Delcath Systems, Inc. (OTCMKTS:DCTHD) has been on an adventure of pain. If you took our advice last month, when the stock was a split-adjusted $14/share, you would have seen this implosion coming and, as we said in black and white, avoided touching this one “with a million foot pole”. In our October 16 piece, here was our take: “The warpath of dilution is stepping up another notch as the company just turned in a new S-1 to hit the market up for “moar” cash. It’s so hard to break old habits. The company is citing this step as a direct consequence of shareholders’ unwillingness to approve the recent petitioned-for reverse split. It’s very difficult to imagine a worse all-around state of affairs for a company. We wouldn’t touch this stock with a million foot pole.”
Before that, we said, “Delcath Systems has found a way to continue its warpath of dilution, announcing last week that it would be forcing through a new reverse split due to funding needs associated with servicing rights linked to outstanding converts. So, the cycle of pain continues.” So, the point is: this outcome was not difficult to foresee. But the big question is: where does this story go from here?
Delcath Systems, Inc. (NASDAQ:DCTHD) frames itself as a specialty pharmaceutical and medical device company focused on oncology.
DCTH focuses on the treatment of primary and metastatic liver cancers. The company is developing melphalan hydrochloride for Injection for use with the Delcath hepatic delivery system to administer high-dose chemotherapy to the liver. It offers melphalan hydrochloride under the Delcath Hepatic CHEMOSAT Delivery System for Melphalan name in Europe.
The company was founded in 1988 and is headquartered in New York, New York.
According to company materials, “Delcath Systems, Inc. is an interventional oncology Company focused on the treatment of primary and metastatic liver cancers. Our investigational product – Melphalan Hydrochloride for Injection for use with the Delcath Hepatic Delivery System (Melphalan/HDS) – is designed to administer high-dose chemotherapy to the liver while controlling systemic exposure and associated side effects. We have commenced a global Phase 3 FOCUS clinical trial for Patients with Hepatic Dominant Ocular Melanoma (OM), and plans to initiate a Registration trial for intrahepatic cholangiocarcinoma (ICC) by the end of 2017 contingent on effecting the reverse stock split as outlined in the Company’s consent proposal. Melphalan/HDS has not been approved by the U.S. Food & Drug Administration (FDA) for sale in the U.S. In Europe, our system has been commercially available since 2012 under the trade name Delcath Hepatic CHEMOSAT® Delivery System for Melphalan (CHEMOSAT), where it has been used at major medical centers to treat a wide range of cancers of the liver.”
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The most recent update from the company is its announcement of financial results for the three and nine months ended September 30, 2017. Highlights from the third quarter of 2017 and recent weeks include: Revenue for the third quarter of 2017 increased 75% to $0.7 million from $0.4 million in the prior-year quarter; Revenue for the first nine months of 2017 increased 53% to $2.0 million from $1.3 million in the prior-year period; Medical University of Hannover achieved its 100th CHEMOSAT treatment milestone; over 450 commercial CHEMOSAT procedures have been performed in Europe; Positive results from a single institution study of CHEMOSAT filtration efficiency were presented at 2017 CIRSE annual meeting in September; and Reverse stock split effected at ratio of 1:350 on November 6, 2017.
However, this is not a story built on current top-line performance. If there’s a hail-mary comeback lotto-ticket storybook turnaround in the making here, then it has to do with IP in the oncology space. While there is some potential in that domain, it has to be reconciled with a pattern of dilutive behavior that has been well documented.
Recent action has seen -7% stripped out of share values of the name over the past week of action. The situation may be worth watching. DCTHD has a history of dramatic rallies. Furthermore, the stock has witnessed a pop in interest, as transaction volume levels have recently pushed a bit less than 350% above its longer-run average levels.
At this time, carrying a capital value in the market of $1062.9M, DCTHD has a significant war chest ($14.7M) of cash on the books, which is balanced by about $12.6M in total current liabilities. DCTHD is pulling in trailing 12-month revenues of $2.4M. In addition, the company is seeing major top-line growth, with y/y quarterly revenues growing at 14.3%. This is an exciting story, and we look forward to a follow-up chapter as events transpire. Sign-up for continuing coverage on shares of $DCTHD stock, as well as other hot stock picks, get our free newsletter today and get our next breakout pick!
Disclosure: we hold no position in $DCTHD, either long or short, and we have not been compensated for this article.
