Sirtex Medical Limited (ASX: SRX) has become the latest business to issue a dire trading update, following in the footsteps of Bellamy's Australia Ltd (ASX: BAL) just one week ago.
As expected, the shares have come under enormous selling pressure today as a result.
While the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) rose 0.1%, Sirtex Medical's share price was slammed as much as 52%, slipping to a low of just $12.20. Shares were fetching $12.99 at the time of writing.
The Update
In an announcement to the market this morning, Sirtex Medical – an Australian-based global healthcare business – said it expected worldwide dose sales to grow just 4% to 6% in the first-half of this financial year. That's down from a much more robust 15.7% rate of growth it enjoyed in the same period last year.
At the same time, the company expects EBITDA to fall between $30 million to $32 million, down 9% and 16% compared to the prior corresponding period. Notably, EBITDA is earnings before accounting for interest, taxes, depreciation and amortisation.
The lower end of the full-year guidance provided by management suggests the second-half mightn't be much better. It expects sales growth to be 5% to 11% and EBITDA in the range of $65 million to $74 million.
Based on that earnings forecast, the worst-case scenario suggests a decline of 12% year-on-year. Best case, it records no growth at all.
The business blamed an increase in competitive pressures in the medical oncology referral market and the Interventional Oncology market in the Americas, as well as unexpected tightness and delays in reimbursement in Europe, Middle East and Africa, or EMEA.
Sirtex's CEO, Mr Gilman Wong, said:
"We anticipated achieving double digit growth in the first half, however trading conditions have been volatile and impacted by a number of factors, including increased competition for patients with liver-directed therapies, a new drug approval in salvage metastatic colorectal cancer and restrictions in reimbursement."
He continued, "We have implemented a range of strategic initiatives across the regions to address the disappointing first half, which we anticipate will result in an improved second half and full year dose sales performances."
What happens now?
Investors are right to be disappointed in today's update, and many will likely draw attention to the fact Mr Wong recently sold a large parcel of shares in the business.
On 7 November, he stated that he had sold 74,968 of the 274,968 shares that he held to cover tax incurred on his recently vested tranche of rights. At the time, he also noted that he had informed the company's Chairman in July 2016 of his intention to do so which, if true, seems reasonable enough.
Still, investors will likely question whether now is the time to offload their own shares in the business. It has enjoyed a tremendous run over the past five years, but fallen significantly over the past 12 months.
Rising levels of competition is certainly a concern, as are the substantial decline in first-half growth and uncertainty going into the second half. That said, the company has stated that it has implemented a range of strategic initiatives to improve its performance in the second half. Based on the magnitude by which the shares have fallen today, it could be worth holding on to see whether that comes to fruition. After all, much of the damage has already been baked into the shares.
