We are initiating coverage of Celsion Corporation (NASDAQ:CLSN) with a valuation of $3.50. Celsion is a biopharmaceutical company developing DNA-based immunotherapies and proof-of-concept for next-generation vaccines. The company has two platform technologies, TheraPlas and PLACCINE, each of which is based on non-viral delivery of non-integrating nucleic acid molecules for therapeutic and prophylactic treatment. The delivery system of TheraPlas is based on polyethyleneimine (PEI) coupled to polyethylene glycol (PEG) and cholesterol to form PEG-PEI-Cholesterol (PPC). The lead TheraPlas product, GEN-1, is in clinical development for the first-line treatment of advanced ovarian cancer. It consists of an interleukin (IL)-12 encoding DNA plasmid that is infused intraperitoneally to increase the concentration of IL-12 at the tumor site. Celsion’s lead vaccine development candidate is based on the PLACCINE technology and consists of a multi-cistronic DNA plasmid vector that encodes for multiple antigens of the SARS-CoV-2 virus. In its earliest form IL-12 is included as an adjuvant.
IL-12 is a Powerful Immune Modulator
IL-12 is a pleiotropic cytokine that connects the innate and adaptive immune system. It is primarily produced in antigen-presenting cells, such as dendritic cells. As opposed to directly inhibiting cancer growth, IL-12 instead controls a number of physiologic processes including: increasing production of interferon gamma (IFN-γ), stimulating growth of CD8 T cells and shifting differentiation of CD4 T cells to a Th1 phenotype; and remodeling of myeloid derived suppressor cells (MDSCs).
Limited Treatment Options for Advanced Ovarian Cancer
Standard first-line therapy for ovarian cancer is tumor resection and platinum-based chemotherapy. Recurrence occurs in approximately 75% of patients, with 25% of those being resistant to platinum therapy. These patients have few treatment options and a median overall survival of approximately 12 months, thus highlighting the need for additional treatment options.
Positive Results for OVATION I Study
Celsion evaluated GEN-1 in combination with standard of care neoadjuvant chemotherapy (NACT) in 18 patients with newly diagnosed Stage IIIC or IV ovarian cancer. Results showed a correlation between high dose GEN-1 and objective tumor response and debulking status. In addition, treatment with GEN-1 resulted in favorable changes in immunosuppressive biomarkers and CD8/CD4 T cell ratio.
Only Multimeric SARS-CoV-2 Vaccine in Development
The company’s PLACCINE technology is a DNA-based vaccine technology that allows for the expression of multiple antigens. It is based on the same technology behind GEN-1 and will also include expression of IL-12 to enhance the humoral and cell-mediated immune response to the vaccine. Celsion is planning to establish its capability using SARS-CoV-2 vaccines as benchmarks. The company’s thesis suggests that multiple antigens, which may act more like a whole virus vaccine and not be as susceptible to breakthrough infections from viral variants, will provide superior vaccine dependent immunity with greater durability than the current generation of mRNA vaccines.
Cash Runway Through 2024
Celsion had approximately $64.5 million in cash, cash equivalents, and short-term investments as of June 30, 2021. We estimate this is sufficient to fund operations through 2024, which will carry the company through multiple key inflection points for both GEN-1 and the SARS-CoV-2 vaccine.
We value Celsion using a probability-adjusted discounted cash flow model that takes into account potential future revenues of GEN-1 in the treatment of ovarian cancer and the potential value of the PLACCINE technology. We model for Celsion to partner GEN-1 and to receive a 15% royalty on net sales.
We anticipate enrollment completing in the OVATION 2 trial in the first half of 2022. We model for a Phase 3 trial to initiate in 2023, a BLA filing in 2026 and approval in 2027 in the U.S. and in 2028 in the E.U. There are approximately 22,000 newly diagnosed cases of ovarian cancer every year in the U.S. and another 40,000 in the E.U., with the vast majority of them being advanced stage cancer. We model for GEN-1 to achieve 30% peak market penetration and generate approximately $1 billion in peak annual revenues in each jurisdiction. Using a 15% royalty rate, a 50% chance of approval, and a 13% discount rate leads to a net present value for GEN-1 in ovarian cancer of approximately $224 million.
For the PLACCINE technology, we assign a value of $50 million for its use in generating vaccines against important infectious diseases, including COVID-19. The technology is still in pre-clinical development and as more data becomes available for it we will be better able to derive a more precise valuation.
Combining the valuation for GEN-1, the PLACCINE technology, and the company’s current cash balance leads to a net present value for the company of $336 million. Celsion’s current fully diluted share count is approximately 95.9 million, which leads to a valuation of $3.50 per share.
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