Ann: Senior Executive Departure, page-24

Bungay - Posted this a while ago re 1st half v 2nd

A number of great ‘finds” and posts over the last couple of weeks so thanks guys and please keep them coming (even if I have to read them 3 or 4 times to understand them!).Now that the dust has settled over the half year numbers I think its now time to look at the future.

We were all disappointed with the half year dosage and the market reflected that by punishing the share price. I was also less than impressed by Gilman Wong’s reasons for the shortfall in dosage sales – as well as the telephone hook up in general.

I sold nearly half my long term holding (in super – held for a couple of years and for well over twice what I paid) and concentrated on other stocks and results.
In reflection I probably acted hastily and have topped up again (a couple of dollars less for than what I sold) to get back to my original holding.

In looking at the sales there is certainly a second half “seasonal” factor which I failed to appreciate. Tabled below is the dosage split by half. I have put some numbers in for the second half to get the numbers back to a 19.7% CAGR. The second half split for 2016 does not look out of place to other years.

	Column 1	Column 2	Column 3	Column 4	Column 5	Column 6	Column 7	Column 8
1		2010	2011	2012	2013	2014	2015	2016
2	1st Half	47.9%	46.7%	43.9%	48.3%	45.8%	48.3%	46.7%
3	2nd Half	52.1%	53.3%	56.1%	51.7%	54.2%	51.7%	53.3%
4	Total	100.0%	100.0%	100.0%	100.0%	100.0%	100.0%	100.0%

The second table below represents the numbers by Region for the full year (my estimate for 2016). The total dosage number for 2016 is the same number I used for the splits used in the 1st table. The full year dosage number of 12,273 means SRX has to do 6,545 doses in the second half. This is a 23.4% increase on the 2nd half of 2015. A big number for the second half but has been achieved before (22.0% in 2011, 29.8% in 2012 and 22.9% in 2014).

	Column 1	Column 2
1	Americas	8703
2	% Increase	23.0%
3	EMEA	2559
4	% Increase	12.6%
5	APAC	1011
6	% Increase	12.0%
7	Total	12273
8	% Increase	19.7%
9

The big driver again – unsurprisingly - will be the Americas. The expectation here will be the investment in sales & marketing, the increase in treatment sites (17.1%) and the release of the SIRFLOX study results as a rapid communication in the Journal of Clinical Oncology will deliver the growth. I don’t think this is unreasonable however if numbers fall short you would have to question the sales & marketing investment.

I don’t think the numbers I have put in for EMEA and APAC are unreasonable. I am not sure what happened in Sth Korea and I don’t think the loss in sales in the 1st half has been quantified but management says it has been resolved. There is also an increase in treatment sites but fairly small when compared to the Americas.

It is interesting to see the average dosage sales per treatment site in the Americas is double that of APAC and 90% bigger than EMEA. So to have the Americas as the fastest growing segment and the highest revenue per dose certainly gives the company a positive sales mix. Without understanding the differences in dynamics between treatment centres throughout the world you would think there would be plenty of upside to get more usage per treatment site in the rest of the world up to the Americas level. In the 1st half alone there would have been more than an additional 1500 doses sold if the rest of the world was at the Americas level.

I see no other key events happening in the next 4 months which will drive sales. SARAH is late in the year and I am not aware of anything SRX will be doing over and above normal sales activity to drive sales.

As for the share price over the nest 12 months the announcements SRX will have are the full year numbers, SARAH and then the 2017 half year numbers. If the full year numbers get back to the 19.7% CAGR then I think we will see the SP get back to the $36 to $40 mark. Positive SARAH results will be the next key driver and this combined with a good half year number (Feb 2017) should see the SP nudging the $45 to $50 mark – IMO! As I type the SP is $31.22. More than happy to book a 44% to 62% return in 12 months. I don’t see 100% recruitment for SORAMIC or SIRveNIB being a share price mover, while I am assuming FOXFIRE and FOXFIRE Global endpoint data will be late 2017.

Anyway lets have a look at the full year numbers and review then. I am cautiously optimistic that Sirtex can deliver and the SP will be well above current levels.

Cheers

SLC