Sirtex: the stars are aligning

Sirtex: the stars are aligning

Sirtex Medical Limited (SRX) is a business we have covered a number of times in the past on the blog. You can find some of our past thoughts here, here and here.

Sirtex was one of this year’s reporting season’s notable high-quality results, and one of the few who made it onto our list of businesses that grabbed our attention amongst the avalanche of reports. It’s also a business which we continue to believe has very bright prospects.

That view continues to be supported by a raft of anecdotal evidence pointing to the release of positive results being reported by SRX’s key trial in February next year, as being a highly likely (but not certain) event.

Positive trial results are important for SRX in their key SIRFLOX trial given any ‘clinically significant’ outcomes could potentially drive an up-tick in adoption by healthcare professionals. Indeed, the use of their SIR-Spheres device we think has the potential to move from the salvage setting, which is a very small addressable market, into the first-line setting, a market many times the size.

Thus, a step-change in the business’ sales and earnings is possible in the not-so-distant future.  By definition, a step change in the business would also result in a step change to our estimated with valuation. This all however hinges on their key SIRFLOX trial, and it is indeed is a rather binary outcome.

Over the years, we have grown to know the Sirtex business very well and have built a meaningful positions for the business in both Funds at Montgomery. Further, we’ve become close to someone who perhaps knows it even better than we do. Tom Duthy of Taylor Collison is, in our view, the best analyst in the market covering SRX, and after a trip to Rome earlier this year to attend the 5th European Multidisciplinary Symposium on Liver-Directed Cancer Therapy Using 90Y Microspheres, has some interesting feedback to share.

Interestingly, Tom was the only analyst we are aware of who attended the conference, hence his research is extremely insightful, and with his permission, we have reposted some of his key observations:

• In Paris two years ago, just 400 delegates attended the conference. This has grown considerably to 550 delegates whom attended in Rome in 2014.

Key takeaway #1: Double the number of medical oncologists represented to drive referral

•  Over 100 medical oncologists across Europe attended, 100% more than 2012, which we believe is a solid indicator of interest in SIRT given their role in directing patient care. 
•  We noted this included the leading Key Opinion Leader (KOL) in medical oncology in Europe.

Key takeaway #2: Significant decrease in non-users, and increase in new users provides platform for adoption

• In the two years since Paris, the percentage of the audience with no experience in SIRT fell from 37% to 12%, with 16% of the audience commencing SIRT within the last 12 months, and the balance having between 12 months and 5 years, and more than 5 years’ experience (44% and 28% repsectively). 
•  This highlights adoption is accelerating across Europe.

Key Takeaway #3: Complete shift in attitude towards SIRT as a front-line therapy

•  In Paris two years’ prior, 70% of the audience believed SIRT was best used in salvage therapy for metastatic colorectal cancer (mCRC), versus 33% in Rome in 2012. 
•  67% now believe SIRT is best utilised in higher treatment lines (first- and second-line), a significant shift in medical opinion, driven by open label global studies such as SIRFLOX and FOXFIRE (UK only).
• We consider this observation a leading indicator for future adoption and more implicitly a reflection of how these trials are performing, given 53 sites are established and recruiting across Europe (SIRFLOX), and 23 in the UK (FOXFIRE).

To quickly summarise Tom’s thoughts, we see the below points as very positive developments that further add weight to our argument that the stars continue to line-up for Sirtex. Naturally, we eagerly await their Phase 111 SIRFLOX trial result.

• Growing levels of interest as evidenced by an increase in conference attendees
• A clear decrease in the level of non-SIRT users meaning the medical device is growing in acceptance and adoption, and;
• The complete shift in attitude noted towards the treatment.