Sirtex swings to a loss after ‘challenging’ year

Shares in Australian cancer treatment developer Sirtex Medical (ASX:SRX) plunged more than 15% yesterday after the company posted a net loss of -A$26.9 million in 2016, compared to a profit of A$54 million the year before.

Sirtex has faced a barrage of obstacles this year, including a number of clinical trials that failed to meet primary endpoints. The company’s full-year results were hit by a slowdown in sales growth of its SIR-Spheres Y-90 radioactive microspheres and by the costs linked to its restructuring efforts.

In June, Sirtex said it planned to cut 15% of its workforce, estimating that it would save nearly $5.3 million in the process.

Sirtex said a “general uptick in competition for patients with liver-directed therapies and a generally tighter reimbursement environment” was partly to blame for what CEO Andrew McLean described as a “challenging” year for the company.

“The 2017 financial year was a challenging one for Sirtex, reflecting the dual fiscal impact of a lower dose sales growth profile and a high level of committed expenditure in anticipation of positive clinical data, which drown down our underlying financial performance,” he said in prepared remarks.

“However, we have now taken decisive actions to improve our financial performance through targeted cost reductions, which are expected to deliver a more focussed [sic] and efficient organization that improves our effectivness in realizing the potential of our SIR-Spheres Y-90 resin microspheres business around the globe.”

Full-year sales were up 0.7% to $234.3 million compared to the previous year. Earnings per share were -46¢, compared with 92¢ in 2015.

In a press release, Sirtex said it has halted most of its non-SIR-Spheres R&D activities to “focus more closely on alignment with the core business.”

But it said it planned to wait on data from a Phase I safety and toxicity trial to decide the fate of its histone inhibition program, which is working to develop novel compounds targeting extracellular histones in the treatment of sepsis.

Sirtex said it expects to report findings from the Phase I study in the second half of the 2018 fiscal year and that will then evaluate commercial options for its STC314 compound.

The company’s core technology, its radioactive SIR-Spheres, have failed in a number of clinical trials this year. But Sirtex said that it still sees a path to market.

In May, the company revealed that the combined analysis of the Sirflox/Foxfire/Foxfire Global trials did not the primary endpoint of an overall survival benefit in patients and that there was no statistically significant survival benefit for patients in pre-specified sub-groups – including patients with metastatic disease confined to the liver.

Sirtex said that an exploratory analysis of the combined Sirflox and Foxfire global trials showed that median overall survival was improved for patients with a right-sided primary tumor. But the company added that it “does not believe another large clinical study to confirm this finding is appropriate.”

In a study comparing the standard-of-care chemotherapy drug, sorafenib, with liver-directed therapy in patients with hepatocellular carcinoma, Sirtex reported that there was no difference between the patients treated with Sir-Spheres and those treated with sorafenib.

The company pointed out that patients treated with SIR-Spheres experienced a number of toxicity and tolerability benefits compared to those treated with sorafenib.

Sirtex said it plans to file for FDA clearance in the first half of the 2018 fiscal year. If the company wins approval, the SIR-Spheres would be indicated for hepatocellular carcinoma.

SRX shares were trading at $14.56 apiece at close yesterday, down -10.5%.

$1 USD = A$1.26676

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