We are downgrading Celsion to Sell from Buy due to robust share price strength prior to a highly binary eventin 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. 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. 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.
Aschoff's price target for Celsion was reduced to $1 per share from $7 per share.
Celsion shares closed Wednesday at $8.10 and have doubled in value since last November.
The results from the phase III study of Thermodox in liver cancer are expected in January, which has investors on high stress awaiting the company's announcement. During intraday trading Wednesday, Celsion shares plunged 32 percent then rebounded just as quickly. The stock closed the day down 13 percent on extraordinarily high volume of 8 million shares.
Roth Capital analyst Joe Pantginis, who has a buy rating on Celsion, released a research note following Wednesday's "bear raid":
Celsion saw a precipitous intraday drop (down>30%) today, only to be followed by a significant rebound. While this trading activity takes us back to the intraday "bear raid" seen by Dendreon (DNDN-Neutral-$6.65) just ahead of its Phase III IMPACT data, we believe things are different here. We spoke to management as well as Nasdaq in assessing today's drama. In short, management has indicated that all is status quo in finalizing the HEAT data readout and that nothing has leaked out. 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. HEAT has been run at 79 sites in 11 countries and the "clinical quality dashboard" is set to ensure that any questions regarding patient data are resolved back at the local site prior to database lockup, data analysis and submission to the DMC.