Delcath Prices Stock and Warrants - Analyst Blog


Specialist producer of pharmaceutical and medical devices for oncology, Delcath Systems Inc. ( DCTH ) recently announced the pricing of an underwritten public offering of 13,333,340 shares of its common stock at $1.50 a share.

The company also priced warrants that entitle holders to purchase up to 4,000,002 shares at an exercise price of $1.65 a share. The offering will generate gross proceeds of $20 million.

After the deduction of underwriters' discounts and estimated offering expenses, this offering will generate net proceeds of about $18.4 million. This excludes any potential cash proceeds by the exercise of the warrants. In a bid to cover over-allotment, the company has also allowed underwriters a 30-day option to purchase an additional 15% of shares of its common stock and warrants.

This is expected to generate gross proceeds of $3 million, if exercised in full. The offering is expected to close on or about May 31, 2012.

Delcath plans to use the proceeds for commercialization of new products, attaining regulatory approvals and to sponsor the clinical trials. The company is on the verge of pitching into a multi-billion dollar global market. 

Delcath recently envisaged a commercialization strategy for the European market. It has also submitted applications for regulatory approvals for its products in Hong Kong, South Korea and Singapore and plans to submit the same in India, Russia, China, Canada and Japan. The proceeds will enable the company to focus on its growth strategy in the international market.

The public offering will enable the company to meet its current capital needs.  As of March 31, 2012, Delcath Systems' cash position stood at $20.8 million, down 47% year over year.  Management believes that its business has not generated sufficient positive cash from operating activities.

It has always operated at a loss since inception and constantly faces liquidity crises. During its first quarter earnings conference call, the company revealed a plan to raise additional capital to fund its development efforts and this public offering is an execution of its earlier plan.

The joint book-running managers for this offering are Cowen and Company, a wing of Cowen Group ( COWN ) and Wedbush PacGrow Life Sciences. Roth Capital Partners is acting as co-manager.

Delcath is a provider of oncology solutions. Its business profile includes development and manufacture of pharmaceuticals and medical devices for cancer therapy.

The concern about Delcath profitability still overhangs and the company remains vulnerable compared to its competitors including Mesa Laboratories ( MLAB ), Given Imaging ( GIVN ) and Genmark Diagnostics ( GNMK ).

The stock currently retains a Zacks #3 Rank, which translates into a short-term Hold rating.

COWEN GROUP INC (COWN): Free Stock Analysis Report
DELCATH SYS INC (DCTH): Free Stock Analysis Report

GIVEN IMAGING (GIVN): Free Stock Analysis Report
GENMARK DIAGNST (GNMK): Free Stock Analysis Report
(MLAB): ETF Research Reports
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Stocks

Referenced Stocks: COWN , DCTH , GIVN , GNMK , MLAB

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