After having recovered some of their value in the latter half of last week, shares of Sirtex Medical Limited (ASX: SRX) have returned to the red today to be trading 4.6% lower at $20.50.
So What: The biotechnology superstar entered last week in a trading halt with its shares locked in at $39 pending the release of an update on its SIRFLOX study. With the shares trading at such a premium, trial success was almost completely baked into the price.
However, when the company said that the primary endpoint of the trial had not been achieved the stock dropped a massive 62% decline (to just $14.80) shortly after the market opened on Tuesday.
To quote the company's release: "Preliminary analysis shows that adding SIR-Spheres® Y-90 resin microspheres to a current first-line systemic chemotherapy regimen for the treatment of non-resectable metastatic colorectal cancer (mCRC) does not result in a statistically significant improvement in the overall Progression-Free Survival (PFS)."
At the same time however, the secondary endpoint was more of a success, with the company saying that it resulted in "a statistically significant improvement in Progression-Free Survival (PFS) in the liver."
At $14.80, it's fair to say the stock was oversold by investors in a state of panic so a rebound was always on the cards. After having regained 55% to a high of $23.01, however, some investors are taking their profits off the table.
Now What: Investing in the biotechnology sector can be extremely risky. While enormous gains can be made when trials go according to plan, the losses can also be catastrophic when they don't – as has also been shown by Acrux Limited (ASX: ACR) and GI Dynamics Inc (ASX: GID) recently. As such, investors who are unable to stomach high levels of risk would be much better off looking to some of the market's safer sectors.
