To treat the world's most lethal cancers, targeted therapy represents a tremendous medical opportunity. Far ahead of this initiative is Celsion Corporation (CLSN), a unique biopharmaceutical firm blending the use of accepted chemotherapy encased in a lipid sac with radio-frequency ablation (RFA) to burn away tumor tissue without collateral damage, a technology that acts as a platform for a variety of cancers. Strong patents from Duke University, competent management coming from industry giants like Bristol-Myers Squibb Co. (BMY), Hoffmann La-Roche and Merck & Co. (MRK), and stoic determination form the hallmarks of the company, bundled in a stock valuation that is far below current trading levels.
Celsion recently accomplished a 1-for-4.5 reverse stock split, its intention to bring the share price to a level more alluring for institutional investors and, if future capital raising became necessary, avoid dilution to an even lower price per share (pre-split). I believe this was clearly done with shareholder value in mind and may point to potential acquisitions on the horizon. My conversations with management revealed a strong desire on their part to find companies with complementary products to facilitate the RFA process.
The therapy under development is ThermoDox®, a heat sensitive liposomal form of the broad spectrum anti-cancer agent doxorubicin that when administered intravenously concentrates at the tumor site. Heating the tumor with FDA-approved devices releases the chemotherapy to target and treat the tumor and its margins with an effective dose of the drug. Late-to-mid stage clinical studies are in primary liver cancer and recurring chest wall (RCW) breast cancer. Earlier stage trials use high-intensity focused ultrasound (HIFU) to evaluate effects in pancreatic and breast cancer, and in liver metastases.
Liposomes move efficiently through the blood stream, collecting like magnets in areas with a high level of blood vessels and fat concentration including the liver and breast tissue. Princeton-based Liposome Company, former neighbors of Celsion, were pioneers in liposome bioengineering and predicted its use one day in cancer. True to this forecast nine years later, high-profile cancer researchers at MD Anderson studied RF ablation in patients with primary liver tumors considered inoperable, claiming the technique could treat lesions "as large as a Texas grapefruit" with minimal side effects. RFA has been compared to cryoablation (freezing), an emerging treatment that eventually faltered because the former produced less adverse effects at lower cost.
The National Cancer Institute recognizes that targeted therapy can afford liver cancer patients hope when all other methods have been exhausted. Medical experts have expressed enthusiasm about RFA coupled with 'drug pellets', noting that temperatures in the range Celsion employs do not have to reach levels that harm the patient or surrounding tissue, eliminating safety concerns. Results have shown that RF heat of between 101-107 degrees Fahrenheit applied to the site of disease over a sufficient amount of time is enough to erupt the chemotherapy-carrying liposome bubble so that the anti-cancer drug baths the tumor with a concentrated dose. The technology is straightforward - tumors have a highly permeable blood covering that allows liposomes to easily surround and envelop the growth. Heating furthers the action, killing cancer and expanding the treatment zone to capture peripheral tissue, potentially avoiding metastases.
This elegant science is the basis for Celsion's current Phase III study, titled Hepatocellular Carcinoma Study of RFA and ThermoDox, or "The HEAT Study", a follow-up analyses from an earlier trial that will capitalize on the finding that liver cancer is best kept at bay when RF ablation times are longer than 45 minutes, resulting in an improvement in overall survival (OS) of 61%.
The company plans to take this information to domestic and overseas regulatory agencies, along with data proving that length of heating time strengthens clinical outcomes, to plan further pivotal studies if necessary. Celsion has Orphan Drug status in the US and Europe for liver cancer and an FDA Priority Review designation from the National Cancer Institute, making the HEAT trial fast-track eligible. By using known chemotherapy agents, Celsion bypasses certain FDA scrutiny reserved for new chemical entities (NCE), shortening time to potential approval.
In January 2013, a predecessor study, under the same name, did not show ThermoDox to be clinically effective when an endpoint of progression-free survival (PFS) was measured. The procedure was well-tolerated, however. Since then, post-hoc analysis has shown good results toward HEAT's secondary endpoint of OS and has been vetted by a number of clinical investigators with presentations at numerous scientific conferences. Lessons learned by Celsion are that RFA in conjunction with liposomes work best at optimal heating times to more effectively activate doxorubicin in high concentrations to liver tumors and surrounding tissue. This clinical adjustment should push the technology of RFA further along to become a viable, less-invasive treatment.
Cancer of the liver, termed hepatocellular carcinoma (HCC) is an extremely underserved therapeutic area where medical needs are not met because surgery is rarely a viable option. Up to 90% of patients are inoperable and only a fraction of those remaining will undergo a successful surgical resection. Worldwide, HCC is the third deadliest cancer.
Leveraging its 'pipeline in a product' strategy, the company is enrolling for a Phase II in recurring chest wall RCW disease, a reappearance of breast cancer, under the title DIGNITY that also uses ThermoDox. Although not as prevalent as its instigator, expected to claim an $11.2 billion market by 2016, RCW disease in pectoral muscles is aggressive, occurring in 2% of all breast cancer cases and dangerous because it affords a second chance at metastasis.
ThermoDox is designed to be coupled with high intensity focused ultrasound (HIFU), another heat-based treatment for which Celsion employs in clinical trials for pancreatic and metastatic liver cancer, markets reaching $1.2 billion and $33 million, respectively. HIFU is similar to RF, where sound energy rapidly focuses heat on tumors for their destruction without blood loss or radiation. Historical studies are numerous, the most recent published in May that showed the 10-year survival rate of prostate cancer, after HIFU treatment, to be 97% over 10 years. Celsion collaborates with the University of Washington School of Medicine in its preclinicals for pancreatic cancer and the University of Oxford to study metastatic liver cancer, both using HIFU in combination with ThermoDox. Again, Celsion leverages its platform technology since liver metastases develop in approximately half of women with metastatic breast cancer, and is typically associated with metastases at other sites.
As testimony to its future value, Celsion partners with Hisun Pharmaceutical Company in a deal that was expanded this summer to continue development with ThermoDox, but with an important addition - transfer of the technology that includes commercial manufacture for the large Chinese market that holds the potential for monumental sales of branded drugs. Hisun is an institution in China, widely recognized for its track record of regulatory skill that has brought more than 40 products to market in 30 countries. Celsion benefits with monetary compensation to guide the manufacturing process and provide Hisun with next-generation liposomal formulas that encapsulate currently-available chemotherapeutics, of which Hisun is a major worldwide supplier.
Celsion also has a long-standing licensing and distribution agreement with life-sciences firm Yakult Honsha for exclusive rights to ThermoDox in the Japanese territory. Both of these arrangements are critical because Asian countries, particularly China, account for almost 50% of the world's incidence of liver cancer, a market projected to exceed $2 billion by 2015.
Only a few companies are attempting targeted liver cancer therapy, the most notable being Bayer AG (OTCPK:BAYRY). In conjunction with Onyx Pharmaceuticals (ONXX), recently bought by Amgen Inc. (AMGN) for $9.7 billion, investigations center on whether the approved drug Nexavar will, when coupled with RFA, effectively treat HCC. The compound itself is dangerous, causing prolonged bleeding and jaundice that is ironic for a drug designed to help the liver. With potential competitors like Bayer and Amgen in place, Celsion should have no problem showing doctors and patients a better solution. Delcath Systems (DCTH), another researcher in targeted cancer therapy, has been trying for 20 years to gain FDA approval but its faulty science intends to perfuse the entire liver using a type of dialysis in a complicated surgical procedure that has been racking up a 7% death rate.
ThermoDox can be compared to first generation liposome technology drug Doxil, originated by Janssen, a Johnson & Johnson (JNJ) company. Doxil is toxic, with drug reactions rampant during a very long infusion time. Patients have suffered hypertension and chest pain similar to an adverse cardiac event. Celsion has none of these problems.
To reach a current value for Celsion, I employed a discounted cash flow model based on a projected income statement that used revenue predictions from a percentage-of-patient base approach. Assumptions included commercialization (upon approval) for ThermoDox for liver cancer, RWC, pancreatic, breast, and liver cancer metastases occurring between 2017 and 2018. To be conservative, I postulated very small penetration of the markets, which led to a positive EPS of $1.23 in the terminal year of 2019. Using a discount rate of 12% and a price/earnings ratio from a group of net-earnings positive public biotechnology companies (with a 50% haircut), I arrived at a target price of $14.00 in 12 months, over 225% from current levels.
This company has specific risks in addition to the typical ones that trouble all biotech companies, like timely patient enrollment and regulatory approval. In RFA, the measurement of tumor areas being heated may be imprecise, skewing results. However, researchers are developing software to create 'temperature maps' so that doctors can monitor procedures without using extra needles, catheters, and diagnostic scanning. Celsion's investigators in HEAT and DIGNITY could easily adopt this new technology to maximize results. Another risk is whether data from the initial HEAT study can be incorporated into a format leading to approval; it may be likely that another large Phase III trial is required but Celsion has the resources should this happen. Thirdly, future products potentially acquired may simply not work well with its technology, although the company, in my discussions with them, appears to be highly diligent in this area.
There exists almost $50 million in cash on the company's balance sheet with a very moderate burn rate of $1.2 million to $1.4 million per month, enabling it to fund multiple clinical trials for several years before seeking financing. New data from Celsion's upcoming RCW study could attract partners. The stock has risen almost 40% since May, yet remains far below its implied value.
Led by veteran management with professional and clinical resolve, with a robust pipeline contained within a single liposomal platform design that starts with doxorubicin and leads to any number of additional anti-cancer agents already on the market, Celsion is mastering RF therapy - finding the optimal treatment time to reduce metastases, in the right temperature, to conquer diseases that comprise a $4.5 billion medical market. Recent consolidation of its shareholder base and strong capital position make a near-term acquisition of products to enhance its own therapeutic tools very likely. This company currently has an unreasonably low valuation compared to its worldwide medical possibilities, making Celsion a stock to buy now.