In the short week of the Thanksgiving holiday, combined with the following Monday and Tuesday, Celsion Corporation (CLSN) rallied to post a gain of more than 45% and has continued to hold these gains. The reason for the movement is related to its lead product, ThermoDox, as the company announced the passing of the 380th progression event in its pivotal study. This passing is significant because it means the company will now begin to analyze and prepare its announcement of data. All early data has been solid, therefore investors are buying in preparation of data, believing significant gains lie ahead in the following few weeks. And if successful, Celsion will not only see a massive change in its valuation, but might also impact the valuation of companies that are developing similar technologies.
A Look at Celsion and its Near Term Catalysts
What makes the movement and the upcoming data so exciting for Celsion is because, if successful, it will open new doors for non-surgical approaches to treat cancer. The company's therapy, ThermoDox, is a lysolipid thermally sensitive liposome (LTSL) encapsulation of doxorubicin (which is approved and widely used in chemotherapy). The agent is delivered into the cancer patient's body via intravenous (IV) infusion, and the LTSL's are allowed to accumulate in cancer tumors. The treatment utilizes radiofrequency ablation to raise the body temperature of the targeted area, which then activates and releases the chemotherapy agent for what could be a more targeted and effective result (reportedly up to 25x greater).
The company is attempting to treat and enter the very large liver cancer market in which over 750,000 new cases occur every year around the globe. The company believes that over 30% of these patients would qualify for the treatment, and that it would be a treatment of choice thanks to the safety profile associated with using the therapy close to major arteries. Of course we will know more in the next few weeks, but investors appear to be preparing for a successful launch.
With a successful trial, it is very possible that Celsion could move forward and test ThermoDox on several new indications, in large studies, and create over $1 billion in eventual sales. Furthermore, the company has several options, pending a successful trial. Perhaps a company such as Johnson & Johnson (JNJ) might look into acquiring or partnering with Celsion. Johnson & Johnson has the medical device business and the oncology products to develop ThermoDox further and allow it to maximize its potential. I am not saying this will occur, or even that there's substance to the suggestion. However, with a successful trial the company could develop ThermoDox alone, alongside a partner, or become attractive as an acquisition. Regardless, it opens the door for other companies in the space with similar technology.
In regards to risk and potential reasons for its less than bullish market capitalization, there is always the chance that data will not be successful. For the most part, strong data is assumed based on past trials, a strong clinical development team, and the support from the FDA. The company currently has cash in the amount of $22.55 million, it has zero revenue, and $5 million in debt. Therefore, the company's first goal should be to find a global partner, a company to take on the majority of costs. Because at this point, its $16 million loss last quarter from operating activities is only going to get worse after the company's launch, and it's very possible that these high costs have also contributed to its conservative valuation, making efficiency very important.
Despite Celsion Corporation's recent 45% gain, the company has a market capitalization of just $273 million. Keep in mind; this is a company that is just weeks from announcing Phase 3 data for a product that has a billion dollar potential. It is also a therapy that has been granted FDA Fast Track and Orphan Drug Designation, giving it many years without generic competition. This shows a clear level of support, yet the market has not appropriately valued the company. The reason is because ThermoDox is not a sexy product; it is not an immunotherapy agent like Dendreon's (DNDN) Provenge or a targeted monoclonal antibody like those created by ImmunoGen (IMGN), but rather a device with global potential and few questions. Throughout history such products have been hit or miss, as it's hard to say how physicians will accept devices. As a result, stocks such as Celsion typically remain undervalued, trading at deep discounts compared to biotechnology companies that develop drugs and or vaccines. It doesn't mean that Celsion couldn't become a good investment, or appreciate, but rather that investors stay somewhat skeptical and are less willing to speculate.
Looking throughout the market there aren't a great deal of clinical stage biotechnology companies that have chosen to focus on medical devices in oncology, most likely due to the lack of investor support. However, there are a few that show promise. Inovio (INO) is a company that is showing promise in this space, as a potential leader, but now seems to divide its focus on synthetic vaccines between some cancers and infectious diseases. The company recently announced that its lead product, VGX-3100, generated a potent and durable T-cell response against papillomavirus (HPV) affected cells that had mutated into precancerous cervical dysplasias, an indicator of the immune response against the targeted cells. The company is using an electroporation device to administer its therapies. An electroporation device applies a current across targeted tissue, which increases the cell membranes' porosity and increases the uptake of pre-injected agents into the cells' interiors. Once the current is removed, the membranes reseal and trap the agents inside. A recent press release announced the publication of positive immunological effects in a preclinical animal model of optimized electroporation (EP) in Human Gene Therapy. This technology is believed to have the capabilities of decreasing dosages of therapeutics, improving tolerability, and improving efficiency, by using the company's synthetic vaccines, for both the Flu and HIV.
Another company in the space is OncoSec (ONCS.OB), and it is using a very similar strategy, increasing uptake and decreasing side effects of immunotherapy and chemotherapy agents. OncoSec licensed Inovio s technology in 2011 as pertaining to "electroporation technology useful for electrochemical and cytokine based immune therapies for treating solid tumors." There may be some similarities, seeing as how Inovio was the original developer of OncoSec's technology, but OncoSec is developing the technology to administer agents to address solid tumors such as melanomas while Inovio is using the technology to administer its synthetic vaccine platform predominantly for infectious diseases. OncoSec is attempting to follow the path of Celsion and will use already approved products within its device, which might create a clear path to an FDA approval than Inovio's in-development agents and administration device.
Much like Celsion's product, OncoSec's has billion dollar potential due to the fact that it can be used in conjunction with virtually any chemotherapy or immunotherapy agent. The basis surrounding Celsion's platform is heat, and OncoSec's is electricity, or electrical currents that create temporary pores and allow for a product to be easily delivered to the source of the cancer. OncoSec recently announced breakthrough interim data that had virtually zero negatives for its NeoPulse system in treating squamous cell carcinoma and basal cell carcinoma. The company also released interim data using its ImmunoPulse treatment for both the treatment of Merkel cell carcinoma (MCC) and metastatic melanoma. As a result, OncoSec has responded with very significant gains both before and after, as interim data showed no safety concerns and a strong response to the system. The stock recently found support, and then progressed to trade higher, as investors brace themselves for further data. This data will occur next year and will be a major catalyst, along with the success of Celsion, and could lead ONCS to becoming one of the better performing stocks in the market (if data remains positive).
Although many are looking ahead to future Phase IV data for NeoPulse and Phase II data for ImmunoPulse, it was interim Phase II data that led to such optimism in OncoSec's stock. The first round was for the treatment of MCC, a very rare disease. Due to its rarity the interim data only tested three patients, but in terms of clinical design this actual benefits OncoSec. The company can progress fairly quickly with a pivotal MCC study in 2013 with limited costs, possibly allowing for NeoPulse to enter the market fairly soon. In the company's metastatic melanoma trial, the trial met its end point and announced positive interim efficacy results. The data showed that 95% of all treated tumors demonstrated a response to the system, which was data collected on 50% of the total enrolled patients.
As previously mentioned, OncoSec's NeoPulse system uses chemotherapy agents, and in its current trial it is using low doses of FDA approved bleomycin. But much like Celsion's technology, NeoPulse can be used with other agents and or indications. This is beneficial to both companies, but in regards to OncoSec, metastatic melanoma is a disease of significant interest among pharma companies. OncoSec will have the flexibility to continue testing its platform on new agents, for even better effects as new products gain approvals. Therefore, much like Celsion's billion dollar potential, due to the diversity associated with its technology, OncoSec presents the same potential, if it continues to be proven effective.
In the last six months Celsion Corporation has increased in value by nearly 300%, going from a market cap of just $70 million to $265 million. In the same period OncoSec has rallied more than 80%, and prior to last month it was a 100% gain. It is very likely that both stocks will continue to appreciate, with incredible data, support from regulators, and no reason to suggest failure based on known information. With that being said, 2013 could be the year of minimally invasive products and the companies that develop the products. It's time for these companies to appropriately reflect market potential and worth. Celsion could be opening the door with others right behind to follow. Due diligence is suggested with all microcap companies, as there is a higher beta associated with smaller biotechs. An investor must weigh the risks with the potential rewards.