Item 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

We are a biopharmaceutical company dedicated to developing therapeutic monoclonal and bispecific antibodies that address diseases for which available treatments are inadequate. Our drug candidates include antibody-based therapeutics which have the ability to engage the human immune system and/or directly affect critical pathways to improve the lives of patients with inflammatory diseases and many forms of cancer.

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

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CDX-0159, a monoclonal antibody that specifically binds the KIT receptor and potently inhibits its activity, which completed a Phase 1a study in healthy subjects in summer 2020. We are studying CDX-0159 in mast cell driven diseases, including, initially, in urticarias and plan to initiate a study in prurigo nodularis in the fourth quarter of 2021. In October and December 2020 respectively, we announced that enrollment had opened and the first patients had been dosed in Phase 1b studies in chronic spontaneous urticaria (CSU) and chronic inducible urticaria (CIndU). Positive interim data to date from the Phase 1b study in CIndU were reported in late Q1 2021 in patients with cold contact urticaria and symptomatic dermographism and we announced that we would be expanding this study to also include patients with cholinergic urticaria;

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CDX-1140, an agonist monoclonal antibody targeted to CD40, a key activator of immune response, currently being studied in a Phase1 study. Dose escalation was completed in a Phase 1 study in solid tumors and lymphoma and the recommended dose for further study was determined to be 1.5 mg/kg for both CDX-1140 monotherapy and in combination with CDX-301, our dendritic cell growth factor. We have initiated multiple expansion cohorts within the study, including a combination cohort with KEYTRUDA® (pembrolizumab) in patients refractory to PD1/PDL1 treatment and a combination cohort with standard of care chemotherapy in patients with untreated metastatic pancreatic cancer. We are exploring additional combination cohorts with mechanisms that we believe could be complementary or synergistic with CDX-1140; and

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CDX-527, a bispecific antibody that uses our proprietary highly active anti-PD-L1 and CD27 human antibodies to couple CD27 co-stimulation with blockade of the PD-L1/PD-1 pathway, for which we initiated a Phase 1 study in advanced solid tumors in August 2020.

We routinely work with external parties to collaboratively advance our drug candidates. In addition to Celldex-led studies, we also have an Investigator Initiated Research (IIR) program with multiple studies ongoing with our drug candidates.

Our goal is to build a fully integrated, commercial-stage biopharmaceutical company that develops important therapies for patients with unmet medical needs. We believe our program assets provide us with the strategic options to either retain full economic rights to our innovative therapies or seek favorable economic terms through advantageous commercial partnerships. This approach allows us to maximize the overall value of our technology and product portfolio while best ensuring the expeditious development of each individual product. Currently, all programs are fully owned by Celldex.

The expenditures that will be necessary to execute our business plan are subject to numerous uncertainties. Completion of clinical trials may take several years or more, and the length of time generally varies substantially according to the type, complexity, novelty and intended use of a drug candidate. It is not unusual for the clinical development of these types of drug candidates to each take five years or more, and for total development costs to exceed $100 million for each drug candidate. We estimate that clinical trials of the type we generally conduct are typically completed over the following timelines:

Clinical Phase Estimated Completion Period

Phase 1 1 – 2 Years

Phase 2 1 – 5 Years

Phase 3 1 – 5 Years

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

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the number of patients that ultimately participate in the trial;

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the duration of patient follow-up that seems appropriate in view of results;

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the number of clinical sites included in the trials;

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the length of time required to enroll suitable patient subjects; and

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the efficacy and safety profile of the drug candidate.

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

An element of our business strategy is to pursue the discovery, research and development of a broad portfolio of drug candidates. This is intended to allow us to diversify the risks associated with our research and development expenditures. To the extent we are unable to maintain a broad range of drug candidates, our dependence on the success of one or a few drug candidates increases.

Regulatory approval is required before we can market our drug candidates as therapeutic products. In order to proceed to subsequent clinical trial stages and to ultimately achieve regulatory approval, the regulatory agency must conclude that our clinical data demonstrate that our product candidates are safe and effective. Historically, the results from preclinical testing and early clinical trials (through Phase 2) have often not been predictive of results obtained in later clinical trials. A number of new drugs and biologics have shown promising results in early clinical trials but subsequently failed to establish sufficient safety and efficacy data to obtain necessary regulatory approvals.

Furthermore, our business strategy includes the option of entering into collaborative arrangements with third parties to complete the development and commercialization of our drug candidates. In the event that third parties take over the clinical trial process for one of our drug candidates, the estimated completion date would largely be under control of that third party rather than us. We cannot forecast with any degree of certainty which proprietary products, if any, will be subject to future collaborative arrangements, in whole or in part, and how such arrangements would affect our development plan or capital requirements. Our programs may also benefit from subsidies, grants, contracts or government or agency-sponsored studies that could reduce our development costs.

As a result of the uncertainties discussed above, among others, it is difficult to accurately estimate the duration and completion costs of our research and development projects or when, if ever, and to what extent we will receive cash inflows from the commercialization and sale of a product. Our inability to complete our research and development projects in a timely manner or our failure to enter into collaborative agreements, when appropriate, could significantly increase our capital requirements and could adversely impact our liquidity. These uncertainties could force us to seek additional, external sources of financing from time to time in order to continue with our business strategy. Our inability to raise additional capital, or to do so on terms reasonably acceptable to us, would jeopardize the future success of our business.

During the past five years through December 31, 2020, we incurred an aggregate of $350.6 million in research and development expenses. The following table indicates the amount incurred for each of our significant research programs and for other identified research and development activities during the years ended December 31, 2020, 2019 and 2018. The amounts disclosed in the following table reflect direct research and development costs, license fees associated with the underlying technology and an allocation of indirect research and development costs to each program.

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(In thousands)

Clinical Development Programs

While our clinical development programs have not been significantly, negatively impacted by COVID-19 to date, we continue to carefully monitor the evolving situation closely across all our development programs and work to minimize potential impact/disruptions.

CDX-0159

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

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

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

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Most common adverse events were mild infusion-related reactions, all of which spontaneously resolved without intervention. Mild and asymptomatic decreases in neutrophil and white blood cell count were observed in laboratory testing.

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A single dose of CDX-0159 suppressed plasma tryptase levels in a dose-dependent manner, indicative of systemic mast cell suppression. Tryptase suppression below the level of detection was observed after a single 1.0 mg/kg dose and was maintained for more than 2 months at single doses of both 3.0 and 9.0 mg/kg of CDX-0159. A subset of subjects from the 3mg/kg and 9 mg/kg cohorts agreed to continued follow up for tryptase suppression which remained below the level of detection for over 3 months (14 weeks) in 50% of subjects and over 4 months (18 weeks) in all subjects, respectively.

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Dose dependent increases in plasma stem cell factor mirror decreases in tryptase, consistent with allosteric blockade of stem cell factor to KIT and demonstrate complete target engagement in vivo.

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Long serum half-life and non-immunogenic profile support a convenient dosing schedule.

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Enhanced PK profile and durable tryptase suppression at low doses support re-formulation for sub-cutaneous administration.

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

In October 2020, we announced that enrollment had opened and the first patient had been dosed in a Phase 1b multi-center study of CDX-0159 in CSU. This study is a randomized, double-blind, placebo-controlled clinical trial designed to assess the safety of multiple ascending doses of CDX-0159 in up to 40 patients with CSU who remain symptomatic despite treatment with antihistamines. Secondary and exploratory objectives include pharmacokinetic and pharmacodynamic assessments, including measurement of tryptase and stem cell factor levels and clinical activity outcomes (impact on urticaria symptoms, disease control, clinical response) as well as quality of life assessments. CDX-0159 is administered intravenously (0.5, 1.5, 3 and 4.5 mg/kg at varying dosing schedules) as add on treatment to H1-antihistamines, either alone or in combination with H2-antihistamines and/or leukotriene receptor agonists.

In December 2020, we announced that enrollment had opened and the first patient had been dosed in a second Phase 1b study in CIndU being conducted in Germany. This study is an open label clinical trial designed to evaluate the safety of a single dose of CDX-0159 in up to 20 patients with cold contact urticaria (n=10) or symptomatic dermographism (n=10) who are refractory to antihistamines. Patient’s symptoms are induced via provocation testing that resembles real life triggering situations. Secondary and exploratory objectives include pharmacokinetic and pharmacodynamic assessments, including changes from baseline provocation thresholds, measurement of tryptase and stem cell factor levels, clinical activity outcomes (impact on urticaria symptoms, disease control, clinical response), quality of life assessments and measurement of tissue mast cells through skin biopsies. CDX-0159 is administered intravenously (3.0 mg/kg) on Day 1 as add on treatment to H1-antihistamines.

In March of 2021, we reported positive interim data from the Phase 1b study in CIndU in patients with cold contact urticaria and symptomatic dermographism. Fifteen out of 20 planned patients with antihistamine refractory CIndU had received a single intravenous infusion of CDX-0159 at 3 mg/kg, including nine patients with cold contact urticaria (ColdU) and six patients with symptomatic dermographism (SD). Safety results were reported for all 15 patients; activity results were reported for all patients assessed for at least 15 days/2 weeks after treatment (n=10; 7 ColdU and 3 SD). Patients had high disease activity as assessed by provocation threshold testing. In ColdU and SD pts, baseline critical temperature thresholds were 18.7 +/- 2.7 °C (range: 5-27°C) and FricTest® thresholds were 3.7 +/- 0.3 (range: 3-4) of 4.

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Eight of 10 patients (7 ColdU; 1 SD) experienced a complete response (CR) as assessed by provocation threshold testing. The remaining two patients (both with SD), had been recently treated and were followed for two weeks. One patient experienced a partial response (PR) thus far and one patient reported symptomatic improvement (decreased itching). All patients will continue to be assessed for response through week 12.

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Patient global assessment (Pat-GA) and physician global assessment (Phy-GA) results were consistent with provocation testing results.

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Measurements of serum tryptase levels are available for only the first six patients evaluated for activity, all with ColdU. The mean baseline was 3.3 +/- 0.2 ng/ml and levels on day 15 after treatment were at or below the limit of detection. These patients all experienced complete responses.

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CDX-0159 was generally well tolerated. Six of 15 patients had mild infusion reactions, generally areas of localized redness and itching, which resolved rapidly. A single severe infusion reaction was observed (brief loss of consciousness, followed by shaking and sweating). The patient was treated with

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antihistamines and steroids; no epinephrine was administered. The patient rapidly recovered and was hospitalized for observation with no further manifestations of this event. Importantly, there was no evidence of mast cell activation as measured by decreases in serum tryptase levels shortly after the infusion and further at a later time point.

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Through day 15, three patients had transient, mild decreases in hemoglobin, and no patients had meaningful declines in white blood cells.

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Enrollment is currently being completed in the ColdU and SD cohorts (10 per cohort; 20 total). Based on these compelling results, the study is being expanded to also include 10 patients with cholinergic urticaria and is planned to begin enrolling these patients in May of 2021.

We continue to assess potential opportunities for CDX-0159 in other diseases where mast cells play an important role, such as dermatologic, respiratory, allergic, gastrointestinal and ophthalmic conditions. In February of 2021, we announced that we plan to expand clinical development of CDX-0159 into prurigo nodularis (PN), a chronic skin disease characterized by the development of hard, intensely itchy (pruritic) nodules on the skin. Mast cells through their interactions with sensory neurons and other immune cells are believed to play an important role in amplifying chronic itch and neuroinflammation, both of which are a hallmark of PN. There are currently no FDA approved therapies for PN, representing an area of significant unmet need. Celldex anticipates initiating the study in PN in the fourth quarter of 2021.

Manufacturing activities are also progressing as planned to support the introduction of the CDX-0159 subcutaneous formulation into the clinical program in the third quarter of 2021.

CDX-1140

CDX-1140 is a fully human agonist monoclonal antibody targeted to CD40, a key activator of immune response, which is found on dendritic cells, macrophages and B cells and is also expressed on many cancer cells. Potent CD40 agonist antibodies have shown encouraging results in early clinical studies; however, systemic toxicity associated with broad CD40 activation has limited their dosing. CDX-1140 has unique properties relative to other CD40 agonist antibodies: potent agonist activity is independent of Fc receptor interaction, contributing to more consistent, controlled immune activation; CD40L binding is not blocked, leading to potential synergistic effects of agonist activity near activated T cells in lymph nodes and tumors; and the antibody does not promote cytokine production in whole blood assays. CDX-1140 has shown direct anti-tumor activity in preclinical models of lymphoma. Preclinical studies of CDX-1140 clearly demonstrate strong immune activation effects and low systemic toxicity and support the design of the Phase 1 study to identify the dose for characterizing single-agent and combination activity.

We initiated a Phase 1 study of CDX-1140 in November 2017. This study is expected to enroll up to approximately 260 patients with recurrent, locally advanced or metastatic solid tumors and B cell lymphomas. The study is designed to determine the maximum tolerated dose, or MTD, during a dose-escalation phase (0.01 to 3.0 mg/kg once every four weeks until confirmed progression or intolerance) and to recommend a dose level for further study in a subsequent expansion phase. The expansion is designed to further evaluate the tolerability and biologic effects of selected dose(s) of CDX-1140 in specific tumor types. Secondary objectives include assessments of safety and tolerability, pharmacodynamics, pharmacokinetics, immunogenicity and additional measures of anti-tumor activity, including clinical benefit rate. We believe that the potential for CDX-1140 will be best defined in combination studies with other immunotherapies or conventional cancer treatments.

In support of this, the Phase 1 study protocol also allows for the exploration of CDX-1140 in combination with CDX-301 at a fixed dose of CDX-301 and escalating doses of CDX-1140. Dendritic cells, which express CD40, are often rare or missing from the tumor microenvironment and are critical for initiating anti-tumor immunity. CDX-301, a recombinant FMS-like tyrosine kinase 3 ligand, or Flt3L, is a hematopoietic cytokine that uniquely expands dendritic cells and hematopoietic stem cells, and in combination with other agents may potentiate anti-tumor responses. CDX-301 is being utilized as a priming agent in this study to increase the number of dendritic cells in blood and tissue available for CDX-1140 activation. CDX-1140 should, in turn, activate and mature the dendritic cells, an important step for enhancing anti-tumor immune responses.

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Prior data presented at Society for Immunotherapy of Cancer’s (SITC) 34th Annual Meeting in November 2019. established the maximum tolerated dose (MTD) and recommended dose for continued study at 1.5 mg/kg — one of the highest systemic dose levels in the CD40 agonist class. Clinical activity both as a monotherapy and in combination with CDX-301 were also reported for CDX-1140 at varying doses, including an unconfirmed partial response (uPR) and tumor cavitation. At SITC 2020, analysis was focused on patients treated at the MTD and recommended dose of 1.5 mg/kg. 41 patients (n=25 monotherapy; n=16 in combination with CDX-301) had been treated at the 1.5 mg/kg dose at the time of data cutoff; 29 patients had post-treatment scans performed and five patients had not reached their first post-treatment response assessment. In addition, preliminary safety data from the combination cohort with pembrolizumab (n=9; 4 at 0.72 mg/kg and 5 at 1.5 mg/kg CDX-1140) were also presented. CDX-1140 monotherapy and in combination with CDX-301 or pembrolizumab was generally well tolerated with mostly grade 1 or grade 2 drug related adverse events. Activity at 1.5mg/kg dose of CDX-1140 to date included:

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An ongoing (6+ months) complete response (CR) in a patient with follicular lymphoma treated with CDX-1140 in combination with CDX-301;

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Notable tumor shrinkage and/or necrosis in 6 patients with squamous cell head and neck cancer (SCCHN), including extensive tumor cavitation/necrosis of a large baseline protruding neck mass associated with decreased tumor pain in a patient; and,

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Stable disease (n=10) for 11 to 32 weeks.

CDX-1140 at the recommended dose of 1.5 mg/kg provided good systemic exposure that enhanced the distribution into tissues and tumor and resulted in marked changes in the tumor microenvironment (TME) consistent with a more inflammatory and less immunosuppressive state as demonstrated by gene expression analysis. Interferon signaling and cytotoxicity pathways were most highly upregulated, while immunosuppression via TGFb signaling and metastatic pathways were downregulated, marking the first clear demonstration in patients of biological activity within the TME for a systemically administered agonist anti-CD40 mAb. Pre-treatment of patients with CDX-301 greatly increased the number of circulating dendritic cells prior to CDX-1140 administration and peripheral blood mononuclear cells (PBMCs) isolated from CDX-301 pretreated patients were more responsive to CDX-1140 than PBMCs from non-pretreated patients.

Two combination cohorts are ongoing. A combination of CDX-1140 with pembrolizumab has completed the safety run-in and expansion cohorts in patients with checkpoint-refractory squamous cell head and neck cancer and non-small cell lung cancer is enrolling patients. A combination of CDX-1140 with gemcitabine/nab-paclitaxel in patients with previously untreated metastatic pancreatic adenocarcinoma is also enrolling patients. We are also exploring additional combination cohorts with mechanisms that we believe could be complementary or synergistic with CDX-1140.

CDX-527

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

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

In August 2020, we announced the initiation of a Phase 1 dose-escalation study in up to ~90 patients with advanced or metastatic solid tumors that have progressed during or after standard of care therapy to be followed by tumor-specific expansion cohorts. The study is designed to determine the maximum tolerated dose, or MTD, during a dose-escalation phase and to recommend a dose level for further study in the

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subsequent expansion phase. The expansion is designed to further evaluate the tolerability, and biologic and anti-tumor effects of selected dose level(s) of CDX-527 in specific tumor types. Enrollment is ongoing.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our significant accounting policies are described in Note 2 to the financial statements included in Item 8 of this Form 10-K. We believe our most critical accounting policies include accounting for contingent consideration, revenue recognition, intangible and long-lived assets, research and development expenses and stock-based compensation expense.

The methods, estimates and judgments we use in applying our most critical accounting policies have a significant impact on the results we report in our financial statements. We evaluate our estimates and judgments on an ongoing basis. We base our estimates on historical experience and on assumptions that we believe to be reasonable under the circumstances. Our experience and assumptions form the basis for our judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may vary from what we anticipate and different assumptions or estimates about the future could materially change our reported results. We believe the following accounting policies are the most critical to us in that they are important to the portrayal of our financial statements and they require our most difficult, subjective or complex judgments in the preparation of our financial statements:

Contingent Consideration

We record contingent consideration resulting from a business combination at its fair value on the acquisition date. We determine the fair value of the contingent consideration based primarily on the following factors:

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timing and probability of success of clinical events or regulatory approvals;

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timing and probability of success of meeting clinical and commercial milestones; and

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discount rates.

Our contingent consideration liabilities arose in connection with our acquisition of Kolltan. On a quarterly basis, we revalue these obligations and record increases or decreases in their fair value as an adjustment to operating earnings. Changes to contingent consideration obligations can result from adjustments to discount rates, accretion of the discount rates due to the passage of time, changes in our estimates of the likelihood or timing of achieving development or commercial milestones, changes in the probability of certain clinical events or changes in the assumed probability associated with regulatory approval.

The assumptions related to determining the value of contingent consideration include a significant amount of judgment, and any changes in the underlying estimates could have a material impact on the amount of contingent consideration adjustment recorded in any given period.

Revenue Recognition

Revenues are recognized when performance obligations under agreements or contracts are satisfied, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services.

The Company determines revenue recognition through the following steps:

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Identification of the contract, or contracts, with a customer;

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Identification of the performance obligations in the contract;

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Determination of the transaction price;

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Allocation of the transaction price to the performance obligations in the contract; and

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Recognition of revenue when, or as, the Company satisfies a performance obligation.

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development and manufacturing, milestone payments and royalties on any product sales derived from collaborations. The Company assesses the multiple obligations typically within product development contracts to determine the distinct performance obligations and how to allocate the arrangement consideration to each distinct performance obligation.

Under product development agreements, revenue is generally recognized using a cost-to-cost measure of progress. Revenue is recognized based on the costs incurred to date as a percentage of the total estimated costs to fulfill the contract. Incurred cost represents work performed, which corresponds with, and thereby best depicts, the transfer of control to the customer. Due to the nature of the work performed in these arrangements, the estimation of cost at completion is complex, subject to many variables, such as expected clinical trial costs, and requires significant judgements. Circumstances can arise that change original estimates of costs or progress toward completion. Any revisions to estimates are reflected in revenue on a cumulative catch-up basis in the period in which the change in circumstances became known.

Revenue for the Company is also derived from manufacturing and research and development arrangements. The Company owns and operates a cGMP manufacturing facility in Fall River, Massachusetts, to produce drug substance for its current and planned early-stage clinical trials. In order to utilize excess capacity, the Company has, from time to time, entered into contract manufacturing and research and development arrangements in which services are provided on a time-and-material basis or at a negotiated fixed-price. Revenue from time-and-material contracts is generally recognized on an output basis as labor hours and/or direct expenses are incurred. Under fixed-price contracts, revenue is generally recognized on an output basis as progress is made toward completion of the performance obligations using surveys of performance completed to date.

Intangible and Long-Lived Assets

We evaluate the recoverability of our long-lived assets, including property and equipment, and finite-lived intangible assets when circumstances indicate that an event of impairment may have occurred. Determination of recoverability is based on an estimate of undiscounted future cash flows resulting from the use of the asset and its eventual disposition. In the event that such cash flows are not expected to be sufficient to recover the carrying amount of the assets, the assets are written-down to their estimated fair values.

IPR&D assets acquired in a business combination initially are recorded at fair value and accounted for as indefinite-lived intangible assets. These assets are capitalized on our balance sheets until either the project underlying them is completed or the assets become impaired. If a project is completed, the carrying value of the related intangible asset is amortized over the remaining estimated life of the asset beginning in the period in which the project is completed. If a project becomes impaired or is abandoned, the carrying value of the related intangible asset is written down to its fair value and an impairment charge is taken in the period in which the impairment occurs. Discounted cash flow models are typically used in these tests, and the models require the use of significant estimates and assumptions including but not limited to:

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timing and costs to complete the in-process projects;

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timing and probability of success of clinical events or regulatory approvals;

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estimated future cash flows from product sales resulting from completed products and in-process projects; and

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discount rates

Each IPR&D asset is assessed for impairment at least annually or when impairment indicators are present. During the fourth quarter of 2020, we evaluated the TAM program IPR&D asset for potential impairment as a result of changes in projected development and regulatory timelines related to the program. We concluded that the TAM IPR&D asset was partially impaired, and a non-cash impairment charge of $14.5 million was recorded in the fourth quarter of 2020. As a result of the discontinuation of the CDX-3379 program in the second quarter of 2020, we concluded that the CDX-3379 IPR&D asset was fully impaired, and a non-cash impairment charge of $3.5 million was recorded in the second quarter of 2020. We performed an annual impairment test of the remaining IPR&D assets during the fourth quarter of 2020 and concluded that the IPR&D assets were not impaired.

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Intangible assets acquired in a business combination with a finite life are recorded at fair value and amortized over the greater of economic consumption or on a straight-line basis over their estimated useful life.

Research and Development Expenses

Research and development costs, including internal and contract research costs, are expensed as incurred. Research and development expenses consist mainly of clinical trial costs, manufacturing of clinical material, toxicology and other preclinical studies, personnel costs, depreciation, license fees and funding of outside contracted research.

Clinical trial expenses include expenses associated with clinical research organization, or CRO, services. Contract manufacturing expenses include expenses associated with contract manufacturing organization, or CMO, services. The invoicing from CROs and CMOs for services rendered can lag several months. We accrue the cost of services rendered in connection with CRO and CMO activities based on our estimate of costs incurred. We maintain regular communication with our CROs and CMOs to assess the reasonableness of our estimates. Differences between actual expenses and estimated expenses recorded have not been material and are adjusted for in the period in which they become known.

Stock-Based Compensation Expense

We record stock-based compensation expense for all stock-based awards made to employees, directors and non-employees based on the estimated fair values of the stock-based awards expected to vest at the grant date and adjust, if necessary, to reflect actual forfeitures. Our estimates of employee stock option values rely on estimates of future uncertain events. Significant assumptions include the use of historical volatility to estimate the expected stock price volatility. We also estimate expected term based on historical exercise patterns. For non-employee grants, we may elect to use the contractual term as the expected term in the option-pricing model. Actual volatility and lives of options may be significantly different from our estimates. Compensation expense for all stock-based awards to employees and directors is recognized using the straight-line method over the term of vesting or performance.

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RESULTS OF OPERATIONS

Year Ended December 31, 2020 compared with Year Ended December 31, 2019

(In thousands)

Revenues:

Total revenues $ 7,418 $ 3,573 $ 3,845 108%

Operating expenses:

Income tax benefit 1,167 — 1,167 n/a

Net Loss

The $8.9 million increase in net loss for the year ended December 31, 2020, as compared to the year ended December 31, 2019, was primarily the result of an increase in non-cash intangible asset impairment expense, partially offset by an increase in revenue and an increase in the gain on fair value remeasurement of contingent consideration.

Revenue

The Company’s agreement with Rockefeller University, as amended, (the “Rockefeller Agreement”) provides for the Company to perform manufacturing and development services for Rockefeller University for their portfolio of antibodies against HIV. This portfolio was licensed to Gilead Sciences in January 2020 from Rockefeller University (“Rockefeller Transaction”). The $1.8 million increase in product development and licensing agreements revenue for the year ended December 31, 2020, as compared to the year ended December 31, 2019, was primarily due to the $1.8 million received from the Rockefeller Transaction. The $2.0 million increase in contracts and grants revenue for the year ended December 31, 2020, as compared to the year ended December 31, 2019, was primarily related to an increase in services performed under our contract manufacturing and research and development agreements with Rockefeller University and Gilead Sciences, partially offset by a decrease in services performed under our manufacturing and research and development agreement with Duke University. We expect revenue to decrease over the next twelve months as a result of a decrease in revenue from product development and licensing agreements.

Research and Development Expense

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

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Year Ended December 31, Increase/(Decrease)

(In thousands)

Personnel $ 21,896 $ 21,410 $ 486 2%

Laboratory supplies 4,393 4,249 144 3%

Facility 6,367 6,790 (423) (6)%

Product development 6,233 6,136 97 2%

Personnel expenses primarily include salary, benefits, stock-based compensation and payroll taxes. The $0.4 million increase in personnel expenses for the year ended December 31, 2020, as compared to the year ended December 31, 2019, was primarily due to an increase in bonus expense. We expect personnel expenses to remain relatively consistent over the next twelve months, although there may be fluctuations on a quarterly basis.

Laboratory supplies expenses include laboratory materials and supplies, services, and other related expenses incurred in the development of our technology. The $0.1 million increase in laboratory supply expenses for the year ended December 31, 2020, as compared to the year ended December 31, 2019, was primarily due to higher laboratory materials and supplies purchases. We expect laboratory supplies expenses to remain relatively consistent over the next twelve months, although there may be fluctuations on a quarterly basis.

Facility expenses include depreciation, amortization, utilities, rent, maintenance and other related expenses incurred at our facilities. The $0.4 million decrease in facility expenses for the year ended December 31, 2020, as compared to the year ended December 31, 2019, was primarily due to lower rent and depreciation expense. We expect facility expenses to remain relatively consistent over the next twelve months, although there may be fluctuations on a quarterly basis.

Product development expenses include clinical investigator site fees, external trial monitoring costs, data accumulation costs, contracted research and outside clinical drug product manufacturing. The $0.1 million increase in product development expenses for the year ended December 31, 2020, as compared to the year ended December 31, 2019, was primarily due to an increase in clinical trial and contract manufacturing expenses of $1.2 million, partially offset by a decrease in contract research expenses of $1.0 million. We expect product development expenses to increase over the next twelve months as a result of higher clinical trial, contract research, and contract manufacturing expenses.

General and Administrative Expense

The $1.0 million decrease in general and administrative expenses for the year ended December 31, 2020, as compared to the year ended December 31, 2019, was primarily due lower stock-based compensation expense and lower facility expenses as a result of the consolidation our Massachusetts lab and manufacturing facilities in the second quarter of 2020. We expect general and administrative expenses to remain relatively consistent over the next twelve months, although there may be fluctuations on a quarterly basis.

Intangible Asset Impairment

We evaluated the TAM program IPR&D asset for potential impairment as a result of changes in projected development and regulatory timelines related to the program in the fourth quarter of 2020. We concluded that the TAM program IPR&D asset was partially impaired, and a non-cash impairment charge of $14.5 million was recorded in the fourth quarter of 2020. We evaluated the CDX-3379 IPR&D asset for potential impairment as a result of the discontinuation of the CDX-3379 program in the second quarter of 2020. We concluded that the CDX-3379 IPR&D asset was fully impaired, and a non-cash impairment charge of $3.5 million was recorded in the second quarter of 2020.

Other Asset Impairment

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

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Gain on Fair Value Remeasurement of Contingent Consideration

The $4.2 million gain on fair value remeasurement of contingent consideration for the year ended December 31, 2020 was primarily due to updated assumptions for CDX-3379 related milestones due to the discontinuation of the CDX-3379 program partially offset by changes in discount rates and the passage of time.

Investment and Other Income, Net

The $1.7 million decrease in investment and other income, net for the year ended December 31, 2020, as compared to the year ended December 31, 2019, was primarily due to lower interest rates on fixed income investments and lower other income related to our sale of New Jersey tax benefits. We expect investment income to decrease over the next twelve months due to lower other income related to our sale of New Jersey tax benefits.

Income Tax Benefit

A $1.2 million non-cash income tax benefit was recorded for the year ended December 31, 2020 related to the partial impairment of the TAM program IPR&D asset in the fourth quarter of 2020 and the full impairment of the CDX-3379 IPR&D asset in the second quarter of 2020.

Year Ended December 31, 2019 compared with Year Ended December 31, 2018

(In thousands)

Revenues:

Operating expenses:

Income tax benefit — 765 (765) (100)%

Net Loss

The $100.3 million decrease in net loss for the year ended December 31, 2019, as compared to the year ended December 31, 2018, was primarily the result of a decrease in non-cash goodwill and intangible asset impairment expense and a decrease in research and development expenses, partially offset by the decrease in gain on fair value remeasurement of contingent consideration.

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Revenue

The $2.9 million decrease in product development and licensing agreements revenue for the year ended December 31, 2019, as compared to the year ended December 31, 2018, was primarily due to a decrease in revenue related to our BMS agreement as a result of the completion of our combination clinical study. The $3.1 million decrease in contracts and grants revenue for the year ended December 31, 2019, as compared to the year ended December 31, 2018, was primarily related to a decrease in services performed under our contract manufacturing and research and development agreements with Rockefeller University and the International AIDS Vaccine Initiative.

Research and Development Expense

Year Ended December 31, Increase/(Decrease)

(In thousands)

Laboratory supplies 4,249 4,176 73 2%

Facility 6,790 7,531 (741) (10)%

Personnel expenses primarily include salary, benefits, stock-based compensation and payroll taxes. The $6.6 million decrease in personnel expenses for the year ended December 31, 2019, as compared to the year ended December 31, 2018, was primarily due to a decrease in headcount, lower stock-based compensation expense and lower severance expense related to the workforce reduction that occurred in the second quarter of 2018 as a result of the discontinuation of the Glemba program.

Laboratory supplies expenses include laboratory materials and supplies, services, and other related expenses incurred in the development of our technology. The $0.1 million increase in laboratory supply expenses for the year ended December 31, 2019, as compared to the year ended December 31, 2018, was primarily due to higher laboratory materials and supplies purchases.

Facility expenses include depreciation, amortization, utilities, rent, maintenance and other related expenses incurred at our facilities. The $0.7 million decrease in facility expenses for the year ended December 31, 2019, as compared to the year ended December 31, 2018, was primarily due to lower depreciation expense.

General and Administrative Expense

The $3.8 million decrease in general and administrative expenses for the year ended December 31, 2019, as compared to the year ended December 31, 2018, was primarily due to a decrease in stock-based compensation expense, lower commercial planning costs and lower lease restructuring expense.

Goodwill Impairment

We recorded a non-cash goodwill impairment charge of $91.0 million during the year ended December 31, 2018 as a result of the discontinuation of the Glemba program.

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Intangible Asset Impairment

We recorded a non-cash intangible asset impairment charge of $18.7 million on the Glemba program intangible assets during the year ended December 31, 2018 as a result of the discontinuation of the Glemba program. Due to the nature of IPR&D projects, the Company may experience future delays or failures to obtain regulatory approvals to conduct clinical trials, failures of such clinical trials or other failures to achieve a commercially viable product, and as a result, may recognize further impairment losses in the future.

Other Asset Impairment

Gain on Fair Value Remeasurement of Contingent Consideration

The $1.3 million gain on fair value remeasurement of contingent consideration for the year ended December 31, 2019 was primarily due to changes in discount rates, the passage of time and updated assumptions for the varlilumab program.

Amortization Expense

The $0.2 million decrease in amortization expenses for the year ended December 31, 2019, as compared to the year ended December 31, 2018, was due to the full impairment of intangible assets subject to amortization recorded in the first quarter of 2018 as a result of the discontinuation of the Glemba program.

Investment and Other Income, Net

The $0.3 million decrease in investment and other income, net for the year ended December 31, 2019, as compared to the year ended December 31, 2018, was primarily due to lower levels of cash and investment balances.

Income Tax Benefit

We recorded a non-cash income tax benefit of $0.8 million related to the impairment of the Glemba IPR&D assets during the year ended December 31, 2018.

LIQUIDITY AND CAPITAL RESOURCES

Our cash equivalents are highly liquid investments with a maturity of three months or less at the date of purchase and consist primarily of investments in money market mutual funds with commercial banks and financial institutions. We maintain cash balances with financial institutions in excess of insured limits. We do not anticipate any losses with respect to such cash balances. We invest our excess cash balances in marketable securities, including municipal bond securities, U.S. government agency securities and high-grade corporate bonds that meet high credit quality standards, as specified in our investment policy. Our investment policy seeks to manage these assets to achieve our goals of preserving principal and maintaining adequate liquidity.

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

At December 31, 2020, our principal sources of liquidity consisted of cash, cash equivalents and marketable securities of $194.4 million. We have had recurring losses and incurred a loss of $59.8 million

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for the year ended December 31, 2020. Net cash used in operations for the year ended December 31, 2020 was $40.4 million. We believe that the cash, cash equivalents and marketable securities at December 31, 2020 are sufficient to meet estimated working capital requirements and fund planned operations through 2023. This could be impacted if we elected to pay Kolltan contingent milestones, if any, in cash.

During the next twelve months, we may take further steps to raise additional capital to meet our long-term liquidity needs including, but not limited to, one or more of the following: the licensing of drug candidates with existing or new collaborative partners, possible business combinations, issuance of debt, or the issuance of common stock or other securities via private placements or public offerings. Although we have been successful in raising capital in the past, there can be no assurance that additional financing will be available on acceptable terms, if at all, and our negotiating position in capital raising efforts may worsen as existing resources are used. There is also no assurance that we will be able to enter into further collaborative relationships. Additional equity financings may be dilutive to our stockholders; debt financing, if available, may involve significant cash payment obligations and covenants that restrict our ability to operate as a business; and licensing or strategic collaborations may result in royalties or other terms which reduce our economic potential from products under development. Our ability to continue funding our planned operations into and beyond twelve months from the issuance date is also dependent on the timing and manner of payment of future contingent milestones from the Kolltan acquisition, in the event that we achieve the drug candidate milestones related to those payments. We may decide to pay those milestone payments in cash, shares of our common stock or a combination thereof. If we are unable to raise the funds necessary to meet our long-term liquidity needs, we may have to delay or discontinue the development of one or more programs, discontinue or delay ongoing or anticipated clinical trials, license out programs earlier than expected, raise funds at a significant discount or on other unfavorable terms, if at all, or sell all or a part of our business.

Operating Activities

Net cash used in operating activities was $40.4 million for the year ended December 31, 2020 compared to $46.4 million for the year ended December 31, 2019. The decrease in net cash used in operating activities was primarily due to an increase in revenue and decreases in both general and administrative and research and development expenses. We expect that cash used in operating activities will remain relatively consistent over the next twelve months, although there may be fluctuations on a quarterly basis.

Net cash used in operating activities was $46.4 million for the year ended December 31, 2019 compared to $75.2 million for the year ended December 31, 2018. The decrease in net cash used in operating activities was primarily due to decreases in both general and administrative and research and development expenses.

We have incurred and will continue to incur significant costs in the area of research and development, including preclinical and clinical trials and clinical drug product manufacturing as our drug candidates are developed. We plan to spend significant amounts to progress our current drug candidates through the clinical trial processes as well as to develop additional drug candidates. As our drug candidates progress through the clinical trial process, we may be obligated to make significant milestone payments.

Investing Activities

Net cash used in investing activities was $98.2 million for the year ended December 31, 2020 compared to net cash provided by investing activities of $17.1 million for the year ended December 31, 2019. The increase in net cash used in investing activities was primarily due to net purchases of marketable securities for the year ended December 31, 2020 of $96.7 million as compared to net sales and maturities of marketable securities of $17.8 million for the year ended December 31, 2019. We expect that cash provided by investing activities will increase over the next twelve months as we fund our operations through the combination of net proceeds from the sales and maturities of marketable securities, cash provided by financing activities and/or new partnerships, although there may be significant fluctuations on a quarterly basis based on the amount of cash provided by financing activities and/or new partnerships.

Net cash provided by investing activities was $17.1 million for the year ended December 31, 2019 compared to $29.8 million for the year ended December 31, 2018. The decrease in net cash provided by

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investing activities was primarily due to net sales and maturities of marketable securities for the year ended December 31, 2019 of $17.8 million as compared to $30.3 million for the year ended December 31, 2018.

Financing Activities

Net cash provided by financing activities was $171.2 million for the year ended December 31, 2020 compared to $16.3 million for the year ended December 31, 2019. Net proceeds from stock issuances, including stock issued pursuant to employee benefit plans, were $171.2 million during the year ended December 31, 2020 compared to $16.3 million for the year ended December 31, 2019.

Net cash provided by financing activities was $16.3 million for the year ended December 31, 2019 compared to $29.4 million for the year ended December 31, 2018. Net proceeds from stock issuances, including stock issued pursuant to employee benefit plans, were $16.3 million during the year ended December 31, 2019 compared to $29.4 million for the year ended December 31, 2018.

Equity Offerings

In November 2020, the Company filed an automatic shelf registration statement with the Securities and Exchange Commission to register for sale any combination of the types of securities described in the shelf registration statement.

In May 2016, we entered into a controlled equity offering sales agreement with Cantor Fitzgerald & Co. (“Cantor”) to allow us to issue and sell shares of our common stock from time to time through Cantor, acting as agent. During the years ended December 31, 2020, 2019 and 2018, we issued 7.1 million, 5.0 million and 2.7 million shares of common stock, respectively, under the agreement with Cantor resulting in net proceeds of $29.4 million, $16.2 million and $29.0 million, respectively, after deducting commission and offering expenses. At December 31, 2020, we had $50.0 million remaining in aggregate gross offering price available under our November 2020 prospectus supplement.

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

AGGREGATE CONTRACTUAL OBLIGATIONS

We have entered into license agreements whereby we have received licenses or options to license technology, specified patents and/or patent applications. These license and collaboration agreements generally provide for royalty payments equal to specified percentages of product sales, annual license maintenance fees, continuing patent prosecution costs and potential future milestone payments to third parties upon the achievement of certain development, regulatory and/or commercial milestones. Because the achievement of these milestones had not occurred as of December 31, 2020 such contingencies have not been recorded in our financial statements. We expect to incur approximately $0.1 million of license and milestone payments in 2021.

The following table summarizes our contractual obligations (not including contingent royalty and milestone payments as described above) at December 31, 2020 and the effect such obligations and commercial commitments are expected to have on our liquidity and cash flow in future years. These obligations, commitments and supporting arrangements represent expected payments based on current operating forecasts, which are subject to change:

(In thousands)

(1)

We enter into agreements in the normal course of business with contract research organizations for clinical trials, contract manufacturing organizations, vendors for preclinical research studies and other

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services and products for operating purposes. We have included obligations in the table above if the contracts are not cancelable at any time by us, generally upon 30 days prior written notice to the vendor.

(2)

The merger agreement between us and Kolltan (“Merger Agreement”) provides that we will be required to pay Kolltan’s former stockholders contingent consideration in the form of development, regulatory approval and sales-based milestones (“Kolltan Milestones”) of up to $172.5 million. Certain Kolltan Milestones related to the METRIC clinical study, TAM partnership closing within two years of the acquisition, CDX-3379 and CDX-0158 have been abandoned and, because of this, as of December 31, 2020, we believe that the adjusted amount we may be required to pay for future consideration is up to $107.5 million contingent upon the achievement of the Kolltan Milestones. We have previously sent abandonment notices to the representative of Kolltan's former stockholders with respect to each of the abandoned Kolltan Milestones, and the representative subsequently objected to the abandonment notices for CDX-3379 and CDX-0158. We disagree with their objection and believe their objection to be without merit. We have filed a Verified Complaint in the Court of Chancery of the State of Delaware seeking declaratory relief with respect to the rights and obligations of the parties relating to certain contingent milestone payments under the Merger Agreement relating to the discontinued CDX-0158 program. At this time, we are unable to reasonably assess the ultimate outcome of our litigation with the representative of Kolltan’s former stockholders over its objection to our abandonment of certain Kolltan Milestones or determine an estimate of potential losses, if any. Further, there are disagreements between that representative and us with respect to our abandonment notice related to the discontinued CDX-3379 program, which could result in litigation. Because the timing and certainty of these milestones being achieved and the outcome of litigation with the representative of Kolltan’s former stockholders is unknown, these potential future obligations are not included within the table.

(3)

Refer to Note 7, “Leases,” in the accompanying notes to the financial statements for details on future minimum lease payments that will become due under non-cancellable leases.

RECENT ACCOUNTING PRONOUNCEMENTS

Refer to Note 2, “Summary of Significant Accounting Policies,” in the accompanying notes to the financial statements for a discussion of recent accounting pronouncements.

OFF-BALANCE SHEET ARRANGEMENTS

None.

Item 7A.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We own financial instruments that are sensitive to market risk as part of our investment portfolio. Our investment portfolio is used to preserve our capital until it is used to fund operations, including our research and development activities. None of these market-risk sensitive instruments are held for trading purposes. We invest our cash primarily in money market mutual funds. These investments are evaluated quarterly to determine the fair value of the portfolio. From time to time, we invest our excess cash balances in marketable securities, including municipal bond securities, U.S. government agency securities, and high-grade corporate bonds that meet high credit quality standards, as specified in our investment policy. Our investment policy seeks to manage these assets to achieve our goals of preserving principal and maintaining adequate liquidity. Because of the short-term nature of these investments, we do not believe we have material exposure due to market risk. The impact to our financial position and results of operations from changes in interest rates is not material.

We do not utilize derivative financial instruments. The carrying amounts reflected in the balance sheet of cash and cash equivalents, accounts receivables and accounts payable approximates fair value at December 31, 2020 due to the short-term maturities of these instruments.

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Item 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of Celldex Therapeutics, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Celldex Therapeutics, Inc. and its subsidiary (the “Company”) as of December 31, 2020 and 2019, and the related consolidated statements of operations and comprehensive loss, of stockholders’ equity and of cash flows for each of the three years in the period ended December 31, 2020, including the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020 in conformity with accounting principles generally accepted in the United States of America.

Change in Accounting Principle

As discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which it accounts for leases in 2019.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

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Fair Value of Contingent Consideration Liabilities

As described in Notes 2 and 4 to the consolidated financial statements, contingent consideration resulting from a business combination is recorded at fair value on the acquisition date and is revalued on a quarterly basis, with increases or decreases in their fair value as an adjustment to operating earnings. As of and for the year ended December 31, 2020, management recorded total contingent consideration liabilities of $8.3 million and a gain on fair value remeasurement of contingent consideration of $4.2 million. The valuation technique used to measure fair value of the Company’s contingent consideration liabilities was primarily an income approach. The significant unobservable inputs used in the fair value measurement of the contingent consideration are estimates, including probability of success, discount rates and amount of time until the conditions of the milestone payments are met. Changes to contingent consideration obligations can result from adjustments to discount rates, accretion of the discount rates due to the passage of time, changes in the Company’s estimates of the likelihood or timing of achieving development or commercial milestones, changes in the probability of certain clinical events or changes in the assumed probability associated with regulatory approval.

The principal considerations for our determination that performing procedures relating to the fair value of contingent consideration liabilities is a critical audit matter are the significant judgment by management when estimating the fair value of these contingent obligations, including a high degree of estimation uncertainty in evaluating the discount rate, the timing and probability of success of achieving development or commercial milestones, and changes in the probability of success associated with achieving clinical events or regulatory approval. This in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures to evaluate the fair value of contingent consideration liabilities. Also, the evaluation of audit evidence available to support the fair value of the contingent consideration liabilities is complex and resulted in significant auditor judgment as the nature of the evidence is highly subjective and the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included, among others, testing management’s process for developing the fair value of contingent consideration liabilities; evaluating the appropriateness of the valuation technique used and the reasonableness of significant assumptions used by management related to the discount rates, accretion of the discount rates due to the passage of time, changes in the Company’s estimates of the likelihood or timing of achieving development or commercial milestones, changes in the probability of certain clinical events or changes in the assumed probability associated with regulatory approval. Evaluating management’s assumptions related to discount rates, accretion of the discount rates due to the passage of time, changes in the Company’s estimates of the likelihood or timing of achieving development or commercial milestones, changes in the probability of certain clinical events or changes in the assumed probability associated with regulatory approval involved evaluating whether the assumptions used by management were reasonable considering the agreements associated with the transaction, the consistency with industry studies, historical data, and the stage of product development. Professionals with specialized skill and knowledge were used in the evaluation of management’s valuation technique and the discount rate assumption.

Indefinite-lived In-process Research and Development Intangible TAM Asset Impairment Assessment

As described in Notes 2 and 8 to the consolidated financial statements, indefinite-lived in-process research and development (IPR&D) intangible assets acquired in a business combination are recorded at fair value on the acquisition date until the project is completed or impaired. If a project is completed, the carrying value of the related intangible asset is amortized over the remaining estimated life of the asset. If a project becomes impaired or is abandoned, the carrying value of the related intangible asset is written down to its fair value and an impairment charge is recorded. Each IPR&D asset is assessed for impairment at least annually or when impairment indicators are present. As of December 31, 2020, the carrying value of the indefinite-lived intangible assets was $30.7 million. For the year ended December 31, 2020, management recorded impairment adjustments of $18.0 million, $14.5 million of which relates to the TAM IPR&D asset. The valuation technique used to measure fair value of the IPR&D TAM asset was primarily a discounted cash flow approach. Management determines the fair value of the indefinite-lived IPR&D TAM intangible asset based primarily on the (i) probability of success; (ii) probability of partnership; (iii) partnership milestones; and (iv) discount rate.

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The principal considerations for our determination that performing procedures relating to the indefinite-lived IPR&D intangible TAM asset impairment assessment is a critical audit matter are the significant judgment by management when developing the fair value estimate of the indefinite-lived IPR&D TAM asset. This in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to the probability of success, probability of partnership, partnership milestones, and discount rate. The audit effort also involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included, among others, testing management’s process for developing the fair value estimate and evaluating the appropriateness of the discounted cash flow analysis, testing the completeness and accuracy of the underlying data used in the analysis, and evaluating the reasonableness of the assumptions related to probability of success, probability of partnership, partnership milestones and discount rate. Evaluating management’s assumptions related to probability of success, probability of partnership, partnership milestones and discount rate involved evaluating whether the assumptions used by management were reasonable considering their consistency with data from external sources and the stage of product development. Professionals with specialized skill and knowledge were used to assist in evaluating the appropriateness of management’s discounted cash flow analysis and evaluating the reasonableness of the assumptions used in the technique.

/s/ PricewaterhouseCoopers LLP

Boston, Massachusetts

March 29, 2021

We have served as the Company’s auditor since 2008.

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CELLDEX THERAPEUTICS, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)

Assets

Current assets:

Cash and cash equivalents $ 43,836 $ 11,232

Marketable securities 150,586 53,151

Accounts and other receivables 1,802 1,015

Prepaid and other current assets 1,619 1,300

Total current assets 197,843 66,698

Property and equipment, net 3,815 4,031

Operating lease right-of-use assets, net 3,449 3,473

Intangible assets, net 30,690 48,690

Other assets 41 41

Liabilities and stockholders’ equity

Current liabilities:

Accounts payable $ 1,048 $ 1,174

Accrued expenses 8,459 6,499

Current portion of operating lease liabilities 1,327 1,944

Current portion of long-term liabilities 3,372 2,026

Total current liabilities 14,206 11,643

Other long-term liabilities 10,121 15,551

Total liabilities 26,481 28,907

Commitments and contingent liabilities (Note 14)

Stockholders’ equity:

Accumulated other comprehensive income 2,589 2,619

Total stockholders’ equity 209,357 94,026

Total liabilities and stockholders’ equity $ 235,838 $ 122,933

The accompanying notes are an integral part of the financial statements.

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CELLDEX THERAPEUTICS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(In thousands, except per share amounts)

Revenues:

Contracts and grants 5,117 3,100 6,197

Total revenues 7,418 3,573 9,538

Operating expenses:

Research and development 42,534 42,672 66,449

General and administrative 14,456 15,426 19,269

Goodwill impairment — — 90,976

Intangible asset impairment 18,000 — 18,677

Other asset impairment — 1,800 —

Income tax benefit 1,167 — 765

Comprehensive loss:

Other comprehensive income (loss):

The accompanying notes are an integral part of the financial statements.

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CELLDEX THERAPEUTICS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands, except share amounts)

The accompanying notes are an integral part of the financial statements.

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CELLDEX THERAPEUTICS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

Cash flows from operating activities:

Depreciation and amortization 3,929 4,858 3,577

Amortization of intangible assets — — 224

Goodwill impairment — — 90,976

Intangible asset impairment 18,000 — 18,677

Other asset impairment — 1,800 —

Non-cash income tax benefit (1,167) — (765)

Accounts and other receivables (787) 2,274 (777)

Prepaid and other current assets (334) 362 1,783

Other assets — (39) —

Other liabilities (816) (6,599) (3,268)

Cash flows from investing activities:

Cash flows from financing activities:

Issuance of term loan 2,962 — —

Payment of term loan (2,962) — —

Non-cash investing activities

Accrued construction in progress $ 221 $ 25 $ 107

Non-cash supplemental disclosure

The accompanying notes are an integral part of the financial statements.

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CELLDEX THERAPEUTICS, INC.

NOTES TO FINANCIAL STATEMENTS

(1) Nature of Business and Overview

Celldex Therapeutics, Inc. (the “Company” or “Celldex”) is a biopharmaceutical company dedicated to developing therapeutic monoclonal and bispecific antibodies that address diseases for which available treatments are inadequate. The Company is primarily focusing its efforts and resources on the continued research and development of CDX-0159, CDX-1140 and CDX-527.

The Board of Directors of the Company approved a one for fifteen reverse stock split of the Company’s outstanding common stock, which was effected on February 8, 2019. All share and per share amounts in the financial statements have been retroactively adjusted for all periods presented to give effect to the reverse stock split, including reclassifying an amount equal to the reduction in par value to additional paid-in capital.

At December 31, 2020, the Company had cash, cash equivalents and marketable securities of $194.4 million. The Company has had recurring losses and incurred a loss of $59.8 million for the year ended December 31, 2020. Net cash used in operations for the year ended December 31, 2020 was $40.4 million. The Company believes that the cash, cash equivalents and marketable securities at the filing date of this Form 10-K will be sufficient to meet estimated working capital requirements and fund planned operations for at least the next twelve months from the date of issuance of these financial statements.

During the next twelve months and beyond, the Company may take further steps to raise additional capital to meet its long-term liquidity needs including, but not limited to, one or more of the following: the licensing of drug candidates with existing or new collaborative partners, possible business combinations, issuance of debt, or the issuance of common stock or other securities via private placements or public offerings. Although the Company has been successful in raising capital in the past, there can be no assurance that additional financing will be available on acceptable terms, if at all, and the Company’s negotiating position in capital-raising efforts may worsen as existing resources are used. There is also no assurance that the Company will be able to enter into further collaborative relationships. Additional equity financings may be dilutive to the Company’s stockholders; debt financing, if available, may involve significant cash payment obligations and covenants that restrict the Company’s ability to operate as a business; and licensing or strategic collaborations may result in royalties or other terms which reduce the Company’s economic potential from products under development. The Company’s ability to continue funding its planned operations into and beyond twelve months from the issuance date is also dependent on the timing and manner of payment of contingent milestones from the Kolltan acquisition, in the event that the Company achieves the drug candidate milestones related to those payments. The Company, at its option, may decide to pay those milestone payments in cash, shares of its common stock or a combination thereof. If the Company is unable to raise the funds necessary to meet its long-term liquidity needs, it may have to delay or discontinue the development of one or more programs, discontinue or delay ongoing or anticipated clinical trials, license out programs earlier than expected, raise funds at a significant discount or on other unfavorable terms, if at all, or sell all or a part of the Company.

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

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to and from third party suppliers and contract manufacturers for APIs and drug product. Any prolonged negative impacts to our business could materially impact our operating results and could lead to impairments of our Intangible (IPR&D) assets with a carrying value of $30.7 million at December 31, 2020.

(2) Summary of Significant Accounting Policies

Basis of Presentation

The balance sheets and statements of operations and comprehensive loss, stockholders’ equity, and cash flows, are consolidated for the years ended December 31, 2020, 2019 and 2018. These consolidated financial statements reflect the operations of the Company and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. The Company operates in one segment, which is the business of development, manufacturing and commercialization of novel therapeutics for human health care.

Use of Estimates

The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP) requires management to make estimates and use assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with a maturity date of 90 days or less at the date of purchase to be cash equivalents. Cash equivalents consist principally of money market funds and debt securities.

Marketable Securities

The Company invests its excess cash balances in marketable securities, including municipal bond securities, U.S. government agency securities, and highly rated corporate bonds. The Company classifies all of its marketable securities as current assets on the balance sheets because they are available-for-sale and available to fund current operations. Marketable securities are stated at fair value with unrealized gains and losses included as a component of accumulated other comprehensive income (loss), which is a separate component of stockholders’ equity, until such gains and losses are realized. If a decline in the fair value is considered other-than-temporary, based on available evidence, the unrealized loss is reclassified from accumulated other comprehensive income (loss) to the statements of operations. Realized gains and losses are determined on the specific identification method and are included in investment and other income, net.

Concentration of Credit Risk and of Significant Customers and Suppliers

Financial instruments that potentially subject the Company to concentrations of credit risk primarily consist of cash, cash equivalents, marketable securities and accounts receivable. The Company invests its cash, cash equivalents and marketable securities in debt instruments and interest-bearing accounts at major financial institutions in excess of insured limits. The Company mitigates credit risk by limiting the investment type and maturity to securities that preserve capital, maintain liquidity and have a high credit quality. The Company has not historically experienced credit losses from its accounts receivable and therefore has not established an allowance for doubtful accounts.

Revenue from Rockefeller University and Gilead Sciences represented 85% of total Company revenue for the year ended December 31, 2020. Combined revenue from Rockefeller University and Duke University represented 74% of total Company revenue for the year ended December 31, 2019 and combined revenue from BMS, Rockefeller University and International AIDS Vaccine Initiative represented 86% of total Company revenue for the year ended December 31, 2018.

The Company relies on contract manufacturing organizations (CMO) to manufacture drug substance and drug product as well as for future commercial supplies. The Company also relies on CMOs for supply

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of raw materials as well as filling, packaging, storing and shipping our drug products. The Company relies on third-party collaborators to develop companion diagnostic tests.

Fair Value Measurements

The Company has certain assets and liabilities that are measured at fair value in the financial statements. The Company seeks to maximize the use of observable inputs (market data obtained from sources independent from the Company) and to minimize the use of unobservable inputs (the Company’s assumptions about how market participants would price assets and liabilities) when measuring the fair value of its assets and liabilities. These assets and liabilities are classified into one of three levels of the following fair value hierarchy as defined by U.S. GAAP:

Level 1: Observable inputs such as quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.

Level 2: Observable inputs other than Level 1 prices, such as quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active.

Level 3: Unobservable inputs based on the Company’s assessment of the assumptions that market participants would use in pricing the asset or liability.

Property and Equipment

Property and equipment is stated at cost and depreciated over the estimated useful lives of the related assets using the straight-line method. Laboratory equipment and office furniture and equipment are depreciated over five years, and computer equipment is depreciated over three years. Manufacturing equipment is depreciated over seven to ten years. Leasehold improvements are amortized over the shorter of the estimated useful life or the non-cancelable term of the related lease, including any renewals that are reasonably assured of occurring. Property and equipment under construction is classified as construction in progress and is depreciated or amortized only after the asset is placed in service. Expenditures for maintenance and repairs are charged to expense whereas the costs of significant improvements which extend the life of the underlying asset are capitalized. Upon retirement or sale, the cost of assets disposed of and the related accumulated depreciation are eliminated and any resulting gain or loss is reflected in the Company’s statements of operations and comprehensive loss.

The treatment of costs to construct property and equipment depends on the nature of the costs and the stage of construction. Costs incurred in the project planning, design, construction and installation phases are capitalized as part of the cost of the asset. The Company stops capitalizing these costs when the asset is substantially complete and ready for its intended use. For manufacturing property and equipment, the Company also capitalizes the cost of validating these assets for the underlying manufacturing process. The Company completes the capitalization of validation costs when the asset is substantially complete and ready for its intended use. Costs capitalized include incremental labor and fringe benefits, and direct consultancy services.

Leases

On January 1, 2019, the Company adopted a new U.S. GAAP accounting standard which requires that all lessees recognize the assets and liabilities that arise from leases on the balance sheet and disclose qualitative and quantitative information about its leasing arrangements (ASC 842). The new standard was adopted using the modified retrospective transition method, which requires the Company to apply the standard as of the effective date and does not require restatement of prior periods. The Company elected to apply the package of practical expedients, which allowed the Company to not reassess: (i) whether expired or existing contracts contain leases; (ii) lease classification for any expired or existing leases; and (iii) initial direct costs for any existing leases. Adoption of this standard did not have a material impact on the Company’s Consolidated Statement of Operations and Comprehensive Loss or Statement of Cash Flow, however, upon adoption, the Company recorded right-of-use assets of $3.8 million and lease liabilities of $4.7 million on its Consolidated Balance Sheet related to the Company’s operating leases.

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The Company has operating leases of office, manufacturing and laboratory space, which have remaining lease terms of one to five years and may include one or more options to renew or terminate early.

The Company determines if an arrangement contains a lease at inception. Operating lease right-of-use assets and lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. Certain adjustments to the right-of-use asset may be required for items such as prepaid or accrued lease payments, initial direct costs paid or incentives received. The Company’s leases do not contain an implicit rate, and therefore the Company uses an estimated incremental borrowing rate based on the information available at the lease commencement date in determining the present value of lease payments. Options to extend or terminate the lease are reflected in the calculation when it is reasonably certain that the option will be exercised. The Company has elected to account for lease and non-lease components as a single lease component, however non-lease components that are variable, such as common area maintenance and utilities, are generally paid separately from rent based on actual costs incurred and therefore are not included in the right-of-use asset and operating lease liability and are reflected as an expense in the period incurred. Leases with an initial term of 12 months or less are not recorded on the balance sheet.

Other Assets

Other assets included a $1.8 million non-controlling investment in a privately-held company that was accounted for under the cost method of accounting as of December 31, 2018. Based on information received in April 2019, it was determined that there was a deterioration of the private company’s financial condition due to a working capital deficiency and an inability to secure additional funding. Therefore, the Company concluded that the investment was impaired, and a non-cash impairment charge of $1.8 million was recorded during the first quarter of 2019.

Contingent Consideration

The Company records contingent consideration resulting from a business combination at its fair value on the acquisition date. The Company determines the fair value of the contingent consideration based primarily on the (i) timing and probability of success of clinical events or regulatory approvals; (ii) timing and probability of success of meeting clinical and commercial milestones; and (iii) discount rates. The Company’s contingent consideration liabilities arose in connection with its acquisition of Kolltan. On a quarterly basis, the Company revalues these obligations and records increases or decreases in their fair value as an adjustment to operating earnings. Changes to contingent consideration obligations can result from adjustments to discount rates, accretion of the discount rates due to the passage of time, changes in the Company’s estimates of the likelihood or timing of achieving development or commercial milestones, changes in the probability of certain clinical events or changes in the assumed probability associated with regulatory approval. The assumptions related to determining the value of contingent consideration include a significant amount of judgment, and any changes in the underlying estimates could have a material impact on the amount of contingent consideration adjustment recorded in any given period.

Intangible Assets

IPR&D assets acquired in a business combination initially are recorded at fair value and accounted for as indefinite-lived intangible assets. The valuation model used to measure the fair value of the Company’s IPR&D assets was primarily a discounted cash flow approach. The assumptions used in determining the fair value of the Company’s IPR&D assets include (i) probability of success; (ii) probability of partnership; (iii) partnership milestones; and (iv) discount rate. These assets are capitalized on the Company’s balance sheets until either the project underlying them is completed or the assets become impaired. If a project is completed, the carrying value of the related intangible asset is amortized over the remaining estimated life of the asset beginning in the period in which the project is completed. If a project becomes impaired or is abandoned, the carrying value of the related intangible asset is written down to its fair value and an impairment charge is taken in the period in which the impairment occurs.

Each IPR&D asset is assessed for impairment at least annually or when impairment indicators are present. The Company has the option to assess qualitative factors to determine if it is more likely than not that the IPR&D asset is impaired and whether it is necessary to perform a quantitative impairment test.

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Goodwill

The difference between the purchase price and the fair value of assets acquired and liabilities assumed in a business combination is allocated to goodwill. Goodwill is evaluated for impairment on an annual basis or when impairment indicators are present. The Company has the option to assess qualitative factors to determine if it is more likely than not that goodwill is impaired and whether it is necessary to perform a quantitative single-step goodwill impairment test. As a result of the discontinuation of the Glemba program, the Company evaluated goodwill for potential impairment in the first quarter of 2018. It was determined that the goodwill asset was fully impaired and an impairment charge of $91.0 million was recorded.

Impairment of Intangible and Long-Lived Assets

The Company evaluates the recoverability of its long-lived assets, including property and equipment, right-of-use assets, and intangible assets when circumstances indicate that an event of impairment may have occurred. Determination of recoverability is based on an estimate of undiscounted future cash flows resulting from the use of the asset and its eventual disposition. In the event that such cash flows are not expected to be sufficient to recover the carrying amount of the assets, the assets are written-down to their estimated fair values.

Revenue Recognition

On January 1, 2018, the Company adopted a new revenue accounting standard, “Revenue from Contracts with Customers” (ASC 606). Upon adoption using the modified retrospective application, the Company recognized a $1.3 million decrease to accumulated deficit, a $0.8 million decrease in deferred revenue and $0.5 million increase in accounts receivable due to the cumulative impact of adopting ASC 606. This impact was driven by the acceleration of revenue using a percentage-of-completion method of accounting under ASC 606 for an open contract that had previously been accounted for using the Contingency Adjusted Performance Model (“CAPM”) under previous guidance. Results for reporting periods beginning after January 1, 2018 are presented under ASC 606. There were no significant changes to the Company’s business processes, systems or internal controls as a result of adopting the new standard. Revenue recognition remained largely unchanged under the new standard.

The Company determines revenue recognition through the following steps:

•

Identification of the contract, or contracts, with a customer;

•

Identification of the performance obligations in the contract;

•

Determination of the transaction price;

•

Allocation of the transaction price to the performance obligations in the contract; and

•

Recognition of revenue when, or as, the Company satisfies a performance obligation.

Revenue for the Company has historically been derived from biopharmaceutical product development agreements with collaborative partners for the research and development of therapeutic drug candidates. The terms of the agreements may include nonrefundable signing and licensing fees, funding for research, development and manufacturing, milestone payments and royalties on any product sales derived from collaborations. The Company assesses the multiple obligations typically within product development contracts to determine the distinct performance obligations and how to allocate the arrangement consideration to each distinct performance obligation.

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costs to fulfill the contract. Incurred cost represents work performed, which corresponds with, and thereby best depicts, the transfer of control to the customer. Due to the nature of the work performed in these arrangements, the estimation of cost at completion is complex, subject to many variables, such as expected clinical trial costs, and requires significant judgements. Circumstances can arise that change original estimates of costs or progress toward completion. Any revisions to estimates are reflected in revenue on a cumulative catch-up basis in the period in which the change in circumstances became known.

Contract Assets and Liabilities

The Company classifies the right to consideration in exchange for products or services transferred to a client as either a receivable or a contract asset. A receivable is a right to consideration that is unconditional as compared to a contract asset which is a right to consideration that is conditional upon factors other than the passage of time.

The Company’s contract liabilities result from arrangements where the Company has received payment in advance of performance under the contract. These amounts are included as deferred revenue within current portion of long-term liabilities on the condensed consolidated balance sheets.

Research and Development Expenses

Clinical trial expenses include expenses associated with clinical research organization, or CRO, services. Contract manufacturing expenses include expenses associated with contract manufacturing organization, or CMO, services. The invoicing from CROs and CMOs for services rendered can lag several months. The Company accrues the cost of services rendered in connection with CRO and CMO activities based on our estimate of costs incurred. The Company maintains regular communication with our CROs and CMOs to assess the reasonableness of its estimates. Differences between actual expenses and estimated expenses recorded have not been material and are adjusted for in the period in which they become known.

Patent Costs

Patent costs are expensed to general and administrative expense as incurred. Certain patent costs are reimbursed by the Company’s product development and licensing partners. Any reimbursed patent costs are recorded as product development and licensing agreement revenues in the Company’s financial statements.

Stock-Based Compensation

The Company records stock-based compensation expense for all stock-based awards made to employees, directors and non-employees based on the estimated fair values of the stock-based awards expected to vest at the grant date and adjusts, if necessary, to reflect actual forfeitures. Compensation expense for all stock-based awards is recognized using the straight-line method over the term of vesting or performance.

Foreign Currency Translation

Net unrealized gains and losses resulting from foreign currency translation are included in accumulated other comprehensive income. At December 31, 2020 and 2019, accumulated other comprehensive income includes a net unrealized gain related to foreign currency translation of $2.6 million.

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Income Taxes

The Company uses the asset and liability method to account for income taxes, including the recognition of deferred tax assets and deferred tax liabilities for the anticipated future tax consequences attributable to differences between financial statement amounts and their respective tax basis. Quarterly, the Company reviews its deferred tax assets for recovery. A valuation allowance is established when the Company believes that it is more likely than not that its deferred tax assets will not be realized. Changes in valuation allowances from period to period are included in the Company’s tax provision in the period of change.

The Company records uncertain tax positions in the financial statements only if it is more likely than not that the uncertain tax position will be sustained upon examination by the taxing authorities. The Company records interest and penalties related to uncertain tax positions in income tax expense.

Comprehensive Loss

Comprehensive loss is comprised of net loss and certain changes in stockholders’ equity that are excluded from net loss. The Company includes foreign currency translation adjustments and unrealized gains and losses on marketable securities in other comprehensive loss. The statements of operations and comprehensive loss reflect total comprehensive loss for the years ended December 31, 2020, 2019 and 2018.

Net Loss Per Share

Basic net loss per common share is based upon the weighted-average number of common shares outstanding during the period, excluding restricted stock that has been issued but is not yet vested. Diluted net loss per common share is based upon the weighted-average number of common shares outstanding during the period plus additional weighted-average potentially dilutive common shares outstanding during the period when the effect is dilutive. In periods in which the Company reports a net loss, there is no difference between basic and diluted net loss per share because dilutive shares of common stock are not assumed to have been issued as their effect is anti-dilutive. The potentially dilutive common shares that have not been included in the net loss per common share calculations because the effect would have been anti-dilutive are as follows:

Year Ended December 31,

Restricted stock — 1,110 3,552

Newly-Adopted Accounting Pronouncements

On January 1, 2020, the Company adopted a new accounting standard that modifies certain disclosure requirements for fair value measurements. For instance, the Company is required to disclose weighted average information for significant unobservable inputs for all Level 3 fair value measurements. The adoption of this new guidance did not have a material impact on the Company’s consolidated financial statements and related disclosures. Refer to Note 4 for the disclosures related to the Company’s level 3 fair value measurements.

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

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Recent Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) or other standard setting bodies that are adopted by the Company as of the specified effective date. Unless otherwise discussed, the Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on the Company’s consolidated financial statements upon adoption.

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

(3) Accumulated Other Comprehensive Income

The changes in accumulated other comprehensive income, which is reported as a component of stockholders’ equity, for the year ended December 31, 2020 are summarized below:

(In thousands)

Other comprehensive loss (30) — (30)

Balance at December 31, 2020 $ (7) $ 2,596 $ 2,589

No amounts were reclassified out of accumulated other comprehensive income during the years ended December 31, 2020, 2019 and 2018.

(4) Fair Value Measurements

The following tables set forth the Company’s financial assets and liabilities subject to fair value measurements:

As of December 31, 2020 Level 1 Level 2 Level 3

(In thousands)

Assets:

$ 185,652 — $ 185,652 —

Liabilities:

$ 8,267 — — $ 8,267

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As of December 31, 2019 Level 1 Level 2 Level 3

(In thousands)

Assets:

$ 57,175 — $ 57,175 —

Liabilities:

$ 12,485 — — $ 12,485

The Company’s financial assets consist mainly of cash and cash equivalents and marketable securities and are classified as Level 2 within the valuation hierarchy. The Company values its marketable securities utilizing independent pricing services which normally derive security prices from recently reported trades for identical or similar securities, making adjustments based on significant observable transactions. At each balance sheet date, observable market inputs may include trade information, broker or dealer quotes, bids, offers or a combination of these data sources.

The following table reflects the activity for the Company’s contingent consideration liabilities measured at fair value using Level 3 inputs for the year ended December 31, 2020 (in thousands):

Other Liabilities: Contingent Consideration

Fair value adjustments included in operating expenses (4,218)

The valuation technique used to measure fair value of the Company’s Level 3 liabilities, which consist of contingent consideration related to the acquisition of Kolltan in 2016 (Note 17), was primarily an income approach. The significant unobservable inputs used in the fair value measurement of the contingent consideration are estimates, including probability of success, discount rates and amount of time until the conditions of the milestone payments are met. As of December 31, 2020, the weighted average discount rate used in calculating the fair value of contingent consideration was 8.1% (with a range of 8.0% to 9.0%) and the weighted average amount of time until the conditions of the milestone payments are met was 4 years.

During the year ended December 31, 2020, the Company recorded a $4.2 million gain on fair value remeasurement of contingent consideration, primarily due to updated assumptions for CDX-3379 related milestones due to the discontinuation of the CDX-3379 program partially offset by changes in discount rates and the passage of time. The assumptions related to determining the value of contingent consideration include a significant amount of judgment, and any changes in the underlying estimates could have a material impact on the amount of contingent consideration adjustment recorded in any given period.

The Company did not have any transfers of assets or liabilities between the fair value measurement classifications during the years ended December 31, 2020 and 2019.

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(5) Marketable Securities

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

(In thousands)

December 31, 2020

Marketable securities

Corporate debt securities

December 31, 2019

Marketable securities

Corporate debt securities

The Company holds investment grade marketable securities, and none were considered to be other-than-temporarily impaired as of December 31, 2020. Marketable securities include $0.2 million in accrued interest at December 31, 2020 and December 31, 2019.

(6) Property and Equipment, Net

Property and Equipment, Net includes the following:

(In thousands)

Laboratory equipment $ 8,566 $ 8,622

Manufacturing equipment 2,630 2,510

Office furniture and equipment 3,409 3,873

Leasehold improvements 10,103 17,238

Construction in progress 344 191

Total property and equipment 25,052 32,434

Property and equipment, net $ 3,815 $ 4,031

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Depreciation and amortization expense related to property and equipment was $2.0 million, $2.7 million and $3.6 million for the years ended December 31, 2020, 2019 and 2018, respectively.

(7) Leases

The Company has operating leases of office, manufacturing and laboratory space, which have remaining lease terms of one to five years and may include one or more options to renew or terminate early.

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