercialization of CDX-110 and additional EGFRvIII vaccineproducts, as well as royalties on any product sales. The Pfizer Agreementbecame effective after clearance under the Hart-Scott-Rodino AntitrustImprovements Act of 1976 (as amended) on May 19, 2008.

 

On May 27, 2008, theCompany received $10 million from Pfizer in exchange for 781,250 shares ofthe Company’s common stock having a fair value of $10.9 million, or $13.91 pershare, on that date. The $0.9 million over the amount received from Pfizer wasrecorded as a reduction to deferred revenue of the $40 million upfrontpayment received from Pfizer on June 18, 2008.

 

The Company has determinedthat its performance obligations under this collaboration should be accountedfor as a single unit of accounting. The Company’s deliverables under thiscollaboration primarily include an exclusive license to its CDX-110 productcandidate and its EGFRvIII technologies, research and development services asrequired under the collaboration and participation in the joint clinicaldevelopment committee. The Company has estimated that its performance periodunder the collaboration will be 9.5 years based on an assessment of theperiod 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 providesfor reimbursement by Pfizer of all costs incurred by the Company in connectionwith the collaboration since the effective date. The Company invoices Pfizermonthly for its reimbursable costs and records the invoiced amount as deferredrevenue. These deferred revenue amounts are amortized to revenue over theexpected 9.5-year performance period on a straight-line basis using the CAPMmodel. The Company incurred and invoiced Pfizer reimbursable costs related tothe Pfizer collaboration of $0.3 million and $1.5 million for the three monthsended September 30, 2009 and 2008 and $3.0 million and $2.8 million forthe nine months ended September 30, 2009 and 2008, respectively.

 

The Company recorded productdevelopment and licensing agreements revenue under the Pfizer Agreement asfollows:

 
| ** **                 | ** ** | **Three months ended September 30,** | ** ** | **Nine months ended September 30,** | ** ** |
|----------------------------|------------|----------------------------------------------------------|------------|---------------------------------------------------------|------------|
| ** **                 | ** ** | **2009**                                                 | ** ** | **2008**                                                | ** ** | **2009** | ** ** | **2008** | ** ** |
| ** **                 | ** ** | **(In thousands)**                                       | ** ** |
| Up-front portion           |       | $                                                        | 1,030      |                                                    | $          | 1,030 |   | $ | 3,089 |   | $ | 1,522 |   |
| Reimbursable costs portion |       | 245                                                      |       | 86                                                      |       | 814 |   | 111 |   |
|                       |       | $                                                        | 1,275      |                                                    | $          | 1,116 |   | $ | 3,903 |   | $ | 1,633 |   |

 

At September 30, 2009,the Company had total deferred revenue of $40.2 million related to the PfizerAgreement.

 

In connection with thePfizer Agreement as discussed further in Note 9, the Company paid a totalof $6.9 million in sublicense fees to Duke University and Thomas JeffersonUniversity.  The Company recorded thesedeferred sublicense fees to other assets in the condensed consolidated balancesheets and is amortizing them over the 9.5-year performance period at a rate of$0.2 million per quarter.  At September 30,2009, the unamortized balance of deferred costs was $5.9 million.

 

*RockefellerUniversity (“Rockefeller”) and Gates Grand Challenge Award*

 

The Company is collaboratingon the development of a vaccine, CDX-2401, aimed at providing protection frominfection with HIV, the virus known to cause AIDS. This program is in a Bill &Melinda Gates Foundation funded partnership with collaborators at Rockefellerand the Aaron Diamond AIDS Research Center. Preclinical

 

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studies and manufacturing development are inprogress and payments to the Company are made on a time and materialsbasis.  The Company recognized grant revenuefrom Rockefeller of $0.8 million and $0.1 million for the three months ended September 30,2009 and 2008 and $0.9 million and $0.3 million for the nine months ended September 30,2009 and 2008, respectively.  At September 30,2009, the Company had total deferred revenue of $0.4 million related to theRockefeller arrangement.

 

**(9)**                             Collaboration Agreements

** **

The Company has entered intolicensing agreements with several universities and research organizations.Under the terms of these agreements, the Company has received licenses oroptions to license technology, specified patents or patent applications.  The Company’s licensing and development collaborationagreements generally provide for royalty payments equal to specifiedpercentages of product sales, annual license maintenance fees and continuingpatent prosecution costs.  In addition,the Company has committed to make potential future milestone payments to thirdparties of up to approximately $117 million as part of our variouscollaborations including licensing and development programs. Payments underthese agreements generally become due and payable only upon achievement ofcertain developmental, regulatory and/or commercial milestones.  Nonrefundable license feeexpense was $0.1 million and $0.2 million for the three months ended September 30,2009 and 2008 and $0.5 million and $0.5 million for the nine months ended September 30,2009 and 2008, respectively.

 

*Medarex, Inc.,**a wholly-owned subsidiary of Bristol-Myers Squibb**(“Medarex”)*

 

Medarex, a related party tothe Company, owns approximately 18.6% of the Company’s outstanding common stockat September 30, 2009.  The Companyand Medarex have entered into the following agreements, each of which wasapproved by a majority of its independent directors who did not have aninterest in the transaction. These agreements include:

 

·                  An Assignment and License Agreement, asamended, (“Assignment and License Agreement”) that provides for the assignmentof certain patent and other intellectual property rights and a license tocertain Medarex technology;

 

·                  A Research and Commercialization Agreement,as amended, (“Research and Commercialization Agreement”) that provides theCompany with certain rights to obtain exclusive commercial licenses toproprietary monoclonal antibodies raised against certain antigens; and

 

·                  A Master Services Agreement, that sets forthMedarex’s agreement to provide the Company with certain services to be mutuallyagreed upon, which may include, among others, clinical and regulatoryassistance.

 

Under the terms of theAssignment and License Agreement and Research and Commercialization Agreement,the Company may be required to pay license fees and milestone payments toMedarex with respect to the development of any products containing suchlicensed antibodies. These fees and milestones may total up to $7 to $10 millionper licensed antibody if a product containing such licensed antibody receivesapproval from the FDA and/or equivalent foreign agencies.  Potential future milestone payments may ormay not be triggered, vary in size and are generally payable only upon achievement ofcertain clinical and regulatory milestones.  No licensed antibody is currently in clinicaldevelopment.

 

The Company may also berequired to pay royalties on any product sales containing licensed antibodies.The royalties will be payable on a country-by-country and product-by-productbasis until the date which is the later of: (i) the expiration of thelast-to-expire of the Medarex patents covering the product in such country or (ii) thetenth anniversary of the first commercial sale of a product in such country.The Company will also be responsible for the payment of any royalties, licensefees and milestone and other payments due to third parties if the Companylicenses any additional technology 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.

 

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The Company and Medarexentered into a settlement and mutual release agreement on October 19,2007, whereby the parties agreed to a settlement with respect to a disputedreturn of capital related to certain unsuccessful initial public offering coststhat were funded by Medarex on behalf of the Company in prior years. TheCompany issued to Medarex 351,692 shares of the Company’s common stock equal invalue to $3.0 million, based on the per share price of $8.64 set on the secondtrading day prior to the closing date of the AVANT Merger. Both parties haveagreed to mutual releases under the settlement and mutual release agreement.

 

The Company has a payabledue Medarex related to the Master Services Agreement of $3.0 million at September 30,2009 and December 31, 2008.  In October 2009,the Company paid Medarex the $3.0 million owed under the Master ServicesAgreement.

 

*RockefellerUniversity**(“Rockefeller”)*

 

On November 1, 2005,the Company and Rockefeller entered into a license agreement for the exclusiveworldwide rights to human DEC-205 receptor, with the right to sublicense thetechnology. The license grant is exclusive except that Rockefeller may use andpermit other nonprofit organizations to use the human DEC-205 receptor patentrights for educational and research purposes. In addition, the Companyacknowledges that Rockefeller has granted Howard Hughes Medical Institute (“HHMI”)a paid-up, nonexclusive, irrevocable license to use the patent rights, biologicalmaterials, and technical information for HHMI’s research purposes, but with noright to sublicense.  The Company may berequired to pay milestone payments to Rockefeller with respect to developmentof the human DEC-205 receptor. The Company may also be required to payroyalties on any product sales. The royalties will be payable on acountry-by-country and licensed product-by-licensed product basis until thedate which is the later of (i) the expiration of the last to expire of thepatents covering the licensed product in such country or (ii) ten yearsfollowing the first commercial sale of a licensed product in such country.

 

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

 

On September 1, 2006,the Company and Duke entered into a license agreement that gave the Companyaccess and reference to the clinical data generated by Duke and itscollaborators in order for the Company to generate its own filing with the FDArelating to its CDX-110 product.  TheCompany may be required to pay license fees and milestone payments to Duke withrespect to development of the CDX-110 product. The Company may also be required to pay royalties upon approval ofCDX-110. 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.

 

In connection with thePfizer Agreement discussed in Note 8, the Company determined that $2.4million was payable to Duke as a sublicense fee. As provided for under the Dukelicense, the Company paid 50% of this amount to Duke in the form of 81,512shares of the Company’s common stock in October 2008.

 

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

 

On October 20, 2006,the Company and Ludwig entered into an agreement for the nonexclusive rights tosix cancer tumor targets for use in combination with the Company’s APCTargeting Technology. The term of the agreement is for ten years. Under theLudwig license, the Company may be required to pay milestone payments to Ludwigfor the use of the cancer targets in combination with the Company’stechnology.  The Company may also berequired to pay royalties upon approval of any product candidate. The royaltieswill be payable on a country-by-country and licensed product-by-licensedproduct basis until the date of the expiration of the last to expire of thepatents covering the licensed product in such country.

 

*AlterisTherapeutics, Inc. (“Alteris”)*

 

In October 2005, theCompany completed the acquisition of Alteris. The Company may be required to pay Alteris up to $5.0 million uponobtaining the first approval for commercial sale of an EGFRvIII product.

 

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*Thomas Jefferson University (“TJU”)*

 

In February 2003, theCompany entered into three exclusive license agreements with TJU.  Under these licenses, the Company may berequired to pay TJU milestone payments with respect to development of thelicensed product as well as royalties on net sales of licensed products duringthe term of the license agreements. In the event that TJU provides notice ofdefault and the default is not cured within 60 days of such notice, TJUmay terminate the license agreements.

 

In connection with thePfizer Agreement discussed in Note 8, the Company amended its licenseswith TJU to add additional sublicensing rights and paid $4.5 million in sublicensefees to TJU in 2008.

 

*3M Company(“3M Company”)*

 

On June 11, 2008, theCompany and 3M Company entered into a license agreement for the exclusiveworldwide rights to access 3M Company’s proprietary Immune Response Modifier,ResiquimodTM, (and additional Toll-Like Receptor 7/8 agonists (“TLR”)) forclinical study with the Company’s proprietary APC Targeting Technology, for useas vaccine adjuvants, with the right to sublicense the technology.  The Company may be required to pay 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.

 

*University of Southampton, UK (“Southampton”)*

 

In November 2008, theCompany entered into an Exclusive Patent and Know-How License Agreement withSouthampton to develop human antibodies towards CD27, a potentially importanttarget for immunotherapy of various cancers. CD27 is a critical molecule in theactivation pathway of lymphocytes, is downstream from CD40, and may provide anovel way to regulate the immune responses. In preclinical models, antibodiesto CD27 have been shown to mediate anti-tumor effects alone, and may beparticularly effective in combination with the Company’s other immunotherapies.  The Company may be required to pay 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.

 

*AmgenInc. (“Amgen”)*

 

In March 2009, the Company entered into a licenseagreement with Amgen to expand its PrecisionTargeted Immunotherapy Platform by acquiring exclusive rights to FMS-liketyrosine kinase 3 ligand (Flt3L) and CD40 ligand (CD40L).  Flt3L and CD40L areimmune modulating molecules that increase the numbers and activity of immune cellsthat control immune responses.  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 his position effective March 1, 2009pursuant to the provision of his employment agreement that deems a resignationwithin the year following a change of control (in this case, the AVANT Merger)as a termination resulting from a change of control.  In accordance with Dr. Newbold’semployment agreement, the Company recorded severance expense during the threemonths 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. UnaS. Ryan, former President and Chief Executive Officer of the Company, executeda separation agreement effective July 16, 2008 (the “Separation Agreement”)setting forth such terms regarding Dr. Ryan’s separation from theCompany.  Pursuant to the Separation Agreement,the Company recorded 

 

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severance expense during the three months ended June 30,2008 of $1.4 million.  The SeparationAgreement also provided for the vesting of options to purchase 153,125shares of Company common stock (of the options to purchase 612,500 shares ofCompany common stock which had been granted to Dr. Ryan on March 7,2008). The remainder of Dr. Ryan’s options terminated as of July 16,2008.  The Company recorded stock-basedcompensation expense of $1.3 million to general and administrative expenserelated to the acceleration of vesting of options in July 2008, when thecriteria for establishing a grant date were met.

 

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

 

As part of the AVANT Merger, the Company acquired theCDX-1135, cholera, ETEC, typhoid fever and cholesterol management vaccineprograms.  In January 2009, theCompany out-licensed its cholera and ETEC vaccine programs to VTI and no longerexpects to incur significant costs on these projects. The Company is presentlyseeking partners for its typhoid fever and cholesterol management vaccineprograms to complete the clinical development and commercialization of theseprojects. The Company does not expect to incur significant costs on theseprograms going forward. The Company is continuing the development of CDX-1135and expects to incur approximately $6.3 million to move this project tothe point of potentially out-licensing it to a third party.  Estimated revenues from thetyphoid-ETEC-cholera vaccine, the cholesterol management vaccine, and CDX-1135are expected to be generated beginning in 2014, 2015 and 2014, respectively.

 

**(12)****                         ****CuraGen Merger**

 

In connection with the CuraGen Merger, effective October 1,2009, the Company (i) issued 15,722,713 shares of common stock of theCompany, or 0.2739 shares, in exchange for each share of outstanding CuraGencommon stock, plus cash in lieu of fractional shares (the “CuraGen ExchangeRatio”), (ii) assumed all of the CuraGen stock options outstanding underthe CuraGen 2007 Stock Plan (the “CuraGen 2007 Options”), and (iii) assumedan obligation for the $12.5 million in CuraGen 4% convertible subordinateddebt due in February 2011 (the “CuraGen Debt”).  The CuraGen2007 Options are exercisable into 931,315 shares of the Company’s common stockafter applying the CuraGen Exchange Ratio.

 

In connection with the consummation of the CuraGenMerger, effective October 1, 2009, Celldex, CuraGen, and The Bank of New YorkMellon (formerly the Bank of New York) (the “Trustee”) amended the CuraGenDebt to provide that the CuraGen Debt shall be convertible into shares ofCelldex common stock at the rate of 28.27823 shares of Celldex common stock per$1,000 principal amount of notes, or $35.36 per share. 

 

Based on the closing priceof the Company’s common stock on October 1, 2009 of $5.43, the fair value ofthe shares issued was $85.4 million. The Company will apply acquisitionaccounting as of October 1, 2009. Accordingly, the results of operations of CuraGen will be included inthe results of operations of the Company beginning October 1, 2009.

 

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**Item 2. ****Management’s Discussion and Analysis of FinancialCondition and Results of Operations**

 

***Safe Harbor Statement under the Private Securities Litigation ReformAct of 1995:***  This reporton Form 10-Q contains forward-looking statements made pursuant to the safeharbor provisions of the Private Securities Litigation Reform Act of 1995 underSection 27A of the Securities Act of 1933, as amended, and Section 21Eof the Securities Exchange Act of 1934, as amended. Forward-looking statementsinclude statements with respect to our beliefs, plans, objectives, goals,expectations, anticipations, assumptions, estimates, intentions and futureperformance, and involve known and unknown risks, uncertainties and otherfactors, which may be beyond our control, and which may cause our actualresults, performance or achievements to be materially different from futureresults, performance or achievements expressed or implied by suchforward-looking statements. All statements other than statements of historicalfact are statements that could be forward-looking statements. You can identifythese forward-looking statements through our use of words such as “may,” “will,”“can,” “anticipate,” “assume,” “should,” “indicate,” “would,” “believe,” “contemplate,”“expect,” “seek,” “estimate,” “continue,” “plan,” “point to,” “project,” “predict,”“could,” “intend,” “target,” “potential” and other similar words andexpressions of the future.

 

There are a number ofimportant factors that could cause the actual results to differ materially fromthose expressed in any forward-looking statement made by us. These factorsinclude, but are not limited to:

 

·                  our ability to raise sufficient capital onterms acceptable to us, or at all;

 

·                  our ability to successfully integrate ourand CuraGen’s businesses, to integrate our and CuraGen’s business withoutcausing delays in the research and development necessary to select drugdevelopment candidates and/or delays in clinical trials, and to operate thecombined business efficiently;

 

·                  our ability to adapt our APC TargetingTechnologyTM to develop new, safe and effective vaccines against oncology andinfectious disease indications;

 

·                  our ability to adapt our vectoring systems todevelop new, safe and effective orally administered vaccines against diseasecausing agents;

 

·                  our ability to successfully complete productresearch and further development, including animal, preclinical and clinicalstudies, and commercialization of CDX-110, CDX-1307, Ty800, CDX-1135 (formerlyTP10), CDX-1401 and other products and the growth of the markets for thoseproduct candidates;

 

·                  the cost, timing, scope and results ofongoing safety and efficacy trials of CDX-110, CDX-1307, Ty800, CDX-1135,CDX-1401 and other preclinical and clinical testing, some of which are notmanaged by us;

 

·                  the ability to negotiate strategicpartnerships or other disposition transactions for our non-core programs,including our cholesterol management vaccine, CETi;

 

·                  our ability to manage multiple clinicaltrials for a variety of product candidates at different stages of development;

 

·                  the strategies and business plans of ourpartners, such as Pfizer’s plans for CDX-110, GlaxoSmithKline’s plans withrespect to Rotarix® and Vaccine Technologies’ plans concerning the CholeraGarde®(Peru-15) and ETEC E. coli vaccines, which are not within our control, and ourability to maintain strong, mutually beneficial relationships with thosepartners;

 

·                  our ability to develop technologicalcapabilities and expand our focus to broader markets for vaccines;

 

·                  the availability, cost, delivery and qualityof clinical and commercial grade materials produced our own manufacturingfacility or supplied by contract manufacturers and partners;

 

·                  the timing, cost and uncertainty of obtainingregulatory approvals for product candidates;

 

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·                  our ability to develop and commercializeproducts before competitors that are superior to the alternatives developed bysuch competitors;

 

·                  the validity of our patents and our abilityto avoid intellectual property litigation, which can be costly and divertmanagement 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-lookingstatements are expressly qualified in their entirety by this cautionary notice.You are cautioned not to place undue reliance on any forward-lookingstatements, which speak only as of the date of this report or the date of thedocument incorporated by reference into this report. We have no obligation, andexpressly disclaim any obligation, to update, revise or correct any of theforward-looking statements, whether as a result of new information, future eventsor otherwise. We have expressed our expectations, beliefs and projections ingood faith and we believe they have a reasonable basis. However, we cannotassure you that our expectations, beliefs or projections will result or beachieved or accomplished.

 

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**OVERVIEW**

 

We are a biopharmaceuticalcompany that uses novel applications of immunology to develop products for theprevention and treatment of diseases. Using our Precision TargetedImmunotherapy Platform, we are developing a broad portfolio of vaccines,therapeutic antibodies and other targeted immunotherapeutics addressing a widerange of applications including oncology, inflammatory and infectious diseases.These include therapeutic cancer vaccines, monoclonal antibodies, single-dose,oral vaccines that protect against important disease-causing infectious agentsand a treatment to reduce complement-mediated tissue damage. We are advancing arobust pipeline of clinical and preclinical product candidates, the mostadvanced of which are for treatment of various cancers. Our lead programs aretherapeutic cancer vaccines designed to instruct the patient’s immune system torecognize and destroy cancer cells.

 

Our strategy is todemonstrate proof-of-concept for our product candidates before leveraging theirvalue through partnerships or, in appropriate situations, continuing late stagedevelopment ourselves. Demonstrating proof-of-concept for a product candidategenerally involves bringing it through Phase 1 clinical trials and one ormore Phase 2 clinical trials so that we are able to demonstrate, based onhuman trials, good safety data for the product candidate and some dataindicating its effectiveness. Our current collaborations encompass thecommercialization of an oral human rotavirus vaccine, the development of oralcholera, ETEC and HIV vaccines, and a therapeutic brain cancer vaccine. Ourproduct candidates generally address large market opportunities for which webelieve current therapies are inadequate or non-existent.

 

We are targeting our effortswhere we can add the greatest value to the development of our products andtechnologies.  We out-license technologyand programs that do not match our development focus or where we lacksufficient resources for the technology’s or program’s efficient development orwhere certain uses of the technology are outside of our focus.  Our goal is to demonstrate clinicalproof-of-concept for each product, and then seek excellent partners to help seethose products through to commercialization. We thus leverage the value of ourtechnology portfolio through corporate, governmental and non-governmentalpartnerships. This approach allows us to maximize the overall value of ourtechnology and product portfolio while best ensuring the expeditiousdevelopment of each individual product.

 

*Mergerbetween AVANT and Celldex*

 

On March 7, 2008, we(formerly known as AVANT Immunotherapeutics, Inc.) (“AVANT”) merged withand into Celldex Research Corporation (formerly known as Celldex Therapeutics, Inc.)(“Celldex Research”), a privately-held company, (the “AVANT Merger”).  Effective October 1, 2008, we changedour name from AVANT Immunotherapeutics, Inc. to Celldex Therapeutics, Inc.

 

The AVANT Merger wasaccounted for using the purchase method of accounting and was treated as anacquisition by Celldex Research of AVANT even though AVANT was the issuer ofcommon stock and the surviving legal entity in the transaction.  Because Celldex Research was determined to bethe acquirer for accounting purposes, the historical financial statements ofCelldex Research became our historical financial as of the closing of the AVANTMerger. Accordingly, our financial statements prior to the AVANT Merger reflectthe financial position, results of operations and cash flows of CelldexResearch, which during the historical periods presented in the accompanyingconsolidated financial statements, was then majority-owned by Medarex, Inc.(“Medarex”). Following the AVANT Merger, the financial statements reflect thefinancial position, results of operation and cash flows of the combinedcompanies. The results of operations of AVANT are included in our results ofoperations beginning March 8, 2008.

 

*Merger between us and CuraGen*

 

On October 1, 2009, CuraGen Corporation (“CuraGen”),a former publicly-traded company, merged with a wholly-owned subsidiary of us(the “CuraGen Merger”) in accordance with a definitive merger agreement dated May 28,2009 (the “CuraGen Merger Agreement”). In connection with the CuraGen Merger, effective October 1, 2009,we (i) issued 15,722,713 shares of our common stock, or 0.2739 shares, inexchange for each share of outstanding CuraGen common stock, plus cash in lieuof fractional shares (the “CuraGen Exchange Ratio”), (ii) assumed all ofthe CuraGen stock options outstanding under the CuraGen 2007 Stock Plan (the “CuraGen2007

 

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Options”),and (iii) assumed the obligations of the $12.5 million in CuraGen 4% convertiblesubordinated debt due in February 2011 (the “CuraGen Debt”). The CuraGen 2007 Options are exercisable into 931,315 shares of ourcommon stock after applying the CuraGen Exchange Ratio.

 

In connection with the consummation of the CuraGenMerger, effective October 1, 2009, Celldex, CuraGen, and The Bank of New YorkMellon (formerly the Bank of New York) (the “Trustee”) amended the CuraGenDebt to provide that the CuraGen Debt shall be convertible into shares ofCelldex common stock at the rate of 28.27823 shares of Celldex common stock per$1,000 principal amount of notes, or $35.36 per share. 

 

Based on the closing priceof the Company’s common stock on October 1, 2009 of $5.43, the fair value ofthe shares issued was $85.4 million. The Company will apply acquisitionaccounting as of October 1, 2009. Accordingly, the results of operations of CuraGen will be included inthe results of operations of the Company beginning October 1, 2009.

 

**CURRENTPROGRAMS AND PARTNERSHIPS**

 

Our products are derived from a broad set ofcomplementary technologies which have the ability to utilize the human immunesystem and enable the creation of preventative and therapeutic agents. We areusing these technologies to develop vaccines and targeted immunotherapeuticsthat prevent or treat cancer and disease caused by infectious organisms, andtreatment vaccines that modify undesirable activity by the body’s own proteinsor cells. A number of our immunotherapeutic and vaccine product candidates arein various stages of clinical trials. We expect that a large percentage of ourresearch and development expenses will be incurred in support of our currentand future clinical trial programs.

 

Below is a table of 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                                    |         | —                 |         | Phase 1/2      |
|                     |         | CDX-1127           |         | Immuno-modulation, multiple tumors                       |         | —                 |         | Preclinical    |
|                     |         | CR011*             |         | Metastatic  melanoma and breast cancer                   |         | —                 |         | Phase 1/2      |
|                     |         | CR014*             |         | Renal and  ovarian cancer                                |         | —                 |         | Preclinical    |
| ** **               | ** **   | ** **         | ** **   | ** **                                               | ** **   | ** **             | ** **   | ** **     |
| **INFLAMMATORY DISEASE** |         | CDX-1135           |         | Transplantation                                          |         | —                 |         | Phase 1/2 |
| (formerly TP10)          |         | Renal disease      |         | —                                                   |         | Preclinical            |
|                     |         | CDX-1189           |         | Renal disease                                            |         | —                 |         | Preclinical    |
| ** **               | *** *** | ** **         | *** *** | ** **                                               | *** *** | ** **             | *** *** | ** **     |
| **INFECTIOUS**           |         | CholeraGarde® |         | Cholera infection                                        |         | Vaccine Technologies   |         | Phase 2b  |
| **DISEASE**              |         | ETEC               |         | Enterotoxigenic *E coli*  infection                      |         | Vaccine Technologies   |         | Phase 1        |
|                     |         | Ty800              |         | Typhoid fever infection                                  |         | —                 |         | Phase 2   |
|                     |         | CDX-2401           |         | HIV infection                                            |         | Rockefeller University |         | Preclinical    |
|                     |         |               |         |                                                     |         |                   |         |           |
| **MARKETED  PRODUCTS**   |         | Rotarix®      |         | Rotavirus  infection                                     |         | GlaxoSmithKline        |         | Marketed       |

 

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* Acquired effective October 1, 2009 inthe CuraGen Merger

 

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The expenditures that willbe necessary to execute our business plan are subject to numerousuncertainties. Completion of clinical trials may take several years or more,and the length of time generally varies substantially according to the type,complexity, novelty and intended use of a product candidate. It is not unusualfor the clinical development of these types of product candidates to each takefive years or more, and for total development costs to exceed $100 millionfor each product candidate. Our estimates that clinical trials of the type wegenerally conduct are typically completed over the following timelines:

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

 

The duration and the cost ofclinical trials may vary significantly over the life of a project as a resultof differences arising during the clinical trial protocol, including, amongothers, the following:

 

·                  the number of patients that ultimatelyparticipate in the trial;

 

·                  the duration of patient follow-up that seemsappropriate in view of results;

 

·                  the number of clinical sites included in thetrials;

 

·                  the length of time required to enrollsuitable patient subjects; and

 

·                  the efficacy and safety profile of theproduct candidate.

 

We test potential productcandidates in numerous preclinical studies for safety, toxicology andimmunogenicity. We may then conduct multiple clinical trials for each product candidate.As we obtain results from trials, we may elect to discontinue or delay clinicaltrials for certain product candidates in order to focus our resources on morepromising product candidates.

 

An element of our businessstrategy is to pursue the research and development of a broad portfolio ofproduct candidates. This is intended to allow us to diversify the risksassociated with our research and development expenditures. As a result, webelieve our future capital requirements and our future financial success arenot substantially dependent on any one product candidate. To the extent we areunable to maintain a broad range of product candidates, our dependence on thesuccess of one or a few product candidates increases.

 

Regulatory approval isrequired before we can market our product candidates as therapeutic or vaccineproducts. In order to proceed to subsequent clinical trial stages and toultimately achieve regulatory approval, the regulatory agency must concludethat our clinical data is safe and effective. Historically, the results frompreclinical testing and early clinical trials (through Phase 2) have oftennot been predictive of results obtained in later clinical trials. A number ofnew drugs, biologics and vaccines have shown promising results in earlyclinical trials, but subsequently failed to establish sufficient safety andefficacy data to obtain necessary regulatory approvals.

 

Furthermore, our businessstrategy includes the option of entering into collaborative arrangements withthird parties to complete the development and commercialization of our productcandidates. In the event that third parties take over the clinical trialprocess for one of our product candidates, the estimated completion date wouldlargely be under control of that third party rather than us. We cannot forecastwith any degree of certainty which proprietary products, if any, will besubject to future collaborative arrangements, in whole or in part, and how sucharrangements would affect our development plan or capital requirements. Ourprograms may also benefit from subsidies, grants, contracts or government oragency-sponsored studies that could reduce our development costs.

 

As a result of theuncertainties discussed above, among others, we are unable to estimate theduration and completion costs of our research and development projects or when,if ever, and to what extent it will receive cash inflows from thecommercialization and sale of a product. Our inability to complete our researchand development projects in a timely manner or our failure to enter intocollaborative agreements, when appropriate, could significantly increase ourcapital requirements and could adversely impact our liquidity. Theseuncertainties could force us to seek additional, external sources of financingfrom time to time in order to continue with our business strategy. Ourinability to raise additional capital, or to do so on terms reasonablyacceptable to us, would jeopardize the future success of our business.

 

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During the past five years through December 31,2008, we incurred an aggregate of $55.6 million in research anddevelopment expenses.  The followingtable indicates the amount incurred for each of our significant researchprograms and for other identified research and development activities duringthe year ended December 31, 2008 and the nine months ended September 30,2009 and 2008. The amounts disclosed in the following table reflect directresearch and development costs, license fees associated with the underlyingtechnology and an allocation of indirect research and development costs to eachprogram. Prior to 2008, the privately-held Celldex Research did not maintainrecords that allowed for quantification of research and development expenses byproject.

 
| ** **                                         | ** ** | **Nine Months Ended  September 30,** | ** ** | **December 31,** | ** ** |
|----------------------------------------------------|------------|-------------------------------------------|------------|-----------------------|------------|
| ** **                                         | ** ** | **2009**                                  | ** ** | **2008**              | ** ** | **2008** | ** ** |
| ** **                                         | ** ** | **(In thousands)**                        | ** ** |
| *Oncology:*                                        |       |                                      |       |                  |       |   |   |
| CDX-110                                            |       | $                                         | 3,483      |                  | $          | 6,353 |   | $ | 8,072 |   |
| CDX-1307                                           |       | 5,341                                     |       | 2,323                 |       | 3,446 |   |
| CDX-1401                                           |       | 3,607                                     |       | 3,337                 |       | 5,562 |   |
| CDX-1127                                           |       | 639                                       |       | 728                   |       | 1,040 |   |
|                                               |       |                                      |       |                  |       |   |   |
| *Inflammatory Disease:*                            |       |                                      |       |                  |       |   |   |
| CDX-1135                                           |       | 371                                       |       | 123                   |       | 159 |   |
| CDX-1189                                           |       | 297                                       |       | 25                    |       | 104 |   |
|                                               |       |                                      |       |                  |       |   |   |
| *Infectious Disease:*                              |       |                                      |       |                  |       |   |   |
| Bacterial Vaccines (CholeraGarde®/ETEC/Ty800) |       | 124                                       |       | 1,391                 |       | 1,481 |   |
| CDX-2401                                           |       | 2,342                                     |       | 571                   |       | 830 |   |
|                                               |       |                                      |       |                  |       |   |   |
| *Marketed Products:*                               |       |                                      |       |                  |       |   |   |
| Rotarix®                                      |       | 5,128                                     |       | 1,915                 |       | 3,260 |   |
|                                               |       |                                      |       |                  |       |   |   |
| *Other Programs:*                                  |       | 2,397                                     |       | 1,977                 |       | 2,393 |   |
| Total R&D Expense                              |       | $                                         | 23,729     |                  | $          | 18,743 |   | $ | 26,347 |   |

 

**CancerVaccine 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, weand Pfizer Inc. (“Pfizer”) entered into a License and Development Agreement(the “Pfizer Agreement”) under which Pfizer was granted an exclusive worldwidelicense to CDX-110. The Pfizer Agreement also gives Pfizer exclusive rights tothe use of EGFRvIII vaccines in other potential indications. Pfizer funds alldevelopment costs for these programs.  Weand Pfizer are currently pursuing the development of CDX-110 for GBM therapyand plan to expand the clinical development into other cancers throughadditional clinical studies. The FDA has granted orphan drug designation forCDX-110 for the treatment of EGFRvIII expressing GBM as well as fast trackdesignation.

 

We initiated aPhase 2b/3 randomized study (ACT III) of CDX-110 combined withstandard of care, temozolomide, versus standard of care alone in patients withGBM 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 control 

 

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arm of the study will be offered the option toreceive treatment with CDX-110. Under this amendment, the ACT III study willprovide a multi-center, non-randomized dataset for CDX-110 in patients withnewly diagnosed GBM. These data will provide important additional informationthat can be used to better design 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-1307targets the beta chain of human chorionic gonadotropin, known as hCG-Beta,which is an antigen often found in epithelial tumors. The presence of hCG-Betain these cancers correlates with a poor clinical outcome, suggesting that thismolecule may contribute to tumor growth. Normal adult tissues have minimalexpression of hCG-Beta; therefore, targeted immune responses are not expectedto generate significant side effects.

 

We are completing twoPhase 1 studies at multiple centers that are designed to explore safetyand dose/effect relationships via two administration routes—intradermal (ID), atraditional vaccine route that allows efficient access to local dermaldendritic cells and intravenous (IV), a novel systemic approach to vaccinationthat might target a much larger population of dendritic cells. In both studies,there are dose escalations of CDX-1307 alone and CDX-1307 with the adjuvantGM-CSF (known to increase mannose receptor expression on dendritic cells). Atthe highest dose levels planned, additional immune system modulators (Toll-LikeReceptor Agonists, or TLR agonists) have been added to determine what effectthey have in augmenting an immune response. Patients with an assortment ofdifferent tumor types that are known to express hCG-Beta are being accrued withretrospective analysis for hCG-Beta expression. A four dose regimen is utilizedwith the possibility of retreatment if patients demonstrate tumor regression orstable disease.

 

Over seventy(70) patients with epithelial cancers have been treated in thePhase 1 clinical trials and more than half have evidence of hCG-Betaexpression by their tumor. The immunotherapy has been well tolerated with onlyminor adverse events observed (reddening at the injection site). Analysis ofthe initial cohorts with GM-CSF have revealed that several patients developedgood humoral responses to hCG-Beta, and some have demonstrated enhancement ofcirculating hCG-Beta-specific CD8 T cells. Thus, we are encouraged thatCDX-1307 is providing similar results as predicted in the preclinical studies.In addition, seven patients with breast, colorectal or pancreatic cancersexperienced disease stabilization from 2.2 to over 6.5 months.   The safety of CDX-1307 in combination withdefined immune system modulators is now being evaluated with intent to enterPhase 2 clinical research in the first quarter of 2010.

 

*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 receptorexpressing dendritic cells, CDX-1401 is the first APC product targeting DEC-205expressing dendritic cells. We are developing CDX-1401 for the treatment ofmalignant melanoma and a variety of solid tumors which express the proprietarycancer antigen 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. In September 2009,we initiated enrollment in a Phase 1/2 study with a combination regimen,including TLRs, for multiple 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.

 

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**Inflammatory Disease Development Programs**

 

*CDX-1135(formerly TP10):*  CDX-1135 isa molecule that inhibits a part of the immune system called the complementsystem. The complement system is a series of proteins that are importantinitiators of the body’s acute inflammatory response against disease, infectionand injury. Excessive complement activation also plays a role in somepersistent inflammatory conditions. CDX-1135 is a soluble form of naturallyoccurring Complement Receptor 1 that effectively inhibits the activation of thecomplement cascade in animal models and in human clinical trials. We believethat regulating the complement system could have therapeutic and prophylacticapplications in several acute and chronic conditions, including organtransplantation, multiple sclerosis, rheumatoid arthritis, age-related maculardegeneration (“AMD”), atypical Hemolytic Uremic Syndrome (“aHUS”), ParoxysmalNocturnal Hemaglobinuria (“PNH”), and myasthenia gravis. We are currentlydefining the most appropriate clinical development path for CDX-1135 and arefocusing on rare disease conditions of unregulated complement activation as thefastest 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. Dependingupon the specific antibody used, anti-CD89 antibodies can either be activatingand thus stimulate immune responses, or down-regulating and act as ananti-inflammatory agent.

 

**Infectious Disease Development Programs**

 

*CholeraGarde®and ETEC Vaccine:*  In January 2009,we entered into a license agreement with Vaccine Technologies, Inc. (“VTI”)under which we granted a worldwide exclusive license to VTI to develop andcommercialize our CholeraGarde® and ETEC vaccine programs. Financial terms ofthe agreement with VTI included an upfront license fee and provide formilestone payments and royalties on net sales of licensed products during theterm of the agreement.

 

*Ty800Typhoid Fever Vaccine:*  Wehave developed an oral vaccine to offer rapid, single-dose protection against *Salmonella typhi*, the cause of typhoidfever. Ty800 is targeted for both the travelers’ market and global healthneeds.  Results from our Phase 2trial of Ty800 showed that the single-dose, oral vaccine was well tolerated andimmunogenic, demonstrating that the desired immune response was achieved.Incidence of reactogenicity symptoms and adverse events post-vaccination weresimilar 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. Preclinical studies and manufacturing development are in progress andour collaborators plan to file an IND for Phase 1 clinical studies in thefirst half of 2010.

 

**Marketed Products**

 

*RotavirusVaccine:*  Rotavirus isa major cause of diarrhea and vomiting in infants and children. In 1997, welicensed our oral rotavirus strain to GlaxoSmithKline (“Glaxo”).  Glaxo gained approval for its rotavirusvaccine, Rotarix®, in Mexico in July 2004, which represented the first ina series of worldwide approvals and commercial launches for the product leadingup to the approval in Europe in 2006 and in the U.S. in 2008.  We licensed-in the rotavirus strain in 1995and owe a license fee of 30% to Cincinnati Children’s Hospital Medical Center (“CCH”)on net royalties received from Glaxo. In May 2005, we entered into anagreement whereby an affiliate of Paul Royalty Fund (“PRF”) purchased aninterest in the milestone payments and net royalties that we receive on thedevelopment and worldwide sales of Rotarix®. We have received a total of $60 million in milestone payments underthe PRF agreement. No additional milestone payments are due from PRF under theagreement.

 

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In September 2006, wereceived notice from Glaxo that Glaxo would begin paying royalties on sales ofRotarix® vaccine at the lower of two royalty rates under their 1997 licenseagreement. Glaxo’s decision to pay the lower royalty rate (which is 70% of thefull rate) is based upon Glaxo’s assertion that Rotarix® is not covered by thepatents Glaxo licensed from us in Australia and certain Europeancountries.  We are currently evaluatingthe 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.

 

## **CRITICAL ACCOUNTING POLICIES**

##  

Our criticalaccounting policies are more fully described in Note 1 to our consolidatedfinancial statements included in our Annual Report on Form 10-K for theyear ended December 31, 2008.  Weconsider our most critical accounting policies include revenue recognition foragreements entered into with various collaborators, accounting for businesscombinations, the amortization policy for acquired intangible assets, theestimates of costs incurred and assumptions made in recording accrued clinicalresearch and contract manufacturing costs and assumptions made in calculatingthe fair value of stock-based compensation expense.

 

**RESULTS OF OPERATIONS**

 

Our financial statementsprior to the AVANT Merger reflect the financial position, results of operationsand cash flows of Celldex Research. Following the AVANT Merger, our financialstatements reflect the financial position, results of operation and cash flowsof the combined companies.

 

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

 
| ** **                                    | ** ** | ** **                                 | ** ** | ** **     | ** ** | **Increase/**  | ** ** | **Increase/** | ** ** |
|-----------------------------------------------|------------|--------------------------------------------|------------|----------------|------------|----------------|------------|---------------|------------|
| ** **                                    | ** ** | **Three Months Ended  September 30,** | ** ** | **(Decrease)** | ** ** | **(Decrease)** | ** ** |
| ** **                                    | ** ** | **2009**                                   | ** ** | **2008**       | ** ** | **$**          | ** ** | **%**         | ** ** |
| ** **                                    | ** ** | **(In thousands)**                         | ** ** |
| Revenue:                                      |       |                                       |       |           |       |           |       |          |       |
| Product Development and  Licensing Agreements |       | $                                          | 1,339      |           | $          | 1,245          |       | $             | 94         |   | 8 | % |
| Contracts and Grants                          |       | 799                                        |       | 138            |       | 661            |       | 479           | %          |
| Product Royalties                             |       | 1,892                                      |       | 975            |       | 917            |       | 94            | %          |
| Total Revenue                                 |       | $                                          | 4,030      |           | $          | 2,358          |       | $             | 1,672      |   | 71 | % |
| Operating Expense:                            |       |                                       |       |           |       |           |       |          |       |
| Research and Development                      |       | 7,241                                      |       | 6,626          |       | 615            |       | 9             | %          |
| General and Administrative                    |       | 3,850                                      |       | 4,206          |       | (356           | )          | (8            | )%         |
| Amortization of Acquired  Intangible Assets   |       | 95                                         |       | 104            |       | (9             | )          | (9            | )%         |
| Total Operating Expense                       |       | 11,186                                     |       | 10,936         |       | 250            |       | 2             | %          |
| Operating Loss                                |       | (7,156                                     | )          | (8,578         | )          | (1,422         | )          | (17           | )%         |
| Investment and Other  (Expense) Income, Net   |       | (18                                        | )          | 922            |       | (940           | )          | (102          | )%         |
| Net Loss                                      |       | $                                          | (7,174     | )              | $          | (7,656         | )          | $             | (482       | ) | (6 | )% |

 

*Net Loss**:** *The $0.5million decrease in our net loss for the three months ended September 30,2009 compared to the three months ended September 30, 2008 was primarilythe result of increased revenues.  The effectof this increase was offset by lower investment income.  

 

*Revenue**:** *The $0.7million increase in our contract and grant revenue for the three months ended September 30,2009 was primarily due to us recognizing $0.8 million in revenue related to ourCDX-2401 program during the three months ended September 30, 2009.  The $0.9 million increase in our productroyalty revenue for the three months ended

 

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September 30, 2009 was related to our retained interests inRotarix® 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.

 

*Researchand Development Expense: *Research and development expenses consistprimarily of (i) personnel expenses, (ii) laboratory supply expensesrelating to the development of our technology, (iii) facility expensesrelated to our three facilities, (iv) product development expensesassociated with our product candidates, and (v) license fees onin-licensed technologies and royalty fees on out-licensed programs as follows:

 
| ** **          | ** ** | ** **                                 | ** ** | ** **     | ** ** | **Increase/**  | ** ** | **Increase/** | ** ** |
|---------------------|------------|--------------------------------------------|------------|----------------|------------|----------------|------------|---------------|------------|
| ** **          | ** ** | **Three Months Ended  September 30,** | ** ** | **(Decrease)** | ** ** | **(Decrease)** | ** ** |
| ** **          | ** ** | **2009**                                   | ** ** | **2008**       | ** ** | **$**          | ** ** | **%**         | ** ** |
| ** **          | ** ** | **(In thousands)**                         | ** ** |
| Personnel           |       | $                                          | 2,328      |           | $          | 1,973          |       | $             | 355        |   | 18 | % |
| Laboratory Supplies |       | 594                                        |       | 730            |       | (136           | )          | (19           | )%         |
| Facility            |       | 1,117                                      |       | 1,283          |       | (166           | )          | (13           | )%         |
| Product Development |       | 800                                        |       | 1,399          |       | (599           | )          | (43           | )%         |
| License and Royalty |       | 2,193                                      |       | 922            |       | 1,271          |       | 138           | %          |
|                     |            |                                            |            |                |            |                |            |               |            |  |  |  |

 

Personnel expenses primarilyinclude salary, benefits, stock-based compensation, payroll taxes andrecruiting costs.  The $0.4 millionincrease in our personnelexpenses for the three months ended September 30, 2009 was primarily dueto higher headcount. We expect personnel expenses to increase over the nexttwelve months primarily due to the CuraGen Merger.

 

Laboratory supply expensesinclude laboratory materials and supplies, services, and other related expensesincurred in the development of our technology. The $0.1 million decrease in our laboratory supply expenses for thethree months ended September 30, 2009 was primarily due to decreasedresearch, preclinical and manufacturing activities. We expect supply expensesto increase over the next twelve months as a result of increased research anddevelopment activities, although there may be fluctuations on a quarterly basis.

 

Facility expenses includedepreciation, amortization, utilities, rent, maintenance, and other relatedexpenses incurred at our three facilities (Phillipsburg, NJ and Needham andFall River, MA).  The $0.2 milliondecrease in our facilityexpenses for the three months ended September 30, 2009 was primarily dueto lower depreciation and amortization expenses.  We expect facility expenses to increase overthe next twelve months as a result of continued capital expansion, althoughthere may be fluctuations on a quarterly basis.

 

Product development expensesinclude clinical investigator site fees, external trial monitoring costs, dataaccumulation costs, contracted research and outside clinical drug productmanufacturing.  The $0.6 million decrease in our product development expensesfor the three months ended September 30, 2009 was primarily due to thetransfer of clinical management of our CDX-110 program to Pfizer.  We expect product development expenses toincrease over the next twelve months due to the increase in clinical trialexpenses related to our CDX-1307, CDX-1401 and CuraGen programs, although theremay be fluctuations on a quarterly basis.

 

License androyalty expenses relate to license fees on in-licensed technologies and royaltyfees on out-licensed programs.  The $1.3million increase in our license and royalty expenses for the three months endedSeptember 30, 2009 was primarily due to an increase in Rotarix® relatedroyalty fee expense.  We expect licenseand royalty expenses to increase over the next twelve months, although theremay be fluctuations on a quarterly basis.

 

*Generaland Administrative**Expense:** *The $0.4 million decrease in our generaland administrative expenses for the three months ended September 30, 2009was primarily due to the $1.3 million in stock-based compensation expenseincurred during the three months ended September 30, 2008 related to ourformer President and Chief Executive Officer. The effect of this decrease was partially offset by an increase inconsultant and legal expense of $0.8 million during the three months ended September 30,2009 primarily related to the CuraGen Merger. We expect general and administrative expense to increase over the nexttwelve months primarily due to the CuraGen Merger, although there may befluctuations on a quarterly basis.

 

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*Amortization**Expense:** *We expect amortizationexpense of acquired intangible assets to increase over the next twelve monthsprimarily due to the CuraGen Merger.

 

*Investment and OtherIncome, Net:*  The $0.9 million decrease in our investmentand other income, net for the three months ended September 30, 2009 wasprimarily due to lower average cash balances and lower average interest ratesin 2009. We anticipate investment income and interest expense to increase overthe next twelve months due to the CuraGen Merger.

 

**Nine Months Ended****September 30****, 2009 Compared****withNine Months Ended September 30****, 2008**

 
| ** **                                      | ** ** | ** **                                | ** ** | ** **     | ** ** | **Increase/**  | ** ** | **Increase/** | ** ** |
|-------------------------------------------------|------------|-------------------------------------------|------------|----------------|------------|----------------|------------|---------------|------------|
| ** **                                      | ** ** | **Nine Months Ended  September 30,** | ** ** | **(Decrease)** | ** ** | **(Decrease)** | ** ** |
| ** **                                      | ** ** | **2009**                                  | ** ** | **2008**       | ** ** | **$**          | ** ** | **%**         | ** ** |
| ** **                                      | ** ** | **(In thousands)**                        | ** ** |
| Revenue:                                        |       |                                      |       |           |       |           |       |          |       |
| Product Development and  Licensing Agreements   |       | $                                         | 4,338      |           | $          | 2,236          |       | $             | 2,102      |   | 94 | % |
| Contracts and Grants                            |       | 939                                       |       | 419            |       | 520            |       | 124           | %          |
| Product Royalties                               |       | 5,170                                     |       | 1,812          |       | 3,358          |       | 185           | %          |
| Total Revenue                                   |       | $                                         | 10,447     |           | $          | 4,467          |       | $             | 5,980      |   | 134 | % |
| Operating Expense:                              |       |                                      |       |           |       |           |       |          |       |
| Research and Development                        |       | 23,729                                    |       | 18,743         |       | 4,986          |       | 27            | %          |
| General and Administrative                      |       | 10,701                                    |       | 11,825         |       | (1,124         | )          | (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     |       | 286                                       |       | 257            |       | 29             |       | 11            | %          |
| Total Operating Expense                         |       | 34,112                                    |       | 45,581         |       | (11,469        | )          | (25           | )%         |
| Operating Loss                                  |       | (23,665                                   | )          | (41,114        | )          | (17,449        | )          | (42           | )%         |
| Investment and Other  Income, Net               |       | 83                                        |       | 1,067          |       | (984           | )          | (92           | )%         |
| Net Loss                                        |       | $                                         | (23,582    | )              | $          | (40,047        | )          | $             | (16,465    | ) | (41 | )% |

* *

*Net Loss:*  The $16.5million decrease in our net loss for the nine months ended September 30,2009 compared to the nine months ended September 30, 2008 was primarilythe result of a decrease in charges for acquired in-process research anddevelopment combined with increased revenue, partially offset by increased researchand development expenses.

 

*Revenue: *The $2.1 million increase in our product developmentand licensing agreement revenue for the nine months ended September 30,2009 was primarily due to an increase of $2.3 million in Pfizer relatedrevenue.  The $0.5 million increase inour contract and grant revenue for the nine months ended September 30,2009 was primarily due to us recognizing $0.9 million in revenue related to ourCDX-2401 program during the nine months ended September 30, 2009.  The $3.4 million increase in our productroyalty revenue for the nine months ended September 30, 2009 was primarilyrelated to our retained interests in Rotarix® net royalties which were not soldto PRF and which is equal to the amount payable to CCH and recognized inresearch and development expense by us.

 
| ** **                             | ** ** | ** **                                | ** ** | ** **     | ** ** | **Increase/**  | ** ** | **Increase/** | ** ** |
|----------------------------------------|------------|-------------------------------------------|------------|----------------|------------|----------------|------------|---------------|------------|
| ** **                             | ** ** | **Nine Months Ended  September 30,** | ** ** | **(Decrease)** | ** ** | **(Decrease)** | ** ** |
| **Research and Development  Expense:** | ** ** | **2009**                                  | ** ** | **2008**       | ** ** | **$**          | ** ** | **%**         | ** ** |
| ** **                             | ** ** | **(In thousands)**                        | ** ** |
| Personnel                              |       | $                                         | 7,385      |           | $          | 6,387          |       | $             | 998        |   | 16 | % |
| Laboratory Supplies                    |       | 1,829                                     |       | 1,528          |       | 301            |       | 20            | %          |
| Facility                               |       | 3,489                                     |       | 3,137          |       | 352            |       | 11            | %          |
| Product Development                    |       | 4,025                                     |       | 3,839          |       | 186            |       | 5             | %          |
| License and Royalty                    |       | 6,219                                     |       | 2,682          |       | 3,537          |       | 132           | %          |
|                                        |            |                                           |            |                |            |                |            |               |            |  |  |  |

 

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The $1.0 million increase in our personnel expenses for thenine months ended September 30, 2009 was primarily due to higher headcountas a result of the AVANT Merger offset by a decrease of $0.8 million instock-based compensation expense.

 

The $0.3 million increase in our laboratory supply expensesfor the nine months ended September 30, 2009 was primarily due toincreased research, preclinical and manufacturing activities as a result of thecontinued development of our product candidates.

 

The $0.4 million increase in our facility expenses for thenine months ended September 30, 2009 was primarily due to the AVANTMerger.

 

The $0.2 million increase in our product development expensesfor the nine months ended September 30, 2009 was primarily due to anincrease in preclinical work related to CDX-1401 and CDX-2401.

 

The $3.5 millionincrease in our license and royalty expenses for the nine months ended September 30,2009 was primarily due to an increase in Rotarix® related royalty fee expense.

 

*Generaland Administrative**Expense:** *The $1.1 million decrease in our generaland administrative expenses for the nine months ended September 30, 2009was primarily due to the $1.4 million in severance expense and $1.3 million instock-based compensation expense incurred during the nine months ended September 30,2008 primarily related to our former President and Chief ExecutiveOfficer.  The effect of this decrease waspartially offset by an increase in consultant and legal expense of $0.5 millionduring the nine months ended September 30, 2009 primarily related to theCuraGen Merger and $0.8 million in severance expense, including relatednon-cash stock-based compensation expense, incurred during the nine monthsended September 30, 2009 related to our former SVP, Business Development.

 

*Amortization**Expense:** *The increase in our amortization expense of acquiredintangible assets for the nine months ended September 30, 2009 wasprimarily due to the intangible assets acquired in connection with the AVANTMerger.

 

*Investment and Other Income,Net:*  The decrease in our investment and otherincome, net for the nine months ended September 30, 2009 was primarily dueto lower average cash balances and lower average interest rates in 2009.

 

**LIQUIDITY AND CAPITAL RESOURCES**

 

At September 30,2009, our principal sources of liquidity consisted of cash and cash equivalentsof $26.0 million. Our working capital at September 30, 2009 was $13.9million. We incurred a loss of $7.2 million and $23.6 million for the three andnine months ended September 30, 2009, respectively. Net cash used inoperations for the nine months ended September 30, 2009 was $19.0million.  We believe that the cash andinvestments acquired in the CuraGen Merger, the cash inflows from existinggrants and collaborations, interest income on invested funds and our currentcash and cash equivalents at September 30, 2009 are sufficient to meetestimated working capital requirements and fund planned operations for at leastthe next twelve months. At September 30, 2009, CuraGen had cash andinvestments of $70.3 million and 4% convertible subordinated debt due in February 2011of $12.5 million.

 

Our cashequivalents are highly liquid investments with a maturity of three months orless at the date of purchase and consist primarily of investments in moneymarket mutual funds with commercial banks and financial institutions. Wemaintain cash balances with financial institutions in excess of insured limits.We do not anticipate any losses with respect to such cash balances.

 

The use of our cash flowsfor operations has primarily consisted of salaries and wages for our employees,facility and facility-related costs for our offices, laboratories andmanufacturing facility, fees paid in connection with preclinical studies,clinical studies, contract manufacturing, laboratory supplies and services,consulting, legal and other professional fees. To date, and for the foreseeablefuture, the primary sources of cash flows from operations have been paymentsreceived from our collaborative partners and from government entities. Thetiming of any new collaboration agreements, government contracts or grants andany payments under these agreements, contracts or grants cannot be easilypredicted and may vary significantly from quarter to quarter.

 

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During the next twelve totwenty-four months, we may take further steps to raise additional capital tomeet our long-term liquidity needs including, but not limited to, the licensingof technology 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 Flowsfrom Operating Activities*

 

Net cash used in operatingactivities was $19.0 million for the nine months ended September 30, 2009compared to net cash provided by operating activities of $17.0  million for the nine months ended September 30,2008. The increase in net cash used in operating activities was primarily dueto Pfizer’s up-front payment of $40 million received during the nine monthsended September 30, 2008.  We expectthat cash used in operations will continue to increase in 2009 as we continueto develop our therapeutic product pipeline, bring forward new productcandidates into clinical development, develop the CuraGen product candidatesand incur interest costs, partially offset by an increase in investment income.

 

We have incurred and willcontinue to incur significant costs in the area of research and development,including preclinical and clinical trials, as our product candidates aredeveloped. We plan to spend significant amounts to progress our current productcandidates through the clinical trial and commercialization process as well asto develop additional product candidates. As our product candidates progressthrough the clinical trial process, we may be obligated to make significant milestonepayments. We also expect to incur future facility costs as a result ofcontinued capital expansion, renovations and replacements. We expect ourgeneral and administrative costs to increase as we expand our administrativeand business development activities. Furthermore, we expect investment incometo decrease as we fund future operations and capital expenditures from our cashreserves.

 

*Cash Flowsfrom Investing Activities*

 

Net cash provided byinvesting activities was $0.4 million for the nine months ended September 30,2009 compared to $10.0 million for the nine months ended September 30,2008. The decrease in net cash provided by investing activities was primarilydue to the AVANT Merger in 2008.  Weexpect to incur future facility cost as a result of continued capitalexpansion, renovation and replacements. Our investment in capital equipment is discretionary and there may besignificant fluctuations on a quarterly basis.

 

*Cash Flowsfrom Financing Activities*

 

Net cash provided byfinancing activities was $0.4 million for the nine months ended September 30,2009 compared to $10.9 million for the nine months ended September 30,2008. The decrease in net cash provided by financing activities was primarilydue to Pfizer’s one-time $10 million equity investment during the nine monthsended September 30, 2008.

 

*OtherLiquidity Matters*

 

Under the Pfizer Agreement,Pfizer made an upfront payment $40 million, an equity investment of$10.0 million and will fund all development costs for the licensedprograms. We are also eligible to receive potential milestone paymentsexceeding $390.0 million for the successful development andcommercialization of CDX-110 and additional EGFRvIII vaccine products, as wellas 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 $117 million as part of our various collaborationsincluding licensing and development programs. Payments under these agreementsgenerally become due and payable only upon achievement of certaindevelopmental, regulatory and/or commercial milestones. Because the achievementof these milestones had not occurred as of September 30, 2009, suchcontingencies have not been recorded in our financial statements. We do notexpect to incur any milestone payments during the remainder of 2009.

 

In connection with the CuraGen Merger, effective October 1,2009, we (i) issued 15,722,713 shares of our common stock, or 0.2739shares, in exchange for each share of outstanding CuraGen common stock, pluscash in lieu of fractional shares, (ii) assumed all of the CuraGen 2007Options, and (iii) assumed the obligations of the CuraGen Debt. The CuraGen 2007 Options and CuraGen Debt convert into shares of ourcommon stock after applying the CuraGen Exchange Ratio.

 

**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 development activities.None of these market-risk sensitive instruments are held for trading purposes.We invest our cash primarily in money market mutual funds. These investmentsare evaluated quarterly to determine the fair value of the portfolio. From timeto time, we invest in marketable securities. These marketable securities onlyinclude securities with active secondary or resale markets to help insureliquidity. We have implemented investment policies regarding the amount andcredit ratings of investments. Because of the short-term nature of theseinvestments, we do not believe we have material exposure due to market risk.The impact to our financial position and results of operations from likelychanges 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 September 30,2009 due to the short-term maturities of these instruments.

 

**Item 4.****                          ****Controls and 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 September 30, 2009, we carried out anevaluation under the supervision and with the participation of our management,including our Chief Executive Officer and Chief Financial Officer, of theeffectiveness of the design and operation of our disclosure controls andprocedures as of the three months ended September 30, 2009.

 

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

 

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*Changesin Internal Control Over Financial Reporting.*

 

Therewas no change 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 September 30, 2009 that has materially affected, or is reasonablylikely to materially affect, our internal control over financial reporting.

 

**PART II — OTHER INFORMATION**

 

## **Item 1.****                          ****Legal Proceedings**

##  

Following theannouncement of the proposed acquisition by Celldex of CuraGen, a putativeclass action complaint, *Margaret Capps v.Timothy Shannon, et al.*, was filed in the Connecticut SuperiorCourt, Judicial District of New Haven, on June 9, 2009. A second putativeclass action complaint, *Cheryl Smith v.CuraGen Corporation, et al.*, was filed in the Court of Chancery ofthe State of Delaware on June 15, 2009. Both lawsuits purport to have beenbrought on behalf of all public stockholders of CuraGen, and name CuraGen, allof its former directors, Celldex, and Cottrell Merger Sub as defendants. Thecomplaints alleged, among other things, that the merger consideration paid toCuraGen stockholders in the merger is unfair and undervalues CuraGen. Inaddition, the complaints alleged that CuraGen’s former directors violated theirfiduciary duties by, among other things, failing to maximize stockholder valueand failing to engage in a fair sale process. The Plaintiffs in the two actionsalso sought to add claims that CuraGen’s former directors breached theirfiduciary duty of disclosure by making purportedly misleading and incompletedisclosures in the preliminary proxy statement concerning the merger. Thecomplaints also alleged that CuraGen and Celldex aided and abetted the allegedbreaches of fiduciary duties by CuraGen’s directors.

 

On July 21, 2009,the attorneys for the parties in the two actions executed a memorandum ofunderstanding (the “MOU”) pursuant to which such actions will be dismissed withprejudice, subject to final court approval of the settlement in the MOU.CuraGen agreed to make certain revisions to the joint proxystatement/prospectus (which was prepared in connection with the approval byCuraGen’s stockholders of the merger and by Celldex’s stockholders of the stockissued to the former stockholders of CuraGen in the merger) as part of theagreement among the parties to settle the actions and agreed to pay attorneys’fees and expenses as awarded by the court, expected to be $0.3 million. Thesettlement of the actions, subject to court approval, will result in adismissal of all merger-related claims against CuraGen’s former board ofdirectors, CuraGen and Celldex. The MOU resolves the allegations by theplaintiffs against the defendants in connection with the proposed acquisition,and includes no admission of wrongdoing.  The settlement outlined in theMOU remains subject to, among other things, (i) drafting and execution ofa formal stipulation of settlement and such other documentation as may berequired to obtain final court approval of the settlement, (ii) 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 (iii) the entry of orders dismissing the actions withprejudice on the merits.  On August 27, 2009, a stipulation ofsettlement was submitted to the court for the action captioned Cheryl Smithv. CuraGen Corporation, et al, pending in the Court of Chancery of theState of Delaware, and thereafter a fairness hearing was set for November 9,2009 where the parties will seek approval of their settlement of the DelawareAction.

 

CuraGenCorporation's former landlord filed a complaint in the Connecticut SuperiorCourt, Judicial District of New Haven, on September 9, 2009, in case captioned *T.K.J. Associates LLC v. CuraGen Corporation*.  The plaintiff alleges that CuraGen failed topay rent and additional charges, and, upon vacating previously leased space,failed to restore the vacated space to the condition of initial occupancy,failed to pay utility charges, failed to remove personal property, and failedto comply with applicable environmental laws and regulations.  CuraGen believes that the claims made by the landlordare without merit and intends to defend the lawsuit vigorously.

 

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## **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 and on Form S-3 filed with theSEC on October 21, 2009, which could materially affect our business,financial condition or future results. The risks described in our Annual Reporton Form 10-K may not be the only risks facing the Company. Additionalrisks and uncertainties not currently known to the Company or that the Companycurrently deems to be immaterial also may materially adversely affect theCompany’s business, financial condition and/or operating results.

 

There were no materialchanges to the risk factors previously disclosed in our Annual Report on Form 10-Kfiled with the SEC on March 2, 2009, in our joint proxystatement/prospectus filed on August 28, 2009 and in our Form S-3filed on October 21, 2009.

 

## **Item 4.****                          ****Submission of Matters toa Vote of Security Holders**

##  

On September 30,2009, the Company held a Special Meeting of Stockholders at which thestockholders approved two proposals: (i) to approve the issuance of theCompany’s common stock pursuant to the Agreement and Plan of Merger dated as ofMay 28, 2009, with respect to the CuraGen Merger; and (ii) to adjournthe meeting if necessary to solicit additional proxies in the event that thereare insufficient votes to constitute a quorum or approve Proposal No. 1 atthe time of the meeting.

 

At the Special Meeting ofStockholders, the following votes were tabulated for the proposal before theCompany’s Stockholders:

 

PROPOSAL I

 

Toapprove the issuance of the Company’s common stock pursuant to the Agreementand Plan of Merger dated as of May 28, 2009

 
| **For**   | ** ** | **Against** | ** ** | **Abstain** | ** ** |
|-----------|------------|-------------|------------|-------------|------------|
| 9,521,404 |       | 396,989     |       | 15,399      |       |

 

PROPOSAL II

 

Toadjourn the meeting if necessary to solicit additional proxies in the eventthat there are insufficient votes to constitute a quorum or approve Proposal No. 1at the time of the meeting.

 
| **For**   | ** ** | **Against** | ** ** | **Abstain** | ** ** |
|-----------|------------|-------------|------------|-------------|------------|
| 9,257,777 |       | 649,017     |       | 26,998      |       |

 

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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 the requirementsof the Securities Exchange Act of 1934, the registrant has duly caused thisreport to be signed on its behalf by the undersigned thereunto duly authorized.

 

| ** **                    | ** ** | **CELLDEX  THERAPEUTICS, INC.**                               |
|-------------------------------|------------|---------------------------------------------------------------|
|                          |       |                                                          |
|                          |       | BY:                                                           |
|                          |       |                                                          |
|                          |       | /s/  ANTHONY S. MARUCCI                                       |
| Dated:  November 6, 2009 |       | Anthony  S. Marucci                                           |
|                          |       | President  and Chief Executive Officer                        |
|                          |       | (Principal  Executive Officer)                                |
|                          |       |                                                          |
|                          |       | /s/  AVERY W. CATLIN                                          |
| Dated:  November 6, 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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