Celsion Corporation (NASDAQ:CLSN)

CAPS Rating: 1 out of 5

A biotechnology company dedicated to furthering the development and commercialization of treatment systems for cancer and other diseases using focused heat energy in combination with other therapeutic devices or heat-activated genes.

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Player Avatar zzlangerhans (99.85) Submitted: 11/22/2012 2:00:37 AM : Underperform Start Price: $27.50 CLSN Score: +83.48

I've got the Celsion blues. I think the HEAT study will fail. There's just not that much clinical data backing up the trial and it took substantially longer to enroll and complete than expected. Also, the company's market cap was 50M as recently as May. There's a neat observation called the Feuerstein-Ratain rule which states that biopharmas with market caps below 300M never, ever report positive results in a phase III oncology trial. The reason for that is likely that larger pharmas smell failure and don't partner up on the drug, and institutional investors likewise keep the price low by ignoring or shorting the stock. The short percentage has gone up from 8% six months ago to 17% and is still rising.

Don't get me wrong, this was a great play for the consortium of traders who engineered the 300% run-up going into topline data in January 2013. The smarter ones are likely handing off the bag as we speak. Cash balance is about 18M so failure in the trial will probably chop the share price below 1, as there isn't much of a pipeline outside of ThermoDox. There is already heavy play in the February 2013 puts with the 5 strikes recently selling for 2.4 and the 2.5 strikes selling for 1. The spreads are wide and the implied volatility is high, but the option play could still be lucrative.

One word of warning - Celsion reminds me a lot of Delcath, a similarly farfetched liver cancer therapy that caused my puts to expire worthless in 2010 when they surprisingly met their PFS endpoint. Delcath subsequently went on to obloquy after failing to show a clear survival benefit and not being able to get the FDA to accept their NDA, but that didn't help my puts much. I think there's maybe a 30% chance that Celsion will report a PFS improvement that either meets the primary endpoint or is close enough to blunt the drop. Don't bet anything you can't afford to lose.

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Member Avatar InTheTrenches (53.61) Submitted: 11/24/2012 11:52:36 PM
Recs: 2

zzlangerhans: A brief rebuttal:

"it took substantially longer to enroll and complete than expected"

Why does this predict failure? We know that enrollment was slower than expected, but I don't think this predicts failure?

"There's a neat observation called the Feuerstein-Ratain rule which states that biopharmas with market caps below 300M never, ever report positive results in a phase III oncology trial."

You can ask Adam, but I think he said this might not apply to CLSN. NCE vs. existing drug (doxorubicin/TDox), I think.

"The short percentage has gone up from 8% six months ago to 17% and is still rising."

Yes, shorts are betting against it, but that still doesn't mean it will fail. Those who are betting heavily on the puts doesn't mean it will fail, either. There are huge bets on the calls, as well. Does that predict success?

Delcath and Celsion are similar in that they treat liver cancer, but very different in delivery. Delcath is more like carpet bombing, while Celsion is more like smart (targeted) bombs. But, you're correct that, if successful on PFS (primary endpoint), TDox will also need to succeed in the post-marketing secondary endpoint (survival). They have an SPA for the primary endpoint (PFS).

What the bet for Celsion (or against) comes down to is whether you believe mgt (or not) in their adament statements that they are confident the control PFS will be around 12mos. If control PFS is 12mos, treatment arm PFS will most certainly meet the threshold for success, based on how long the trial has taken.

This confidence by mgt is backed up by stock purchases in the open market (as recently as a few weeks ago) and large warrant exercises. Also, mgt of most companies would fill up the coffers with a private placement at these recent high prices, but they haven't. So not only are they using their own cash to buy shares, they are also betting their jobs that TDox will succeed. That's a lot of confidence by insiders.

Member Avatar z1on (< 20) Submitted: 1/11/2013 12:14:01 AM
Recs: 0

Perhaps you didn't consider the fact the the length of the trial is an indicator of success... If lasts longer it is because subjects didn't progress.

Member Avatar z1on (< 20) Submitted: 1/11/2013 12:14:05 AM
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Perhaps you didn't consider the fact the the length of the trial is an indicator of success... If lasts longer it is because subjects didn't progress.

Member Avatar zzlangerhans (99.85) Submitted: 1/13/2013 6:56:45 AM
Recs: 1

Bought 50 contracts of Feb 3 puts at 0.95 ($4750). Too similar to Keryx and Oncothyreon before their blow-ups, with pumper cults claiming it is mathematically impossible for the trial to fail. Feuerstein-Ratain rule says the trial fails.

Member Avatar dunce12 (< 20) Submitted: 1/13/2013 6:25:15 PM
Recs: 0

Actually Celsion is everything that DCTH is not. This I admit can be one way or another but you are definitely spooked, seeing that you have compared it to DCTH, KERX, and ONTY. . DCTH is a terribly run company with the goofy leader who kills the investors at every turn, with his night and day PR'S about putting one foot in front of the other not to mention his constant --"guess what's? ahhhhh nothing"

Member Avatar Momentum21 (56.30) Submitted: 1/14/2013 1:06:46 PM
Recs: 1

you lost me at the Feuerstein-Ratain rule...all rules work until they don't. And in my experience they fail the moment you put your hand in the cookie jar.

Member Avatar TMFBlacknGold (98.78) Submitted: 1/19/2013 6:23:33 PM
Recs: 0

The rule certainly works. And I'm pretty sure it applies to all oncology trials, not just new molecules as some pumpers claim. zz is right about the parallels with Keryx. Delayed results, shakey previous trials, etc.

http://www.fool.com/investing/general/2013/01/18/will-the-feuerstein-ratain-rule-hold-in.aspx?source=itxsitmot0000001&lidx=1

Member Avatar sidiling (96.57) Submitted: 1/31/2013 4:49:48 PM
Recs: 0

Well we all know now who is the expert

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