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Delcath Systems, Inc. (OTCMKTS:DCTH): Here's Our Take

Delcath Systems, Inc. (OTCMKTS:DCTH): Here's Our Take
Written by
Chris Sandburg
Published on
December 11, 2017
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It's been a month or so since we last looked at Delcath Systems, Inc. (OTCMKTS:DCTH) as part of this piece. The point of our looking at the stock back then was to outline a short squeeze play that we saw as a nice short-term option for a trader with a bit of risk tolerance. The play proved a smart one – the stock ran up 90% on said squeeze before correcting to dip towards current levels. DCTH Daily ChartSince then, we've seen Delcath decline substantially and the company currently trades for just $0.05 a share, amounting to a market capitalization of just shy of $600,000.So why are we coming back to it today?Well, because at the end of last week, a fresh bit of news pushed the company up more than 70% as it hit press. The news wasn’t that big of a deal in the sense that it didn’t really offer too much in the way of fresh information (we'll get into this in a minute) but, even with this being the case, the stock ran to the above mentioned high double figures.We think this tells markets something about the current state of sentiment surrounding Delcath – that the company is undervalued at its current market capitalization. Some will look at this statement and question our logic. This is a company that has repeatedly diluted its shareholders and has, along the way, subjected the latter to a number of reverse splits. Sentiment is weak and has been for a long time and, aside from a few spikes on the back of some positive news, or a split being voted down, the overarching trajectory has been firmly to the downside during 2017 to date.Our argument is as follows, however: this is a company that has an asset, an oncology asset, no less, that's already commercially available. Sure, it's available in Europe and not the US, but the value of this asset alone, even with its current regulatory status limiting its sales potential, outweighs the company's current market capitalization.If Delcath can pick up a regulatory green light for its CHEMOSAT product in the US, markets are very quickly going to forget the disaster that has been 2017 and, in turn, are going to start trading up on the company in anticipation of a revised commercialization potential.In line with this, then, any development that reinforces a commercialization push is going to inject some upside momentum into the stock – and that's what we saw last week. The news (that we mentioned above) basically outlines the fact that data from a multisite trial of CHEMOSAT points towards efficacy (which, of course, we'd expect, given that it's already approved in Europe) and that the data has been accepted for publication in the peer-reviewed Journal of Surgical Oncology.That's a positive input, of course, but it's not really +76% positive and it goes to show just how trigger happy markets are on this stock.And all this ignores the potential for a buyout. Whatever anyone thinks of management, CHEMOSAT is an approved asset that's in late-stage development in the US (as part of an ongoing phase III trial). While we've not heard anything solid on the wire, that nobody is interested in picking up the company, or the program, or just the asset, at current prices is hard to believe.Don't get us wrong here. This is still a risky one and anyone that picks up a position is catching a falling knife – something that's advised against for a reason. With that said, for anyone that's willing to get on the ride and, in turn, to accept that there's likely some further downside in store before this one spikes again, it could a great small-scale exposure.Check out our previous coverage of this one here. We will be updating our subscribers as soon as we know more. For the latest on DCTH, sign up below!Image courtesy of Scott Cresswell via FlickrDisclosure: We have no position in DCTH and have not been compensated for this article.

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