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Delcath slips on change to Chemosat FDA filing

NEW YORK (AP) -- Shares of Delcath Systems Inc. fell Thursday after the company said it will apply for a more limited marketing approval of its Chemosat cancer treatment system.

THE SPARK: Delcath said Wednesday that it will amend its marketing application for Chemosat. It plans to ask the Food and Drug Administration to approve the use of Chemosat as a treatment for ocular melanoma, a cancer of the eye, which has metastasized to the liver. Previously Delcath asked the FDA to approve the system for the treatment of cutaneous melanoma, or skin cancer, which had spread to the liver.

The company also said it had arranged a $35 million financing commitment. It said Terrapin Opportunity LP agreed to buy up to $35 million in company stock over the next two years.

THE BIG PICTURE: Delcath said it changed its marketing application based on advice from the FDA, noting that most of the patients in its late-stage trial of the system had ocular melanoma. The company said treatments for melanoma have improved significantly in recent years while ocular melanoma remains more difficult to treat.

The FDA is scheduled to make a decision on the system by June 15.

The Chemosat system is designed to treat cancer by delivering high doses of chemotherapy drugs directly to the liver while controlling exposure of the rest of the body to the drug. Delcath is asking the FDA to approve a version of the system that delivers a drug called melphalan. The system has been approved in European countries, and a newer version was recently approved in Australia.

THE ANALYSIS: Canaccord Genuity analyst Jason Mills said the change "significantly reduces the size of the on-label patient population opportunity" but may improve the chances the FDA will approve Chemosat. Mills said ultimate approval of the system is more important than the specifics of the label because physicians will use the system to treat a variety of cancers.

Delcath would only be allowed to market the Chemosat system for use in treating inoperable ocular melanoma that has spread to the liver, but doctors would be able to use their discretion in treating patients with other conditions.

Mills kept a "Buy" rating on Delcath shares but cut his price target to $2.50 per share from $5.

SHARE ACTION: Delcath stock slipped 3 cents to $1.43.