The Sirtex Medical Limited (ASX: SRX) share price edged lower to $13.90 in morning trade after the company revealed dose sales growth of its cancer treatment was "flat" for Q1 FY 2018 compared to the prior corresponding quarter (pcq).
However, due to the company reining in costs versus the pcq profit was up 3% or 11% or on a constant currency basis adjusting for the effects of a weaker U.S. dollar that proved a headwind over the quarter ending September 30, 2017.
The market's muted response to the profit growth is likely a response to concerns that "flat" dose sales growth is a symptom of rising competition in its core U.S. market.
Moreover, ever since the group lost its Head of Americas Mike Mangano in 2016 it seems sales in the region have been softer-than-expected as the market's valuation of the business gradually retreated.
If the business is losing market share in the world's largest and most medically advanced healthcare market it may suggest that competition in the form of new more advanced medical treatments is starting to be preferred as a treatment option by oncologists.
This would be a troublesome scenario for investors as Sirtex currently only has a single product and the operating leverage it enjoyed as dose sales grew between 2012-2017 can also work in reverse with interest.
To be fair Sirtex was a stock worth owning and story worth following back in 2014 when dose sales were growing at double-digit rates and it had potential to widen its addressable sales markets via its clinical trials.
However, in 2017 the outlook is more troublesome with dose sales "flat", competition rising, and varying interpretations as to the success of its recent clinical trials.
Of course this is no big secret and is reflected in the stock's 52% fall over the past year, with potentially more falls to come in 2018.
The decision of its former CEO to sell $2 million worth of shares in a move that saw him sacked and now reportedly under regulatory investigation also adds to the impression that insider confidence as to the group's dose sales trajectory may not be as strong as is publicly presented.
For my money there's too much risk around Sirtex as an investment 2017, despite the stock's price reflecting a more muted outlook and if you want to do well in the share market you've got to find the find the winners of tomorrow, rather than the winners of 2014.
As such in the healthcare space I would prefer to look to a business like CSL Limited (ASX: CSL) that may be expensive, but is growing market share and has significant barriers to entry that go someway to justifying its price premium. CSL shares are up 36% over the past year and I expect its growth will continue to provide solid total returns to investors.
