Why the Sirtex Medical Limited share price is climbing higher today

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The Sirtex Medical Limited (ASX: SRX) share price opened 2% higher at $12.11 this morning after the cancer treatment specialist announced that a Federal Court application to have its on-market share buyback postponed was dismissed.

This is good news for the company and its capital management plans as the healthcare specialist has an extremely strong balance sheet with no debt and around $100 million in cash on hand as at the end of December 31 2016.

Arguably, Sirtex also has an undervalued share price after investors reacted badly to a series of disappointing clinical trial results that all but ruled out the possibility of its flagship SIR-Spheres treatment being more widely used by oncologists in the treatment of different cancers.

The Federal Court application had been filed by a little-known team of Melbourne lawyers who at the end of 2016 also announced they would be chasing compensation from Sirtex on behalf of a single named shareholder over its recent market announcements.

Sirtex aslo recently fired its chief executive as a result of an internal investigation into his share selling over the second half of 2016 and has recently appointed a new full time CEO.

Although, today’s news that the company is free to commence its buy-back is a positive it does not mean it will escape the already announced claim and a possibly wider class action from shareholders upset over the December 2016 downgrade to dose sales forecasts. In that sense it could still be facing a decent sized compensation bill.

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Motley Fool contributor Tom Richardson has no position in any stocks mentioned.

You can find Tom on Twitter @tommyr345

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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