By Patrick Crutcher
Analysts continue their bullish sentiment on Delcath Systems Inc.(DCTH), following their recent accomplishments. Namely, the NDA submission and CE Mark technical filing, both of which the company had given guidance for year-end 2010. We continue to believe that DCTH should receive a priority 6-month review from the FDA and that they should see approval in 2011.
Before touching upon some analyst commentary, we want to highlight some keypoints about recent developments at Delcath. First, this NDA was submitted as a 505(b)(2) filing, since they are referencing Synerx ANDA for use with their ChemoSaturation system, which is already an FDA approved source of melphalan for the U.S. market. Typically, this approval route has less regulatory risk, since they are improving upon an already approved drug by using it in conjunction with their system.
Second, they have added some experience in terms of sales and marketing by hiring Bernard Tyrell to be the senior VP of North American Sales and Marketing. He has significant experiece in commercialization efforts for oncology products. We are also very optimistic for two approvals in the U.S. and EU in 2011, based on the survival data presented at ASCO 2010. Additionally, a 6-month priority review seems likely because of the very promising data and the fast-track designation from the FDA. We should be hearing back about this sometime in late 1Q 2011.
In a recent report from Wedbush & Morgan analyst, Gregory R. Wade, Ph.D, they maintained their "Outperform" rating with a $21.00 price target. They also had the following to say about the recent NDA submission:
The company has requested priority review of their NDA which could facilitate a 6 month review of the application and Q2:11 PDUFA date. Announcement about priority or regular review and PDUFA date from the FDA is expected within 60 days.
We remain confident that the PHP system will receive FDA approval based upon the highly statistical and compelling achievement of success at the endpoint pre-specified in the Special Protocol Agreement.
DCTH intends to submit the PHP Phase III data to a journal for publication in Q4:10, which could allow for publication of results in Q1 2011. The paper is expected to include additional subgroup analyses permitted by the Phase III statistical rules.
In their 3Q 2010 conference call, management also noted that they “recently concluded our multi-arm Phase II clinical trial for primary and metastatic liver cancer utilizing melphalan. The data are currently being compiled. We intend to include the Phase II trial results in our NDA submission, and expect to release the top line results thereafter.”
The results from this trial could also have a potentially very positive effect on their valuation, since the market for primary and metastic liver cancer is much larger than their initial focus. They are currently compiling the data on the Phase II trial; one might suspect that ASCO 2011 seems like a good venue for these type of results. Maybe we will be lucky and here back sooner. CEO Eamon Hobbs also noted that they are still having ongoing discussions with various potential Asian partners and that the primary interest has centered around HCC (primary liver cancer). Once this Phase II data is available, investors might have a better sense of the potential for a partner.
Additionally, Canaccord Genuity also came out with a report following the NDA submission, where they outlined their thesis for a "Speculative Buy" on Delcath and raised their PT to $16.50. With $55 million in cash/cash eqs. at the end of the 3rd quarter, Delcath has sufficient cash to take them well into 2011. They have been burning about $2.2 million a month, which could increase as they prepare their future U.S. sales team.
We will continue to follow Delcath closely over the coming months.
Disclosure: No position