There's more bad news for Celsion (CLSN) and we're here to report it. Based on the Company's continued cash burn in the second quarter, we are revising our price target down to $0.68 per share, the current net cash balance at the Company. This represents 42% downside from the current price of $1.17 per share. We expect further cash burn and for the fair value of the Company to continue to decline. Let's review the bad news:
1. The "Smart Money" has given up
One of the repeated bull cases for Celsion has been the ownership of its shares by respected biotech investors, such as Sabby Management and Perceptive Advisors. For instance, commentator brandond wrote "Sabby, who made an almost $10M investment recently at around $1.75/share has a good track record and they didn't invest without having access to lots of information and thinking there is a lot of upside. "Follow the money" has served me well in the past."
Unfortunately for Celsion's remaining shareholders, the professional biotech hedge funds have sold every single share that they own. See for yourself. Both the Sabby 13F and the Perceptive Advisors 13F show zero owned shares. Only a few thousand options remain in the case of Sabby, including put options that would benefit from further declines in the price of Celsion's stock. In contrast, these two investors owned a combined 2,222,270 shares at the end of the prior quarter as can be seen here and here that were worth a combined $2,336,000.
The smart money has sold.
2. The Company has given up on approval based on the HEAT trial
One of the great hopes of Celsion's shareholders was that the post-hoc analysis of the Thermodox trial would enable it to file for approval, if not in the United States then elsewhere, such as China. This hope now appears to be dead following the statement in the last earnings release that "We believe that the emerging data from our post hoc analysis of the HEAT Study may provide a rationale for continued development of ThermoDox® and a basis for discussion of a path forward for our HCC program with various regulatory agencies." On the last conference call, the CEO further elaborated that "our expectation would be in the first quarter of 2014 to begin enrolment of the confirmatory trial in HCC." Just in case anyone is confused, confirmatory trial means that the Company would need to run a whole new Phase 3 trial. Shareholders will have six or seven more years of waiting and many many additional rounds of dilutive financing. This is in contrast to many of the Company's supporters, such as the Griffin analyst, who believe that some sort of mythical accelerated pathway exists to reach approval based on the existing data.
3. The statisticians have given up on the original data mining
In the Company's initial press release detailing its data mining, it stated that "Emerging data from the HEAT Study post analysis demonstrates that ThermoDox® markedly improves progression free survival (PFS) and overall survival (OS) in patients who had optimal RFA. The analysis indicates that if patients' lesions undergo RFA for 45 minutes or more, they clearly benefited from ThermoDox®. These findings apply to HCC lesions from both size cohorts of the HEAT Study (3-5 cm and 5-7 cm) and represent a sizable subgroup of patients." Unfortunately for Celsion's investors, the data seems to be getting worse and not better. Specifically, in the most recent conference call, the Company stated "Those patients with relatively small lesions did better when given ThermoDox, as compared to the control group." Later in the call, the Company also stated that "When we looked at all patients with a single lesion we saw that longer RFA procedures correlate very well with improved outcomes in all tumor sizes. This was particularly enhanced in the ThermoDox group." Unfortunately, this is a further narrowing of the subgroup that supposedly benefits from Thermodox - whereas previously everyone who got a long enough RFA treatment benefited from Thermodox, now only the people who either had smaller lesions or single lesions benefited. This subgroup narrowing should be a warning signal, because it most likely results from the Company realizing that the previously defined subgroup was not showing enough of a benefit. As you know based on our prior article about data mining, the more that a trial's data is sliced and diced, the more opportunities a Company has to find a random positive data point. In other words, companies narrow subgroups in order to take otherwise unimpressive data and put a positive spin on it.
It's been another quarter of consistently bad news for Celsion. The Company's major healthcare investors sold every share they own. The Company confirmed it needed an entirely new Phase 3. The data mining got more extreme and the Company still can't find a statistically significant subgroup. The cash burn continued. Our fair value for Celsion is decreased to $0.68 per share.