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Delcath Systems, Inc. (OTCMKTS:DCTHD) Loss Spooks Investors

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Delcath Systems, Inc. (OTCMKTS:DCTHD)

Shares of Delcath Systems, Inc. (OTCMKTS:DCTHD) fell 59.6%, as investors reacted to a wider than expected third-quarter net loss. The stock’s drop was further fueled by reports that the company had experienced liquidity issues related to the conditions embedded in their 2016 convertible note issuance.

Delcath Systems, Inc. (OTCMKTS:DCTHD)

Widening Net Loss

Thursday’s sell-off resulted in the stock registering a new 52-week low as investors sentiments on the stock continued to drop. The stock has been on a poor run for the better part of the year, as short sellers continue to pile pressure. For the full year, the stock is down by more than 90%.

Compounding the stock’s woes on Wall Street is the fact that the company’s net loss continues to widen, even as revenues increase. Net loss for the three months ended September 30, 2017, increased to (-$12.6) million or (-$9.36) a share from (-$1) million reported last year.

Delcath Systems, Inc. (OTCMKTS:DCTHD) attributes the wider than expected net loss to an $8.7 million charge in fair value of the warrant liability. The company also incurred a $3 million loss related o convertible, not debt settlement.

Net loss for the first nine months of the year more than doubled to (-$25.8) million compared to a net loss of (-$9.5) million for the corresponding period last year. The increase was due to a $13.7 million increase in interest expense related to amortization of debt.

Despite the wider than expected net loss, the management team remains optimistic about the company’s long-term prospects. Revenue increased by 75% to $0.7 million in the third quarter and was one of the bright spots that helped shrug off some concerns about the company’ net loss. Revenue for the first nine months of the year was also up by 53% to $2 million.

Delcath’s Cash Constraints

In addition, Delcath Systems, Inc. (OTCMKTS:DCTHD) resolved cash constraints and other restrictions related to its authorized shares limit. The company can now issue additional authorized shares – a move that should allow it to raise funds needed to finance its clinical development program. The company is also able to access the balance of restricted cash as it moves to explore other equity financing options.

Primary focus on the clinical development front is the Phase 3 Clinical trial of Melphalan for the treatment of dominant ocular melanoma. The company plans to accelerate patient enrollment after being barred to do so in the third quarter because of cash constraints.

“With the reverse split effected, we are exploring steps to accelerate enrollment and will seek to add new trial sites in both the U.S. and Europe once new equity financing is secured. We still expect to conduct an interim safety analysis by the end of this year,” said CEO, Jennifer K Simpson.

I have no positions in any of the stocks mentioned, and have no plans to initiate any positions within the next 72 hours. All information, including any data, is provided without any guarantees of accuracy.

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