It is only been a week or so since we last covered Celsion Corporation (NASDAQ:CLSN) but recent action in the company necessitates that we take another look at it today.
At the time of our previous coverage, which came on November 14, Celsion was trading in and around $1.89 a share.
Intraday on Tuesday, this rose to as high as $3.60 piece before the company settled to close out the session at $2.86.
Premarket activity on Wednesday is adding strength to this close-out number and the company (at time of writing, shortly before US market open) is trading for just shy of $3 a piece right now.
From our initial highlight price to current levels, that’s a 61% increase. For anybody that managed to time an exit at intraday highs yesterday, this number rises to close to 95%.
So what’s behind the action and where do things go from here?
Let’s take a look.
Our thesis last time was based on the fact that this company has had a pretty rough last few years (well, technically, a little bit longer than that) but that things were finally looking to be in place for a longer-term recovery.
This is something we often see in the biotechnology space, with a company disappointing markets with a sub-par data readout and then having to essentially dig itself out of a hole for an extended period of time in order to get back to a point at which it can start adding shareholder value. The act of digging itself out of said hole usually brings with it dilution and this translates to both a weakened share price and shareholder sentiment across the period.
For anybody that wasn’t in prior to the decline, however, waiting until things look as though they may be turning around can be a great strategy and, when we looked at the stock last week, we highlighted the fact that we think this might be Celsion’s turnaround point.
What’s driving the action today is the release of some analyst coverage from Oppenheimer outlining essentially the same thesis we put forward in our previous coverage. The positive opinion of Oppenheimer’s analyst has filtered through to market sentiment and the run we are seeing at the moment is symptomatic of a large inflow of speculative volume in support of the Oppenheimer bias.
So what happens going forward?
The future of this one is all about the outcome of a trial called OPTIMA. Having failed a phase 3 trial back in 2013 (a trial called HEAT), Celsion set about analyzing the study for areas of weakness and basically set up the OPTIMA study as a new and improved version of HEAT. It’s another phase 3 trial and it’s looking at a drug called ThermoDox, which is a proprietary heat-activated liposomal encapsulation of doxorubicin (which, in turn, is an already well-established cancer drug) in patients with liver cancer.
If the trial succeeds, and there’s a good chance it will, given the revised protocol based on the failure points of HEAT, the drug could be looking at a revenue potential of between $300 million and $500 million annually. When considered against the fact that this is a company that currently holds a market capitalization of just $31 million, there’s a substantial amount of room for upside revaluation if and when the numbers hit press as positive.
There’s a binary risk, of course, rooted in the fact that the stroke has failed a phase 3 trial once and could potentially fail a phase 3 trial again. There is also some degree of near-term dilution risk given that the company has to fund itself for at least another 12 to 18 months before the data hits press.
If we get positive numbers, however, the dilution will be secondary to the degree of upside run we see on a positive topline release.
Data should hit press during early 2019.
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Image courtesy of Libertas Academica via Flickr
Disclosure: We have no position in CLSN and have not been compensated for this article.