US Active Treatment Centers Expansion Will Unlock Broader Oncology Markets

Key Takeaways

• Expansion of treatment centers and pipeline therapies positions Delcath for significant revenue growth and reduced concentration risk across multiple cancer indications.
  
• Strengthening clinical evidence and favorable healthcare trends drive broader adoption, pricing power, and sustainable earnings growth in domestic and global markets.
  
• Heavy reliance on a limited product focus and persistent pricing difficulties abroad constrain revenue growth, while operational hurdles and slow expansion limit near-term diversification and upside.

Catalysts

An interventional oncology company, focuses on the treatment of primary and metastatic liver cancers in the United States and Europe.

• The rapid expansion of Delcath’s active treatment centers across the U.S.—with a target of 30 by year-end and a strong pipeline of pending activations—directly supports continued top-line revenue growth as more sites come online and mature.
  
• Large, underserved patient populations for liver-dominant metastatic colorectal and breast cancers—each with an addressable market roughly seven times larger than uveal melanoma—represent major future revenue expansion opportunities, especially as Phase II trials and regulatory milestones are achieved.
  
• Growing clinical and real-world evidence supporting the efficacy and safety of HEPZATO and CHEMOSAT fuels increased adoption and pricing power, which in turn can drive higher net margins and operating income.
  
• The combination of higher healthcare expenditures and increased global demand for innovative, minimally invasive oncology therapies positions Delcath to benefit from favorable reimbursement environments and broader utilization, positively impacting revenue and earnings potential.
  
• Expansion into additional indications and new geographies, enabled by regulatory approvals and increased access programs, provides a diversified and sustainable revenue base, reducing concentration risk and supporting long-term earnings growth.

Delcath Systems Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Delcath Systems's revenue will grow by 46.7% annually over the next 3 years.
• Analysts assume that profit margins will increase from -26.4% today to 26.4% in 3 years time.
• Analysts expect earnings to reach $44.9 million (and earnings per share of $1.04) by about July 2028, up from $-14.2 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $68.3 million in earnings, and the most bearish expecting $20.6 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 27.0x on those 2028 earnings, up from -26.5x today. This future PE is lower than the current PE for the US Medical Equipment industry at 31.1x.
• Analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.05%, as per the Simply Wall St company report.

Delcath Systems Future Earnings Per Share Growth

Risks

• European reimbursement and pricing challenges are expected to persist, resulting in significantly lower achievable prices (~1/7 of US levels) in key markets outside Germany, limiting the size of the total addressable market and capping international revenue expansion.
  
• High dependency on a narrow portfolio focused around liver-directed therapies for rare cancers (currently metastatic uveal melanoma) increases the company's vulnerability to slower growth, market saturation, or competitive pressures from more established or innovative non-device-based therapies—potentially threatening long-term revenue diversification and stability.
  
• Significant operational complexity and long activation timelines for clinical trial sites and treatment centers (especially in large academic centers), may slow enrollment for pivotal trials and new site expansion, thus delaying potential future revenue growth from label expansions into larger markets like metastatic colorectal and breast cancer.
  
• The company is guiding to a rapid ramp in operating expenses (R&D expected up ~150%, SG&A up ~60% YoY), driven by trial execution and commercial buildout, which could put downward pressure on net margins and earnings in the absence of matching topline revenue growth.
  
• No meaningful near
• or mid-term catalysts from potential new geographies or indications are expected, as management acknowledges real-world uptake in new indications beyond uveal melanoma is currently minuscule in Europe, and evidence/publications to support new uses remain scarce, further narrowing future growth avenues and possibly limiting revenue upside.

Valuation

• The analysts have a consensus price target of $24.078 for Delcath Systems based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $29.47, and the most bearish reporting a price target of just $21.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $170.2 million, earnings will come to $44.9 million, and it would be trading on a PE ratio of 27.0x, assuming you use a discount rate of 7.1%.
• Given the current share price of $11.08, the analyst price target of $24.08 is 54.0% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.