Speculating On Celsion: Low Valuation With Near-Term Catalysts

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 |  About: Celsion Corporation (CLSN)
by: George Kesarios

(Editor’s Note: This article covers a stock trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.)

I want to bring to your attention a small biotech company that under certain conditions, might give good money over the next several weeks and months. And by good money, I mean at least a two bagger. The speculation play we will dissect is a company called Celsion (NASDAQ:CLSN).

There are currently two news catalysts that might spark some life into the stock:

First, the company announced that the U.S. Food and Drug Administration has reviewed and provided clearance for the Company's planned pivotal, double-blind, placebo-controlled Phase III trial of ThermoDox®, its proprietary heat-activated liposomal encapsulation of doxorubicin in combination with radio frequency ablation in primary liver cancer, also known as hepatocellular carcinoma. The trial design is based on a comprehensive analysis of data from the Company's Phase III HEAT Study, which demonstrated that treatment with ThermoDox resulted in a 55% improvement in overall survival in a substantial number of HCC patients that received an optimized RFA treatment. Celsion expects to launch the study in the first half of 2014.

The second is, Celsion announced positive interim data from its ongoing open-label Phase 2 DIGNITY Trial of ThermoDox® in Recurrent Chest Wall Breast Cancer. The trial will enroll 20 patients at 5 clinical sites in the United States and is evaluating ThermoDox in combination with mild hyperthermia. Based on data available to date, a local response rate of 80% has been observed in the 5 evaluable patients with refractory disease, notably 2 complete responses (CR), 2 partial responses (PR) and 1 patient with stable disease (SD). These data are consistent with the previously reported positive Phase 1 data in RCWBC.

Now irrespective of what one thinks of the company's pipeline -- and if the company will be successful or not in the long term-- there are certain issues that make Celsion a very interesting play.

I will not get into the details of analyzing the drugs the company is developing. I think that fellow S.A. contributor Sharon di Stefano makes a good case and I have nothing to add. I prefer to get into the mechanics of the speculation play.

The most interesting issue is the company's market cap. Currently Celsion is valued at about $50 million. Why is this interesting? Because there are very few biotech companies out there valued this low (if any), while at the same time having a drug in clinical III phase trials and two other drugs in phase II trials.

The second thing to notice is the company's current cash position. The company has about $46 million in cash and short term investments, and is currently burning about $3.5 million per quarter. So theoretically the company has money for about 2 years, before it resorts to the markets again. The interesting thing to note here is, I do not know of any other biotech company out there, with its market cap in cash.

So on the one hand the company is in the news with positive data supporting its ongoing developments, and on the other, it will be some time before the company decides to tap the markets again and dilute shareholders (once again). The hope of course is that the company will bring its drugs to market fast enough, so as to not need any more money in the long term.

Is this enough to speculate on? I think so. News and ample cash in the bank is always a reason to drive a biotech tech stock crazy. Whether it happens in Celsion's case remains to be seen.

Remember breast and liver cancer are both in the top ten causes of death for people with cancer internationally. In the U.S. alone there are more about 235,000 breast cancer cases every year. So any positive data coming out from these trials might mean a very big deal for investors, given that the company is well stocked with cash for about two years and that the trials are continuing.

Granted that the company had many problems with its ThermoDox method that caused the stock to crash by 80% back in 2013, however by the same token, investors today are not buying the stock at $40 a share, but at a discount of over 90% from its highs. In addition, this stock (like most biotech stocks for that matter) are by definition speculative in nature, and one must do additional due diligence before deciding to buy this stock.

So keep an eye on this stock and be on the look out for a sudden uptick in the price, or unusually high volume that might point to higher prices ahead. And as always, try to follow the price action on the charts, and make sure you make your move if you see positive (and confirmed) technical strength.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.