Shares in liver cancer treatment business Sirtex Medical Limited (ASX: SRX) lifted around 6 per cent this afternoon to $27.80 after the group provided updated guidance for dose sales.
For FY2016 the company expects worldwide dose sales of its radioactive microspheres treatment to climb 16.4% over the prior corresponding period (pcp). On June 1 2016 the company previously updated the market to expect full year dose sales to climb between 15%-17% on the prior year.
The most recent financial year looks a tale of two regions for Sirtex with US sales growing strongly and ex-US sales growth below expectations. In the US it posted 19.4% growth for the six months ending June 30 2016, compared to the prior corresponding half. This is a strong result in Sirtex's core US market and the reason why investors are bidding up the shares today.
Sirtex also enjoys the tailwind of a stronger US dollar after it exchanges sales revenues from the region into Australian dollars. Overall US sales were up a decent 19% for the full year.
However, sales growth outside the core US market was a disappointment, especially given that the results of its SIRFLOX trial were expected to help support the global sales effort.
Europe Middle East and Africa sales were up a moderate 11.9%, while the Asia Pacific region disappointed with growth of 8.9% over the pcp while cycling off a low base. The departure of the chief executive of the Asia Pacific region in November 2015 was a symptom of the company's troubles in Asia, where sales in South Korea reportedly ground to a halt due to management issues.
Investors though are forward looking and the Asia Pacific region may now be over its short-term problems with the company also recently flagging its medium-term ambitions to enter the giant Chinese and Japanese healthcare markets.
As the company has a fast-selling product but difficulties in promoting its use on a global scale it also looks a natural takeover target for global healthcare giants with the ready made global distribution networks to really crank sales.
Previously mentioned suitors include German and US healthcare giants Bayer and Cephalon, while the weakening Australian dollar adds to my expectations that renewed takeover interest could materialise in FY 2017.
If Sirtex is able to maintain high-double-digit compounded growth over the next three to five years the stock is a bargain at $27.78 and importantly it has several clinical trials in advanced stages that are designed to deliver the clinical evidence required to promote more sales of its therapy.
However, it remains a moderately high-risk investment as it is a one-trick pony not without competition that operates in the fast-changing field of medical oncology.
