(Editors' Note: This article covers a micro-cap stock. Please be aware of the risks associated with these stocks.)
Since we began publishing on Celsion Corporation (NASDAQ:CLSN), we have highlighted the many differences between what Celsion has been telling investors and the depressing reality of its business.
First, it should be made clear that Celsion's Phase III HEAT trial was a complete failure, both for the Company and for investors. After 5 years and over $95 million of losses, the HEAT trial showed that using Thermodox was no different than a placebo as there was no difference between the treatment and control populations. Investors took a bath.
Yet, in numerous press releases following the failed HEAT trial, Celsion has published post-hoc results. When it published these results, Celsion chose data from trial populations that were not pre-specified and are therefore statistically meaningless. Historically, we have observed that when small biotechs engage in data mining, it is in an effort to pump up their share prices. Unfortunately for Celsion, none of its post-hoc analysis have been statistically significant. As we've explained in previous articles, post-hoc analysis should be viewed with extreme skepticism (here). Essentially, post-hoc analysis allows a company to data-mine for the best possible results. Therefore, it is pretty shocking that Celsion has done this numerous times and still cannot find results that are statistically significant.
We believe that every time Celsion publishes statistically insignificant results based on data mining, they are hoping to get investors excited and to drive up the share price. Celsion must do this because they need millions of dollars of funding in order to survive and pursue another costly Phase 3 trial. Over the course of the original Phase 3 HEAT trial, not only did Celsion burn over $95 million dollars, but they also had to dilute shareholders more than three times - the share count increased from 10 million shares in Q1 2008 to over 35 million at the end of 2012. There are over 60 million shares outstanding today.
Today's Data is Not New
This morning's release of updated post-hoc results was supposed to be incremental; however, we fail to see how today's press release sheds any new meaningful insight. It's clear when comparing these results (here) with the previous update from September (here), that there has been no meaningful change:
The most important point to take away is that the post-hoc analysis continues to fail to show statistical significance.
Beware of Upcoming Dilution
As we have written previously (here), Celsion will require significant funding simply to continue existing operations. Celsion is losing about $4 million to $5 million in operating income per quarter, which closely approximates cash spend, or about $0.25 per year. Today's release that Celsion will pursue another Phase III clinical trial only adds to its financial burden. Shareholders have already been diluted by over 600% over the last 5 years as Celsion has lost over $100 million since the start of the HEAT trial. Investors today face even more dilution, greater losses, and significant clinical trial risk going forward. If the Company spends a similar amount on its second Thermodox trial, it will most likely need to raise another $50 million. At the current share price, this would entail over 60% dilution to current shareholders. Investors in Celsion who have taken a bath on Celsion shares should see past their shenanigans. You know, fool me once…
We remain short Celsion's stock and our price target remains $0.68 per share.