Everything was going great for Celsion Corporation (CLSN) in the run up to the Phase III HEAT trials of ThermoDox, a drug used for treatment of hepatocellular carcinoma, a type of liver cancer. Then all hell broke loose and the stock that had appreciated more than 160% in six months prior to January 30, 2013, went into a tailspin and closed 81% lower than its previous close on January 31, 2013. Adding insult to injury, the stock lost an additional 12.6% next day, raising questions about the survival of the company.
What went Wrong
It all started with the company announcing that ThermoDox in combination with radiofrequency ablation (RFA) did not meet the primary endpoint of the phase III HEAT study in patients with hepatocellular carcinoma.
From the events prior to the release of the findings of the study, it appears that the management would have been as dumbstruck and letdown as the investors. The recent insider buying and the upbeat statement made by the management regarding ThermoDox, all indicate that the management was not expecting this.
On January 22, 2013, the company had announced what investors were long hoping for - a technology development agreement with Zhejiang Hisun Pharmaceutical Company Ltd., a Chinese pharmaceutical company. Under the terms, the Chinese company would pay $5 million upfront to Celsion and in return Celsion would provide support for it in its development program for manufacturing ThermoDox.
Under the terms of the agreement, the Chinese company was to pay $5 million (non-refundable) upfront to Celsion and another $5 million within 60 days of execution of the contract. Over the next ten years, Celsion was expecting to receive some hundreds of million dollars from exclusive licensing rights for the Greater China market that includes China, Hong Kong and Macau.
Come February 5, 2013, Celsion announced that the exclusive option agreement will be allowed to expire as Zhejiang Hisun Pharmaceutical Company did not plan to pursue the option to license ThermoDox in China and there would be no future payments to Celsion. The technology development contract, however, was not to be canceled and the two companies would continue to work together in the development process of ThermoDox in the Chinese market.
ThermoDox is an approved drug, a proprietary heat-activated liposomal encapsulation of doxorubicin, frequently used in treatment of a wide range of cancers. Besides studying ThermoDox for treatment of hepatocellular carcinoma (also known as primary liver cancer), Celsion is also studying the drug for treatment of other cancers and exploring if any other additional opportunities exist.
Presently, for treatment of primary liver cancer, it is now being evaluated in population sub-group analyses for the HEAT study.
Celsion is also involved in studying ThermoDox for treatment of RCW breast cancer. It is in a Phase II DIGNITY study for evaluating safety and evidence of clinical activity and building upon promising data from a Phase I study.
In 2011, the company initiated a Phase II study of ThermoDox in combination with RFA for treatment of colorectal liver metastases. It involves studying the effect of the drug on 88 patients with colorectal liver metastases. Patients are to receive RFA alone or RFA plus ThermoDox for treating liver tumors.
The company is also exploring the possibility of ThermDox's use in combination with high frequency ultrasound (HIFU) as a non-invasive treatment for a variety of cancers. For this purpose, Celsion is collaborating with Phillip Healthcare and Focused Ultrasound Foundation for studying the efficacy of ThermoDox with HIFU in bone metastases, pain palliation and treatment of pancreatic cancer respectively. Recently, the company announced that it was beginning clinical study of ThermoDox plus HIFU for treatment of metastatic liver cancer.
Celsion is also considering additional development opportunities for ThermoDox.
More information on development programs for ThermoDox is available here.
Will Celsion Survive
Celsion is a late stage development biopharmaceutical company with a focus on "development of innovative, targeted therapies that address unmet medical needs in oncology."
Regardless of whether it is positive or negative, shares of biopharmaceutical companies are sensitive to news. A classic example is that of approval and the debate that followed on obesity drugs, Belviq and Qsymia of Arena Pharmaceuticals (ARNA) and VIVUS, Inc. (VVUS) respectively. The current performance of the CLSN stock is on expected lines.
Another news item that would concern investors is the investor alert on CLSN. It appears that the Shareholders Foundation announced an investigation of Celsion shares over potential securities laws violation. This relates to whether statements made by Celsion management regarding its business, its prospects and its operations were materially false and misleading at the time they were made.
These - both the results of Phase III HEAT study and securities violation - are likely to affect CLSN's stock performance in the short-to-medium term. However, the stock still holds some promise because ThermoDox is an approved drug and CLSN is involved in development and exploration of its use in other types of cancers.
The company has a negative stock flow and is in dire need of cash. The agreement with the Chinese company was an opportunity that did not fructify. There is a likelihood that the company may try to raise funds by selling more shares, which may not be easy.
Unless Celsion finds finance, it may be very difficult for it to continue its operations. Stock dilution at this point is tantamount to further reduction in shareholder value. It may be a farfetched idea, but let us hope that any of the foundations dedicated to the fight against cancer comes forward to support Celsion in its development programs.