Last week I held an interview with a ROTH Capital senior analyst, who recommended Delcath Systems (NASDAQ:DCTH) as a buy and reiterated a one-year price target of $6 a share, representing a premium of 228% to DCTH stock closing price of $1.83. Since the publication of the interview, investors have shown a strong vote of confidence in the company's prospects, and the share price has risen nearly 12%.
The company is currently waiting for the FDA acceptance of its New Drug Application (NDA) for CHEMOSAT, the company's proprietary hepatic chemosaturation system for the treatment of unresectable metastatic cutaneous and ocular melanomas of the liver. Delcath requested a priority review (6 months) for CHEMOSAT when the NDA was resubmitted. By regulation, the Food and Drug Administration (FDA) will notify the company of a priority review in writing by day-60, or of a standard review (10 months) by day-74. Since the NDA resubmission announced on August 15, 2012, Day 60 would be October 14 and Day 74 would be October 28.
This week, as part of my research, I've had the honor of interviewing Mr. Eamonn P. Hobbs, President and Chief Executive Officer of Delcath Systems. Mr. Hobbs was appointed President and Chief Executive Officer of Delcath in July 2009 and has been a director of Delcath since October 2008. He has over 30 years of experience in the interventional radiology, interventional cardiology, and gastroenterology medical device industries. From 1988 until 2009, Mr. Hobbs was co-founder, President and Chief Executive Officer of AngioDynamics (NASDAQ:ANGO), which he built into a leading medical technology company with an international market presence and a highly diverse product line. He left a very comfortable position to take Delcath through the FDA process and into commercialization. Mr. Hobbs is currently Chairman of the Medical Device Manufacturers Association, serves on the Board of Directors of Antares Pharma (NASDAQ:ATRS), and is a member of that Board's audit committee. In 2009, Mr. Hobbs also joined the Board of Directors of Cappella Cardiovascular Innovations, Inc. and was elected Chairman of the Board in 2010
Ben Yoffe: Mr. Hobbs, in February 2011, Delcath received a "refusal to file" letter from the FDA for the New Drug Application (NDA) of the Company's proprietary system for chemosaturation therapy (CHEMOSAT). Can you provide us more details about the amendment and the amendment process regarding the NDA resubmission?
Hobbs: The FDA's "refusal to file" letter requested information involving manufacturing plant inspection timing, product and sterilization validations and additional safety information as well as additional statistical analysis clarification. To address the issues the FDA identified in their letter, we began very substantive work on clinical and safety data gathering from all of the clinical sites and migration to FDA compliant clinical and safety databases. This included migration of clinical data for the Phase I, II and III studies from the database used at the NCI to a CDISC compliant database that allows us to provide data to the FDA in a more "FDA review friendly" manner. We also created the Company's first safety database, which includes a pharmacovigilance and medical device database, and implemented a significantly expanded Case Report Form that allowed capture of far more comprehensive and detailed data points related to the RTF, such as Severe Adverse Events (SAEs), hospitalization, concomitant medications, all labs and procedure related data, all of which conservatively represents the addition of over 1.4 million new data points to the new database which was presented to FDA in our NDA submission. We also supported the hire of additional data entry staff at the clinical sites to aid with data entry, and hired clinical research audit experts to improve our GCP audit readiness. Delcath has engaged in ongoing communications with the FDA and, following on a pre-NDA meeting in mid-January of this year, we believe we've resolved all outstanding safety queries.
We requested priority review for our NDA at the time of filing and, assuming the NDA is accepted and that priority review is granted, our expected PDUFA date would be in February of next year. We believe that our application meets the FDA's criteria for priority review based upon the strength of our clinical trial data, along with the limited treatment options available for patients with unresectable melanoma metastases in the liver
Yoffe: The company included its Generation 2 filter in its NDA submission. However, it was submitted without any efficacy or safety data from clinical trials. Can you shed some light on this issue?
Hobbs: Our NDA is based upon the efficacy and safety data generated from the use of the Generation 1 system in our clinical trials. At the same time, after consultation with a variety of experts and the FDA, we have agreed to include the addition of the Generation 2 filter in the NDA as a technical change as part of the CMC or Chemistry, Manufacturing and Control module. We believe it is in the best interest of U.S. patients to accelerate availability of Generation 2 and that, if approved, this approach represents the fastest regulatory review path for the Generation 2 system.
Yoffe: Can you give us a picture of the market size for CHEMOSAT in the U.S?
Hobbs: We believe the potential market opportunity for melanoma liver metastases indication we are seeking is approximately $500 million. In the future, we hope to include indications in colorectal cancer metastases, hepatocellular carcinoma, and neuroendocrine tumor metastases, and we believe the market opportunity in the United States with these additional indications is approximately $2.6 billion.
Yoffe: What can you tell us about the competition?
Hobbs: There are many treatment approaches for cancers in the liver, each with its own advantages and disadvantages. For patients with unresectable melanoma metastases in the liver, current treatment options are limited. Systemic chemotherapies are non-invasive and repeatable but are associated with systemic toxicities and limited efficacy in the liver. Regional treatments like Isolated Hepatic Perfusion, which is an open surgical procedure that temporarily separates the liver's blood supply from blood circulating throughout the rest of the body and allows high doses of anticancer drugs to be directed to the liver only, are highly invasive and have a limited repeatability. Focal treatments such as surgical resection, radio-embolization, chemoembolization, and radio-frequency ablation to remove or treat individual liver tumors are limited to lesions visible on medical imaging and by their size, number, and location within the liver. Only 10-20 percent of tumors are treatable by this approach.
In hepatic chemosaturation therapy, a percutaneous hepatic perfusion (PHP) procedure delivers ultra- high doses of intra-arterial chemotherapy directly into the isolated liver, saturating both the liver and the tumor cells. The blood from the liver is drained through an isolation-aspiration catheter, and then directed outside the body to proprietary filters, which reduce the concentration of chemotherapeutic agent before this blood is returned to the body.
The potential of chemosaturation therapy includes:
The ability to administer higher doses of chemotherapeutic agent to the liver than could be delivered with traditional systemic-intravenous methods
Significant reduction of systemic exposure to the higher dose levels
It is worth noting that some of the physicians in the U.S. and Europe who have used chemosaturation therapy have already stated that they see a potential complementary role for therapy with other treatments, and believe that the therapy may have a role to play as part of an overall disease management approach. This potential obviously must be validated through actual clinical practice, but these comments suggest that physicians familiar with the therapy do not view it as competitive to existing treatments, but as a possible bridge to them.
Yoffe: What are your commercialization plans for CHEMOSAT in the U.S?
Hobbs: We intend to commercialize our chemosaturation system ourselves in the U.S., with an initial focus on Interventional Radiologists and Surgeons at leading cancer centers and referring community hospitals, using a dedicated medical science liaison team to educated Medical Oncologists throughout the referring network. We intend to utilize top centers that participated in our Phase III trial as Centers of Excellence for training and support. We will seek chemosaturation specific codes based on a value proposition relative to other cancer therapies.
Yoffe: Can you tell us about your expectations regarding the ongoing commercial launch of CHEMOSAT in Europe?
Hobbs: The bulk of the year is being spent on laying the foundation of training, reimbursement, patient recruitment and education of the referral network. In the first half of this year, we exceeded our initial goal of signing 6 to 8 European cancer treatment and research centers through initial launch and training agreements. We signed a total of 13 such centers to date and have a presence in all seven of our target markets of Italy, Germany, France, the United Kingdom, Spain, the Netherlands and Ireland. Five of these centers, each in a different country, have begun treating patients so far. With agreements in our target markets in place, our priority for the rest of the year is to complete the training process at each center and drive clinical adoption of their therapy in respective referring networks.
We received CE Mark approval for the Generation 2 CHEMOSAT system in April, and the first Gen 2 case was performed at the European Institute of Oncology that same month. On the investor call we held
August 7, we reported that a total of 16 procedures have been completed in Europe on 13 patients with liver dominant metastasis from cutaneous and ocular melanoma, gastric cancer, breast cancer and cholangiocarcinoma. Going forward, we do not intend to provide regular updates on procedure volumes, and will limit any additional commentary to appropriate public opportunities.
Since our agreements with initial launch centers include an initial small supply of sample kits free of charge, we expect that revenue will be realized more weighted toward 2013, sales driven primarily by the activated centers we have so for and by our third-party distributors.
Yoffe: Do you have plans to market CHEMOSAT in the rest of the world?
Hobbs: In the Asia-Pacific, we expect to have two CHEMOSAT centers in Australia and one in Hong Kong by the end of this year. In Australia, where CHEMOSAT is approved, we are marketing this system directly on an interim basis, while we search for a suitable distributor to drive clinical adoption.
In Argentina, we have selected a distributor, who is in the process of submitting the application to register the CHEMOSAT system, which would cover requirements in Chile as well, with approvals expected in 2013. We are targeting specific centers in these markets with affiliations with major US cancer hospitals, which will provide an avenue for international patients from countries where CHEMOSAT is currently unavailable as a treatment option.
We currently expect regulatory approval of Gen 2 in Canada by the end of this year, Singapore in 2013, and Brazil in 2014.
Yoffe: Are there any other significant products in Delcath's clinical-stage pipeline?
Hobbs: We continue to move forward with the development of a CHEMOSAT system for use with doxorubicin, a chemotherapeutic agent shown to be effective in the treatment of HCC or primary liver cancer. We expect to be able to apply for the CE Mark for CHEMOSAT with doxorubicin this Fall. The CE Mark for CHEMOSAT with doxorubicin would assist in initiating clinical trials in the treatment of HCC in China and Taiwan, which we believe are the primary markets for CHEMOSAT with doxorubicin.
Also on the R&D front, we have initiated two R&D programs to evaluate a variety of chemotherapeutic agents for use in new CHEMOSAT systems to treat cancers of the lung and brain. These programs involve the development of dedicated isolation catheter systems, unique filters, and procedural changes associated with treating the lung and brain, which have some unique challenges compared to the liver.
Yoffe: To close, is Delcath funded well enough to get through all of the upcoming steps or will the company be looking for additional funding?
Hobbs: Our last quarterly report was for the period ended June 30, 2012. At that time, our cash balance was approximately $29.3 million. As of June 30th, we remained debt-free and have a $20 million working capital credit facility with Silicon Valley Bank that provides us with additional financing options to access capital to support our commercialization plans, if needed. In addition, our Board of Directors and our management team are constantly evaluating ways to strengthen our balance sheet while at the same time maximizing returns to our shareholders.
Disclosure: I am long DCTH. 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.