Chairman denies Sirtex fire sale claims

Despite rumours that Sirtex's Dr Bruce Gray is wanting to cash in his stake and sell out to established US pharma Cephalon, it appears he is still keen to steer his fledgling company towards a profitable future.

Gray, founder and executive chairman of the oncology biotech at the centre of a $270 million bid by Cephalon, totally refuted comments that he wants to take the money from the higher share price, saying that he could do that without Cephalon.

"If I just wanted the money I could have sold my shares on the open market," he said. "If Cephalon goes for the offer or if it doesn't it doesn't worry me. It's up to the shareholders either way."

Sirtex has built its reputation on SIR-Spheres, a biocompatible radio-active microsphere technology that delivers beta radiation from Yttrium-90 isotopes direct to the seat of liver tumours. SIR-Spheres travel via the blood stream, and are trapped in the small blood vessels of the tumour. Once trapped, they irradiate the tumour, whilst most of the normal liver tissue remains relatively unaffected.

The technology has been rolled out across hospitals in the US. Gray said that the technique was proving very valuable, and described it as "real technology" not simply an unproven theory.

"We are also working on our 'hyperthermia' technique which uses similar spheres to heat up tumours and destroy them. This has potential but people have to make up their own mind about it still -- it is still at the R&D stage, and needs a value judgement to assess [its real worth]," he noted.

Gray said that as far as he knew, Cephalon had not yet had a positive response from the shareholders to its $AUD4.85 share offer. "I have not seen a lot of [offer] acceptances so far," he said.

Cephalon has an option on 19.9 per cent of Sirtex's capital, and would need to convince both Gray (16 per cent) and investment house Hunter Hall (14.8 per cent holding) to sell at a reasonable price in order to control the company.

Jack Lowenstein, investment team member at Hunter Hall, said the reason it had bought steadily into Sirtex was because the company looked a good investment -- not just a good biotech.

"We are not a specialist biotech investor, and saw Sirtex as a pure investment vehicle," he said.

"They had reached an interesting stage of development and had a proven concept. They did have some issues with their Aussie origins potentially slowing inroads into the major markets, but they have obviously overcome that now," he said.

Gray said the original reason for seeking the share offer was a cash shortage at the start of last year.

"We were struggling to meet our milestones, and investor confidence had dropped. We looked at lots of options, and employed a US-based financial advisor to help us with alternatives. This offer from Cephalon was the only one that made it to the table, although others expressed interest," he noted.

But now the company has weathered last year's crisis and is no longer in need of any urgent outside support.

"I'm not sure what the end result will be," said Gray. "It is unlikely Cephalon will want to be a minority shareholder. I'd guess they will either want to acquire the whole company or walk away. It's up to the shareholders."

'A very good sign'

Some observers are doomsaying the offer, asserting it is unlikely to get up given the share price Cephalon are offering compared to the 'what might happen' scenario. However, if Sirtex hits the big time, it is likely the stock will reflect Gray's confidence in the company.

Either way, it looks as though some of the more adventurous Australian biotechs are coming to the attention of major overseas pharma, which many see as a good thing.

"Whatever happens, I'm delighted to see Cephalon's interest in Sirtex," Cerylid CEO Dr Jackie Fairley told a Sydney conference today. "We really need local biotechs to get on the world investors' radar screens. This offer is a very good sign."