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,


  1. I saw those 9000 deep ITM calls trade in the morning and was completely puzzled as to why someone would buy Jan calls this late in the game. That conspiracy theory is not just a theory IMO. Total market manipulation and a total disgrace.

  2. My take on Bream. The stock ran faster than they expected so they and their top clients took profits and now they need to talk it down so they can buy it back at lower levels, preferably before data release.