Ann: Clinical Study Result , page-19

I have the research article mentioned in the 23 October Press Release (I live close to Monash University).

It adds interesting perspective as follows:

.. There are many different “dose types” administered dependent upon the exact nature of the patient’s cancer

.. Even in these trials SIR-Spheres is a component of a treatment regime that started well before SIR-Spheres were administered and, in some cases, following that administration

.. The Trial only administered SIR-Spheres to 29 patients; however there are references to 3 other studies all of which have similar positive results

..The treatment prolonged life by 4.8 months (20 weeks)

The conclusion is a bit sobering:

“Radioembolization offers a promising addition to Basic Supportive Care in treatment-refractory patients for whom there are limited options. Survival was prolonged and adverse events were generally mild-to-moderate in nature and manageable.”

This paper is a bit of a two edged sword for me. The SIR-Spheres treatment itself is very narrowly focussed to specific circumstances (and appears to be effective in those circumstances). For the medium term reduces the possibility of a disaster scenario where an alternative therapy becomes available that will render SIR-Spheres redundant. But at the same time the narrow treatment focus limits its application to that small market.

The slide Gillman Wong often uses to show current market presentation (p14 September Presentation) talks about “less than 1%”. The true market is not patient driven. Key factors include patients that have sufficient financial means who are treated by Oncologists with experience of SIR-Spheres and near appropriate facilities.

The result is that the total market for SIR-Spheres is probably significantly smaller than that slide suggests but still provides significant scope for increased sales.

The reason I’m going through all of this is to try to identify “what could go wrong”. Sirtex has a profitable and growing business model that is well past the speculative stage. It is in a very narrowly defined market, but that is OK. Even a competitor with a “me too” product is OK there is enough market to go around.

While new products will come I suspect there is already a range of SIR-Spheres at differing does sizes radiation levels etc.

The share price will continue to increase if the business continues to grow. My calculations are that current dose sales growth rates around 40% until end 2015, at the current share price/market cap produces an IRR of 11.3% against future cash flow earnings implying a prospective price to earnings ratio of approximately 9x.

This prospective PE is a bit lower than I said earlier but the share price is $1 higher!!

I hope this helps.

P.S. I don’t believe they brought sales forward