Medical device maker Sirtex Medical Limited (ASX: SRX) appears to have moved back into the takeover spotlight with reports in The Australian newspaper suggesting that global giant Bayer is running the ruler over the Australian-based business.
Indeed, a merger between the two entities has been spoken about for some time with reports from Bloomberg dating back to September 2012 speculating about a tie-up. Since then, Sirtex's stock has more than tripled in price from $8.40 to trade at $28 (down from a 52-week high of $39.95) as sales of its core SIR-Spheres microspheres product have continued to skyrocket.
In fact, just last week Sirtex reported that sales for Sirtex's SIR-Sphere microspheres had lifted by 22% in the first 10 months of the financial year, while the results from its SIRFLOX trial also confirmed an improvement in survival rates for liver cancer patients, adding an average of 7.9 months to the survival rate to 20.5 months.
Bayer is a German-based multinational chemical and pharmaceutical company and seems like a reasonable suitor for Sirtex. As highlighted by The Australian, Bayer was involved in the development and marketing of the drug Nexavar, which is another treatment for liver and kidney cancer.
In saying that, an acquisition of Sirtex could also be risky given the company's reliance on the success of one single product. In March this year, the stock more than halved in value (wiping more than $1 billion from its market value) after preliminary trial results failed to result in a statistically significant improvement in the overall progression-free survival rate for patients in its SIRFLOX trial.
With solid growth in sales and promising research results, Sirtex represents a fantastic company with long-term potential, but it is also a risky proposition. As such, investors with a low appetite for volatility may want to give this one a miss, for now.
