Delcath Systems (NSDQ:DCTH) said today that it inked a deal to extinguish its 2016 convertible notes with the unnamed holder of the majority of the notes. But the agreement is contingent upon the company effecting a reverse stock split – a move that shareholders voted down in June.
The company’s board urged shareholders to this time vote in favor of a reverse stock split, saying that it would allow Delcath to regain compliance with the Nasdaq minimum bid price. Today, DCTH shares were trading at 13¢ apiece in mid-afternoon activity, up 4%.
“We negotiated this agreement as a means of reducing future potential dilution from the convertible notes after a reverse stock split. We strongly urge shareholders to vote in favor of the proposed reverse stock split as it will now trigger the extinguishment of a substantial portion of the convertible notes,” president & CEO Jennifer Simpson said in a regulatory filing.
“The proposed reverse stock split will also allow us to regain compliance with the Nasdaq minimum bid price, which provides liquidity and other benefits to shareholders. Additionally, we believe a successful reverse stock split will provide the company with the flexibility to raise new equity capital at potentially more beneficial terms, allowing us to continue to support our clinical development program and commercial efforts in Europe where we believe shareholder value ultimately resides.”
If the deal is fully executed, Delcath said it will extinguish approximately 90% of the remaining $12.6 million in debt related to the convertible notes, leaving $3.8 million in debt to remain outstanding.
Delcath is developing a system for liver-directed high dose chemotherapy, which involves a procedure known as percutaneous hepatic perfusion. During the procedure, an infusion catheter is inserted into the femoral artery and the tip of the catheter is brought to the hepatic artery to deliver a chemotherapeutic, melphalan hydrochloride.
The company’s isolation-aspiration catheter is then inserted into the femoral vein and guided to the inferior vena cava, according to Delcath, at which point two occlusion balloons are inflated to block the normal flow of blood between the liver and heart.
After isolating the liver, the device delivers high doses of melphalan to the liver and tumor tissue over the course of 30 minutes.
As the blood leaves the liver, the isolation-aspiration catheter collects it and directs it out of the body, where the chemotherapy agent is removed using Delcath’s hemofiltration system. The filtered blood is then returned to the patient’s body using a third catheter in the internal jugalar vein.
Delcath’s system for percutaneous hepatic perfusion has been studied in unresectable ocular and cutaneous liver metastases, as well as colorectal cancer and primary liver cancer.