Delcath Systems, Inc. (NASDAQ: DCTH) is a late-stage clinical development company focused on cancers of the liver. It is a specialty pharmaceutical and medical device company developing its product, Melphalan Hydrochloride for Injection for use with the Delcath Hepatic Delivery System (Melphalan/HDS). The system delivers and filters melphalan hydrochloride, which is marketed as a device under the trade name Delcath Hepatic CHEMOSAT Delivery System for Melphalan (CHEMOSAT). The focus is on the execution of the clinical development program (CDP) in ocular melanoma liver metastases (mOM), intrahepatic cholangiocarncinoma (ICC), hepatocellular carcinoma (HCC or primary liver) and other cancers that are metastatic to the liver.
The company’s stock had a rough start to 2017 with the share price down a little under 90% on its opening in January. However, there are a number of catalysts to be announced over the next two years which could affect the price of the stock. This biotechnology company has a primary focus on the development of drugs for the treatment of cancer of the liver. It has specifically developed a delivery system, (technically classified as a medical device system) and it is also developing drugs which are designed to be administered using that proprietary delivery system. It intends to market the combined drugs/delivery combination through a development pathway. The lead application is called Melphalan/HDS in which the Melphalan is a chemotherapy agent by the name of Melphalan Hydrochloride and HDS is the device delivery system for which the full name is Hepatic Delivery System.
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The idea is pretty straightforward, because the delivery of standard chemotherapy agents is systemic, which means that it has to reach the liver for the treatment of liver cancer through the bloodstream. The agent being used can be highly toxic to cancer cells, which is why it is effective but, unfortunately, it is not highly selective, meaning that considerable damage is also caused to cells, which are healthy. The HDS delivery method can deliver large doses of the chemotherapy agent Melphalan but can also restrict the impact on healthy noncancerous cells, which is not possible using current administration methods. Limiting the damage to healthy cell tissue means that the dosage is less toxic overall with fewer side effects and an improved quality of life for patients being treated. The primary objective is surgical resection for patients with intrahepatic cholangiocarcinoma (ICC), which is the type of liver cancer that the company is targeting because resection isn’t possible. This kind of cancer represents around 10-20% of new liver cancer cases, amounting to a little over 3,100 a year in the US.
The latest news
This news concerns the acceptance of what is called a special protocol assessment for a registration trial, which investigates the efficacy of the drug. There is already a phase 3 trial, which is in progress in ocular melanoma and this one is scheduled to start sometime during the third quarter of the year. A special protocol assessment is basically a predefined confirmation from the FDA on the design of a study. In other words, the FDA has asked the company to demonstrate this and show what the technology can do and the approval for commercialization will be forthcoming. This is important because it determines whether the technology is going to be approved at the end of the study, and brings forward any potential revaluation in eight months, which is the period the company would generally have to wait to get a decision after submission. An important element of this process is that the study is in two parts in which patients are going to receive the compound before continuation of the treatment or a transfer to another active compound. This drastically changes the timetable because, though the study starts before the end of the year, the capital outlay for the company will not commenced before the middle of the first quarter next year. This removes some of the concerns that existing investors may have about equity dilution and it gives the current phase 3 trial a chance to fructify before the costs have to be scaled up. To put it another way, the risk of equity generation is delayed in the process and there could be some strong upside revaluation before deletion is absolutely necessary.
The bottom line
In the case of this company operating cash flow indicates that expenses are more than revenues, but this situation is acceptable in the case of fast-growing companies scaling up business. Moreover, companies should have enough resources to meet short-term obligations and DCTH is able to meet its short-term (defined as one year) commitments such as payment of principal and interest on debt with its present holdings of cash and short-term assets. The company’s current share price could jeopardize their standing in the NASDAQ listing market
Source: Broad Street Alerts Editor
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