On May 10, 2018 Delcath Systems, Inc. (OTCQB:DCTHD), an interventional oncology Company focused on the treatment of primary and metastatic liver cancers, reported financial results for the quarter ended March 31, 2018 (Press release, Delcath Systems, MAY 10, 2018, View Source;p=RssLanding&cat=news&id=2348432 [SID1234526476]).
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Highlights from the first quarter of 2018 and recent weeks include:
Revenue from European sales for the quarter was $0.7 million;
Completed a $5.0 million capital raise in February 2018;
Announced that the independent Data Safety Monitoring Board (DSMB) of the Phase 3 FOCUS clinical trial has again recommended that the study continue without modification;
Announced the opening of the ALIGN registration trial for the treatment of Intrahepatic Cholangiocarcinoma (ICC);
Modified the Special Protocol Agreement (SPA) with the U.S. Food and Drug Administration (FDA) for the Company’s Phase 3 clinical trial of Melphalan Hydrochloride for Injection for use with the Delcath Hepatic Delivery System (Melphalan/HDS) to treat patients with hepatic dominant ocular melanoma (OM);
CHEMOSAT featured in main stage training presentation at European Conference on Interventional Oncology;
Reported the 500th CHEMOSAT treatment in Europe;
Announced results from a multi-center analysis of Delcath’s Percutaneous Hepatic Perfusion (PHP) therapy in the peer-reviewed Journal of Surgical Oncology; largest data set outside of clinical trial showed manageable toxicity and overall median overall survival of 15.3 months; and
Secured a commercial supply of melphalan hydrochloride for injection through an agreement with Tillomed Laboratories
Management Commentary
"Our focus continues to be on resolving the cash constraints and other restrictions related to our capital structure," said Jennifer K. Simpson, Ph.D., MSN, CRNP President and CEO of Delcath. "These limitations have necessitated the series of transactions we completed in second half of 2017 and the early weeks of 2018, permitting us to exit our 2016 Convertible Note, raise additional capital, invest in our clinical development program, and advance our commercialization efforts for CHEMOSAT in Europe. We continue to work to resolve the remaining issues and secure new equity financing in order to execute our plan and create value for our shareholders."
"Despite cash constraints, revenues for the first quarter of 2018 were $0.7 million, consistent with the prior year quarter and reflecting steady adoption of CHEMOSAT in our core European markets. During the quarter, we announced a commercial supply agreement with Tillomed Laboratories for the supply of melphalan hydrochloride. This agreement provides us with firm control over our melphalan supply chain in Europe and, over time, will provide economies of scale. The supply agreement with Tillomed also gives Delcath access to the drug dossier for melphalan hydrochloride, an important asset that potentially provides a drug approval pathway with the European Medicines Agency (EMA) in Europe. As many of the cancers of the liver we are treating with CHEMOSAT are orphan indications in the United States, a Marketing Authorization Application (MAA) approval by the EMA for CHEMOSAT could potentially provide added market protection for these indications in Europe.
"Regarding our FOCUS Phase 3 Trial, we recently announced that the independent Data Safety Monitoring Board (DSMB) has completed another review of safety data for treated patients in the trial, and has again recommended that the study continue without modification. Enrollment in this trial remains slower than projected, and our ability to take proactive steps to support enrollment continues to be limited by the cash constraints we have been operating under. We continue to rollout the SPA protocol modification we announced in January to participating centers, and hope to accelerate enrollment in 2018 once cash constraints are alleviated. Any impact on enrollment from the SPA modification is not expected to be immediate, and it is unlikely that enrollment for this trial will be completed in time to submit an NDA to the FDA in 2019. We plan to update our enrollment projections in the second half of this year.
"On May 7, 2018 we announced the initiation our registration trial of Melphalan Hydrochloride for Injection for use with the Delcath Hepatic Delivery System (Melphalan/HDS) to treat patients with intrahepatic cholangiocarcinoma (ICC). Called The ALIGN Trial, this trial will seek to enroll approximately 295 ICC patients at approximately 40 clinical sites in the U.S. and Europe. The trial is being conducted under a Special Protocol Assessment (SPA) agreement reached with the U.S. Food and Drug Administration (FDA) in March 2017. The ALIGN Trial is based on a strong efficacy signal observed in the ICC tumor type through our commercial experience with CHEMOSAT in Europe. The sequential design of the therapies under investigation in the trial will allow us to minimize capital investment requirements in 2018. We are also leveraging our existing network of trial sites from our FOCUS Phase 3 trial to rollout the trial protocol as efficiently as possible. In this orphan population where there exists a huge unmet need, this trial provides us with a second pathway to commercial drug approval in the United States, and if successful we believe will be an important value driver for the Company.
"Though the recent months have been financially difficult, we remain committed to advancing our clinical and commercial programs. We are continuously working to improve our ability to operate so we can realize the potential of PHP therapy and return value to our shareholders," concluded Dr. Simpson.
First Quarter 2018 Financial Results
Revenue for the three months ended March 31, 2018 was $0.7 million, a slight decrease from $0.74 million for the prior year period. Selling, general and administrative expenses were approximately $2.4 million, unchanged from the prior year quarter. Research and development expenses for the current quarter increased to $5.7 million from $2.3 million in the prior year quarter. Total operating expenses for the current quarter were $8.1 million compared with $4.7 million in the prior year quarter.
The Company recorded net income for the three months ended March 31, 2018, of $7.2 million, an increase of $18.5 million, or 163.4%, compared to a net loss of $11.3 million for the same period in 2017. This increase in net income is primarily due to an $8.3 million decrease in interest expense primarily related to the amortization of debt discounts related to convertible notes that were fully satisfied in 2017, and a $13.5 million increase in the change in the fair value of the warrant liability, both non-cash items. Additionally, there was a $3.3 million increase in operating expenses primarily related to increased investment in our clinical trial initiatives.
Balance Sheet Highlights
As of March 31, 2018, Delcath had cash and cash equivalents of $2.0 million, compared with $4.0 million as of December 31, 2017. During the first quarter, the Company used $6.4 million of cash to fund operating activities.
In February 2018, the Company completed the sale of 424,000 shares of its common stock and the issuance of warrants to purchase 1.0 million common shares (the "February 2018 Warrants") pursuant to a placement agent agreement. The Company received net proceeds of $4.6 million, with cash proceeds after related expenses from this transaction of $4.3 million.
On April 9, 2018 the Company announced that shareholders approved the provisions of the Company’s Consent Solicitation filed with the Securities Exchange Commission (SEC) on February, 26, 2018. By a vote of 54.3%, shareholders as of the record date of February 9, 2018 approved the Company’s proposals to amend its certificate of incorporation to increase its authorized shares of common stock from 500,000,000 to 1,000,000,000 (the Authorized Share Increase), and, by a vote of 52.8%, to effect a reverse stock split of the Company’s common stock at a range of 1-for-100 to 1-for-500 (the Reverse Stock Split Authorization). We effected our increase in authorized shares on April 21, 2018 and our 1-for-500 reverse stock split on May 2, 2018.
Delcath believes it has sufficient capital and access to committed capital to fund its operating activities through May of 2018.