Mark the Calendar; Celsion to Release ThermoDox Trial Results in January

Oncology-focused Celsion Corp. (NASDAQ:CLSN) announced Friday morning that the Phase III HEAT trial met its unblinding milestone, and top-line data will be released in January of 2013, sending shares up 7% at the open. The trial evaluates ThermoDox in combination with radiofrequency ablation (RFA) as a treatment for liver cancer, or Hepatocellular Carcinoma (HCC). The primary endpoint in the study is Progression Free Survival (PFS), and the study was set to unblind for analysis once 380 progression events occurred. Management believes the trial has done just that, to be confirmed by an independent data monitoring committee, and plans to have data analyzed and ready for release in January.

More important, perhaps, is guidance in this morning’s press release about the company’s capital position and financing expectations. Michael H. Tardugno, CEO, said, “Consistent with our previous guidance, we have no plans to raise additional capital before disclosing top line data from the HEAT Study which, if positive, will vastly expand the Company's strategic and financing options.” At June 30, Celsion had $24M in cash and marketable investments, and added $4.7M through warrant and option exercising. The company burns roughly $5.5M quarterly, suggesting that capital use should not be an issue in the immediate future. The affirmation is a relief to many investors, as the company initiated a $75M shelf offering in August; we speculate that the offering will be reserved for commercialization efforts should Thermodox prove a viable cancer treatment. Management emphasized efforts to develop ThermoDox while retaining full ex-Japan marketing rights. There’s little question that a successful product stands to benefit from the large market for HCC treatments.

The story falls to ThermoDox’s ability to meet its primary endpoint. The drug is a heat-activated liposomal encapsulation of doxorubicin, administered intravenously, and when combined with RFA (mild hyperthermia), results in concentrated delivery of doxorubicin in the tumor; it’s a focused payload without the same systemic risks that accompany many cancer treatments. The drug performed well in a Phase I study, but Bears question its ability to produce the same results in a larger trial; oddly enough, ThermoDox moved straight from Phase I to Phase III. The missing Phase II study can be attributed to doxorubicin’s well-established safety profile and widespread use. And the FDA seems willing to accept the results regardless, as Celsion operates the HEAT trial under a Special Protocol Assessment, and ThermoDox received Orphan Drug status from the FDA. The study was also deemed a Priority Trial by the National Institutes of Health.

Celsion’s $150M market capitalization is considerably low for a company with a late-stage oncology product. (Note Threshold Pharmaceuticals' (NASDAQ:THLD) $236M market cap, and Ziopharm's (NASDAQ:ZIOP) $365M.) Is the market accurately valuing the company based on clinical chances, or is this an undiscovered opportunity? The question has plagued shareholders for years. If ThermoDox meets its PFS endpoint in January with acceptable safety, shares could easily double as the market adjusts for clinical success and begins looking towards potential sales figures. CLSN recently retraced since it’s $6.09 high in September and isn’t far above support at $4.25. We expect appreciation ahead of the data release, but trading the event takes a fair amount of risk tolerance.