Delcath Systems, Inc. (NASDAQ:DCTH) has had a pretty rough start to the year, and is currently trading around 53% off its annual open. The decline comes about on the back of no real negative catalysts, aside from – perhaps – the unmet expectations of an interim release relating to one of the company’s ongoing studies. As things stand, however, and the just mentioned expectation miss aside, Delcath remains on track to pump out catalysts throughout the latter half of this year and beyond into 2018 from a number of programs. With this in mind, we think the latest decline might be an opportunity to pick up an exposure at a discount, and benefit from a revaluation as the year ahead matures.
In light of this, here’s a look at the company, and what we’re looking at as being the driving catalysts going forward.
By way of a quick introduction to Delcath, the company is a development stage biotechnology company (although it refers to itself as a late stage development company) with a primary focus on cancers of the liver. The company has one ongoing phase 3 trial investigating the efficacy of its lead investigational product — Melphalan Hydrochloride for Injection for use with the Delcath Hepatic Delivery System (Melphalan/HDS) – in patients with Hepatic Dominant Ocular Melanoma (OM), and a phase 2 trial Melphalan/HDS system for the treatment of primary liver cancer (HCC) and intrahepatic cholangiocarcinoma (ICC).
That sounds pretty wordy, and by proxy, pretty complicated. It’s not really, however. Basically, the company is trying to make chemotherapy less toxic. Current cancer treatment involves pumping high levels of toxins into the bloodstream in order to kill cancerous cells. It’s not particularly selective, and this results in the associated side effects of chemotherapy and other cancer treatments. With the hepatic delivery system, Delcath can administer a high-dose chemotherapy agent to the liver directly, and this direct delivery reduces the chemo agent’s impact on noncancerous, healthy cells. The system is already approved in Europe, and the company is now trying to get it approved in the US, as well as expand on the current commercial market in Europe.
So that’s what the latest announcements, and in turn, the company’s incoming catalysts, relate to. Specifically, for the phase 2, the company expected to have some interim data available this month. On January 12, however, Delcath announced that this data was not available, not because the drug was not effective, just because it had not come in yet. Alongside this announcement, the company also reported that an efficacy signal had been met as the result of some retrospective analysis, and that it should have the interim data ready to hit press near-term. It’s a bit of a snag, but nothing serious, and with the interim slated for release soon, we think the recent decline should close quickly if and when this data comes out.
On January 18, the company also announced that data from another retrospective study has been accepted for presentation at the Regional Cancer Therapies 12th International Symposium, taking place February 18 – 20, and that this data points to clinical benefit in patients with a type of liver cancer called primary metastatic ocular melanoma. Basically, while it looks as though there is a slight delay on collection, all the data to-date points towards clinical benefit, and there is no real reason that this one should be declining. It is, of course, and that is where we see an opportunity. Further, there are no real cash concerns right. The company recorded $27 million cash on hand as of September 30, and debt of just $6 million (long-term). As such, dilution shouldn’t be an issue for the foreseeable future, at least while the ongoing trials mature through to completion.
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Disclosure: We have no position in DCTH and have not been compensated for this article.