UBS write up

Sirtex Medical Limited
Positive lead indicator on trial data – We upgrade
sales & valuation
Positive trial data creates 'runway' for sustainable 20% dose sales growth
An Australian study emerged in early Sep-15 which showed that Sir-Spheres and
chemo improved patient Overall Survival (OS) by an average 26% compared to chemo
alone. This may be the best data point before a cascade of OS data from SRX, starting
CY16. SARAH, FOXFIRE & FOXFIRE Global are the key trials that are capable of
expanding the addressable market by >10x over the next 5 years. We upgrade our dose
sales growth to factor in sustainable 20% growth, which assumes positive trial results
expanding the market, but capped by practical considerations. We switch to a classic
DCF to set a PT of $50.00. We maintain a BUY rating and acknowledge further upside
potential in the event that SRX can tap into the larger markets at a faster rate.
We await results from future trials: SARAH & FOXFIRE / FOXFIRE Global
We expect SRX to sustain incremental market penetration at ~20% growth until the
release of their next major trials. To recap, SARAH is a trial on HCC, with Sir-Spheres
going head-to-head with the current standard of care (Sorafenib) and the primary
endpoint being OS. If the trial reveals compelling results, i.e. >4months improvement,
where previous mCRC trials of ~8mths improvement in liver-only PFS are encouraging,
SRX can apply for a PMA to expand their label for HCC use in the US with potential for
exponential growth on switching – capped only by capacity. FOXFIRE & FOXFIRE Global
trial results are expected to be released early CY17. Strong OS results would allow SRX
to market their product to the first-line mCRC market.
Refining the addressable market – the runway gets longer
The SRIFLOX trial results have now enabled SRX to recommend broader use of their
product, i.e. beyond the salvage treatment line for patients with liver-only metastases.
We estimate that this represents a 6x expansion of the addressable market in FY15. We
also refine our HCC market and estimate that successful SARAH result would increase
SRX's market by 3x in FY17. Beyond that, and assuming positive FOXFIRE results, SRX's
opportunity lies in the first-line market, which would double its market in FY17.
Valuation: PT $50.00ps (was $43.00ps), Maintain Buy
We upgrade our dose sales growth to be reflect SRX's future addressable markets,
which even risk-adjusted and capped by capacity allows SRX sustainable 20% dose
sales growth. Our valuation is based on a DCF to set a PT of $50.00ps.