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Celsion Corp. (CLSN): A Buy Write The Way To Go With Data Pending?

 January 02, 2013 12:19 PM

(By Rich Bieglmeier) With volume shriveling during the holiday week, our weekly accumulation/distribution list experienced a similar fate; the numbers are half their normal readings.

Celsion Corp. (CLSN) stands at the top of our thin list. Last week, Wall Street accumulated $1.58 million or 0.67% of the biotechnology's market cap of $286 million. As we said, it was a slow week. To start 2013, CLSN is off to a decent start, up 1.34% as we type on sturdy volume of about half its normal average daily volume.

Celsion is a leading oncology company dedicated to the development and commercialization of innovative cancer drugs including tumor-targeting treatments using focused heat energy in combination with heat-activated liposomal drug technology. January 2013 could be a huge month the small biotech.

[Related -Celsion (CLSN) Discloses Stock Sales Agreement With Cantor Fitzgerald]

The company is expected to announce Phase III data for its lead product ThermoDox® by the end of the month.  ThermoDox® is a proprietary heat-activated liposomal encapsulation of doxorubicin, an approved and frequently used oncology drug for the treatment of a wide range of cancers. In the HEAT Study, ThermoDox® is administered intravenously in combination with Radio Frequency Ablation (RFA). Localized mild hyperthermia (39.5 - 42 degrees Celsius) created by the RFA releases the entrapped doxorubicin from the liposome. This delivery technology enables high concentrations of doxorubicin to be deposited preferentially in a targeted tumor.

[Related -Celsion (CLSN) Downgraded To 'Sell' By Brean Capital On Share Runup Prior To Binary Event]

In English, it means the heat-activated liposomal encapsulation of doxorubicin penetrate cancerous tumors and are activated by sound waves. The resulting heat kills the tumor and leaves most everything else surrounding the tumor intact, untouched.

It could be revolutionary and a game changer.

According to the American Institute for cancer Research, the global cost of cancer runs at $895 billion a year. The latest data we could find from the National Institutes of Health (NIH) put the costs at more than $226 in the USA. 

iStock doesn't need to tell you, good data for cancer and new treatments are big business for stock prices, you already know that. If the data is good later this month, management will submit a New Drug Application (NDA) for ThermoDox®. The U.S. Food and Drug Administration (FDA) designated ThermoDox® as a Fast Track Development Program, which means the FDA has a goal to review within 60 days.

Good data and CLSN will most likely enter into a collaborative arrangement with a pharmaceutical major; rumors suggest Pfizer Inc. (PFE). Good data and the stock takes off.   Who knows how high the stock can fly? Bad data and shareholders will be in real trouble.

Normally, iStock would suggest using options as means to trade the pending news. Ahh, but CLSN calls ain't cheap, unless you purchase, deep, in-the-money calls, which probably still offer the same level of downside.

Buying the stock and writing calls could be an attractive play. Shares are at $8.33 as we type, and the February 10 calls last traded at $2.60, a 31% premium. If the data and the news are good, the worst case scenario is that CLSN trades way above $12.60. In which case, you'll most likely have to sell your shares for $10, but get to keep the $2.60 for writing the call, making your net sell price $12.60 – a 50% gain.

If the data is bad, your break-even point is $5.73, which is much better than owning the stock outright.


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