Saturday, February 2, 2013

Debate Comes to a Swift End: Bears Win, ThermoDox Fails in Phase III HEAT Study

After months of anticipation (years for many of us longs), and a January 2013 that brought with it many nail-biting days of anticipation and some crazy trading days and events (Brean downgrade, Hisun developments), earlier this week Celsion reported that ThermoDox failed to meet the primary endpoint of achieving at least a 33% improvement in progression-free survival (PFS). Of course, it's a very unfortunate outcome for the company, and one, that in my opinion, puts the nail in the coffin for Celsion. I was clearly wrong in my bull thesis here, though I did do the very best I personally could possibly do in terms of research and highlighting risks. It just was not enough to compel me to take a net bearish position, and clearly, I was wrong here. 

We heard on the conference call an extremely depressed, downbeat management team. We know from CEO Mike Tardugno that the trial "wasn't close", though we did hear that the reported hazard ratio for the trial was "below 1.0", but they did not give us anything tangible (note, these had to be pried from management during the Q&A). A "modest benefit" was seen, per the CEO, and my guess is that the HR was around .90, falling way short of the 33% hurdle to meet the primary endpoint goal in progression-free survival. Management said the control arm did better than their expectations, and after I pressed them during the Q&A to say by how much, the approximate (unofficial, please note) median PFS of the control arm was ~20% better than the expected 12 months, or around 14.4 months. Let’s say ThermoDox did 10% better, that places the treatment arm at around 15.8 months, absolutely dismal results. Many of you recall my "#15v25" prediction for the HEAT trial. It appears I was actually near spot on with the "15" side of the equation given what we know about the control arm, I only wish for the sake of patients, investors, and company management, the 25 component came true. I have noticed that some media outlets are reporting that the control arm did better than the ThermoDox arm, which, in fairness, is simply not true. Still, it's a moot point altogether since ThermoDox failed to show any meaningful clinical benefit, and in fact, I question why this trial was not halted for futility at the first interim analysis back in November of 2011. Recall CEO Tardugno mentioning the chances of that were "de minimis" at the time, how on earth could he have known that at the time with such certainty if the trial turned out to be an utter failure?

One might ask what next for Celsion, perhaps there are subsets of data worth exploring, etc? To be brutally honest, as my friend @trondhildahl mentioned as well, I heard absolutely nothing on the call to make me think there may be any glimpse of hope in the HEAT dataset. Per my question on the call, we know distant progression, the biggest threat facing the study in my opinion as I have said 100’s of times, was higher than “expected”, though we never knew what they expected for distant or local progression. If local progression, at least, looked good for the ThermoDox arm, management would have volunteered that data, I have no doubt. Local, distant, even across both 3-5cm and 5-7cm groups, probably looked poor. Still, the "geek" in me is curious to see the full data set to see the actual complete ablation rates, adverse events, etc., and I hope that data is made available as soon as possible.

Why the trial likely failed (hat being tipped to bears):
  1. Doxorubicin has always had modest response rates in HCC, despite being widely used in TACE and deb-TACE regimens. It was hypothesized by bulls that given sufficient concentrations and synergies with heat, efficacy could be significantly enhanced.  We now know this did not happen, at least in the adjuvant setting, for tx naive HCC patients with 3-7cm lesions it didn't. 
  2. Doxorubicin concentrations may not have been enough and sustained for an ample amount of time, undermining the above
  3. Distant progression jeopardized the trial, and from the CEO's comments on the call, I have no doubts that was a primary factor for the trial failing. This was probably due to ThermoDox not having a potent enough of a local impact to prevent some of the distant metastases emanating from the original ablation site. 
In hindsight as well, SA author Quoth the Raven also does point out a few "tells" that longs did not interpret as caution. Firstly, the supposed "bear raid" and the downgrade by Brean, secondly the Cowen conference cancellation which Jeff Church told me was due to board meeting conflict (that might be true still, who knows), thirdly results being delayed until the last day, and the Feuerstein-Ratain rule, which was discussed frequently leading up to the results. The ever increasing short interest, high cost to borrow, and seemingly absent institutional interest were also some additional tells that I will tack on to the list. Oh, the beauty of hindsight.

So, what next for Celsion? I told many of you that I would be as objective as possible, so here are my thoughts:
  1. ABLATE trial is very unlikely to move forward. That trial has local progression at 1 year as the primary endpoint, but from what I heard on the call, ThermoDox likely had very little effect on local progression.
  2. RCW Dignity Phase II study can be moved forward, but unless earlier line patients are selected, this will not complete enrollment for quite some time, perhaps as late as mid-2014. Even then, moving earlier line is no guarantee, since we have no evidence that ThermoDox works in early line RCW patients (for example, as the first chemo or prior to radiation). 
  3. HIFU bone metastases Phase II study with Philips may move forward (and was expected to enroll first patient in early 2013 from prior guidance), but even if this moves forward and shows benefit, HIFU itself still has a huge adoption curve, and the commercial prospects of this indication would be not be realized for quite some time. 
  4. LTSL platform is in jeopardy altogether given the above, particularly since we know from recent presentations that improvements are being made very rapidly in terms of other heat sensitive liposomes. For example, we know that while early stage still, some liposomes are being developed that are much more stable than ThermoDox, and release doxorubicin contents more efficiently. The ideal liposome would be 100% stable at body temperature (which ThermoDox is not), and release contents via some form of trigger, be it heat or some other source such as sound. Point is, the platform altogether might be in jeopardy given the aforementioned. 
  5. I see bankruptcy in the very near future Celsion, and they would be wise to sell off rights to LTSL docetaxel and carboplatin for whatever they can get for it. HEAT was validation for the entire platform, and that failed miserably. Remember, it is not like they have that much time left from a patent perspective either (2021), and the above mentioned docetaxel and carboplatin LTSL products are still in preclinical stages.
The only wildcard that can possibly save Celsion as they stutter forward is if overall survival data somehow shows a significant benefit for the ThermoDox arm, which is highly, highly unlikely. That said, much to my amazement, the company questioned whether or not they would even follow patients in the HEAT study for overall survival, they alluded to that both in the PR and on the call. Though yes, this would be an added "cost" for the company when they clearly will have cash issues in the very immediate future, I have to say I was quite infuriated by this, as they owe it the medical community to follow these patients and report robust data from the largest study ever conducted in intermediate HCC using RFA. There is an overall lack of data in this space, and the least, the very least they could do to assist future research is to get crystal clear data from this study to pass on to the medical community. 

Overall, I am obviously disappointed by the HEAT outcome. But what I am proud of, from a personal growth perspective, is the experience this gave me. What started out as an investment very quickly turned into so much more, not a love story with the company, but a personal mission to cover the company and it's developments as unbiased and objectively as I could, while sharing everything I came across with the public. In that journey, I came across and met a diverse group of people, from highly respected journalists, company management (whom I have spoken to and interacted with many times), highly experienced traders, and made many friends along the road. I remained an open book in this process, never was anonymous, and completely transparent. I also went out of my way to point out risks, I mentioned that repeatedly to people, including some family and friends who bought CLSN as well. In the minutes prior to the closing bell on January 30th, I recall urging people to assess their risk tolerance and take something off the table if they were not comfortable holding. I can hold my head up knowing that I tried, and did my best. I said before this was always about the "process", and I wouldn't have changed a thing about how the story was covered. 

I guess this is how the story ends, and you can expect me to end coverage of Celsion from this day moving forward. Regardless of the outcome, I was going to move all my funds back to my Vanguard indices, so from a personal investing perspective, I am not going to be playing with biotechs anymore. That said, I may, MAY, continue to blog about other companies, if a compelling story comes along, and if I have the time and energy for it. I wish you all the very best, and want to thank each and every one of you who took the time to visit my blog and interacted with me in a number of different forums. I am just humbled by the amount of support and visits my blog received during my coverage, and for that, I thank you all greatly. Please do stay in touch. 


Thursday, January 17, 2013

[UPDATED] Brean Murray Timing Suspect, Logic Flawed, as New Downgrade and $1 PT Causes Further Drama

I guess nothing about this upcoming Phase III data release for Celsion will be "conventional", far from it. Before moving on to the Brean news, I want to make a couple comments with respect to the antics from yesterday. I am not a Wall Street person per se, and perhaps I am a bit young and naive, but I hope that ALL BULLS AND BEARS agree with me in saying that what we saw yesterday as far as trading activity for Celsion was highly suspicious, and smells of blatant manipulation. Regardless of the outcome of the trial, for whatever it's worth, I personally call on the SEC to investigate thoroughly what happened yesterday. After years of research, I hate to see the most pivotal outcome in this company's history get tarnished with traders conducting blatant manipulation. Regardless of what side you are on, I hope you agree with my views here, as we have seen this countless times in biotech ahead of binary events. One interesting note on ihub from a poster speculated on what may have happened yesterday, it is worth a read.

With yesterday's antics behind us, today we woke up to a downgrade from Brean Murray's Jon Aschoff, dropping his target price from $7 to $1. While I do not have access to the report, Adam Feuerstein reported the news earlier this AM and included the verbiage from Jon Aschoff. I tweeted earlier as well that the "gloves are off" at this juncture, so let me be a bit blunt here:

  1. The sheer timing of this "downgrade" is highly, highly suspect given HEAT data being just around the corner. Note that I do NOT view the Roth report issued yesterday in the same vain, since that report was primarily meant to be "coverage" of what happened during the irregular trading yesterday, not necessarily a sudden shift in their fundamental view of Celsion (which, incidentally, with a $10 price target, I think should be re-thought). Adam Feuerstein himself tweeted earlier as well that Aschoff's timing was "stupid", despite Adam's own belief ThermoDox will fail. I suppose this is nothing new for Jon Aschoff, as he had a similar situation pan out with Dendreon a few years ago. The bottom line is, for Aschoff to have a sudden change in heart, fundamentally, regarding Celsion, with data near is very suspect.
  2. Aschoff's piece is missing facts, and his logic is highly questionable. Let me preface this by saying even the staunchest of bears, and you ALL know I have sought and "battled" many of them over the years, believe that for ThermoDox to hit it's accelerated endpoint in progression-free survival, itself, would be a HUGE accomplishment. In fact, I have said it before as well, PFS is almost an "unfair" endpoint for ThermoDox, yet one in which I think ThermoDox will handily show clinical benefit by reducing most local and some distant progressions. No bear I have come across believes there would be a sell-off on news of positive PFS data, to the contrary, the consensus is a 100-200% gain from today's current market cap. PFS aside, I have discussed before, and the company and KOLs have confirmed numerous times, patients in the HEAT trial will not only potentially receive up to 2 ablations to achieve an initial complete ablation, but will likely receive multiple RFA treatments post-progression, according to their randomized protocol.

    So, all that aside, let's read verbatim what he wrote, and my comments are in [red brackets]:

    "We are downgrading Celsion to Sell from Buy due to robust share price strength prior to a highly binary event in 1Q13 that, in our view, will define whether or not the company remains viable thereafter. Recent share price strength places the valuation at a level where we expect more downside from negative results than sustainable upside from positive results [so, if trial succeeds, they don't see any upside, and if trial fails, magnitude on downside is much larger than increase if positive. FINE, but read carefully, he is generically speaking about either outcome, not saying one way or another which will happen]. We question the sustainability of a positive valuation inflection upon the potential showing of a progression free survival (PFS) benefit due to the need to show at least a clinically meaningful overall survival (OS) benefit thereafter, which after only a single administration of one active therapy (RFA) versus two active therapies (RFA and ThermoDox), appears more difficult than benefiting PFS, given the introduction of any additional therapy between progression and death [Again, factually incorrect, he assumes patients won't receive any additional doses of ThermoDox post progression, which is simply untrue. Even if they don't, and progression times are significantly extended with even one dose of ThermoDox, PFS we know is already a strong surrogate for survival in HCC]. Despite the HEAT trial's SPA, meeting the PFS primary endpoint is not a shoe-in for approval without at the very least a strong numerical OS advantage for those treated with ThermoDox [FINE, once again. But OS is a secondary endpoint, I believe Aschoff is forgetting that PFS is an accelerated endpoint here. The big problem here, for his own sake, is his implicit assumption that PFS will be positive, and once again, even the "bearest" of bears believe hitting PFS itself would be both meaningful clinically, and catapult Celsion from a valuation perspective. And furthermore, Aschoff KNEW OF THE TRIAL PROTOCOL upon initiating coverage, didn't he? Why does he suddenly believe that PFS is a big issue, when Aschoff never raised this before in his earlier report from Feb 16, 2012?] ."
The bottom line is, if you believe a positive PFS outcome, which he implicitly assumes, warrants a $1 price target, then by all means listen to Aschoff. 

As my friend @biorunup tweeted earlier today as well, "data is the great equalizer", and I agree, data will end this debate once and for all. Best of luck to you.


Just to give you some more color highlighting why Brean Murray's report today was extremely suspect and a demonstration of very questionable logic/rationale, consider the following direct quotes from his first report, which I linked above. Now, call me crazy, but one would think to change one's opinion on something, in general, requires one to re-visit the original crux of one's opinion, right? What is particularly baffling to me is that nothing in his report today, not even close, conflicted with these primary drivers for his original bull thesis. MOST BAFFLING to me is that his concerns over PFS as the HEAT primary endpoint, the crux of his argument today, was never once mentioned, not even as a minor risk, in his original report. That, my dear friends, tells me something is terribly wrong about today's report, because a study's primary endpoint would be one of the very first things anybody conducting DD would give thought to, especially a supposed "analyst". I do not buy that it suddenly dawned on him to look askance on PFS, literally days before top-line data. Let's have a look at some other glaring inconsistencies not addressed in today's report:

-"The Phase 3 ThermoDox trial should read out in 4Q12, and we are expecting a positive PFS outcome."
Question--> Has that changed from today's new downgrade? No, it's actually reinforced, date aside. 

-"We believe ThermoDox will be broadly adopted once it's approved."
Question--> Has that changed from today's new downgrade? No

-"We believe the potential end-markets for ThermoDox use are significant."
Question--> Has that changed from today's new downgrade? No

-"Celsion is carefully monitoring the Phase 3 ThermoDox trial to avoid common pitfalls."
Question--> Has that changed from today's new downgrade? No

-"We further believe that a positive PFS result would likely rapidly attract an ex-US partner"
Question--> Has that changed from today's new downgrade? No, and this is my favorite one. I suppose PFS is valuable enough to attract an ex-US partner, yet, that same Ex-US partner, with much greater understanding of the regulatory environment, would do so knowing regulatory agencies would want OS rather than PFS for approval? Nevermind that such an Ex-US partnership itself would be another major catalyst for the company's valuation. There are so many things just simply wrong with the logic and rationale for a $1 PT here it is hard to believe.

Good luck to all longs,

Wednesday, January 16, 2013

"Flash Crash" Causes Concern for Celsion Investors, Roth Issues New Report

I did not anticipate having any new blog posts until final data, but today's actions prompted me to give my blog viewers a quick update on a couple fronts.
  1. A T7 halt was issued when shares of Celsion plummeted to an intraday low of 6.17. Flyonthewall issued this brief note as well. I reached out to management directly asking what had happened, and the response from Greg Weaver, Celsion CFO, was "We have no further information right now, and are in contact with nasdaq and trading desks to sort it out."  Celsion CEO also subsequently provided a brief, general follow-up saying "fundamentals here are strong and have not changed...Company remains on track." Nobody can be sure of what happened (leak, bear raid, whatever), but the responses from Celsion management do give me some reassurance.
  2. Obviously lost in this news, Roth Capital issued a new report as well today, and the link is provided below. From the report, the author states: 
  3. "In short, management has 
  4. indicated that all is status quo in finalizing the HEAT data readout and that 
  5. nothing has leaked out
  6. Nasdaq has indicated its belief that the intraday drop was driven primarily by retail and some short interest pressure coming through. Recall that the stock performance has been strong and sustainable as of late as investors have been making bets on HEAT. Other feedback we received from investors was that if it was a leak or institutional selling, the negative stock pressure would have been sustained."

 I remain extremely confident in a positive HEAT outcome, despite the craziness we observed today. Fingers are crossed, wishing management, shareholders, and most importantly, potential future patients, the best of luck as we near data release.