A Biotech Stock Up 78% This Month; Will It Soar Come January?

With the weak third-quarter earnings season pretty much behind us, it’s time for penny stock investors to look for areas of growth. One sector that has been outpacing the overall markets has been the biotechnology sector, up 60.6% for the year and 46.0% year-to-date.

One penny stock biotech company that has been performing well since June and generating buzz is Celsion Corporation (NASDAQ/CLSN). Celsion is a development-stage penny stock whose lead product is “ThermoDox,” a heat-activated cancer therapy that combines a common oncology drug, doxorubicin, with a heat-activated liposome, which may help deliver and release the drug more accurately. The drug is being studied as a treatment for liver cancer and breast cancer.

The penny stock’s pivotal phase III trial (the “HEAT Study”) was designated as a priority trial for liver cancer by the National Institutes of Health and received fast track designation from the U.S. Food and Drug Administration (FDA) and orphan drug designation in both the U.S. and Europe. Results from this trial are expected in January 2013.

Primary liver cancer, also known as hepatocellular carcinoma, or HCC, is one of the most common and deadly forms of cancer. It is estimated that up to 90% of liver cancer patients will die within five years of diagnosis. Although the most effective treatment for liver cancer is surgical resection of the tumor, 80% to 90% of patients are ineligible for surgery due to the progression of their tumors. (Source: “Celsion’s lead indication is in Primary Liver Cancer,” Celsion Corporation web site, last accessed November 26, 2012.)

ThermoDox is also under phase II clinical trial for colorectal liver metastasis, and phase II clinical trial for treatment of recurrent chest wall breast cancer.

On November 12, Celsion announced its third-quarter results and a business update. The penny stock’s third-quarter loss improved to $6.0 million, or $0.18 per share, from a loss of $6.4 million, or $0.25 per share, in the same period last year. The penny stock’s year-to-date net loss came in at $18.3 million, or $0.55 per share, compared to $17.1 million, or $0.72 per share, in the same period of 2011. (Source: “Celsion Corporation Reports Third Quarter 2012 Financial Results and Business Update,” Celsion Corporation press release, November 12, 2012.)

Chart courtesy of www.StockCharts.com

Celsion’s share price has been bullish since late June, on the heels of encouraging ThermoDox updates and speculation. In September, the penny stock broke through a three-year resistance level near $5.50, and currently remains bullish, trading above $7.50.

Since Celsion is in the development stage, it is not generating any revenues and won’t unless its flagship product gets FDA approval. That said, Celsion has $22.0 million in cash, which is more than enough to take it to January 2013, when data from the penny stock’s ThermoDox phase III study is released.

If the data are positive, Celsion should have no issues getting further financing. On the other hand, if the data are less than positive, the penny stock has enough resources to continue operations and look for additional funding.

In a November 9, 2012 update, company President and CEO Michael H. Tardugno said, “We enter this transformative period from a position of financial strength, having taken ThermoDox through to pivotal data while maintaining full worldwide rights outside of Japan, a minimal number of shares outstanding and a strong balance sheet.” (Source: “Celsion Announces Phase III HEAT Study of Thermodox,” Celsion Corporation press release, November 9, 2012.)

Tardugno added, “Consistent with our previous guidance, we have no plans to raise additional capital before disclosing top line data from the HEAT Study which, if positive, will vastly expand the company’s strategic and financing options.”

In conjunction with the penny stock’s third-quarter results, Tardugno noted, “With a positive outcome, ThermoDox will become the most important 1st line therapy for patients with non-resectable disease. The positive implications of this study, for patients and their families, the healthcare community, our investors and employees, cannot be overestimated.” (Source: “Celsion Corporation Reports Third Quarter 2012 Financial Results and Business Update,” Celsion Corporation press release, November 12, 2012.)

While the company says it cannot comment on its phase III HEAT Study data, Celsion President and CEO Tardungo seems quite optimistic. Investors appear equally as hopeful—sending the stock to a three-year high. The next 60 to 90 days will be a very important period for Celsion. Newcomers can either take a wait-and-see approach or follow closely.