Fundies’ favourite – Sirtex Medical

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How long have you held the stock?

A little over one year.

What do you like about it?

Sirtex is an Australian-domiciled company, which sells a product called SIR-spheres, an innovative liver cancer treatment that has regulatory approvals for use in major international markets. Dose sales have grown at over 20% per annum, driven by increased clinical awareness and emerging evidence of the efficacy of the treatment. The company is profitable, has substantial cash reserves and no debt.

Stock Chart for Sirtex Medical Limited (SRX)

The company estimates its treatment is being used in only a fraction of the addressable market. The key to capturing a greater share is to drive greater awareness and acceptance of the therapy by the medical community. To achieve this, management is investing in the business foundations from which it can build a larger sales base and drive growth. The areas of investment include large-scale clinical trials to strengthen the case for use of its therapy, expansion of the sales and marketing team and production capacity.

How is it better than its competitors?

Sirtex’s cancer treatment uses microspheres to deliver radioactive yttrium-90 directly to liver tumours, a procedure called SIRT (Selective Internal Radiation Therapy). Other treatments for inoperable primary (HCC) and metastatic colorectal (mCRC) liver cancers include chemotherapy/TACE and radioablation. SIRT patients experience usually mild side effects and it provides a differentiated therapy option, particularly for tumours, which are unresponsive to existing chemotherapy.

What do you like about its management?

Management has demonstrated a capacity for strategic oversight and detailed long-term planning. Sirtex’s management team started by developing a coherent strategy and growth plan and is now executing this in a consistent manner. Meanwhile profitability has continued to grow and the balance sheet remains strong, despite considerable investment. The company is also exploring longer-term horizons to grow value, developing further applications for its therapies as well as new therapies.

What is your target price on the stock?

We anticipate that Sirtex will maintain a strong double-digit revenue growth profile for a number of years. On this basis our price target is $16 per share.

At what point would you sell it?

We would sell Sirtex once its products reached maturity and ceased to offer meaningful growth potential.

How much has it added to your overall portfolio over the last 12 months?

Sirtex’s share price has performed strongly over the last 12 months and has been a strong contributor to the portfolio. Liquidity has increased as it attracts greater investor interest. The value in Sirtex lies in its growth potential, the company has a highly profitable business, which is expanding rapidly from a small base into a large market.

Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regards to your circumstances.

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