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Shares of CellDex Thereapeutics were slammed late last week after Pfizer backed out of an over two-year-old licensing agreement for CDX-110, a cancer vaccine currently being tested for effectiveness in fighting one of the most aggressive forms of brain cancer.  CDX-110 is CellDex's most advanced product candidate, currently being evaluated in the latter stages of an ongoing Phase II trial.

After having traded near ten dollars over the past year, CLDX collapsed to below the three dollar mark for a brief time on Friday before recovering somewhat to settle in the mid three dollar range.  Over seven million shares traded hands, signifcantly higher than the average of roughly 600,000, and the company's market cap closed last week at 112.56 million.

After such a dramatic drop on just as dramatic news, the million dollar question now is whether it's time to buy, time to hold, time to run or time to sit on the sidelines and watch for a little while.

VFC's Take is this:  there's two scenarios at play here.

1.  Pfizer has lost confidence that CDX-110 is effective enough to make it through Phase III and onto utlimate approval and decided to cut the cord (and cash burn) sooner rather than later, or

2.  The truth is in the published reports and Pfizer decided that CDX-110 was no longer - or never was - a strategic fit for the company's, especially not for the pricetag attached to the potential royalty payments.

There's also some grey area built into these scenarios that may have influenced Pfizer's decision; the company may have decided that the competition for brain cancer vaccines was a lot thicker at this time than it was at the time of signing the partnership and Pfizer also may have felt that they could advance similar products of their own with technology already indiginous to the company, and save the big bucks that would have been paid to CellDex in the process. 

The second scenario is definitely a lot more positive - and maybe even more probable - than the first, but regardless of whatever decision an investor makes at this point, he or she must keep both scenarios in mind because it's all speculation at this point.

It's also worth keeping in mind that regardless of which scenario is at play here, we've got to expect that CellDex - barring the addition of another deep-pocketed partner - will need to raise cash to advance this product through Phase III.  That means dilution is likely in the near to mid term future. 

So let's weigh it up. 

The Good: 

- A speculative 'Phase II' company with multiple cancer treatments in the pipeline in addition to a few earlier-stage candidates that treat various infectious and inflammatory diseases. 

- A large decline in price already occurred, meaning the worse may be over since a market cap of 112.5 is not an unreasonable buy for a speculative company with the solid pipeline of CellDex.

- Should CDX-110 make it to market, then the company will not be looking at sharing revenue with Pfizer (although another partnership deal could materialize). 

The Bad:  

- CellDex's most advanced product just got dumped by one of the world's largest pharmaceutical giants.

- Speculation will run rampant about what Pfizer knows that we don't.

- Dilution is almost a sure thing.

The Ugly:

- The huge price decline last week.

- The fact that Pfizer might have dumped the agreement because there's little chance of success.

VFC's Take:  I'm a fan of a speculative buy here, although I wouldn't be ready to jump all in at once.  I'd wet my beak (I've got a big nose) with a few shares and keep CLDX high on the watch list to see if a better 'accumulate' point presents itself.  If a better entry point did present itself, I'd add a few more shares, but I'd still hold off investing the full intended amount until the future financing played out.

I think we're looking at a decent speculative buy here, but I wouldn't get in all at once.

Disclosure:  No positions.

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