It’s that time of year again – the blackout period – one of two windows in the year when senior management teams of many listed businesses refuse to take calls and meetings with investors.
With their books, budgets and results largely signed off in preparation for half-yearly reporting season, given the risk of selectively briefing market participants and the penalties that could be levied (and although as fund managers, we find lack of access frustrating), it’s fair enough.
During a void of information and in what many others call their down time, we have instead been reviewing our existing portfolio positions, scratching around for anecdotal evidence and also hunting for new ideas.
As you will find below, we have put together a list of companies whose recent market announcements since the start of January have caught our attention, both in terms of the business being considered by us to be a quality operation, and also the announcement reflecting encouraging prospects for future growth.
Some of these might be worth following more closely in the months and years ahead:
Of these four, we currently hold shares in just one – Sirtex Medical Limited (SRX). A business we believe has very bright prospects and whose share price rallied an amazing 25%, within just two days after announcing their second quarter growth in dosage sales on 8 January 2014.
Sirtex is an Australian medical device business whose core medical device, a product known as SIR-Spheres, has been refined over the years to deliver a highly-focused radioactive dose directly to liver cancers (Hepatocellular Carcinoma, or HCC). We wrote extensively about what the company does in early November here .
While SIR-Spheres are by no means a cure for liver cancer, as we can show below (even without statistically significant clinic results being available to support the use of Sir-Spheres; a usual medical requirement), actual clinical success of the device and excellent patient outcomes over many years throughout Europe, America and the Asia Pacific, has resulted in quarterly dose sales growing strongly.
And while focusing on quarter-to-quarter growth isn’t something we encourage, 38 consecutive quarters of dosage growth (we have shown just 14 quarters above) suggests the business is on to something special.
The next phase
Growth rates averaging 20% per annum over this period also suggests that this exciting but still largely unknown treatment and its success to date has forced management to take the next logical step. This being to undertake a large and expensive Phase 111 clinically significant randomised medical study: one that is now fully recruited (with hundreds of patients) and slated to be completed later this year.
Potentially stemming from positive test results, and likely to be released in 2015, is a step-change in both Sirtex’s market position and addressable market. This step-change is possible because SIR-Spheres currently operate in the salvage setting. This means they are administered once all other medical treatments have been exhausted.
The current study pairs the medical device with chemotherapy (SIRFLOX) in an attempt to show that the combination as a first line of defence significantly improves patient outcomes both in extending and improving quality of life.
Rather than being the last cab off the rank, the potential to expand the number of patients who can receive the treatment by a factor of six, is an exciting outlook and a potentially exciting development in healthcare technology.
Management is therefore focused not only on the trial, but also what happens afterwards. In that regard, an expansion of their sales teams and manufacturing facilities in anticipation of servicing strong future demand is currently being undertaken.
There are risks, of course. SRX is largely a one-product company, and if the study is unsuccessful, the impact on the business would be disastrous.
Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regards to your circumstances.
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- My SMSF: A shared responsibility 
- Tony Negline: Keep your binding death benefit nominations and your will aligned 
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