Following the release of dose sales growth of 27% for the quarter ended 30 June 2014, the market capitalisation of Sirtex Medical Limited (ASX:SRX) has smashed through the $1 billion mark for the first time. Impressively, the Americas saw sales growth of 33%. The share price of Sirtex has increased by a whopping 58% since the start of 2014. The question for investors is whether the share price still represents value, or has the future growth already been factored in following the huge increase over the past 12 months.
Sirtex has now reported 40 consecutive quarters of dose sales growth. Dose sales have been a key measure of the company's performance and have increased from 3,658 in FY09 to 7,299 in FY13.
A key date for Sirtex and investors will be the release of clinical trial results in the first quarter of 2015, which if successful would likely deliver a huge growth in sales for Sirtex and send earnings and the share price rocketing. Currently, the Sirtex treatment is used as a treatment of last resort or as the company describes it "a last line, salvage therapy" with less than 10% of patients eligible for the treatment. However, if the results were successful, the Sirtex product could be used as a "first-line", stage 1 treatment, meaning the product could be used much earlier in the treatment process. This would mean that the potential addressable market for Sirtex would increase significantly.
Macquarie analyst, Craig Collie is confident that the trial results will be positive, backed up by the company tripling their manufacturing capacity later in 2014. However, even if the trial tests were not positive, the company has stated that dose sales growth should continue in line with prior historical growth rates, meaning that Sirtex will continue to grow sales and earnings even if the trial results are negative.
I believe there is certainly plenty of upside to the share price in FY15. A positive trial result would see the shares soar, however a negative result should not see the share price fall signifcantly as the company will continue to grow sales strongly.
