On November 14, 2017 Delcath Systems, Inc. (OTCQB:DCTHD), an interventional oncology Company focused on the treatment of primary and metastatic liver cancers, reported financial results for the three and nine months ended September 30, 2017 (Press release, Delcath Systems, NOV 14, 2017, View Source;p=RssLanding&cat=news&id=2317164 [SID1234522086]).
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Highlights from the third quarter of 2017 and recent weeks include:
Revenue for the third quarter of 2017 increased 75% to $0.7 million from $0.4 million in the prior-year quarter;
Revenue for the first nine months of 2017 increased 53% to $2.0 million from $1.3 million in the prior-year period;
Medical University of Hannover achieved its 100th CHEMOSAT treatment milestone; over 450 commercial CHEMOSAT procedures have been performed in Europe;
Positive results from a single institution study of CHEMOSAT filtration efficiency were presented at 2017 CIRSE annual meeting in September; and
Reverse stock split effected at ratio of 1:350 on November 6, 2017.
Management Commentary
"During our third quarter, we focused on resolving the cash constraints and other restrictions related to our authorized shares limit, which necessitated the reverse stock split we effected on November 6, 2017. The authorized share limit prevented the Company from accessing the restricted cash otherwise available under our 2016 convertible notes. With the ability to issues shares now restored, we are able to access the balance of the restricted cash and begin exploring opportunities for new equity financing necessary to execute on our Clinical Development Program (CDP) and European commercialization," said Jennifer K. Simpson, Ph.D., MSN, CRNP President and CEO of Delcath.
"Despite the cash constraints, revenues for the third quarter of 2017 increased 75% over the prior year quarter, continuing the steady growth in our core European markets. This growth was supported by the establishment of ZE diagnostic-related (DRG) reimbursement for CHEMOSAT in Germany last year, which we are leveraging to obtain market access and reimbursement in other regions such as the United Kingdom and the Netherlands. In the Netherlands, Dutch Health Authorities have included CHEMOSAT treatment in their published guidelines for ocular melanoma liver metastases, an important step toward eventual reimbursement coverage of CHEMOSAT in the Dutch market. During the quarter, Medical University of Hannover performed their 100th treatment since beginning CHEMOSAT procedures in 2014, the second of our Europe centers to have achieved this milestone. Since launching CHEMOSAT in Europe, over 450 commercial CHEMOSAT procedures have been performed.
"In our Clinical Development Program (CDP), our primary focus continues to be on our FOCUS Phase 3 clinical trial of Melphalan/HDS in hepatic dominant ocular melanoma (the FOCUS trial). Enrollment in this trial has been proceeding more slowly than anticipated, and cash constraints during the quarter limited our ability to take steps to accelerate enrollment. With the reverse split effected we are exploring steps to accelerate enrollment, and will seek to add new trial sites in both the U.S. and Europe once new equity financing is secured. We still expect to conduct an interim safety analysis by the end of this year.
"For our pivotal trial in intrahepatic cholangiocarcinoma (ICC), we continue to work with potential trial sites with a view to initiating enrollment when financial resources permit. Our ICC pivotal trial is based on the prior work done in our Phase 2 trial program in hepatocellular carcinoma (HCC) and ICC, which had the objective of identifying an efficacy signal worthy of further clinical investigation. This objective was met by the retrospective data collection performed by European investigators last year, which informed our development path for ICC. With the Phase 2 trial program goals now met, we have closed enrollment in the Phase 2 trials to devote available resources to the FOCUS Trial and the ICC pivotal trial.
"Though the recent months have been financially difficult, we remain committed to advancing the clinical programs for our innovative Melphalan/HDS as well as to our commercialization efforts for CHEMOSAT in Europe. We are continuously working to advance our ability to operate so we can advance these important programs to increase value to our shareholders," concluded Dr. Simpson.
Three Month Financial Results
Revenue for the third quarter of 2017 was $0.7 million, an increase of 75% from $0.4 million for the third quarter of 2016. Selling, general and administrative expenses increased modestly to $2.9 million in the 2017 third quarter from $2.4 million in the prior-year third quarter. Research and development expenses for the third quarter of 2017 declined slightly to $2.3 million from $2.7 million in the prior-year quarter. Total operating expenses for the current quarter were $5.1 million compared with $5.0 million in the prior-year quarter.
The Company reported a net loss for the 2017 third quarter of $12.6 million, or $9.36 per share based on 1.4 million weighted average common shares outstanding on a split adjusted basis. This compares with a net loss in the prior-year period of $1.0 million, or $230.99 per share based on 4,349 weighted average common shares outstanding on a split adjusted basis. This increase in net loss is primarily due to an $8.7 million change in the fair value of the warrant liability and a $3.0 million loss related to two transactions to settle convertible note debt, both non-cash items.
Nine Month Financial Results
Revenue for the first nine months of 2017 was $2.0 million, an increase of 53% from $1.3 million for the first nine months of 2016. Selling, general and administrative expenses in the first nine months 2017 were approximately $7.8 million compared with $7.0 million in the prior-year period. Research and development expenses for the first nine months of 2017 increased to $7.1 million from $6.0 million in the first nine months of 2016. Total operating expenses for the first nine months of 2017 were approximately $15.0 million compared with $13.0 million in the prior-year quarter.
The Company recorded a net loss of $25.8 million for the first nine months of 2017, or $34.99 per share based on 754,421 weighted average common shares outstanding on a split adjusted basis. This compares with a net loss for the first nine months of 2016 of $9.5 million, or $2,232.30 per share based on 4,249 weighted average common shares outstanding on a split adjusted basis. The increase in net loss is due to an approximately $13.7 million increase in interest expense primarily related to the amortization of debt discounts and a $3.0 million loss related to two transactions to settle convertible note debt, offset by a $9.6 million gain on the extinguishment of the June 2016 Series C Warrants, both non-cash items. Additionally, there was a $1.9 million increase in operating expenses and a $7.9 million change in the fair value of the warrant liability, a non-cash item, offset by a $0.5 million increase in gross profit.
Balance Sheet Highlights
As of September 30, 2017, Delcath had cash and cash equivalents of $2.5 million, compared with $4.4 million as of December 31, 2016. In addition, the Company had $8.3 million in restricted cash primarily related to the Convertible Notes issued in June 2016. During the nine months ended September 30, 2017, the Company used $11.7 million of cash to fund operating activities. Management believes that its capital resources are adequate to fund operating activities through January 2018.