Innovative cancer treatment business Sirtex Medical Limited (ASX: SRX) held its AGM today with the chief executive forecasting dose sales growth at least in line with the five-year compound annual growth rate of 19.7 per cent.
In 2015 the business grew dose sales of its SIR-Spheres radiation therapy at 19.5 per cent, but sales revenues grew at 36.1 per cent thanks to higher pricing and the tumbling Australian dollar.
Both these factors are tailwinds the business may continue to enjoy beyond June 2016 and the news that dose sales growth is expected to be higher than the prior year suggests another bumper year for a business that is also investing heavily in its long-term growth.
Sirtex continues to invest in clinical trials to promote the effectiveness of its micro-spheres therapy in the first-line treatment of metastatic colorectal cancer patients and the CEO today suggested acceptance of the treatment has gained momentum amongst oncologists. This corresponds to the large amount of publicity generated by its SIRFLOX trial and subsequent marketing effort designed to promote sales of the treatment.
Sirtex presented the initial results of its SIRFLOX trial data in June of this year and has five other major clinical trials in progress aimed at improved clinical outcomes for patients, with potential to promote the medical effectiveness of its products.
The company has also flagged that it is formulating appropriate strategies to enter the giant Chinese and Japanese markets, while acquisitions of junior rivals are also a possibility.
The business earned 71.4 cents per share in the last financial year and when you factor in more strong sales growth and the opportunity to lift margins then today's price of $34.75 may be attractive to investors willing to take on some more risk.
According to Thomson Reuters, analysts are estimating the group could earn 99 cents per share in FY16 which would place the group on an estimated 35x forward earnings – pretty reasonable given that would equate to a gangbusters growth rate in the region of 40% over the current year.
Of course these all are just estimates, but given the large addressable markets, growing momentum, and a low penetration rate to date for its products the long-term outlook remains attractive, although comes with risk around it being largely a single-product business.
Two more of my preferred global healthcare businesses that will probably offer investors a less volatile ride include medical device maker ResMed Inc. (CHESS) (ASX: RMD) and CSL Limited (ASX: CSL).
Both look reasonable value at current prices and with multiple product lines and market-leading reputations they offer investors more certainty than the high risk / high reward prospect of Sirtex.
