Is Celsion (CLSN) a Stock to Watch?

CLSN: Celsion logo
CLSN
Celsion

Submitted by Michelle Price as part of our contributors program.

Biotechnology stocks have done almost as well as the S&P 500 this year. They’re up 13.94% YTD, while the S&P 500 is up 14% YTD.

Although this industry isn’t outperforming the S&P 500 this year, I can’t help but stay excited about it given the kind of lifesaving research these companies perform.

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Celsion Corporation (CLSN) popped up on my radar recently. This company develops anti-cancer therapies for hard to treat cancers. Oncologists administer Celsion’s treatments to patients. Note that oncologists diagnose, treat, and follow-up on patients diagnosed with various forms of cancer.

It’s an area of medicine I’m familiar with after getting a biopsy for Non-Hodgkin’s Lymphoma 10 years ago and seeing an oncologist for several months. Luckily, my biopsy was benign. But for 1 and 50 adults, it’s not.

I can appreciate Celsion’s work. But that aside, is its stock an investment opportunity?

Let’s look at its core stats:


Celsion 3-yr Chart: Sept 2009 – Sept 2012

Core Statistics
– Market Price (as of September 24, 2012): $5.86
– YTD Growth: 244.71%
– Average Analyst Target: $10.75

Although Celsion once traded in the $60’s prior to the 2001 recession, recent news such as an FDA Fast Track Designation for its drug ThermoDox® is breathing new life into its price.

Key Observations
– Low Institutional Ownership (10%)
– High YTD Asset Growth (284%)
– Low YTD Internal Growth Rate (-79%)

Given the length of time Celsion has been trading publicly (over 10 years), the vote of confidence from the institutional community is low. Although it makes sense for a research and development firm to accumulate assets at a high rate, a 284% increase can be a drag on future returns. Paired with a low internal growth rate, and Celsion may need external financing to survive if its earnings don’t pick up. Analysts are unfortunately estimating lower earnings through 2013.

Overall Opinion
A $10 target appears fair given the buzz and momentum behind Celsion. I’d expect the stock to hit that target within the next 1-2 years if the economic environment stays bullish.

However, I can’t see Celsion hitting a much higher target than $10 unless its financials improve.

I’ll continue to watch this company. It has a great purpose and its price has legs in the near term. But its long term outlook is a question mark.

Follow Michelle on Twitter at @wallstreetgeek.