J.P. Zaragoza's  Instablog

J.P. Zaragoza
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DVM, biotech tech transfer specialist for over 5 years.
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  • What's next for Delcath? 5 comments
    Oct 22, 2010 7:26 AM | about stocks: DCTH

    Methods related to isolating a specific organ of the body in order to deliver a large amount of chemotherapy have been developed over  the last 40 years. These are, among others, Hepatic Arterial Infusional therapy (HAI) and Isolated Hepatic Perfusion (IHP). Main drugs administered have been doxorubicin, melphalan, TNF, oxaliplatin, 5-FU and some others to treat aggressive malignancies such as colorectal cancer, hepatocellular carcinoma, breast cancer, sarcoma and a number of methastases from primary cancers.

    Unfortunately, these techniques didn’t gain much acceptance due to their complicated setup, increase in morbidity, related toxicities and  more importantly: a lack of efficacy evidenced by decades of clinical trials using them. Data concerning response rates and other parameters come expertly explained in a couple of reviews that summarize the work done in the last years and an outlook on thermal ablation and perfusion hyperthermia.

     Delcath’s PHP is basically the same as IHP except it uses a double balloon catheter instead of clamps to isolate the liver from the general blood circulation, it allows some circulation through one of the lumina of the catheter instead of by-passing it and it filters the blood so it can get back to circulation at least 80% cleansed.

    Now, I’m going to provide a deeper insight into Delcath’s clinical trials. The phase I study was designed to establish MTD and RR. The former was set at 3mg/kg of melphalan and a 30% overall radiographic response in treated patients (n= 28) was reported while there was a 50% overall response in patients with ocular melanoma (n=10). These data were published in 2005 and are freely available online on Delcath’s website.

    The three-year phase III trial involved administration of PHP-mel vs standard of care in patients with liver methastases from metastatic ocular or cutaneous melanoma, most of them had the former which, , has in fact shown better results in the past as described in the papers I referred to previously. The primary endpoint was set as the hepatic-progression free survival (h-PFS) and secondary endpoints were ORR and OS. The abstract showing these results was presented at the ASCO annual meeting in June. In summary, median h-PFS for PHP-mel was 245 days vs 49 days for the BAC arm. ORR was 34% for PHP-mel vs. 2% for BAC. Therefore, the results exceeded the primary endpoint and were regarded as quite positive as the stock price reflected when they were first presented in April. However, after ASCO the stock plummeted to stabilize in the $6-$8 range. So, how come  this happened? Weren’t the results  compelling enough  to keep a sustained uptrend in the stock’s price? By researching  some publicly available information, it’s easy to see that there are a few issues about the data presented by Delcath:

    -         The PHP-mel did improve the disease control, but data were not so good in terms of overall survival. Median OS was 301 for BAC and 298 days for PHP-mel. Why?

    -         Well, 55% of the patients crossed over from the BAC arm to the PHP-mel arm. Actually, median PFS rose to 398 days in patients who crossed over vs 124 days in patients who did not. That question was raised at one of the meetings by German researcher Dr. Schadendorf, of the University Hospital in Essen. Given that according to the news release I got this from, he’s involved with Bristol Mayers, I’d forget about a buyout from this pharma. However, one must take into account that this was done as a compassionate treatment in the BAC arm that experienced progression despite being treated.

    -         There were two deaths linked to the process by neutropenic sepsis. It may have been due to a failure in the filters that resulted in a release of a high dose of melphalan to the blood stream. The FDA requested Delcath to suspend the trial enrollment and this had a big impact on the company’s prospects and hence on the stock price.

    -         Patients selected were mostly affected by ocular melanoma and were the “healthiest”, with an ECOG of 1 or 0 in a scale that ranks from 0 to 4.

    On the competition front.  Yes, there are indeed some devices approved for this purpose. Vascular Design’s Isoflow looks very similar to Delcath’s PHP. I have not investigated thoroughly  the IP of these two companies, but from Delcath’s 2009 investor presentation one can infer that they have secured the IP. Nonetheless, I assume that its patents aren’t very strong at least in terms of inventive step since similar devices with the same application have been developed in the past.

    On the marketing side, I saw impressive estimates on the market share and opportunity that this device, if commercialized, may achieve. It’s difficult to assess an exact amount of sales or market share and I don’t want to go further into it. There are some estimates based on the average population that suffer from these cancers, but unfortunately, not all patients will be available for treatment and the numbers lack accuracy in my view. 

    So now, what’s next? Delcath is expected to submit an NDA to the FDA before this year’s end. After acceptance from the FDA, an advisory panel and/or a PDFUA date will be programmed by mid-2011 and the stock may -or may not-, run up. Based on Vascular Design’s experience and the fact that they got FDA clearance, one may think that Delcath will get it too. However, what VD got is an FDA 510(k) marketing clearance which is designated to devices that have not undergone clinical trials. On the contrary, Delcath did perform CTs with its device so approval might be a bit trickier in this case. I personally don’t see Delcath undervalued as some pointed out, with a P/B of 20, and counting on the fact that, apart from june’s spike, it’s trading in a historically high range of $7-9. After August dilution, Delcath is probably set for a run up from now until its NDA submission and a potential mid-2011 approval.

    Disclosure: I have a small position on DCTH in the hope of a run up heading to the NDA submission and a subsequent FDA panel or PDFUA date.
    Stocks: DCTH
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Comments (5)
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  • Rockford Coscia
    , contributor
    Comments (56) | Send Message
    Hey JP,


    Awesome. Love the DD you've done here. I definitely learned a few things.


    It's a shame about Dr. Schadendorf's commentary (or is it a blessing as an opportunity for people like us?). Artcles from that time seem to paint the picture that his words alone tanked the stock price. All the presentations from CEO Eamonn Hobbs after that point have addressed the crossover survival issue. It seems completely reasonable to me. And also keep in mind the study was done under an SPA - good news indeed.


    The deaths seem to be well explained as well. Check out a presentation here:


    I wouldn't worry about VD's Isoflow. It's a targeted injection, but there's no filtration step possible. It doesn't allow the concentrations possible in the PHP system. I don't believe there will be any overlap in this case.


    This is quickly becoming my favorite stock and company. Analysts love it to - every single one rates it a buy. The biggest concern I have, like you, is the potential market. I don't think it's bad - just worthy of more research to justify a share price. Do we know what they plan on charging per patient yet?


    Thanks for the well researched article!
    22 Oct 2010, 08:21 AM Reply Like
  • J.P. Zaragoza
    , contributor
    Comments (189) | Send Message
    Author’s reply » I appreciate your comment, Rock. Thanks indeed!


    About the price, from their presentation, on slide 24 they state that it'd cost $15,000 per treatment on a 2.5 treatments per patient basis, that is, $37,500. According to Delcath's numbers, taking into account US prevalence of cutaneous and ocular melanoma and the percentage expected to metastatize to the liver, the potential market for both applications combined is over $400MM. The problem here is that those are potential users, not to mention that they still have to partner future commercialization, train nurses and doctors, etc etc, hence we don't know the actual penetration now.


    Contributor Tim Shaw has posted a pair of articles addressing the commercial issue, he mentions that the cost of the treatment would be $20,000...I don't know where he got it from.


    In any case, when the FDA accepts Delcath's NDA and sets a specific date for a binary outcome there´ll likely be a run up or at least that's my hope. And yes, the SPA is good news and it'll help, no doubt about that.


    25 Oct 2010, 09:22 AM Reply Like
  • Nealhugh
    , contributor
    Comments (32) | Send Message
    $20,000 comes from Hobbs.
    Market is $500 million.
    Looking for $25 on approval or near...


    Deals ...Sale..Partnerships...


    Thanks, Neal
    26 Oct 2010, 02:52 AM Reply Like
  • Chemistfrog
    , contributor
    Comments (275) | Send Message
    Nice work and thorough DD on a company with an exciting 2011! Thanks for the nice comment on my article, seekingalpha.com/artic... , and I think we'll see come news with regard to NDA and priority review sometime the week of February 21st.


    Additionally, did you see the ISO certification PR, www.prnewswire.com/new... on Thursday as well?


    Additional news I'm excited about is the expansion of their office space and product facility as PR on February 2nd poststar.com/news/loca....


    Great job and good luck to us!
    19 Feb 2011, 10:17 PM Reply Like
  • Nealhugh
    , contributor
    Comments (32) | Send Message
    Delcath needs due diligence and new management. BOD is irresponsible as well.
    7 Jun 2013, 08:40 AM Reply Like
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