1. ResMed Inc. (CHESS) (ASX:RMD)
ResMed designs, manufactures and distributes medical equipment for treating and diagnosing sleep disorders. ResMed's potential market opportunity is huge. The National Heart Blood and Lung Institute estimates that 12 million people in America suffer from sleep apnea and ResMed believes that currently only four million people are treated or diagnosed each year. Analysts at UBS estimate that around 100 million people globally suffer from sleep apnea, with the rate of people suffering from sleep apnea increasing by between 4-8% each year.
As a global leader in sleep apnea treatment, ResMed is set to benefit over the long term. Furthermore, ResMed has a strong history of financial performance by increasing earnings per share, and analysts have forecast earnings growth of 20% for FY15. Currently trading on a price earnings ratio of 20, the shares look cheap.
2. Sirtex Medical Limited (ASX:SRX)
Sirtex Medical has developed a novel device to treat liver cancer that involves the infusion of radioactive microspheres to target liver tumours. The share price of Sirtex Medical has increased by a whopping 90% year-to-date. Is there more upside to the share price or has the future growth already been factored in?
Sirtex increased dose sales by 27% for the quarter ended 30 June 2014, and sales from the Americas increased by an impressive 33%. Sirtex has now reported 40 consecutive quarters of dose sales growth, increasing 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. Successful results 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 with symptoms regarded as eligible for the treatment.
However, if the results were successful, the Sirtex product could be used as a "first-line" 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.
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 significantly as the company will continue to grow sales strongly.
