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(Contributor's note: This article covers a micro-cap stock, which sometimes moves without rhyme or reason and carries significantly more risk than large-cap stocks. Please be aware of the risks associated with these stocks. Don't be a fool, stay in school.)

It's the delivery, not the drug.

Longs have known that for a while - while the crowd that loves to abuse Celsion (NASDAQ:CLSN), their executives, and their poor Phase III performance in January are seemingly missing that point over and over again. If they're short, it's a point missed that's going to cost them, in this investor's opinion.

You know who does seem to understand it? One of the largest pharmaceutical companies in China. Interesting. Whose lead should we follow, a slew of people rehashing the poor results from Phase III back in January ...

... or the multi-million dollar pharmaceutical company that just laid their name and resources on the line to back Celsion up in the largest liver cancer market in the world?

Hmm. Tough one.


(Click to enlarge)

I've been covering Celsion since the beginning of January 2013, when it was anticipating its Phase III results for ThermoDox with RFA (radio frequency ablation). ThermoDox, Celsion's main focus, is a unique liposomal delivery method of getting doxorubicin to the site of cancer tumors being treated. Preliminary trials looked great and the idea behind ThermoDox was one that made sense: delivering a concentration of an often-used cancer drug to the site of the tumor by its liposomal transport system, and using heat to activate it en masse. (Again, it's the delivery). Their Phase III results were hardly what the company expected, as they didn't meet their primary endpoint, and the stock subsequently tanked in January 2013.

I've previously argued that the post-ThermoDox Phase III trials Celsion could be worth $4/share, and I'm sticking with that analysis. With the news released today, I vigorously reiterate that sentiment.

We hadn't heard much from Celsion lately, with the most recent news announcing Jeff Church being reappointed back to CFO and another presentation on the HEAT study data being announced in September - nothing of massive substance, but signs that the company continues to push forward and play "small ball".

Today, Celsion shareholders got something they could sink their teeth into.

Friday morning, pre-market, Zhejian Hisun Pharmaceutical Company - a company already on the hook for $5 million that they forked over in anticipation of getting first dibs on ThermoDox in the case of successful results - announced they're doubling down, putting their name on the line, and betting big on Celsion.

Celsion released this press release Friday morning, the stock is up 15% to $1.40 currently in mid-day trading.

First, let's get some context around Zhejiang Hisun. Don't know much about them? Read this, from its website:

Founded in 1956, the mission for Zhejiang HISUN Pharmaceuticals Co., Ltd. (stock code 600267) hereinafter called "HISUN") is one of "To be persistent in pharmaceutical innovation for humans' well-being". The company's vision is to become "a widely respected global pharmaceutical provider". It focuses on the integration of pharmaceutical research and development (R&D) with production resources in order to provide its global customers with outstanding products and services. To date, over 40 of the company's products have passed certification by the FDA (U.S.), EDQM (EU), TGA (Australia), KFDA (Korea), etc., and are sold to more than 30 countries worldwide.

Over the years, HISUN has received numerous commendations and accolades. For example, in 2009 the company received the "May 1st Labor Award". The company's name in Chinese and English (HISUN) and its logo were recognized as "Famous Brands in China". The company was also selected to participate in "China's Genome Project for 10,000 Micro-organisms" and "National Technical Innovation Alliance for Commercialization of Major Pharmaceuticals". As a result of its successful completion of the Central Government's assignment with respect to the production of "anti-H1N1 pharmaceutical intermediate agents", the company was commended by the Zhejiang Provincial Government.

In 2010, Hisun was selected as the "Top 10 Enterprises " of ZheJiang Medicine Industry, and honored as the "Top 10 Industrial Enterprises of Optimum Product Lines in China ", and at the same time, Hisun awarded the "Gold Bee Prize of Growing Enterprise". At the same year, Hisun achieved sales revenue of RMB 4.5 billion, total profit of RMB 450 million, which were 14.4% and 28.2% respectively higher than the previous year.

And now, let's move on to the meat and potatoes of this press release which can be summed up in one sentence: it's becoming clear that Hisun wants to have full control over ThermoDox in China.

Whether this is from promising subgroup data of the HEAT trial or just due to the fact that they want the liposomal delivery technology, the press release basically shows that they're really interested. Also, it's worth noting that Hisun happens to be one of the largest manufacturers of chemotherapy agents globally - can you tell me they don't see potential in this delivery method?

When was the last time you threw a non-refundable $5 million at something and then, when it failed, came back for more? If Hisun didn't see something promising here (post-HEAT), they wouldn't be going through this trouble. Hisun basically comes out here to Celsion and says, "In China, we've got your back."

It's the delivery, not the drug.

The press release states (my emphasis in bold):

In addition, the expanded collaboration will focus on next generation liposomal formulation development with the goal of creating safer, more efficacious versions of marketed cancer chemotherapeutics.

Among the key provisions of the Celsion-Hisun collaboration are:

  • Hisun will provide Celsion with non-dilutive financing and the investment necessary to complete the technology transfer of its proprietary manufacturing process and the production of registration batches for China;

  • Hisun will collaborate with Celsion around the clinical and regulatory approval activities for ThermoDox® as well as other liposomal formations with the China state Food and Drug Administration (SFDA). A local China partner affords Celsion access to accelerated SFDA review and potential regulatory exclusivity for the approved indication; and

  • Hisun will be granted a right of first offer for a commercial license to ThermoDox® for the sale and distribution of ThermoDox® in the greater China territory.

"We are delighted with our continuing collaboration with Hisun which serves multiple strategic purposes towards successful ThermoDox® drug development and eventual product launch in the China market, potentially the largest opportunity in the world for ThermoDox®," said Michael H. Tardugno, Celsion's President and Chief Executive Officer. "Hisun represents an ideal strategic partner due to their regulatory and manufacturing expertise. We will work very closely with Hisun to accelerate our drug development program in China for ThermoDox® in primary liver cancer and other indications."

Mr. Hua Bai, CEO and Chairman of Hisun, stated, "We are pleased to announce our expanded collaboration with Celsion for the continued development of ThermoDox® to treat HCC to patients in China, the world's largest market. China is one of the countries with the highest HCC incidence and mortality and, up until now, there has not been any standard of care for treating intermediate HCC in China. This joint effort will not only focus on ThermoDox for HCC and other indications but will also facilitate the local manufacturing and potential product launch in China , thereby providing physicians with more options for better care and prolonging the survival of patients."

Oh, I can count the short myths disintegrating before my very eyes. So many negative people were screaming from rooftops that Celsion was going to need a reverse split and more dilutive financing. Suddenly, it's not looking like that's necessary.

In addition, it was release earlier this month that Celsion will be presenting their HEAT study data, yet again - this time in Washington DC on September 14. The press release stated:

Celsion Corporation announced today that Ronnie T.P. Poon, MD, MS, PhD, FRCS (Edin), FACS, Professor of Surgery at the University of Hong Kong and Lead Asia Pacific Principal Investigator for Celsion's Phase III HEAT Study of ThermoDox® in hepatocellular carcinoma (HCC) will present the clinical trial results at the International Liver Cancer Association 7th Annual Conference being held September 13-15, 2013 in Washington D.C. The presentation will include data from the HEAT Study post hoc analysis, which suggests positive progression free survival (PFS) and overall survival (OS) in ThermoDox® treated patients when heating cycles from the radiofrequency ablation (RFA) procedure were optimized.

Professor Poon's oral presentation, titled "Phase 3 Randomized, Double-Blind, Dummy-Controlled Trial of Radiofrequency Ablation + Lyso-Thermosensitive Liposomal Doxorubicin for Hepatocellular Carcinoma Lesions 3-7 cm," will be held Saturday, September 14, 2013 at 12:00 p.m. (local time) in the Plenary Session. ILCA has selected the HEAT Study presentation to be webcast as part of an online educational program of the ILCA 2013 Annual Conference. Dr. Poon's presentation will be made available online after the conference.

As I stated in my last article, my Celsion caveats continue to be met, post Phase III results. The company has cut costs as promised, communicated efficiently and often with shareholders, have completed a corporate strategy shift, and are poised to head up from here. News on an acquisition is still coming, as well. I touched on this in my last article:

The first news that I'm convinced is definitely coming sooner than later is the announcement of an acquisition. The company has been alluding to this over the past few months, and at last disclosure had about ten potential candidates. There's two types of companies that I can see Celsion acquiring:

  • A company with a pipeline - this would again build even more value into Celsion's pipeline and give them "another leg to stand on," aside from the liposomal transport pipeline that represents everything Celsion has right now.

  • A profitable company - with cash in the bank and the option of doling out some stock, why wouldn't Celsion consider acquiring a company that's already profitable? It would be a substantial way to lighten the cash burn on the company and give Celsion a true leg to stand on for future institutional financing and business strategy.

QTR remains long and strong on Celsion, betting on experienced management being able to right this ship and deliver tangible results from this point forward. The company has a terrific cash position and a large strategic alliance in Hisun now going forward. With several catalysts coming down the road, I remain very bullish on Celsion.

Celsion Upcoming Catalysts

  • August 14 - Earnings
  • September 13-15 - HEAT Study Presentation in Washington DC
  • 2014 : DIGNITY Phase II Results
Source: Hisun Pharmaceutical Doubles Down On Celsion