Celsion Corporation (NASDAQ: CLSN) is rocketing in the premarket hours this morning, and for good reason. The company announced that it has received Fast Track Designation from the United States Food and Drug Administration (FDA). Here’s what’s happening:
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- Celsion Announces Fast Track Designation
- Management Commentary
- Shorts are Being Squeezed
- Risks to Consider Before Buying CLSN
- Final Thoughts
Celsion Announces Fast Track Designation
As mentioned above, Celsion Corporation is flying in the market this morning after announcing FDA Fast Track Designation. The company said that it received the Designation for GEN-1, a DNA-mediated interleukin-12 (IL-12) immunotherapy.
At the moment, GEN-1 is under development in Phase 2 studies as a potential option to treat advanced ovarian cancer. The treatment was designed using TheraPlas, the company’s proprietary, synthetic, non-viral nanoparticle delivery system platform.
In the release, CLSN reminded investors that Fast Track Designation was designed to facilitate the development and expedite the regulatory review of drugs to treat conditions with a significant unmet medical need. Moreover, the company outlined the criteria for the Designation, which include:
- Efficacy. The experimental drug must show superior effectiveness, effect on serious outcomes, or improved effect on serious outcomes.
- Side Effects. The treatment must avoid any serious side effects.
- Toxicity. The treatment must decrease a clinical significant toxicity of an available therapy that is common and causes discontinuation of treatment.
Considering these criteria, and the fact that the company received Fast Track Designation, CLSN is clearly doing promising work with its GEN-1 candidate.
In a statement, Michael H. Tardugno, Chairman, President and CEO at CLSN, had the following to offer:
Fast Track designation is an important step in developing GEN-1 for advanced ovarian cancer. Presuming the encouraging data we are generating in early clinical studies continues, this designation supports an expedited path to market.
Fast Track allows for more frequent communication with the FDA to discuss development plans and clinical trial design. In addition, should criteria be met, Fast Track-designated drugs are eligible for rolling review, a process whereby the drug’s sponsor can separately submit sections of its New Drug Application to the FDA. They also are eligible for accelerated approval and priority review, under which drugs for serious conditions fulfilling an unmet medical need can be approved based on a surrogate endpoint. We are optimistic that GEN-1 represents a game-changer for women with advanced ovarian cancer who have limited treatment options.
Shorts are Being Squeezed
Not only was the news released today overwhelmingly positive, it’s clear that the shorts are being squeezed out of Celsion Corporation stock. Prior to today’s pre-market session, more than 20% of the volume on the stock was sold short. That’s a pretty hefty short interest.
Nonetheless, when stocks that are heavily shorted tick upward, those who short the stock begin to lose money. As a result, they race to buy shares to cover their positions, leading to significant gains in both volume and price. That seems to be the case today, and with a public float of around 60 million shares, demand could far outstretch supply, leading to gains far higher than what we’ve already seen in the premarket.
Risks to Consider Before Buying CLSN
If you’re considering buying CLSN stock, you’ll have to be willing to accept risk. After all, there’s no such thing as a risk-free investment. When it comes to Celsion, some of the most significant risks to consider include:
- Penny Stock. First and foremost, CLSN is a penny stock, which adds to the general risk associated with investing in individual stocks. Penny stocks tend to experience high levels of volatility, making entrance and exit decisions difficult. Moreover, these companies tend to operate relatively unproven business models, making them highly speculative bets and adding to the risk associated with an investment.
- Profitability. As a clinical stage biotechnology company, Celsion doesn’t have a single product on the market. As such, it can’t generate revenue or profits. So, it must survive on the money it has in the bank. Should that not be enough to bring the company to profitability, a public offering will be likely, diluting value for existing shareholders and leading to significant declines.
- Clinical & Regulatory Risk. Finally, in order for CLSN to bring its products to market, it must prove they are safe and effective in the clinic. Should a clinical trial fail, significant declines could be the result. Moreover, the company must gain approval from regulatory authorities. Even if all clinical trials seem to go well, if authorities find holes in the data, they will reject the drug, further opening the door to significant risk of loss.
There’s no question, an investment in Celsion, or any other stock for that matter, will come with risk. Nonetheless, CLSN stock is looking pretty attractive at the moment.
The Fast Track Designation will speed up the development and regulatory review of GEN-1, and if all goes well, the treatment has the potential to become a blockbuster, taking a decent share of a multi-billion dollar annual industry. Sure, there are risks, but the potential reward that could come with CLSN stock is difficult to bat an eye at.