Should you buy Sirtex Medical?

Sirtex Medical (ASX: SRX) is a biotechnology and medical device group whose primary objective is to manufacture and distribute effective liver cancer treatments. It markets to the Americas and Asia Pacific, as well as Europe, Middle East and Africa (EMEA). Sirtex’s key product, Selective Internal Radiation (SIRT), uses microspheres to carry radioactive yttrium-90 by the bloodstream directly to the tumours in the liver. Here they preferentially lodge in the small blood vessels feeding the tumour and delivering their dose of radiation.

Like other major Australian medical success stories, CSL (ASX: CSL), Cochlear (ASX: COH) and Resmed (ASX: RMD), Sirtex has developed and exploited niche markets. Sirtex has established significant business overseas. Based on doses sold in the first quarter of the current financial year, 68% of business is in the Americas, EMEA is 22% and the Asia Pacific is 10%.

In early 2008 the company commissioned a production facility at the American east coast city of Boston to enhance its ability to service its U.S. customers. Then in 2011, it opened a facility in Singapore to supply Europe and Asia. In August 2012, the company said it would triple capacity at Boston, and in November announced plans to build a plant in Frankfurt, Germany.

Currently Sirtex is developing other products to avoid dependency on a single product. These employ various types of nanotechnology. There is Carbon Cage Nanotechnology, involving hollow carbon-based nanoparticles engineered to carry radioactive material. Secondly, there is use of large polymer chains to create polymer-based microspheres. Thirdly, there are radio-protector molecules that protect healthy cells from the effects of radiation.

Speaking at the 2013 annual general meeting, chairman Richard Hill commented: “While the Australian economy has slowed and conditions in many international markets remain a challenge, Sirtex is positioned to continue to deliver growth over the coming year.” Adding: “We are still very much in the early stages of our global expansion and Sirtex is well positioned for sustained long-term growth.” With no debt and return on equity of 20%, Sirtex is financially very well managed.

Foolish takeaway

Currently, Sirtex has a single technology whose application is being used more widely in existing and new markets, almost all of which are overseas. In addition, the falling Australian dollar, if it happens, benefits sales and profitability even further. Having experienced 32 consecutive quarters of growth, it can be deduced that solid growth will continue throughout 2014.  Accordingly, the share price should continue its trend upwards, and thus this is a stock well worth buying now, or during 2014.

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Motley Fool contributor Chris Koenig does not have shares in any of the companies mentioned.

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