Celsion and Oncothyreon

Celsion still is a good investment thesis.

If you have not heard, Oncothyreon had a failed trial this morning and had the share price cut by more than 50%. As a disclosure, I had no position in ONTY but was in it a couple years ago for the continue at the first interim. I do have a lot of friends and colleagues who were in it, some quite heavily, and they are hurting quite a bit this morning.

Celsion has had a number of people who are bullish because of models showing the trial “is running longer than it should, thus it must be doing well.” ONTY, as numerous trials have before this, should serve as a wake-up call to these investors. Fortunately, Celsion’s Thermodox has a plethora of features that allow me to be “watchfully bullish.”

For one, the method of action (MOA) is pretty clear.
Reviewing the concept in extremely basic language, Thermodox is the chemo doxorubicin, covered by a fatty layer. That fatty layer is engineered to be attracted to the “leaky” blood vessels that are found most prominently in tumors. So after Thermodox is infused into the patient, these entities congregate around tumors. When radio-frequency ablation (RFA) occurs, burning away the cancerous tissues, that fatty layers cracks open (it has been compared to a hexagonal soccer ball) and releases the doxorubicin, bathing the tumor and surrounding tissue in the chemotherapeutic agent.
Doxorubicin does two extra things germane to this process:
Its cell-killing activity is heightened by heat. Thus it’s even more effective than normal.
It lowers the temperature of the surrounding tissue. This means heat-activated ablation is more effective, especially in the margin areas that otherwise would not be completely ablated.

Importantly, both RFA and doxorubicin are known processes and drugs, with a familiarity by doctors and the FDA.

I question the models that show the trial is “going long.” We are actually on the schedule put out by management in the prior year. Enrollment took a heck of a lot longer than anyone initially thought. And HCC is a wide-open kind of cancer, where many issues interact and no patient can be said to be “average.” The size and number of tumors, where they are located, and general health (otherwise to the cancer!) all have a lot to do with their prognosis. While generally speaking the median progression-free survival (PFS) should be around 12 months for the RFA-only group in the trial, the clinical sites are at some of the most skilled RFA-practitioners in the world. Patients who are in clinical trials tend to have better outcomes, due partially to the placebo effect, to the improved follow-up care and also simply by the desire to live as evidenced by being willing to enter a clinical trial. I will not be surprised to see PFS for the placebo arm come in higher than 12 months.

The Japanese firm Yakult partnered with Celsion a couple years ago, and before partnering you can be sure they got a peek at the preclinical and other available Thermodox data. At the beginning of 2011 Yakult elected to pay an extra couple million dollars upfront in order to receive a lower-than agreed royalty rate going forward. I cannot imagine how that can be spun as anything but positive. Philips Healthcare has partnered with us using their high-frequency ultrasound (HIFU) technology at the heating mechanism in lieu of RFA. They are paying trial costs, which is a reasonable (and bullish) commitment, also having seen private company data. I think it fair to propose that preclinical and ph1 data are reasonably strong.

The most “squishy” factor to consider is the insider buying. Several officers and directors have recently bought shares on the open market or exercised options or warrants. As a reminder, this takes real money, either straight up or as “income” defined by the IRS, and so it is coming out of these folks’ disposable income. As the old saw goes, insiders can sell for many reasons, but there is only one reason for them to buy.
Alongside that, we need to look at the company’s refusal to do a financing prior to data, and in fact their reiterated commitment NOT to do so very recently. This is pretty much unheard of, and very bullish. Let me be explicit here – the insider buying and no-raise factors are bullish but these people do NOT have much more insight into the trial than investors do. They do not have unblinded info from the interim look, they don’t get “winks and nudges” from the Data Monitoring Committee (DMC), and they cannot trade if they did know such things. But they are the closest to the data and such actions should at least be acknowledged.

In sum, I feel Celsion at a sub $300M market cap is undervalued and eminently tradable. I think the HEAT trial has a very reasonable chance of success and have a 2-month target price of $20.

Disclosure and disclaimer:
I own shares and option of Celsion at the time of this writing and while my positions may change, I have no intention of doing so within three days of this article. My own resources, risk tolerance, and personal situation have been taken into consideration for any trades mentioned and should not be used as a basis for someone else's trades. Stocks may lose value and this is not recommendation to buy or sell this particular issue.
This is presented for educational and informational purposes only, and should not be construed as personalized legal, tax, investment, or financial advice.

Arena wins approval

The FDA, as I expected, approve Arena's drug today, following last month's 18-4 Advisory Committee positive vote. The drug will sell under the name Belviq and is for weight loss - the first such drug approved in the last 13 years. The full release can be viewed here: http://finance.yahoo.com/news/arena-pharmaceuticals-eisai-announce-fda-171300471.html Congratulations to any who were long here. I believe the fun is just getting started. Best regards, Trond Hildahl

Return to 1981?

Very nice and succinct summary of why history cannot repeat itself right now. http://markdow.tumblr.com/post/24081371136/reagans-gone-youre-old-get-over-it Which reads in part: "The world of 1980 had tons of pent-up demand and gale-force tailwinds. Inflation and interest rates were coming down from high levels, household leverage was very, very low, financial innovation non-existent, consumption had been deferred, and demography was coiled as the baby boomers were just coming on line. On the government side, unions were powerful, price and wage controls were a reality, and tax rates were high. This was the ideal set up for supply side reforms. "Fast-forward to post-2008. Whatever the opposite of pent-up demand is, that’s what we have. Inflation and interest rates are already low, household leverage is a major burden, consumption was pulled forward during the boom, and demography is no longer our friend. Plus, we have globalization acting like a supply shock to our labor pool, holding down wages. In short, the tailwinds are now headwinds. On the government side, unions are far less powerful today, there are no price and wage controls, and tax rates are low. It seems next to impossible to make the case that supply-side policies can have anywhere near the effect today that they had in the 80s." Trond out. Pool, here I come.

Arena (ARNA) garners positive Advisory Committee vote

A couple of years after it should have occurred, but ARNA got a 18-4-1(abstain) thumbs up from the FDA's Advisory Committee today. The company's weight-loss drug Lorquess is up for approval. The stock nearly doubled to $6.85 after opening for trading in after hours - it was halted during the Committee meeting and vote. The actual approval decision is not due until June, but expect fireworks over the next couple days. Congratulations to the longs (of which I happen to be a member in my personal accounts) and to the company. Regards, Trond This site is for educational and informational purposes only. Nothing contained here should be construed by anyone as an invitation or solicitation to buy or sell any security. This site does not contain personalized legal, tax, investment, or financial advice. Users of this site should consult with a qualified adviser to obtain advice suited to their personal circumstances.

Celsion thoughts

I was asked the following question about Celsion raising more money prior to getting results from their HEAT trial....

>>Do you have an opinion on whether they would hang ten on cash until after the HEAT readout?

I was blindsided by the raise immediately after the interim results. That one-two punch really killed us, and only the specter of the 2nd intermi look was what was keeping us above $1.75.

It kind of blows my mind that we're this low - even if we're 7-9 months out. But it is what it is.

I feel fairly confident that as the summer draws nigh, we'll pick up some analyst coverage - and while they may be positive or negative, we're almost sure to add some, "IF they get good results, then my target is $XX" statements. Keep in mind the three targets we have, ($6, 7, and 10 IIRC) all were assuming a continue at interim. So we are so far below those targets it's not even funny (or at least my accounts are not laughing). We do have target reiterations to look forward to, as well as China completing enrollment, DIGNITY/ph2 starting, more ABLATE news, the mysterious product #4, Yakult news in Japan, the ever-present chance of a partnership or buyout, and the clock is always winding down towards Q4 and the 380th event. Today may not be the lowest price we'll see, but odds are in our favor to start a climb upwards - you just need to be patient.

All that does not answer the question, "Do you have an opinion on whether they would hang ten on cash until after the HEAT readout?"

They have been both aggressive and safe at times. Last summer, they starved themselves of cash to see if they could make it through the interim, and then they also raised at the worst possible post-interim time. It would not surprise me to see a raise at any time, but my opinion is they will not do so in the next two months. Once we have a handle on DIGNITY andf ABLATE costs in the next quarters' numbers, I might change my mind! And of course, when the price does get some traction, that begs the company to raise a little.

It probably comes down to how close they really are in partnership talks. Right now, they are fine for cash. Projecting out for 5 quarters, after thinking about the trials going on, we'll definitely need some more. Does it change things that we should *know* HEAT results exactly one year from now? Uh, yeah. So final thought is again the partnership side of things. If they can sign one more regional agreement for Thermodox - only (China, or Europe) and grab a $4M up-front payment, then I think a further raise can wait until we're at the final (and the price should be above $3).

Best regards,
Trond

Disclaimer:
This is presented for educational and informational purposes only, and should
not be construed as personalized legal, tax, investment, or financial advice.
I am long shares of Celsion in my personal accounts, but my holdings are based on my own risk tolerances and situation.

Mothballs

I am a little sad as I write this.

The Port24 is hereby mothballed. There are quite a few regulatory requirements when an investment adviser representative (as you probably know, I am now President of Heartstone Capital Management) puts out any kind of stock-picking list. Beyond the disclaimers that you could probably figure out, there are performance and trading considerations.

If I sold any stock in the Port that a client owns, or contra-wise bought a stock that I’d recently chosen to sell in real-life, there are issues. To even mention performance, without bringing up a comparable index, with the associated warnings about commissions, fees, and reinvested dividends, and its performance, brings down the wrath of several agencies.

I’m not saying that it’s gone, just mothballed while I figure out some of these issues. The good news is that I think all the securities within the Port can last a while without any guidance from me. And the best ideas are going to be what I’m investing in, and recommending, at Heartstone.

In the meantime, if you want to hear about a couple stocks a month, as well as get tips for financial planning, you can sign up for my free newsletter at http://eepurl.com/i4VQ1 or go to www.HeartstoneCapital.com and visit Services – Newsletter.

Best regards,
Trond Hildahl


This site is for educational and informational purposes only.
Nothing contained here should be construed by anyone as an invitation or solicitation to buy or sell any security.
This site does not contain personalized legal, tax, investment, or financial advice.
Users of this site should consult with a qualified adviser to obtain advice suited to their personal circumstances.

Launch!

Poor TrondsWorld has been sorely neglected. I have good news and bad, for readers.

The good news is that I have launched my firm, Heartstone Capital Management, Inc. That puts me firmly in writing mode, perhaps not daily, but considerably more often than I have in the past.

The bad news is that I have a blog, The Four Money Steps, at www.HeartstoneCapital.com also, so that will absorb half or more of the writing I do. However, I do intend on keeping up both blogs. Most mentions of securities will be more appropriate for that site, since disclaimers are built in, but there will be plenty of commentary from Trond the person that will be more appropriate for this venue.

I'll give the quick plug, of course - visit http://eepurl.com/i4VQ1 to sign up for my twice-monthly newsletter, chock full of financial planning tips and more.

If you are looking for a comprehensive finanical plan, I will cover your entire financial picture: including your budget and debt; family situation and college aid expectations; investment choices, both taxable and retirement-oriented; tax planning, estate planning; and retirement projections.

I'll also manage accounts for growth according to your needs and timelines. If you are in Southern California or beyond, check out the site at www.HeartstoneCapital.com.

Regards,
Trond

Disclaimer:

This newsletter is for educational and informational purposes only. It expresses the views of the author as-of the date on the byline and such views are subject to change without notice.

Nothing contained herein should be construed as either 1) personalized legal, tax, investment, or financial advice, or 2) as a solicitation to buy or sell any security. Readers should consult with a qualified adviser to obtain advice suited to their personal circumstances.

Heartstone Capital Management, Inc. is a Registered Investment Adviser registered in the State of California. If you live in another state, I may only transact business in your state if first registered, excluded, or exempted from registration requirements in that state. Follow-up, personalized responses to people in such states that involve either attempting to effect securities transactions or the rendering of individualized investment advice for compensation will NOT be made absent compliance with state