On July 20, Delcath Systems (NASDAQ: DCTH) raised $23.5 million in a secondary offering, pricing its stock at $5.05—a significant discount to the $11 price tag the medical device company’s shares had sported six months earlier. But in a meeting with Xconomy at Delcath’s midtown Manhattan headquarters a few weeks later, Delcath CEO Eamonn Hobbs and CFO David McDonald expressed no regrets. Just after the offering, U.S. debt worries and other economic woes knocked the Dow all over the place, and beat Delcath’s shares as low as $3.10. “The pricing [of the secondary] looks pretty good right now,” McDonald says.
The new money will certainly come in handy as 22-year-old Delcath gears up to launch its very first product. Delcath has been developing a device that bathes the liver in a potent chemotherapy drug. This “chemo saturation” is designed to provide new hope to patients whose melanoma has spread to their livers. The company estimates its device could achieve sales of $675 million in the U.S. and more than $3 billion overseas, where it could be used to treat many different types of liver cancer.
But getting the product on the market has been anything but straightforward for the tiny company. Delcath was founded in 1988 based on intellectual property licensed from Yale University. The idea was to run catheters directly to the liver, saturate the organ with chemo, then remove the blood from the liver and filter out the chemo before returning the blood to the body. That filtering process limits the drug’s toxic effects beyond the cancerous liver, which allows physicians to administer it at a concentration that’s 100 times higher than what the liver would see when chemo is given normally, by an intravenous infusion. Delcath labored for a decade to get the FDA to approve the product as a medical device, given that the chemo drug it was using, called melphalan, was already on the market and widely used.
That strategy failed. “The FDA decided that the device was new, as was the dose and the route of administration,” Hobbs says. So Delcath had to go back to the drawing board and seek … Next Page »