Celsion Corporation (CLSN)

[jape1]

Shares of Celsion (CLSN) continue to mark time as the company gets closer to the binary outcome of a key drug approval or disapproval. Recently released quarterly results shed little new information, and investors will have to continue to show patience with this name. The risks are obvious, but insiders appear to believe the risks are worth it for the considerable upside potential in their high-risk, high-return biotech.

Celsion has developed ThermoDox treatment therapy, which uses heat-sensitive nano-particles to precisely place cancer treatment drugs within tumors. The company has secured patents in the United States and Japan, and it's now currently undergoing Phase III trials for the treatment of liver cancer.

Although ThermoDox is also in earlier clinical testing phases for the treatment of breast cancer and colorectal cancer, the "HEAT" trial for liver cancer is the main driver of CLSN's price right now. That was unfortunate for all of us holding CLSN last November, when Celsion's Phase III HEAT study failed to meet expectations for early success. (HEAT is a multinational, double-blind, placebo controlled, pivotal study of ThermoDox in combination with radio frequency ablation for primary liver cancer.)

Feeling The Burn

Latest quarterly results were filled with the kind of data points you would expect from a development-stage biotech. Phase II and III trials using ThermoDox in various cancer therapies continue, and the company's opportunity in China has taken greater shape. Celsion has secured a Chinese sales and manufacturing partner, and is now undergoing clinical trials in that market. ThermoDox may be especially well-suited to treat liver cancer, and that infirmity has a relatively high incidence in China, in part due to high rates of Hepatitis.

After last November's disappointing news for ThermoDox, there is a concern that Celsion's burn rate could become a headwind for its stock. The company used almost $6 million in cash last quarter, and a one-time $2 million licensing payment means that subsequent quarterly burn rates will likely be around $8 million. That means that Celsion's $25 million in the bank doesn't appear as big as it needs to be.

Management cannot wait until the fourth quarter to replenish the balance sheet, as shares will come under heavy pressure as cash slips below $10 million. In an ideal world, management would secure a key partnership that brings in cash on a non-dilutive basis. The alternative of having another secondary while the stock trades around $2 is not an attractive prospect. Celsion's share count, at a recent 33 million, has already more than doubled from a year ago. Further dilution can only make the stock sink further as the all-important end to the HEAT trial approaches.

Optimistic Execs

That important event is expected "later this year," which is a pretty vague time frame. Even then, it's not even clear that investors should expect imminent action from the FDA. But with much pessimism already priced into the stock, any positive interim updates on the HEAT trial are likely to give a quick and firm lift to these beaten-down shares.

That appears to be what insiders are betting on. Since last November's disappointing news regarding the HEAT trial, six insiders have purchased nearly 69,000 more shares of these out-of-favor shares. That doesn't represent a major cash commitment in a $2 stock, but this stock's insider profile has stayed significantly positive by the scoring metrics at InsiderInsights.com by virtue of both the percentage increases in insiders' commitments, and the persistence of their bullishness.

Director Robert Hooper, for instance, increased his holdings in CLSN by 40% since last November's disappointment, to nearly 66k shares. He purchased last December, last March, and again just last week. Director Alberto Martinez has increased his stake by 23% since last December, to 85k shares. In all, five of the six buyers since November's disappointment have increased their skin in the game by at least 16%.

So insider sentiment remains positive despite Celsion's setback, and in our decades of using insiders to help identify biotech bets, such a positive bent has meant better-than-even odds that the stock at least appreciates into the next anticipated event date.

But increased odds certainly don't equate to a sure thing, and any investors taking a punt on the stock shouldn't kid themselves: Despite persistent insider bullishness, it is still far from decided whether the HEAT results will set Celsion's stock alight or burn up yet more of shareholders' capital. Biotech insiders may be better than most at judging the potential for their firm's products, but the FDA has proven more than enough times that it can reach conclusions that bedevil even the smartest biotech money.

Disclosure: I am long CLSN. Clients of Insider Asset Management LLC are also long CLSN

http://seekingalpha.com/article/610151-insiders-persistent-at-celsion