Delcath Systems, Inc. (NASDAQ:DCTH) Is A Bumpy, But Potentially Rewarding, Biotech Ride

Delcath Systems, Inc. (NASDAQ:DCTH) played into the day traders’ hands at the end of the last week, running up from a floor of $0.02 a share at the Thursday open to reach Friday midday highs of $0.085 and close out the session around $0.063. As the markets opened for a fresh week this week, the upside run continues, and the company currently goes for $0.072, a 17% premium on the daily open.As far as what’s causing the run, things aren’t particularly clear. There’s a pending shareholder meeting (which just got delayed) at which shareholders will vote on a range of different things, but primarily on the authorization of management to effect a reverse split. Those who’ve been around for a while will remember last year’s split, which was necessary to maintain minimum bid. Well, this year’s split (and while there aren’t enough votes in yet to green light it, we expect it’s will get approved and effected in the end) is being used for exactly the same reason.This potential for split has weighed pretty heavily on sentiment over the last few months and we suspect that the short interest that’s built up in line with this negative sentiment shift is being squeezed (shares short rose from 363K back in February to 17 million at the end of May), and in turn, that this squeeze is driving the upside momentum.The question now, is what’s next?Well, with a reverse split likely, this one’s a risky play during the coming weeks and months. With that said, however, there’s also a large amount of reward on offer for an operator willing to shoulder a bit of risk. For those new to Delcath, it’s a biotechnology play that’s got a pipeline targeting certain types of cancer. The company has designed a delivery method for chemotherapy drugs and it’s trying to pick up approval for this method as and when applied to – for now – ocular melanoma (OM), which is a type of eye cancer, and two types of liver cancer, intrahepatic cholangiocarcinoma (ICC) and hepatocellular carcinoma (HC).Each of these indications is a potential upside catalyst for the company, but the two on which we’re basing our value thesis are the first, the OM indication, and the second, the ICC indication. There’s an ongoing phase III pivotal trial called FOCUS that’s evaluating safety and efficacy in OM and data from this study should hit press during the fourth quarter of this year. It’s only interim data, and it’s primarily going to address the safety side of the equation (as per the protocol agreed with the FDA) but this doesn’t negate it as a value driver. If we see a clean safety profile on read out, and we get some indication of clinical benefit (we expect that we will) then there’s a double-digit run to be had on release.Looking at the ICC catalyst, management has already agreed on an SPA with the FDA (this was the focus of our previous coverage) and the drug will jump straight into a pivotal trial during the fourth quarter of this year. This initiation is a catalyst in itself, as it will give the company a second shot on goal to add to its value thesis, and data during mid to late 2018 should serve to compound any action we see on the back of positive OM data.Bottom line here is that this is a company that’s been a pretty tough one to hold year to date, and it’s going to be a bit of a rollercoaster across the next month or so, but for those willing to ride out the storm, and taking into consideration the potential of its pipeline, it looks incredibly cheap at current prices.We will be updating our subscribers as soon as we know more. For the latest updates on DCTH, sign up below!Disclosure: We have no position in DCTH and have not been compensated for this article.