Why DCTH is offering an interesting opportunity now
Management consensus - a 150% revenue growth in 25
Revenue growth trend has quadrupled over the past 3 quarters to 76%.
The 40% pull back since mid-May has not been accompanied with any negative news and appears to be profit taking on the prior 400% run up in the prior 12 months
Seven analysts following the stock are projecting an average revenue gain of 16%
The number of centers using DCTH treatment is increasing by about 20% per quarter
On the negative side
The explosive revenue growth last quarter will be difficult to achieve again
The number of patients using DCTH is small, so the risk exists of a negative natural fluctuation.
Competitive treatments are projected to deliver better results and are expected on the market in about 2 years.
Currently DCTH represents 2.8% of my portfolio of 23 tickers.
Stock price has dropped +25% the last couple months and the PS has dropped from 10 to 7 so is affordable, I guess. I don’t think this stock is followed much by Mr. market and health care and treatments are out of favor these days. The patient uptake forecast is very fragile. Seems like the hospitals are kicking the tires. I do like their technology and think this provides a good low point in their chart to take a nibble.
There is a lot of uncertainty around Medicare right now and what is going to be approved or not. It seems like the general market sentiment is that more experimental or newer technologies are likely to be cut first in favor of lower cost alternatives. Delcath has some portion of Medicare business but from what I could gather it is not listed what percentage of revenue is Medicare based.
Here’s from a press release from August 2024,
Delcath Systems, an interventional oncology company focused on the treatment of primary and metastatic liver cancers, announced today that the Centers for Medicare & Medicaid Services (CMS) has granted New Technology Add-on Payment (NTAP) status for its HEPZATO KIT™ (melphalan/Hepatic Delivery System). This approval will be effective for the fiscal year starting October 1, 2024.
The NTAP designation under the CMS Inpatient Prospective Payment System (IPPS) is designed to support the adoption of innovative medical technologies that provide substantial clinical improvement over existing treatments. HEPZATO KIT™ is used primarily in the outpatient setting, however there are instances where it is used in the inpatient setting. This additional payment will help to cover the costs associated with the HEPZATO KIT for eligible Medicare inpatients, ensuring that more patients can benefit from this advanced liver-directed therapy.
I misunderstood this Medicare related risk earlier this year with two investments of Ardelyx ARDX and BioStem BSEM. With the case of BioStem they didn’t get removed from Medicare, but some hospitals thought they might be so they waited on buying and that probably cut off about a 1/3rd of projected revenue for the quarter. With Ardelyx, they were removed from the kidney “dialysis bundle”, a niche issue I simply did not understand.
I’m seeing the risk/reward for Delcath to have both the risk and reward sides be quite high. If they are further confirmed for Medicare treatments of liver the stock could skyrocket, but if they are not it could continue to weigh on the stock. I agree the price of Delcath seems attractive with their growth prospects but it seems the portion of the business relying on the government is subject to arbitrary decisions and potential cost cutting.
I agree with this but one thing I will point out, it does make all of it’s drugs for the United States market in the United States from what I could find out. With that being said I am not invested in any medical companies until we get more clarification, supposedly in August.
Dermatech had a non invasive melanoma test far cheaper than biopsy and the firm failed because of patient adoption. Derma’s hated it because it was cheaper than just doing a biopsy so less reimbursement. Market hesitancy on this firm is probably driven in part by the fickleness of deploying solutions that even when they work, may not be adopted by the market. Still not sure why DCTH would be better than incumbents.