Delcath Systems Financial Review and Outlook

Delcath Systems, Inc. (NASDAQ: DCTH), is an interventional oncology Company focused on the treatment of primary and metastatic liver cancers. Commercial activities have been taking place in the Europe segment. Delcath is still in the late stage clinical development in the US. Presently it generates revenue from its reimbursement program. Delcath has identified the potential markets with large global patient population of 1.2 million patients diagnosed annually.

In the recent past, the company has made headlines for reasons other than its core development pipeline. Delcath shares has been in continuous action after its shareholders voted down a reverse split. As a result of the shareholders non-approval of its reverse stock split last week by the requisite vote required under Delaware law, the Company does not meet the requirements for continued listing on the Nasdaq Capital Market.

Delcath had decided on the reverse stock split so that it could issue new shares to raise funds for the Company’s day-to-day operations, support clinical programs, amortization of its Convertible Notes and to avail equity financing. The Company had reached the maximum number of authorized shares of common stock under its Certificate of Incorporation. The Company needed additional authorized shares to arrange for equity financing and access approximately $11.8 million in cash which was blocked in the Convertible Notes issued in 2016. The reverse split would have reduced the number of shares and hence allow the Company to issue new shares for raising funds. The second reason for the reverse stock split was to comply with NASDAQ Capital Markets’ continued-listing requirements.

Subsequently, the decision to delist from NASDAQ was taken following the Company’s review and consideration of several factors including the likelihood of ongoing non-compliance with the NASDAQ listing requirements. The Board of Directors determined that an orderly transition to the OTCQB is in the best interests of the Company and its shareholders.

DCTH recently announced that after conversations with both Nasdaq and OTC Markets, the Company is able to effect the change in listing to the OTC Markets more quickly than anticipated.  The Company’s common stock will commence trading on the OTCQB on or about September 22, 2017 under the symbol “DCTH”.

Notwithstanding these developments, Delcath’s oncology platform continues to remain robust and therefore it should not have troubles picking up an associate/strategic partner, with which it can push forward its product platform. The company must issue its common shares to fund its operations and support its clinical programs.

The Company reported its second quarter result on August 2nd; During the first half of 2017 it continued to advance its clinical development programs in ocular melanoma liver metastases (OM) and intrahepatic cholangiocarcinoma (ICC), while making steady progress with the ongoing commercialization of CHEMOSAT in Europe.

Revenues for the second quarter of 2017 increased 20% from a year ago, demonstrating continued growing demand in core markets.  This increase is largely driven by the recent establishment of ZE diagnostic-related (DRG) reimbursement for CHEMOSAT in Germany.

DCTH continues to leverage this positive German reimbursement to support its efforts to obtain market access and payment in other markets such as the U.K. and the Netherlands, where there is growing interest in and use of CHEMOSAT.  This is evidenced by the recent inclusion of CHEMOSAT in the Dutch Health Authorities treatment guidelines for ocular melanoma liver metastases, an important step toward eventual reimbursement coverage of CHEMOSAT in the Dutch market.


Outlook over the medium term: For rest of 2017, the company plans to focus on advancing its clinical programs of its innovative Melphalan/HDS, as well as to push commercialization efforts for CHEMOSAT in Europe.  DCTH continues its focus on the clinical trials that comprise Clinical Development Program (CDP). Its CDP consists of its FOCUS Phase 3 clinical trial of Melphalan/HDS in hepatic dominant OM (the FOCUS trial) and its intrahepatic cholangiocarcinoma (ICC) pivotal trial, which is scheduled to initiate enrollment by the end of 2017.

To be looking at a company in this position, with the dust settled and clarity on way forward, Delcath is in a very attractive position. Furthermore, Delcath’s development program continues to looks promising. Analysts covering the stock are projecting that the stock will reach $4 within the next 52-weeks.


Description: Delcath Systems, Inc. is an interventional oncology Company focused on the treatment of primary and metastatic liver cancers.


Major product pipeline:

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.

DCTH has commenced a global Phase 3 FOCUS clinical trial for Patients with Hepatic Dominant Ocular Melanoma (OM) and plan to initiate a Registration trial for intrahepatic cholangiocarcinoma (ICC) in the fall of 2017. Melphalan/HDS has not been approved by the U.S. Food & Drug Administration (FDA) for sale in the U.S.

In Europe, the company’s 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. CHEMOSAT has been included in Dutch Health Authorities Guidelines (published in July 2017) as a recommended treatment for ocular melanoma liver metastases.


Key Stock Influences:

Some key influences that might govern future stock price performance include:

Successful and positive outcome of the near/medium term catalyst (mentioned above) would lead the future direction for DCTH. Any adversities related to these upcoming milestones might adversely impact the overall investor sentiments.

DCTH’s operations are still at a nascent stage and have not yet generated meaningful revenue and will likely operate at a loss as it grows its market position and seeks ways to monetize it.   Therefore, any time or cost overrun in its ongoing R&D activities and its impact on business & financial profile will remain a key business sensitivity factor. Moreover, meaningful commercialization of its upcoming products candidates is not likely to happen in the near future.

As of June 30, 2017, Delcath had cash and cash equivalents of $1.8 million. It is highly likely that it could raise cash over the medium term. That means investors should expect dilution after the next round of funding.


Earnings Review:

Revenue for the second quarter of 2017 was $0.6 million, an increase of 20% from $0.5 million for the second quarter of 2016.  Total operating expenses for the current quarter were $5.0 million compared with $4.2 million in the prior-year quarter.

The Company recorded a net loss for the three months ended June 30, 2017, of $2.0 million, a decrease of $4.7 million, or 70.9%, compared to a net loss of $6.7 million for the same period in 2016.

As of June 30, 2017, Delcath had cash and cash equivalents of $1.8 million, compared with $4.4 million as of December 31, 2016.  In addition, the Company has $12.9 million in restricted cash primarily related to the Convertible Notes issued in June 2016.


Stock Performance:

On Friday, September 15th, 2017, DCTH shares closed at $0.082. Market capitalization is $49.85 million. The current RSI is 37.82

In the past 52 weeks, shares of DCTH have traded as low as $0.01 and as high as $4.70

At $0.08, shares of DCTH are trading below their 50-day moving average (MA) at $0.123 and below their 200-day MA at $0.304

The present support and resistance levels for the stock are at $0.0747 and $0.0897 respectively.


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