What a remarkable day for Sirtex (ASX: SRX). On the back end of the release of the ASCO abstract for the SIRFLOX study the stock predictably rallied in a way that most $Bn market cap biopharma companies can only dream of. While I think the release is very positive and has some good information, there are a few things to remember:
1) The stock got hammered based on essentially the same news information. What we are seeing here is a slightly more polished management of the communication process, including some crucial details that were not, as far as I am aware, previously released. I largely consider this adjustment to be recalibration of the stock price after a completely ridiculous retail market reaction to the initial SIRFLOX news (news that I believe the vast majority of punters didn’t even understand in terms of clinical or commercial significance).
2) It needs to be remembered that SIFLOX still failed its primary end-point. While several key drugs in oncology have been approved on the basis of clinical end-points like progression-free survival (PFS) the commercial impact of SIRFLOX’s secondary outcomes, in this case, is probably negligible at this time. SIR-Spheres are already FDA approved so the stock price jump isn’t warranted on the basis of this information. In fact, not to put too fine a point on it, ultimately the lack of overall survival (OS) benefit is going to hamper reimbursement for indication expansion of SIR-Spheres in many countries because the pharmacoeconomics are simply not compelling for mCRC based on the current information.
3) Based on what I have read on the trading platforms, the vast majority of retail shareholders don’t understand that the data released in the ASCO abstract means that people did not live longer with SIR-Spheres in the SIRFLOX study. Patients on SIR-Spheres did not “get more months”. It’s critical to understand this.
4) I am reserving judgement on the ASCO outcome until I hear how the panel discussion goes and I think the stock jump on the basis of the abstract release, without a bit more colour around it, is a little premature. Although I think the clinical execution was likely solid for SIRFLOX (this should not be the issue in terms of peer-review), I have a fear that the response is going to be somewhat lukewarm about whether SIR-Spheres really have a role to play in this patient setting.
Given that SRX is not trading all that high above it’s historic P/E mean at the moment – and the growth in the business has been solid – I think there are a few bucks of headroom left in the stock even after this bump, purely on the basis of the existing commercial proposition. A business proposition that, incidentally, seems to have been essentially forgotten about by the punters out there (though not Montgomery who is obviously grinning from ear-to-ear today based on the usual crapola follow-on announcement). Of course, the irrationality of the ownership behavior in this stock will prevail and I am sure there will still be plenty of interesting stock movement to come.
By the way, for those of you who have been sucked into believing that Oncosil (ASX:OSL) will be the next Sirtex, it’s worth noting that in order to prove utility in a first-line metastatic indication, SRX will have dosed over a thousand patients between SIRFLOX and FOXFIRE. Only with 500 patients was SRX able to evaluate PFS with statistical certainty (not 17 patients). My back of the envelope calculation is that SIRFLOX and FOXFIRE will have cost somewhere between USD $50m and $80m by the time we get the data out in 2017, factoring clinical costs, regulatory and development runway required to achieve that data point. Perhaps more. With current cash on hand somewhere between $5m and $7m (based on Dec ’14 financials and rough burn rates) it helps you to realise just how far away OSL is from prime time and how tough this space is to make inroads.
Regarding FOXFIRE, I am going to make the prediction now that it will have no impact on OS either. Very few drugs have beaten end of life chemo in the advanced metastatic setting.
But let’s wait and see…