There has been much posted regarding the half year results. I...

There has been much posted regarding the half year results. I know it is unusual but I resisted too much comment myself as I wanted some time to reflect and hopefully take a considered view of events and the future for SRX.

Firstly, in my view Mr Market made a reasonable call in selling down SRX in the lead up to the results. Looks as if there was some leakage around the dose sales numbers. The traders, as always, appear to be in control for the very short term and as it happens it was one hell of a profitable trade.

Onto the presentation of the results. There has been copious comment about the split from 1st half to 2nd, and this is all fair comment. However GW and Dr Tom Duthy (investor relations) would have been very much aware of these numbers. Tom, being an ex analyst who covered SRX for a major investment house would have had a very good idea how the data would be received by the market.

I think GW oversold the EU reimbursement and 'late' publication of ASCO papers. They knew about both of these events at the AGM, nearly 4 months into the half, so pretty lame.  SRX could have been very specific about the half year split and simply used that data as the rationale. Secondly we have a number of precedents when SRX has updated the market with dose sales outside of half yearly reporting, and there was silence on dose sales YTD C2016. Tom would know that this would be interpreted by the Market as not good news.

So, IMO, either Tom has completely misjudged the market reaction and given GW not so good advice, or GW has chosen to ignore said advice. I prefer to think one of these occurred. Of course the third option was that dose sales are struggling in the first two months and there was little GW could do about it, in which case Mr Market and the traders have made another good call. When I say 'struggling', I refer to less than 20% growth and not that sales are not being made.

R&D - I fail to understand why they did not at least attempt to draw the line between the dots in regard to the delay in the RESIRT trial and the R&D. The fact that the trial has had 3 extension points for increased dosage is great news as the higher the dosage that is tolerable, the higher the opportunity to obtain a good result in the kidney. This could have had more focus and a reasonable explanation why some expected news has been delayed. It was all there in the report but sometimes folks need the live to be drawn, especially when the key metric of dose sales was a little underwhelming. I'm also surprised that more was not made of the patent application for lung treatment. Again a great piece of news, albeit very very early stages.

Profit number, excluding Forex benefits. I understand the concerns.

I would point out that $10m was earmarked for additional marketing last fiscal year, and from memory less than 50% was spent.  It was stated that the remainder would be spent this fiscal year, and I suspect a lot of that was spent in the first half. Maybe around $5m or so. This would account for a significant % of the increase. Marketing spend is always going to cause concern to SH when they don't see the immediate return. Unfortunately in a business like medical devices it really is a long game, and there can be a considerable lag between an uptick in send and the impact on sales numbers. It is not unreasonable for SRX to use the benefit of the exchange rates to spend the profit as it sees fit, with the primary aim to increase the long term value for SH, and not the ST headlines.

Trials nearing enrollment completion. It would have been a better presentation to show the recruitment rate over the last 6 months, and an estimated end date. I appreciate these are variable and outside the control of the company, but with nearly 2 months into the year I would have expected somewhere around 99% completion in both of these based on the previous 6 months recruitment data. In fact I was surprised that at least one of then had not completed yet - maybe it was a very close call.

Thus, my earlier comment, about the presentation not being one of the better ones. There was a lot that could have been said, or said in a better way. Tom would have known how the market would read the data, and should have advised GW accordingly. Maybe he did.

I have to conclude my views of the half year presentation as a not so good effort in the style and delivery  of the presentation. Considering GW is a marketing dude, and Tom is a serious investor analyst I must assume that there were more important aspect that took their time, and maybe a lot was delegated to the CFO, who would be most interested in the $ and not the presentation to SH.

Now, having got that of my chest - the future.
Asco papers. I think many have grossly underestimated the value.  Te special status of the open access really is not a normal event, and must be considered of value.The marketing dudes have been constrained until publication. I'm sure the reprint presses are in overtime mode and every sales rep will have a bundle of these as hand out and talking points. Medics want to see data. The high increase in Lung only progression is fantastic news and every oncologist must at least sit up and take note. It will raise the awareness considerably.  I would expect additional marketing effort at ASCO in June with further analysis of the progression data.

Dose sales. I still think the Americas had a really good result. 18% on top of 28% last year is really not too shabby, is it? I feel bad for the marketing folks in the US and ROW. With the delay in the ASCO publication they must have been pushing water uphill and desperately awaiting the paper. They still managed a pretty good result under the circumstances in the US. Well done.

Trials. A mentioned above I'd expect news of completion of 1 of the 2 remaining HCC trails within days, or weeks. Sad that they could not announce with the presentation, but it should be very soon.
RESIRT, again would expect completion very soon, and post 30 days the initial efficacy data. There is no reason why a larger trial is not announced in the very near future as the efficacy date for the initial 12 pts would have been available for some time now and assuming good news, the trail planning should be advanced.
I also expect new on a lung trail in the near future. The data has been known within SRX for some time, and now the patent application has been published there is no reason to waste any more time before starting a trial.

Looking further ahead.
Well we have the full year dose and fiscals and these will be interesting.  If they do end up at around 20% then CW will have been vindicated, along with the many HC posters who made the valid point about the split of sales between 1st and 2nd half. If the number come in much above 20% then I guess everyone will be most happy. However if they come in at around the 15-17% then the SP will be hit hard, in the absence of other really good news.

ASCO in June may yield some beneficial data. I think reimbursement in the EU will be somewhat easier with the latest and maybe new data in June. And the first HCC data set towards the end of the year will be a killer one way or the other.  There will no doubt be increased speculation leading up to the results, and should the data disappoint then another immediate sell off. Just the nature of clinical trials and the hopes of investors. However if the data shows an improvement in OS of at least the same as SOC then it will make the current SP insignificant. We can only do the research and make are own informed view. I think the previous evidence, as discussed on another SRX HC tread bears out a win on this one.

2017 - the OS for mCRC. This is probably a good chance of a result, especial now we have the latest ASCO paper. I would dearly love to explore this with any medcos that have good oncology knowledge. My view is that progression in the lung is less of a killer than progression in the liver. Thus my logic (often flawed) is that this should be a good indicator of extended OS to some degree. I also think that in the SIRFLOX trial there was a significant learning curve in those early years and that the later 2 trials would have benefited from those learnings. Secondly the advances in PET scanning over the past 10 years should have made for better pt selection and thus more targeted end results.

Scale of trail data. SRX will have completed trails involving about 2000 pts for mCRC and HCC. This data set is most valuable for future development. They know more about liver cancer and how radiation impacts it than any other company in the world. How valuable this is, is unknown but better to have the data set than to be going in almost blind as they were 10 years ago.

To Sum up
Presentation of data leaves a lot to be desired. Classic school mark 'could do better'.
Current SP is a bargain for anyone who thinks the HCC data will yield a good result.
Current SP is a bargain for anyone who thinks the mCRC will yield an OS benefit.
Current SP is probably in value ares for those who have serious doubts and are relying on incremental but slowing growth rates of dose sales.
Current SP is overvalued to those who believe sales will be static or decline, for whatever reason.

I retain 'buy' as I think one or both of the top two above will be the go.