The Sirtex Medical Limited (ASX: SRX) share price is down 1.7% to $13.40 in morning trade and has now fallen 7 per cent over the past five trading days as the provider of specialist oncology treatments faces mounting problems on different fronts.
Rising competition?
Perhaps the biggest problem for the business are the reports suggesting that the company's core selective internal radioactive therapy (SIRT) treatment may face "intensifying competition" from alternative therapies in its core U.S. market.
In fact the company itself acknowledged in December 2016 that sales growth was slowing in part due to "increased competition for patients with liver-directed therapies, a new drug approval in salvage metastatic colorectal cancer and restrictions in reimbursement".
More specifically analysts at Morgans and elsewhere have also reportedly suggested that new treatments such as inhibitors Stivarga or "checkpoint receptor inhibitor" Opdivo threaten Sirtex's overall market share. It seems the rise of IV-infused immunotherapy oncology treatments could pose a significant threat to this fallen market star.
Moreover, as I have pointed out previously, if Sirtex's sales growth is slowing in what is supposed to be an under-penetrated market then it looks like it is already losing market share.
Evidently, a company with a single product losing market share as healthcare technologies advance carries a substantial amount of risk to the downside.
Legal problems
Sirtex also recently paid corporate regulator ASIC a $100,000 penalty over allegations it breached its continuous disclosure obligations in failing to keep the market updated as to its dose sales growth over the six-month period ending December 31 2016.
Fee-hungry class action lawyers like Maurice Blackburn are also proposing a class action against the business over alleged breaches of its continuous disclosure obligations and won't act as magnanimously as ASIC.
As such Sirtex could face a big compensation bill if the allegations against it are proven with IMF Bentham Ltd (ASX: IMF) proposing to fund the action on behalf of shareholders and its acting legal team at Maurice Blackburn.
Outlook
Sirtex does retain a strong balance sheet and may be able to face down its competitors to succeed over the years ahead, but I'm not surprised to see its share price falling and expect it may come under further pressure through 2018.
In the healthcare space, I'd much prefer market leaders Cochlear Ltd (ASX: COH) or CSL Limited (ASX: CSL) as investments. They trade on sky-high valuations that are perhaps justified due to their competitive advantages and earnings moats. If for example the prices of these stocks pulled back sharply due to a crisis on the Korean peninsular smart investors may use this as an opportune time to buy.
