Should Sane Investors Consider Celsion?

With shares of Celsion Corp. (NASDAQ:CLSN) trading at around $1.54, is CLSN an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

C = Catalyst for the Stock’s Movement

growthWARNING! If you want to invest in biotech, then you must be fearless and as emotionless as humanly possible. This is a dangerous game. It’s a game that can give you the greatest natural high you’ve ever experienced – most stocks don’t have the potential to skyrocket 100 percent or more in a day – but it’s also a game that will eventually break your heart.

It’s like Russian roulette. You might have a great winning streak going that makes you a lot of money, but you’re eventually going to have to deal with fatal consequences. Luckily, in this sense, it’s only an investing fatality. And if you’re an experienced investor, then you know that the best of the best are those who have lost a lot of money, brushed themselves off, and entered the arena once again. The reason they’re better investors is because they know what it’s like to have lost everything, and they’re not going to let it happen again.

That’s also why great investors will only take small and speculative positions on biotech stocks. This way, a win is great, and a loss is manageable, both financially and emotionally. Celsion presents a perfect example. Not many stocks have the potential to move in this manner.

ThermoDox recently missed the primary endpoint of the Phase III HEAT study related to liver cancer. This led to an 86 percent drop in the stock price. That’s beyond the house of pain. That’s the house of hell, where you feel the tips of the pitchforks and the scorching white hot fire burning your flesh. So, the next time you’re upset about spilling coffee on your pants because it’s hot, uncomfortable, and looks like you wet yourself, think about those people who were heavily invested in Celsion. Better yet, think about the people who were hoping for positive results due to health reasons. After all, ThermoDox is safe and well tolerated. ThermoDox is also being used in two more trials for breast cancer and colorectal cancer.

Let’s take a look at some important numbers prior to forming an opinion on this stock…

E = Equity to Debt Ratio Is Normal   

The debt-to-equity ratio for Celsion is normal. The balance sheet is strong.   

Debt-To-Equity

Cash

Long-Term Debt

CLSN

0.39

$22.55 Million

$5.09 Million

BSDM

0.00

$9.14 Million

$0

DCTH

0.00

$28.30 Million

$0

 

T = Technicals on the Stock Chart Are Weak

You’re not going to find a weaker stock over the past month, and that includes a huge move to the upside today. Over the past month, Celsion has underperformed BSD Medical Corp. (NASDAQ:BSDM) and Delcath Systems (NASDAQ:DCTH) by wide margins.

1 Month

Year-To-Date

1 Year

3 Year

CLSN

-81.56%

-80.95%

-23.15%

-44.29%

BSDN

-7.01%

-3.31%

-36.52%

-14.12%

DCTH

8.21%

23.17%

-63.41%

-69.58%

 

At $1.54, Celsion Corp. is trading well below its averages.    

50-Day SMA

7.00

100-Day SMA

6.14

200-Day SMA

4.58

 

E = Earnings Have Been Terrible             

Welcome to the land of biotech. If a blue chip stock is the equivalent to the opera, then this is the carnival down the street. In the land of biotech, most revenue and EPS numbers look like the ones below. What’s behind Curtain number one? Come on, take a guess. Win a prize and make your dreams come true! It’s only one dollar! Well, $1.54 in this case. Only a few biotech stocks will make it to the promise land, but those that do offer phenomenal returns.

2007

2008

2009

2010

2011

Revenue ($)in millions

N/A

2.50

N/A

N/A

2.00

Diluted EPS ($)

3.07

-1.16

-1.43

-1.52

-1.11

 

What revenue?

9/2011

12/2011

3/2012

6/2012

9/2012

Revenue ($)in millions

N/A

N/A

N/A

N/A

N/A

Diluted EPS ($)

-0.25

-0.16

-0.19

-0.18

-0.18

 

Let’s take a look at the next page for the Trends and Conclusion. Is this stock an OUTPERFORM, a WAIT AND SEE, or a STAY AWAY?

T = Trends Might Support the Industry

Actually, there are no trends in this industry. Once a trend is established, it’s reversed. There is no rhyme or reason to biotech, so don’t bother trying to figure out a consistent pattern. That said, there is one common theme that seems to replay itself over and over again…

Conclusion

If you’re looking to invest in Celsion, then patience is the key. The best part about this story is that you don’t have to panic thanks to the strong balance sheet. If the stock spikes, then greed is the enemy. Investors tend to think that a big spike will lead to yet another big spike, and then eventually lead to the company being the next Gilead Sciences Inc. (NASDAQ:GILD). Then, the stock gets slammed and hearts are broken. Dendreon Corp. (NASDAQ:DNDN) is a perfect example, as this has already happened more than a few times.

At these prices, Celsion is a great speculative play, but it’s not likely that investors will be rewarded overnight. It could be more like months, or even years, before investors are handsomely rewarded – or recoup their losses. The next spike will also likely happen when least expected.

As far as cash flow goes, it’s poor, but financing is likely.

Celsion is a long-term OUTPERFORM because of its enormous potential, but it’s still a highly speculative play.

Using a solid investing framework such as this can help improve your stock-picking skills. Don’t waste another minute — click here and get our CHEAT SHEET stock picks now.