Delcath Begins Platform Expansion With Two Phase 2 Trials

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Delcath's Q3 US sales hit $10 million. This unlocked $25 million in cash from its Tranche B Warrants, which will fund its Phase 2 trials for mCRC and mBC.HEPZATO KIT's hospital rollout is progressing ...

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This unlocked $25 million in cash from its Tranche B Warrants, which will fund its Phase 2 trials for mCRC and mBC.HEPZATO KIT's hospital rollout is progressing ...</p>\n\n<a href=\"https://seekingalpha.com/article/4738964-delcath-begins-platform-expansion-with-two-phase-2-trials\">Source Link</a>\n\n</div>\n","source":"seekingalpha","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Delcath Begins Platform Expansion With Two Phase 2 Trials</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nDelcath Begins Platform Expansion With Two Phase 2 Trials\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-11-20 20:50 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4738964-delcath-begins-platform-expansion-with-two-phase-2-trials><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Delcath's Q3 US sales hit $10 million. This unlocked $25 million in cash from its Tranche B Warrants, which will fund its Phase 2 trials for mCRC and mBC.HEPZATO KIT's hospital rollout is progressing ...</p>\n\n<a href=\"https://seekingalpha.com/article/4738964-delcath-begins-platform-expansion-with-two-phase-2-trials\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"DCTH","symbol_name":"迪卡斯","start_time":0,"source_url":"https://seekingalpha.com/article/4738964-delcath-begins-platform-expansion-with-two-phase-2-trials","article_id":"2484131511","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/2148991962/image_2148991962.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2484131511","pubTimestamp":1732107020,"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"Delcath's Q3 US sales hit $10 million. This unlocked $25 million in cash from its Tranche B Warrants, which will fund its Phase 2 trials for mCRC and mBC.HEPZATO KIT's hospital rollout is progressing ","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"DCTH":"迪卡斯","BK4082":"医疗保健设备"},"translate_title":"Delcath通过两项2期试验开始平台扩展","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"DCTH":0.9},"content_text":"Delcath's Q3 US sales hit $10 million. This unlocked $25 million in cash from its Tranche B Warrants, which will fund its Phase 2 trials for mCRC and mBC.HEPZATO KIT's hospital rollout is progressing well. Delcath plans to end the year with 15 centers and end 2025 with 30. Treatment has gone well at UCLA.Three retrospective clinical trials and the FOCUS trial's subgroup analysis add to the growing body of evidence which shows PHP's effectiveness in treating mUM and other tumor types.Upcoming catalysts include the CHOPIN presentation in 2025, potential ICC guideline inclusion, and Phase 2 trial results for mCRC and mBC in 2028.Delcath has a high upside if it gets a platform multiple on top of sales from the mUM and ICC indications.Mohammed Haneefa Nizamudeen/iStock via Getty Images  Delcath Hits $10 Million In US Sales On October 17th, Delcath Systems, Inc. (NASDAQ:DCTH) preannounced Q3 sales results, which were $10 million in the US and $1.2 million in Europe. $10 million in quarterly US sales was the threshold the firm needed to hit to access the $25 million in cash from its Tranche B Warrants. Delcath reached this milestone one quarter quicker than my expectation. This was impressive considering the firm's hospital rollout has been slower than I projected. Gaining access to the $25 million allowed management to announce its plans for two Phase 2 trials to expand usage into the metastatic Colorectal Cancer (mCRC) and metastatic Breast Cancer (mBC) indications. Delcath Q3 Investor Presentation I will highlight the most important parts of the report/call, update you on how the treatment is going at UCLA, provide key takeaways from recent studies, comment on how the firm will pay for the two trials and their timelines, and review recent results from KIMMTRAK (sales) and Darovasertib + Crizotinib (trial updates). Delcath is still one of my two favorite stock ideas. I have no plans to sell my shares. Ideally, I don't change my opinions on stocks each quarter, but that's partially up to how management executes. In this case, management is executing flawlessly. The team is effectively utilizing its experience from TheraSphere which makes Y-90 which is a targeted radioembolization therapy. Expansion Timeline (Early Promising Results) Part of investors' analysis of Delcath is a simple counting exercise. We are reviewing the number of HEPZATO KIT treatment centers in the US and the number of treatments per center per month. I also look at the number of CHEMOSAT centers in Europe. In the near term, those will serve as study and trial sites. There are currently 11 CHEMOSAT centers in Germany, 4 in the UK, 1 in the Netherlands, 1 in Italy, and there is 1 distributor in Turkey. In Germany, the reimbursement rate is only ~$20k per procedure (it's $182.5k in the US). In the UK, it costs $40k per procedure. However, even though NICE (National Institute for Health & Care Excellence) approved it, the NHS (National Health Service) isn't paying for it. The situation is heartbreaking for patients who are forced to raise money via donations to pay for life-extending care. Management expects modest yearly sales growth in Europe via center expansion and additional reimbursement (the UK next). againsttheodds.com I projected Delcath would have 14 US treatment centers by the end of Q3 and about 1.7 treatments per center per month. The firm ended Q3 with 11 hospitals. It added 1 in October and is about to add another in the 3rd week of November. It did just under 2 treatments per center per month in Q3. In the short term, we care more about adding new centers than keeping the average number of treatments per center per month up. Each new center starts with a low cadence as it wants to make sure the complex procedure is done right and reimbursement goes smoothly. There are 10-12 people involved in each procedure. While having so many people involved makes uptake slow, it creates a moat since no hospital would want to coordinate all these people to relearn a different process for a similar treatment. Centers are investing 6 months of preparation time to be ready for patients. Over the next couple of years, they will refine HEPZATO KIT's treatment protocol to make it more efficient and effective. The fact that over 20 centers are in active conversations to start the activation process shows their belief in the treatment's effectiveness even with this long process. Early results seem promising. Dr. Jonathan Zager's team at Moffitt was given a Center of Excellence award by Delcath. Moffitt has done over 300 Percutaneous Hepatic Perfusion (PHP which is HEPZATO KIT/CHEMOSAT) procedures. Dr. Padia from UCLA said in an October 15th interview all procedures have gone extremely smoothly since the center started doing PHP treatments in April. Each one has taken 2.5 to 3 hours, with the patient being discharged the same day or the next morning. They measured the enzymes post-procedure and not a single person had elevation of liver function. The hepatocytes, which are the normal liver cells, are not reacting to the melphalan. Only the cancer cells are being killed. With every subsequent treatment, patient tolerance of PHP is increasing. This could lead to more patients who are seeing improvement getting the full 6 doses. On the November call, Gerard reported anecdotally medical oncologists/interventional radiologists have been telling the firm the response rate is much better than was seen in the FOCUS trial (36.3% ORR). This supports one of my thesis points from last year which was real world results would likely be better than were seen in the FOCUS trial because FOCUS trial patients were treated near the end of their life when the liver had a high tumor burden rate. Generally speaking, early cancer treatment provides better results. I would love to see a retrospective study with these patients. It's still too early for that because the first patients in the commercial setting are currently on their 4th or 5th treatment (6 total treatments every 6-8 weeks). Early in 2025, the firm will be mostly focused on adding new centers. Late in 2025 and into 2026, the firm will be more focused on increasing patients per month at each one. The intermediate-term goal should be to go from below 2 treatments per month per center to 4 per month. Specifically, management's goal is to get to 30 centers by year-end 2025 (35-40 centers at maturity). It takes 6-9 months to activate a center. I think all 17 of the centers that were on the HEPZATO KIT website accepting referrals as of my August report will be activated by the end of Q1 (there are 20 on the website now as seen below). The firm is guiding to end the year at 15 centers (currently at 12 according to the REMS website) and to end Q1 with 20 centers. HEPZATOKIT.com Since management and hospitals have settled on a 6-9 month cadence for site activations, I'm more focused on mid-funnel centers seen on the HEPZATO KIT website than late funnel-activated centers on the REMS website. Once a center gets added to the REMS (Risk Evaluation and Mitigation Strategy) website, it is active. Delcath is early in its referral network development which will increase treatments per center per month. In 2H 2025, the firm will rely on it much more since more centers will be comfortable taking on more patients (due to experience with treatment and reimbursement). I expect analysts to ask on future calls the average procedures per month at older centers outside of the original 3 FOCUS trial sites. The first 3 will be workhorses, but we need to understand the cadence of the median site to better estimate treatments per site at maturity. In my opinion, there was way too much emphasis on the call on how many patients will push off the procedure until after the holiday season if their normal 6-8 week cadence lands in the 2nd half of December. It shouldn't matter even to short-term investors who have a time horizon of 6 months whether a treatment gets pushed back from late December into January. It has no impact on overall value. It's a positive for patients that there isn't a strict time frame when the procedure must be done because there is travel involved. Maybe in the next few years, doctors will realize a stricter time frame provides better outcomes, but for now, doing a procedure more than 8 weeks after the previous one isn't considered problematic. I know the feeling patients have because I personally had an unrelated surgery in mid-December a few years ago that had complications during the holidays and it was difficult to access care. UCLA Usage Going Perfectly (Treatment Landscape Analysis) UCLA Cancer Center was one of the first 6 treatment centers doing PHP. It started in April in line with the J-code establishment by CMS. Dr. Siddharth Padia is a specialist in vascular and interventional radiology. His interview on the \"A Cure In Sight\" YouTube channel helped me understand the treatment landscape for metastatic Uveal Melanoma (mUM) patients with liver-dominant cancer. He said the first step for patients with one or two small tumors on their liver is a radiofrequency ablation where the doctor heats up a small needle on the tumor to destroy it. Since the needle is small, it only works on small tumors. Once there are more than a couple of tumors, it's not feasible to manually ablate them all. It doesn't make sense to use PHP when there are only one or two tumors because the doctor wants that tool, which treats the whole liver, to stay in their kit for later use when the tumor burden is higher. An alternative to radiofrequency ablation is a new treatment called histotripsy which uses ultrasound waves to release tumor antigens which encourage the immune system to attack cancer cells. This can be used when radiofrequency ablation is too risky. It has limited side effects, but can only be used to treat reachable small tumors. One issue is the study to get approval didn't include mUM since it is rare. It included other liver tumor types. The next step is Y-90 which is targeted focal radiation. It uses radioactive beads to treat specific small tumors without the risk of radiation spread. These plastic/glass beads containing a radioactive isotope called Yttrium-90 (Y-90) are delivered through the tumor's blood supply. This is for a limited, but larger tumor burden than radiofrequency ablation and histotripsy. Dr. Padia believes transarterial chemoembolization (TACE) and immunoembolization will go away due to their side effects now that PHP has been approved to treat the whole liver with limited side effects. UCLA has treated patients with Ipilimumab (IPI), Nivolumab (Ipi/Nivo) and PHP combined. Remember, Ipi/Nivo is the immune checkpoint inhibitor combination that is being treated with PHP in the CHOPIN trial in the Netherlands (76 patients) and the SCANDIUM trial in Sweden (40 patients). There's nothing stopping doctors from going through with this regimen before those investigator-initiated trials report results. Similarly, UCLA is already treating patients with KIMMTRAK (Tebentafusp) and PHP simultaneously. There are no cross-reaction side effects. If PHP and Tebentafusp are being used together, it's hard to call them competitors. Dr. Padia does the PHP treatments in pairs; he asks patients after a pair is done if they are up for another one. Tolerance increases after each PHP treatment which is encouraging patients to go for more treatments. Sometimes doctors wait a few months for the white blood cell count to normalize before doing another couple treatments of PHP. Obviously, imaging needs to show that the tumor burden is decreasing along with there being limited side effects for treatment to continue. Importantly Dr. Padia sees room for improvement which will increase PHP's competitive advantage. Anytime doctors make the effort to improve a procedure it helps patients and makes doctors less likely to switch procedures. UCLA has already started removing the catheters and sheaths and closing the arteries/veins before the patient wakes up. Dr. Padia discussed improvements to the filter and varying how much chemo gets withdrawn. Before PHP was approved, there were deaths in the trial population which caused Delcath to improve the filter, increasing the melphalan that is taken out after it goes through the liver to 86%. I doubt the firm will want to lower that rate. Currently, PHP is being offered to all patients with multi-focal tumors. Eventually, doctors will figure out which patients PHP works the best in. This will shrink the addressable market, but further solidify its usage in patients because it will have a higher success rate. Takeaways From Recent Studies 3 studies came out in recent months which retrospectively reviewed PHP's results in Europe. Plus, Delcath revealed subgroup analysis from its FOCUS trial. I'll highlight some key points from them. None are gamechangers like CHOPIN could be, but they provide a few tidbits of information worth understanding. Delcath is trying to get PHP's treatment of Intrahepatic Cholangiocarcinoma (bile duct cancer) added to NCCN's (National Comprehensive Cancer Network) guidelines without needing to do a formal trial that would take years. The next step to achieve that is off-label experimentation with the Intrahepatic Cholangiocarcinoma (ICC) indication in the US, like we've seen in Europe. This can be part of small investigator-initiated trials. The retrospective study from 2016 to 2023 published in ESMO includes such experimentation in Germany. ICC was the 2nd most common indication in the study as seen below (basket of tumor types). In 8 patients, median hepatic Progression Free Survival (hPFS) was 38 weeks. The goal is to generate enough solid results to encourage experimentation similar to how doctors are experimenting with combining PHP with Ipi/Nivo and Tebentafusp (still too early to know the results from PHP and Tebentafusp being combined). ESMO I'm anticipating ICC getting on the NCCN guidelines by 2026. ICC wasn't mentioned on the Q3 call, but management remains focused on it (there just wasn't a notable strategy update). Remember, ICC is the less common primary liver cancer (compared to HCC), but its incidence level is still twice that of mUM. As Delcath moves to indications that are more common, I expect lower reimbursement rates. However, all liver-dominant tumor types are firmly in the orphan category, so reimbursement rates will be elevated just at a lower level than mUM. In fact, all liver-dominant tumor types except mCRC and HCC are included in the ultra-orphan category (1 in 50k people affected) which means they will get a high reimbursement rate. The Annals of Surgical Oncology had a nice bit of information on PHP's use as a first-line therapy. It says: \"In our study, we found OS, hPFS, and PFS rates generally higher than those reported in the literature, signifying the potentially enhanced efficacy of the melphalan/HDS in the early stages of treatment.\" This supports the anecdotal results seen in initial commercial treatments in the US which are being done earlier than in the FOCUS trial and showing better outcomes. This is all limited information, but it signals what more substantial data sets could show. Remember, because PHP has to be used before over 50% of the liver is covered with tumors, it already has to be used earlier in the treatment landscape. As I will get to later, Darovasertib + Crizotinib has shown very strong results in treating uveal melanoma in the eye before it metastasizes. Unfortunately, even if the primary tumor in the eye is treated well, the cancer can metastasize to the liver many years later. Specifically, one study summarized the average metastasis after the initial diagnosis of uveal melanoma is 4.9 years later. The breakdown of distant metastasis is 25%-31% within 5 years, 34%-45% in 15 years, and 49% in 25 years (50% of uveal melanoma metastasizes). Finally, Delcath released a breakdown of the subgroups in its FOCUS trial. The most useful portion of the report is seen below. Ideally, PHP is used to treat patients with little metastasis outside of the liver since it only treats the liver. However, since the liver is thought of as the life limiting organ when cancer spreads, PHP has been used with extrahepatic disease in the bones, lymph nodes, subcutaneous tissues, or lungs that is amenable to resection or radiation. As you can see, there wasn't a significantly worse overall survival, objective response rate, or progression-free survival with the presence of lesions outside of the liver. This reinforces the notion of the liver being the life limiting organ especially if the lesions in the other organs are treated properly. Delcath Investor Website Two Phase 2 Trials Starting Next Year Prior to the November call, I expected Delcath to initiate one Phase 3 trial that would cost $8.4 million likely in the mCRC indication. The cost of the trial was a very crude estimate, but I was fairly confident the company would do one Phase 3 trial. Instead, the firm plans to do two Phase 2 randomized trials on mCRC and mBC. Each will have 90 patients at over 20 sites in the US and Europe. The firm plans to spend $35-$40 million on R&D in 2025. That's total R&D. If you take out the $15 million of base spending we will see in 2024, that's $20-$25 million in incremental R&D spent on the trials. Even though that's two trials instead of one, it's definitely more spending per trial than I projected considering some spending will be after 2025. Regardless, as I will detail in a later section, the firm has plenty of cash to execute them both without raising money via equity or debt. By doing two trials nearly simultaneously, the firm compresses the time it will take to reach milestones and de-risks the plan since one indication might not show favorable results. It also shows management is confident in mUM's ability to generate cash to fund them considering its high reluctance to dilute shareholders. On the negative side, Phase 2 trials imply we are further away from approval since a Phase 3 trial is needed afterward. The mCRC trial will start in mid-2025 and enrollment will take 2 years. The mBC trial will also take 2 years to enroll patients and it will start in Q4. The mCRC trial protocol is complete and the lead investigator has been picked. I didn't expect any sales to come from a future indication beyond mUM and ICC until at least 2027. My valuation framework was based on a multiple of mUM sales. The high multiple was supported by future indication potential. The first step towards a higher multiple on 2026 sales will be evidence Delcath can make money off the ICC indication. As the number of US mUM sites increases and existing ones mature, we will see more experimentation which can lead to data being published and a subsequent push to get PHP on NCCN's ICC treatment guidelines. This will likely grant insurance reimbursement. Ideally, beyond the CHOPIN and SCANDIUM studies, which I will review in a future section, the firm will see small investigator-initiated trials for ICC. To get a higher multiple on 2027 sales estimates, Delcath will need to report positive interim data from the mCRC and mBC trials. If the mCRC trial finishes in mid-2027, I expect the primary endpoint to be in early-2028 with complete results published in mid-2028. mBC will be about 3-6 months behind each milestone. At that point, I expect Delcath to push for NCCN guideline inclusion while launching Phase 3 trials for mCRC in mid-2028 and mBC in late-2028. Early readouts and full data presentations will be catalysts for multiple expansion, but the full sales push might not start until 2030-2031 after Phase 3 results come out. Sales could start in 2028-2029 if Delcath is successful at getting PHP added to the NCCN guidelines for mCRC and mBC. We will have a better understanding of how successful Delcath can be at guideline inclusion with ICC in the next couple of years. This brings me to an important point. If Delcath reports very strong Phase 2 data in the mCRC indication in 2028, I think it can get a 10x sales multiple on 2028 sales estimates which will likely include revenue from ICC. The high multiple is due to the large size of the mCRC (and mBC) patient population. If PHP's reimbursement rate for ICC is 0.75x of mUM, the total sales pool could be 1.5x that of mUM since ICC has double the population. The ICC rollout would be easier than mUM because there will be over 30 mUM hospitals willing to train new ICC hospitals. Plus, existing mUM hospitals can add treatment for ICC since it's the same procedure and each center might only be doing 1 per week. Delcath Q3 Investor Presentation If Delcath can get to 37 mUM treatment centers in the US treating 4 patients per month, that's ~$324 million in sales. Adding 1.5x the sales from ICC gets us to ~$810 million in US sales. A 10x multiple gained from strong mCRC Phase 2 data presented in 2028 would give Delcath a $8.1 billion market cap. This is not an official forecast. My goal is to illustrate how sales including the ICC indication valued at a high multiple due to strong mCRC Phase 2 results can be exciting for investors as early as 2028 since some might be discouraged by the idea of waiting ~6 years for sales from mCRC and mBC. Amazing Margins & Strong Balance Sheet Delcath's Q3 report showed how great the business model is. The company scaled the usage of HEPZATO KIT without hiring many employees, giving it high incremental operating margins. That's in addition to its high gross margins which come from the disposable razorblade business model. Q3 gross margins were 85.4%. The operating loss was only $1.259 million. Product revenue increased from $434k last year to $11.2 million, while SG&A only increased from $6.195 million to $6.953 million. A meager $758k in additional SG&A expenses have driven the entire product launch so far. The firm didn't need to add many employees to scale PHP in the US. Specifically, the firm has a clinical support specialist in each of its 4 regions who attends each procedure to ensure they go well. It has a liver-directed manager who opens and manages the centers. Finally, there is an oncology manager in each region who develops the referral networks. Developing referrals is not a difficult task when the community of doctors and patients is so small and there are such limited treatment options. Delcath ended the quarter with $14 million in cash. In October, the firm repaid a $2.8 million loan which means it now has no debt. It received the $25 million in cash from the warrants in October. This means the firm had $36.2 million in cash at the end of October excluding operations in the month. Delcath has set itself up well for investing in its clinical trials next year. The balance sheet risk is low considering the firm's potential to scale high margin sales which will get it to profitability in the near term. Near-Term Sales & Burn Rate Projections Before, I project near-term sales and cash flows, I must recognize the warrant situation. Delcath has 3.6 million in warrants with an exercise price of $10. Half expire in December 2024 and half expire in May 2025. I'm confident that the stock will be at least at $10 in both months (it's at $9.91 as of this writing). Therefore, I'm going to assume Delcath gets access to $36 million in cash from the warrants ($18 million in December and $18 million in May). I don't think either is necessary for Delcath to have enough cash to invest in its clinical trials next year without issuing debt or equity. Even though Delcath had a $1.259 million operating loss, it burned $3.64 million. I'm seeing a $3.21 million increase in accounts receivable which management told me is part of the business growing. Accounts payable and accrued expenses fell $1.219 million. Working from the $3.64 million burn rate, I'll forecast cash flow for the next 2 quarters, showing how the cash burn transitions to profitability which gives the firm plenty of flexibility to invest in clinical trials. As I mentioned, Delcath will hit 13 centers in November. Management guided for 15 at year-end. While the firm has missed guidance in the past, I think this is achievable. It would be only 4 activations in Q4 which is the same as Q3. I would like to see greater momentum, especially with 20 centers listed on the HEPZATO KIT website as looking for patients. This implies the 8 unactivated sites are weeks from activation. However, the holiday season will limit activation in the 2nd half of December. Because more centers as a percentage of the total will have some experience rather than being newly activated (11/15 in Q4 instead of 7/11 in Q3), I would expect the firm to hit 2.1 procedures per month per center in Q4. However, I have to lower my estimate due to the holiday season. That brings me to 1.8 procedures per month per center which equates to ~$14.6 million in US sales. I think Europe can do $1.1 million in Q4 sales due to the holidays. That adds up to $15.7 million in overall Q4 sales. The current consensus is $12.4 million. Clearly, analysts expect lower procedures per month than I do. The countervailing force on average procedure volume per month is the dilution of the original 3 FOCUS trial centers (they have high volume). However, even an average of 1.6 brings us to $13.1 million in US sales and $14.2 million in overall sales. Therefore, I believe a modest beat of $1.8-$3.3 million is likely if analysts don't update their estimates. An incremental $4.6 million in US sales would bring the firm to a modest profit, while an incremental $3.1 million would leave it with a modest loss. With substantial profitability starting in Q1, the analysis of the burn rate ends. Delcath will finally reach profitability after decades of losses. Remember, the firm plans to spend $35-$40 million on R&D in total in 2025 which includes the $15 million in base rate R&D spent in 2024 and the clinical trials. The firm will probably end 2024 with around $35 million in cash. That alone would be enough for the $20-$25 million in clinical trial expenses. Remember, Delcath will get an additional $36 million from warrants if the stock hits $10 in December and May. The assumption of just breaking even next year with its normal $15 million R&D expense and using the $35 million (year-end amount) + $36 million (warrants) in cash to fund the clinical trials is far too conservative because the firm will be very profitable starting in Q1. It just illustrates how easily Delcath clears its investment goals without issuing new shares or debt. It also doesn't need the additional $36 million from the warrants to be in great financial shape. Specifically, I expect the firm to have 20 active centers in Q1 with an average of 2.3 treatments per month per center due to patients shifting treatments from December to January. I think management will give Q1 guidance when the firm reports its Q4 results in early March since the quarter will be 2/3rds over (the start of consistent quarterly guidance). With that number of active centers and treatment cadence, the firm would reach $25.2 million in US sales. With $1.4 million in European sales, that's $26.6 million in total which is way above the consensus of $13.6 million. Either a strong guide in March or a substantial Q1 beat in May would be a major near-term stock catalyst. Clinical trial spending will be back-end weighted. Therefore, in Q1 I expect an incremental spend of just $3 million on top of the normal $3.75 million in quarterly R&D spending. This allows me to model mid to high-single-digit millions in free cash flow. Just that sales rate alone would allow the firm to fund R&D in the quarters (Q3 & Q4) where spending on the trials reaches its apex for the year (mid to high single digit millions in incremental R&D spending and low double-digit millions in overall R&D spending). Sales will grow further throughout the year as site activations and treatments per center increase, which means the firm will produce free cash flow even when R&D spending is at its highest. As you can see, there are multiple safety valves in place that minimize dilution risk (cash on hand, warrants, probability, and future growth). This minimal risk plus the Q4 and Q1 sales beats should be enough to power the stock substantially higher in the next few months. Updated Review Of KIMMTRAK & Darovasertib + Crizotinib As I mentioned earlier, Immunocore's (IMCR) KIMMTRAK is far from a competitor since it can be used simultaneously with PHP. It doesn't make sense to worry about which will be used as a first-line therapy if they are used together. Reviewing KIMMTRAK's sales solely helps us predict PHP's rollout over the next couple of years since KIMMTRAK had a 2-year head start. In Q3, KIMMTRAK had sales of $80.2 million globally and $57.3 million in the US. That's $229 million annualized in the US. Remember, KIMMTRAK only treats 45% of mUM patients with liver-dominant cancer, while PHP can treat them all. Furthermore, KIMMTRAK isn't at peak sales since its sequential growth rate was 3.1% in the US (31.8% YoY). This makes the estimate for Delcath of $324 million in US sales via 37 centers with 4 treatments per center per month look conservative. KIMMTRAK implies HEPZATO KIT can reach ~$509 million in sales. IDEAYA Biosciences (IDYA) has 4 ongoing clinical trials for its Darovasertib + Crizotinib combination therapy. First, there is the Phase 2/3 mUM trial which might be registrational. To be clear, IDEAYA needs the FDA's acceptance for it to transition into a Phase 3 registrational trial. If another trial is needed, it would take another 2-3 years after this one ends before approval. This Phase 2/3 trial for HLA negative patients (KIMMTRAK treats only HLA positive) is ahead of schedule with over 150 patients enrolled. It aims to enroll 420 patients; its primary completion date is in January 2027. There wasn't an update on the Phase 1/2 trial in patients with solid tumors harboring GNAQ/11 mutations which includes HLA positive mUM patients and cutaneous melanoma patients. This study's primary completion date is in December 2026, but there will need to be another trial afterward for an approval. Finally, there are two uveal melanoma (UM) trials. IDEAYA has the most data on this indication. It is also the indication the treatment is most likely to be approved for in the near-term. However, Darovasertib + Crizotinib treating the eye in UM doesn't compete with PHP which treats the liver in mUM. IDEAYA reported positive Phase 2 interim data with the cutoff of August 15th in its company-sponsored study. 59% (29) of 49 patients had over 20% ocular tumor shrinkage. Out of 38 patients, just 11% had a grade 3 or higher adverse event and 5% had a serious adverse event. The firm is currently designing its registrational Phase 3 UM trial with the FDA. The goal is for a 400-patient trial to start in 1H 2025. It will take 2 years of data maturity to initial readout which implies a mid-2027 approval timeline. It doesn't matter for Delcath if this treats patients at high risk of metastasis because even after a successful treatment, distant metastasis is possible. Finally, there is also a Phase 2 investigator-sponsored trial for the treatment in ocular melanoma. Importantly, IDEAYA will have an investor R&D Day on December 16th to highlight the firm's pre-clinical and clinical pipeline. I will watch for any additional news regarding the uveal/ocular melanoma and mUM indications. CHOPIN Presentation Is The Biggest Catalyst The most important catalyst for Delcath in 2025 will be the presentation of the CHOPIN data. This is the randomized Phase 2 investigator-initiated trial in the Netherlands which recently completed enrollment (76 patients). It combines the use of PHP with the immune checkpoint inhibitor systemic combination therapy Ipilimumab and Nivolumab. On the November call, management reiterated that the primary endpoint (progression-free survival at one year) will be in mid-2025. The results will be presented in 2H 2025 (likely in the fall). The data is blinded, but it's good to hear Dr. Padia discussing using this combination in the real world already. Plus, there is the SCANDIUM trial which is a similar 40-patient investigator-initiated combination trial in Sweden which started enrollment this year. If the data presented next fall is close to the interim reading (100% disease control rate in 7 patients), PHP will become the standard of care for liver-dominant mUM patients. Uptake will increase, peak sales will be higher, and it will be used earlier in the treatment landscape. Patients will get 2 PHP treatments as part of the combination approach to start and will likely come back for more if they progress later on. Getting more patients to start PHP early could be beneficial since patients' tolerance to PHP has been shown to increase with experience. Updated Risks It's uncertain when PHP will start being reimbursed for the treatment of ICC in the US. The goal is to avoid a trial that takes 2 years and instead do small investigator-initiated trials. There are also retrospective trials like the ones I mentioned which review a basket of liver tumor types that include some data on PHP treating ICC. Europe has been using PHP for over a decade. With ICC being the 2nd most common tumor type treated, there should be a deeper data trove than what we've seen so far. The most recent data is the best since newer methods have improved outcomes. With that being said, sometimes it's risky to take shortcuts to get reimbursement. You can argue even though ICC is the smallest new indication, it's the most important because it likely has the greatest chance of success given PHP's extensive experience treating it in Europe. In 2021, Delcath paused its ALIGN Phase 3 trial for ICC to reevaluate the trial design. This wasn't because PHP didn't work; instead, the trial was a poorly designed. If PHP gets added to NCCN guidelines and gets reimbursement, it still needs to convince doctors to use it often. Because the current prognosis for bile duct cancer (ICC) is so grim (5-year survival rate of less than 8%), there is a lot of research going into new treatments. However, there has been little progress made in the past decade. One potential treatment is Tinengotinib (FGFR2) which is a new type of FGFR (fibroblast growth factor receptor) inhibitor that has an improved binding mechanism that overcomes the genetic mutations cancer cells evolve when they become resistant to FGFR within 6-8 months. In a Phase 2 trial, the median progression-free survival was 9 months in 103 patients. However, FGFR2 fusions only occur in up to 14% of patients with bile duct cancer, meaning only 14% can be treated with this new potential treatment. The CHOPIN data presented next fall might not be as impressive as the results seen in the first 7 patients. I'd argue anything significantly better than the data seen in the FOCUS trial would be a positive. The exact threshold that will make PHP a first-line therapy is uncertain due to the travel and hospital time required. Even though Y-90 only has an ORR of 20% and a median progression-free survival of 5.5 months (PHP's is 36.3% and 9 months), Dr. Padia still thinks it makes sense to do it before PHP. If most patients progress to needing PHP/Tebentafusp, it's not a huge deal which is used first. However, being used later shrinks the addressable market since some patients pass away quickly.  The Phase 2 data from the mCRC and mBC trials might not be positive enough to alter their treatment landscapes or get regulatory approvals. Adding to the risk, the treatment landscape for mCRC and mBC in the early 2030s is virtually unknowable. Within the next few years, better treatments can come out, making it harder for PHP to beat the standard of care and be added to the treatment landscape.","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"1","news_tag":"analysis","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":1,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.3","shortVersion":"4.29.3","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2484131511"}