Delcath Systems (NASDAQ: DCTH) stock is up 66% premarket. DCTH stock has been higher this morning showing us that there’s still some uncertainty as to how much weight to put on this news. It’s possible to think that there has been an over-reaction overnight to the welcome FDA approval news. Also, that once the market fully opens there will be a fuller reconsideration. It depends on what we think about the low liquidity of post- and pre- market really. Was the price move driven by excitement in a thin market? Or are we awaiting the considered views of the specialists when they get into work?
The background at Delcath: “ Delcath Systems, Inc., an interventional oncology company, focuses on the treatment of primary and metastatic liver cancers in the United States and Europe. The company’s lead product candidate is HEPZATO KIT, a melphalan hydrochloride for injection/hepatic delivery system to administer high-dose chemotherapy to the liver while controlling systemic exposure and associated side effects.
That’s the kit that has just received the FDA approval: “Delcath Systems, Inc. (Nasdaq: DCTH), an interventional oncology company focused on the treatment of primary and metastatic cancers of the liver, announced that today the US Food and Drug Administration (FDA) approved HEPZATO KIT (melphalan/Hepatic Delivery System) as a liver-directed treatment for adult patients with metastatic uveal melanoma (mUM) with unresectable hepatic metastases affecting less than 50% of the liver and no extrahepatic disease, or extrahepatic disease limited to the bone, lymph nodes, subcutaneous tissues, or lung that is amenable to resection or radiation.” OK, so that all looks pretty limited. But it is also the final approval that is required to be able to go out and actually sell something.
Delcath Systems stock price from Google Finance
It’s not unusual for limited approvals like this to be widened over time. It’s also true that doctors can widen the use themselves - if something is approved then it’s always possible for doctors to use it “offlabel”.
There are some very aggressive valuations out there given this approval: “Post approval, DCTH could easily be worth $10+, a modest multiple even to a mere $100m/rev peak sales number. Since HEPZATO KIT will never do generic, the NPV of any revenue-stream is orders of magnitude higher than the current valuation. Never mind the platform value and use in other indications.” We’d suggest that that’s very hopeful indeed. But that is the possible level of excitement here.
As ever, FDA approval does make a massive change in the valuation of a development stage pharma like Delcath.
