Sirtex Medical (ASX: SRX) reported a profit after tax of $11.2 for the half year, up 43.6% on the previous corresponding period, meaning this Australian biotech company has had 38 consecutive quarters of growth. Every dollar invested when the company listed in 2000 has compounded 23% annually.
In the future, Sirtex could emulate other players in the biotechnical field, including major Australian medical success stories CSL (ASX: CSL), Cochlear (ASX: COH) and ResMed (ASX: RMD). These three companies have been able to dominate markets overseas but have taken many years to obtain approvals and medical acceptance for their products. Like the big players, Sirtex is developing products that are proving to be efficacious in niche markets. It is by successfully investing in research and development that these companies position themselves for future success.
Sirtex is pioneering what are called "microspheres" in delivering treatment for liver cancer. Annual growth in sales of microspheres has been on average 28% since initial sales in 2005.
To avoid dependency on a single product, Sirtex is employing various types of nanotechnology. There is Carbon Cage Nanotechnology, involving hollow carbon-based nanoparticles engineered to carry radioactive material. Secondly, there is use of large polymer chains to create polymer based microspheres. Thirdly, there are radio-protector molecules that protect healthy cells from the effect of radiation.
Earnings per share were 19.5 cents in the recent half year compared with 13.6 cents in the previous corresponding period, a 43.4% increase. As dose sales of 3,919 were up only 11.3%, the profit margin per sale has increased to provide the difference in profit.
The business is continuing to be robust as advances develop in liver cancer treatment.
The latest Half Year Results Presentation showed that there has been a continued investment in the company's strategy creating a solid foundation, delivering strong growth and multiple opportunities.
Foolish takeaway
Shares in Sirtex have risen to an all-time high of $15.47 at time of writing. A suggested pull-back to $14.50 within a few days would present a reasonable opportunity to purchase. A cursory glance at the chart shows a good trend upwards over the last four years with higher highs and lower lows. I expect that general trend to continue as microspheres play an ever-increasing role in treatment of liver cancer over the next 10 or so years. I recommend that Sirtex be bought by long-term investors interested in capital gains and eventual dividend returns of 5% or better.
