Sirtex: Interim result 2016

After 45 consecutive quarters of growth, it comes as little surprise that Sirtex Medical has posted a 46th.

Sales of the company's internal radiotherapy for liver cancer, a product known as SIR-Spheres, increased 16% to 5,728 doses for the six months to December.

This demonstrates the growing support for the therapy in the medical community, which was no doubt helped by positive results from the SIRFLOX clinical trial.

As we explained in Sirtex trial better than expected, the trial found SIR-Spheres added nearly eight months to median progression-free survival – a 63% improvement – as well as significantly lowering the risk of a patient's tumours progressing. This suggests that SIR-Spheres may be an effective first-line therapy.

Revenue increased 40% to $113m, helped also by the lower Aussie dollar. Though the company increased marketing spending by $7.4m, most of Sirtex's costs are fixed so 27 cents of every additional dollar of revenue fell straight to the bottom line. Net profit rose 47% to $26m.

US & EMEA

The number of treatment centres using SIR-Spheres in the US rose 18% to 533, which helped increase sales in the region by 19% to 4,028 (70% of the total). US revenue rose 46% to $89m.

In addition to the foreign exchange tailwind, management attributed the strong result to increased utilisation and awareness following the additional investment made in sales and marketing.

Dose sales in Europe, the Middle East and Africa increased a more modest 9% to 1,219, with the number of active treatment sites increasing 10%. Revenue rose 19% to $19m, mainly due to the positive currency effect.

Australia Pacific revenue increased 27% to $4m thanks to a 9% increase in dose sales and the company said that it is making progress with regards to Sirtex's entry to the Japanese and Chinese markets.

Research and development

Sirtex spent $11m in the period (down 10%) on clinical studies that it hopes will further improve acceptance among doctors. General R&D expenses, however, increased 32% to $5.4m.

'R&D expenditure is allocated across a select number of programs which seek to improve our current SIR-Spheres microspheres product under the SIR-Spheres Evolution program, and the development of a range of different platform technologies, such as carbon cage nanoparticles, polymer coated magnetic nanoparticles and a novel radioprotector compound' said management.

With a recent 2.8% increase in US Government reimbursement for Sirtex's therapy and the suspension of the 2.3% medical device excise tax – as well as the positive SIRFLOX study results – management expects another year of growth ahead. 

Sirtex's share price has risen almost fivefold since we first upgraded it on 8 Nov 10 (Speculative Buy – $5.90). As a one product company, it remains a high-risk proposition, so we recommend members lock in profits as the share price rises and keep their portfolio weighting below our recommended maximum of 3%.

Nonetheless, with profitable sales growth, no debt, and plenty of potential from its ongoing clinical trials, there's still every reason to HOLD.