Delcath Systems, Inc. (NASDAQ:DCTH) continues to be a dreadful performer, gradually sliding down a mountain of pain day after day, month after month, year after year. It’s somewhat remarkable that anyone still pays attention to this dog. Beset by titanic dilutive behaviors, the company has been in the stereotypical death spiral of convertibles, reverse splits, dilution, and falling share prices, which restrict its access to efficient funding, ensuring the spiral continues.
The descent has been accelerated of late as the company delists from the Nasdaq and heads down onto the OTC following a repeat vote in which shareholders have expressed their unwillingness to back a new reverse split. But the story gets worse: 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. But could this change?
Delcath Systems, Inc. (NASDAQ:DCTH) 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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As noted above, this former Nasdaq biotech play has proved repeatedly that it is locked into the proverbial death spiral that we have seen play out time and time again. The question right now is this: is there some potential for a dead cat bounce out of this name now that it has fallen over 99.999% since its 2010 levels, and 99% over the past 12 months?
If one wants to make that argument, then one might get there through two argumentation pathways. First, after last week’s strong stand and statement that, despite the protestations of shareholders, the spiral would continue, we have to think there cannot possibly be any speculative positions left alive and breathing in this stock right now.
Second, the stock has viable IP in the oncology marketplace and should be inundated with short interest at this point. Hence, as we have pointed out with other similar plays: when the crowd is leaning short, it takes very little to spark a powerful bounce. We could be lining up that type of move in DCTH before long, provided the company can put together some kind of viable catalyst to jolt some life into the tape and plant a seed of doubt among shorts.
One such possible catalyst might have to do with the company’s potential to achieve some level of commercialization in the US for its principal technology.
Currently trading at a market capitalization of $28.4M, Delcath Systems has a significant war chest ($14.7M) of cash on the books, which must be weighed relative to about $12.6M in total current liabilities. DCTH 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 may be a very interesting story and we will look forward to updating it again soon. Sign-up for continuing coverage on shares of $DCTH 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 $DCTH, either long or short, and we have not been compensated for this article.