This morning cancer treatment specialist Sirtex Medical Limited (ASX: SRX) reported a net profit of $53.6 million on revenues of $232.5 million for the full year ending June 30 2016. The profit and revenue are up 33% and 32% respectively over the prior corresponding year.
The company reported a final dividend of 30 cents per share, up 50% over the prior year and this represents a payout ratio of 32% on earnings per share of 93.7 cents.
This was another strong year of growth from Sirtex, although it's notable much of the profit growth was thanks to the stronger US dollar with constant currency adjusted net profit up 17.3% to a theoretical $47.5 million. Currency gains are real gains however and the 19% dose sales growth in its core US market was the year's highlight with overall dose sales up a respectable 16.4%.
The Europe Middle East and Asia region grew dose sales 11.2%, while the Asia Pacific region grew dose sales 8.9%, with strong growth in Australia offsetting disappointing performance across Asian markets in the region. The company is also aiming to move into the potentially large Chinese and Japanese markets, with reimbursements achieved in the new markets of South Africa and The Netherlands over the period.
For medical product businesses like Sirtex, Cochlear Ltd (ASX: COH) and ResMed Inc. (ASX: RMD) margins are critical, with Sirtex's gross margin lifting 50 basis points thanks mainly to product price lifts in the US. While the EBITDA margin that reflects expenses as a percentage of sales also declined 70 basis points in a positive sign as to the underlying quality of the product.
Sirtex also continues to invest heavily in research and development with several clinical trials designed to promote the use of SIR-Spheres in more advanced stages of oncology treatments due to report over the next 24 months.
The SARAH trial data is due to be released around the end of 2016, with a targeted goal of an overall patient survival improvement of greater than four months, compared to the results of rival treatment Sorafenib. Slightly more distant on the horizon are Sirtex's release of the FOXFIRE & FOXFIRE GLOBAL clinical trial results due later in 2017. Clinical success in any of these trials could rapidly expand Sirtex's addressable treatment markets and put a turbocharger under the already strong sales growth.
Outlook
Sirtex remains something of a one-trick pony with just a single product and therefore remains vulnerable to competitive threats or a general slump in demand for its products. This means it remains a medium-to-high risk investment that will remain volatile due to the great expectations built into its share price.
Management has forecast another year of "double digit" sales growth and if it can continue growing sales at close to its five-year compound annual growth rate of 19 per cent it should prove a rewarding long-term investment to today's buyers.
