http://seekingalpha.com/article/3020326-sirtex-phase-iii-setback-...

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Sirtex Phase III Setback Offers Investment Opportunity
Mar. 23, 2015 8:14 AM ET  by: Keith Williams  

Summary

• Sirtex share price almost doubled over the past 6 months leading up to phase III Sirflox results.
• Share price halved on failure to achieve primary endpoint in Sirflox phase III trial of colorectal cancer patients with metastatic liver tumors.
• Secondary endpoint, which relates to key liver cancer outcome, was achieved.
• Opportunity for new investors to benefit from major setback.

Investment in biotech companies is always a roller coaster ride as results of clinical trials give "boom or bust" outcomes for share price. Australian Company Sirtex (ASX : SRX; OTCPK : OTCPK:SXMDF) has had more than its share of high wire acts over the years, but it has nevertheless steadily progressed its novel SIR (Selective Internal Radiation Therapy)-Spheres for treating liver cancer, to achieve profitability (net $A23.9 mill, up 32%) on sales revenues of $A129 mill in FY14. Most of the revenue ($A96 mill) came from American sales from 400 treatment centers, but there were substantial sales in Europe ($A27.7 mill) and overall sales were recorded in 30 countries. Sirtex has manufacturing operations in the US, Germany and Singapore.
Liver cancer is a really tough disease and it is clear that there is significant support for the Sirtex SIR-Spheres as a second line treatment option. Sirtex's goal is to make liver cancer a chronic rather than a lethal disease.
The Sirflox study involved first line treatment of patients with colorectal cancer with metastatic spread to the liver. It involved comparing a complex chemotherapy (3 drugs) regime with the same chemotherapy regime plus SIR-Spheres. While the full results of the Phase III Sirflox trial are not yet available, Sirtex has reported that although the primary endpoint was not achieved, there was significant progression free survival for tumors in the liver (the secondary endpoint). Since tumors in the liver are commonly the dominant or only site of disease and 90% of patients die of local effects of liver tumors, success with this secondary endpoint is important for Sirtex's business.
The setback led to 21% of the stock being sold off over 3 days (March 17-19, 2015) at a price of 50% or less than pre-announcement. The stock price has stabilized at $A21.49 ($A39.00 pre-announcement).
Two strategic biotech institutional investment groups (Hunter Hall, Montgomery) had reduced their holdings prior to the announcement as the increased valuation distorted their portfolios. So both had done well with their Sirtex investments. Most interesting is that they both were eager buyers post-setback, with Hunter Hall increasing its stake from 7.17% to 9.39% immediately after the share price crash. Given that Hunter Hall and Montgomery have been a major investors in Sirtex for a long time, their support at this difficult time is a sign of confidence that the setback is not fatal.
Of course it is devastating that the primary endpoint was missed, but my reading of the Sirtex press release is that the key clinical target (tumors in the liver) did achieve a statistical endpoint. I presume this is why the major investment groups have returned to increase their shareholdings and why two major institutional groups (UBS, 5.36% and NAB, 5.17%) have become substantial shareholders. It doesn't look as if this trial result is going to be fatal and when the dust has settled, perhaps the share price will show an interesting recovery.
Well worth considering as a significantly derisked biotech opportunity. Sirtex still has a market cap of $1.2 billion.​