NEW YORK (
caught the attention of biotech analysts after recently reporting positive top-line data for its drug/device system that clears tumors from the liver. Detailed results will be delivered on June 5 at the
Delcath developed the PHP System, a minimally-invasive technique which provides a high dose concentration of chemotherapy for a patient's malignancy while maintaining an average dose systematically. Several analysts rate the stock a buy with target prices ranging from $16 to $21. The analysts expect that details from the study will point to a faster revenue ramp.
Delcath CEO Talks ASCO
"Delcath could be seen as becoming one of the few device companies in the U.S. with a multi-hundred million dollar product opportunity," wrote Wedbush analyst Greg Wade, who has the highest target price of $21.
However, every medical device company comes with risks. Brooks West of Craig-Hallum Capital Group outlines the risks very clearly. Some come with the standard regulatory approval process challenges, but the partnership risk can't be overlooked. Delcath is reliant on third-party distributors
a newly assembled direct sales force to sell a new technology requiring doctor education and adoption. Then there are the reimbursement issues at a time of major health care reform.
had a chance to speak with CEO Eamonn Hobbs to ask about these upcoming risks and challenges.
Phase III trial results for Delcath's PHP were very promising, what's next?
: Well what's next for Delcath is the ASCO meeting -- the American Society of Clinical Oncology in Chicago -- and our complete phase III clinical trial results will be presented on June 5 at 3:30 p.m. by the lead investigator, Dr. James Pingpank.
What is the market potential for this delivery system?
Well, this really is a paradigm-changing technology for chemotherapy delivery and in that regard, the market potential is measured in the billions of dollars. The on-label indication for melanoma metastases to the liver by itself in the United States would equate to a market of more than $745 million on an annual basis. That's just the U.S. That's just on-label. If you factor in the potential for off-label use, which is not uncommon in oncology, the market skyrockets to $5.6 billion annually in the U.S. and again, only 10% of the liver cancer in the world is in the U.S., so the market is quite large.
What is the pricing for this delivery?
The chemo saturation system is expected in our models to have an average selling price of approximately $20,000 per procedure. In our Phase III clinical trial we had a little over three procedures on average per patient. In our models we've calculated a potential market based on a conservative two-and-a-half procedures per patient.
What concern do you have about reimbursement? We're not sure how generous insurers are going to feel.
We're very optimistic about reimbursement in that the clinical sites -- twelve clinical sites in our phase 3 clinical trial -- have communicated to us that they believe this procedure will be adequately reimbursed with existing codes. And we are, of course, prepared to get additional discreet codes if necessary.
You mentioned that the U.S. has about 10% of the liver cancer market. What about the Asian market? You've clearly made some attempts to go into that area.
Yes, we've had very active negotiations going on with potential strategic partners -- large pharma companies in China, Korea, Japan and Taiwan. The majority of the liver disease in the world is located in Asia for various reasons. So the Asian markets are extremely interested in our technology. We announced our first strategic partnership -- with Chi-Fu trading company of Taiwan. That deal is indicative of what we're trying to do in the bigger Asian market as well.
That deal involved an up-front payment of $1 million, five-year take or pay of $10 million to Delcath and a contractual commitment from Chi-Fu to invest in it. It also includes an additional two indications via clinical trials in Taiwan, so that translates into starting a primary liver cancer trial in Taiwan by the end of this year and early next year.
So, if everything goes well on June 5 and you get lots of promising market information, what is your regulatory approval process?
Our regulatory process is regulated solely as a drug. Our system is comprised of a drug with melphalan; that's going to be labeled with a discreet indication for melanoma mets to the liver -- a new indication for it. The regulatory process in the U.S. is an NDA (a new drug application), a 505b2. We anticipate in the U.S. to complete our filing of the NDA in the late thrid quarter -- early fourth quarter -- and we would anticipate approval in mid-2011. Outside the U.S., it depends on the country. We're a class three medical device and a drug in Europe. In Asian markets it varies by country as well.
Truly the most gratifying aspect of this technology is we believe it's going to help millions of cancer patients have a much more beneficial treatment and hopefully much better outcomes.
--reported by Debra Borchardt in New York
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