From todays AFR

Lesson from Sirtex: biotech investment is a long-haul game
It’s not uncommon for companies in the ASX200 to fall victim to investors’ impatience for quick results and when those results involve clinical trials – and the news isn’t good, or even just perceived poorly – the market can react savagely.
Sirtex fell squarely into that frame last year when results of a study saw the share price plunge 53 per cent in a single day.
The $2 billion company is one of the few success stories in the competitive and speculative health sciences sector. The company listed on the ASX in August 2000 and those who have bought and held are sitting on paper profits of more than 1000 per cent.
The company’s flagship development and product is known as SIR-Spheres, a treatment for liver cancer. As the firm attempted to position the product ahead of standard chemotherapy, the results from a trial known as SIRFLOX failed to conclusively prove this was the case and the share price slumped.

In following weeks, more detailed announcements pointed to the efficacy of the product leading to a spike in the price. Since the bottom of the sell-off the share price has more than doubled. Over the past two years shares are up 180 per cent.
Sirtex’s CEO Gilman Wong says the events of the past 12 months contain an important message for investors to stick with companies that have a proven track record for innovation and not to bail out at the first sign of a hiccup.
MARKET OVERREACTS
“If we report something, we’re not going to put a spin on it or sugar coat it, we present it as it is,” Wong says. “And I think maybe investors were saying ‘well if they’re presenting it like this, without any spin, it must be worse than what they’re saying’. That’s what they’re used to with most other companies.”
He says the results were a “misread” leading to a market “overreaction” and investors should take the time to look into results more carefully. He’s confident that Sirtex’s core shareholder base now knows that.
The message about not reacting to company announcements until the verdict is crystallised may become increasingly important for Prime Minister Malcolm Turnbull’s program of innovation tax breaks for start-up investors. Understandably, investors want a steady stream of returns but there may be hurdles along the way.

Sirtex’s Wong says large clinical trials are essential for the development of new products and the robustness of existing products but it wasn’t something Sirtex’s founder, Bruce Gray, made a priority.
“The founder did a very good job of getting regulatory approval fairly quickly... but didn’t invest in major clinical studies. We had small clinical studies, but in order to go to market you had to have major clinical studies,” says Wong.

MAKING UP GROUND
As a result, Wong had to do a bit of catch-up when he joined the company in 2005.
Wong admits he was a “left-field candidate without the right background”, but knew a reasonable amount about business. During his tenure, he has taken the biotechnology company from a speculative microcap that was losing money, to a world-class innovator with revenue close to $200 million and knocking on the door of the ASX 100.
He credits it to the application of business principles, the recognition of investors through dividends and the product at the centre – SIR-Spheres.
The product works something like this: microspheres lodge into the blood vessels surrounding an otherwise inoperable tumour in the liver and irradiate the tumour directly rather than by an external beam. As a result, there is no collateral damage to healthy tissue.
So far more than 50,000 people have used the treatment, which is made in the US, Singapore and Frankfurt.
He would like to see Australia become a medical innovation hub, marrying academic research and commercial outcomes. Sirtex has been working to do this with institutions such as the Australian National University, the University of Sydney and the Peter MacCallum Cancer Institute.
“I don’t think they should be purely focused on commercialising whatever research they can, because they do need to do research for research’s sake, but you do need to harness part of that and work with industry,” he says.

Unsurprisingly, Wong supports incentives to encourage investment in innovation.
For Sirtex specifically, the future will hopefully include new research, new products and perhaps an acquisition or two.
“I am proud of what we’ve done with SIR-Spheres, I would like to do it again. And again, preferably with another Australian technology that we could then take to market and do it again,” Wong says.
While no M&A is in the pipeline, Sirtex is open to possibilities.
“If there was an appropriate target company that already had a technology ready to go into market or was already in the market but they didn’t know how to execute that, they could be a target for us,” Wong says.
Sirtex reports on February 24.