DCTH Reports Q4 Results. FIP Moves to Hold
Delcath (DCTH) reported before the bell this morning that Q4 revenue was $15.1 million (+2,701%) and adjusted EPS was $0.00. Revenue beat by $1.5 million (almost 11%). Gross margin was 86%.
Of the $15.1 million HEPZATO generated, $13.7 million (90.7%) was from 14 treatment centers (three new added in Q4). Remember that HEPZATO KIT is the U.S. version of Delcath’s combination drug and device solution for Injection/Hepatic Delivery System (HDS). This is a whole-organ treatment system that delivers a high dose of chemo directly to the liver, which is isolated from the rest of the patient’s vascular system. It gained FDA approval in August 2023.
The label allows for up to six treatments. Since it is still early days, management expects an average of around four (some patients pass away), though there is some upside potential as results seem to be (anecdotally) better than in the trial.
In Europe, where Delcath’s strategy is to use its system primarily for clinical development and medical journal publications, the device-only configuration, called CHEMOSAT, generated the remaining 9.3% of Q4 revenue. This year the company will expand into France, Italy and Spain. It is already in the U.K., Germany and the Netherlands, with reimbursement only in the last two countries.
Should the reimbursement situation in European countries change (hopefully it will), Delcath would likely be a lot more aggressive there. That represents upside but no commitment.
Fourth-quarter cash burn was $1 million, and Delcath generated positive adjusted EBITDA for the first time (+$4.6 million). It ended the year with $53.2 million and no debt, thanks, in part, to $41 million in warrant proceeds.
Since the end of the quarter, Delcath has activated another two centers (total of 16 now) and expects to add another 14, meaning a year-end target of 30 active centers. These are leading centers being activated, including the Mayo Clinic, MGH, Cleveland Clinic and Thomas Jefferson. More than half of these new centers are expected to be added in the second half of 2025.
To support growth, Delcath is expanding its commercial team to include six regions (up from four), each with a liver-directed therapy manager, an oncology manager and a clinical specialist. Field support staff will grow as well to help with admin.
There will be higher costs associated with this SG&A ramp, roughly a 30% to 40% increase in 2025 vs. 2024. Management expects to be cash flow positive this year but isn’t committing to “forever” – it needs to invest.
Turning to forward expectations, an analyst on the call asked if consensus expectations for 2025 revenue of $77 million (+106%) made sense. Management said no comment. Things are just moving too quickly (only $2.1 million in 2023 revenue and $37.2 million in 2024), and a couple centers, more or less, can really change the full-year number.
Turning to clinical trials, the CHOPIN trial (Netherlands) is expected to have primary endpoint analysis data at one year in the second half of 2024. A Phase 2 trial in metastatic colorectal cancer should begin in the second half of the year (PFS data due at end of 2027), and a Phase 2 metastatic breast cancer trial should begin in Q4, pending FDA approval of trial design. These trials will take some time, obviously, but represent major growth opportunities.
It was a good call, and Delcath continues to make impressive progress. In a better market, I’d say buy the second half, but let’s be a little conservative and see how the stock finishes the day. BUY HALF
FTAI Infrastructure (FIP) Moves to Hold
FTAI Infrastructure (FIP) has not caught a bid in a while, and while the stock seems undervalued, I’ve had at buy long enough. Moving to hold and looking for the stock to firm up. MOVE FROM BUY TO HOLD
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