Sirtex Medical: Interim report – half-year ended 31 December 2012

Sirtex Medical Limited (ASX: SRX) today announced half year results that demonstrate another strong financial performance over the reporting period and continued dose sales growth of its SIRSpheres ® microspheres targeted radiotherapy treatment for liver cancers.

The strong result reaffirms the company’s strategy over the past five years of making appropriate investments in the company’s sales and marketing infrastructure, operations, and clinical studies program to build a robust company with sustainable long term growth prospects.

Total revenues were $46 million, up 25.1 per cent from $37 million in the six months to 31 December 2012. Net profit after tax (NPAT) was $7.8 million for the period, up 27.6 per cent on the same period last year. Pre-tax profit was up 30.4 per cent from $8.2 million to $10.7 million. Global dose sales were up 30.5 per cent to 3,522 units compared to 2,698 for the same period last year.

Strong global sales growth continues

US dose sales of 2,305 rose 35.4 per cent. Dose sales in the Asia Pacific region of 347 increased 34.5 per cent compared to the same period last year. Sales in Europe, Middle East and Africa (EMEA) of 870 were up 17.9 per cent compared to the same period last year.

US sales growth was a direct result of increased investment and effectiveness in sales and marketing. The team continues to make steady progress working closely with the referral community and making sure the potential benefits of SIR-Spheres microspheres is widely understood.

Asia Pacific sales continue to lift. The business has adopted a direct sales business model through the new Singapore regional head office and also improved management of local distributors in Taiwan, South Korea and India resulting in improved pricing and volumes.

EMEA sales demonstrated reasonable growth however, continued economic uncertainty in Europe has made this market more challenging. The team in EMEA is confident sales momentum will continue and medical demand remains strong.

Overall sales and marketing investment grew 27.1 per cent to $15.9 million during the period and we continue to make good progress in our efforts to expand awareness and the use of our product among the global oncology community.

Investment in clinical studies to drive a step change in growth

Our clinical studies program is designed to obtain the level 1 data required to demonstrate that SIRSpheres® microspheres is an effective treatment option for patients at an earlier stage of their disease and can help them achieve better clinical outcomes.

Investment aimed at accelerating clinical study recruitment was up 13.2 per cent to $7.0 million. This has resulted in an increase of 43.4 per cent in the rate of patient recruitment during the reporting period.

Importantly, in the company’s flagship SIRFLOX study recruitment passed 90 per cent at the end of the December and is on track to complete recruitment by the end March 2013. Recruitment in the SIRveNIB study was 43 per cent complete at the end of December 2012 and the French SARAH study is recruiting rapidly, achieving 20% recruitment within the last twelve months.

Operating expenses

Total operating expenses of $27.9 million were up 21.0 per cent from $23.0 million spent in the previous corresponding period. This is in line with the company’s strategy of investing to build capability and capacity to support long term global growth. Staff numbers were up 8% per cent as we continued to build sales, marketing, clinical, support and administration infrastructure worldwide ahead of the anticipated growth in demand over coming years.

New product development accelerates

Sirtex maintained a strong focus on innovation and is developing a promising portfolio of new products based on the success of the company’s current core technology platform. Research and development investment was up 9.0 per cent to $2.9 million in the first half of the 2013 financial year.

Sirtex’s strategy under the SIR-Spheres Evolution Program is to deliver useful new product enhancements. This is being achieved by addressing how to make the company’s core product more effective in the clinic and easier to use by a wider number of medical specialists. Based on the good results to date, the company has accelerated these development programs. This will help support longer term sales growth.

Cash management and dividend

Cash from operating activities was up 132 per cent from $5.7 million to $13.2 million. A fully franked dividend of 10 cents per share for the 2012 financial year was paid on 26 October 2012. This equated to a payment of $5.6 million and is the fourth consecutive year of dividend payments. Sirtex remains debt free and at the end of December 2012 the company’s cash balance, including term deposits over 90 days, is a healthy $51.0 million ($39.7 million, December 2011) Capital expenditure, excluding the capitalisation of intangible assets, for the period was $1.2 million, mainly representing the investment in expansion of manufacturing capacity and capabilities.

Foreign exchange

Foreign exchange movements continued to impact Sirtex’s financial results as the Company earns over 95 per cent of its revenue overseas. During the reporting period, the Australian dollar appreciated 1.7 per cent against the US dollar and 7.9 per cent against the Euro compared to the same period last year.

A very positive outlook

Sirtex today is well positioned for long term sustainable growth and our business outlook in all geographic markets remains positive. There is a significant unmet global medical need for our liver cancer therapy which will continue to drive demand in new and established markets over the long term. We are focused on rapidly expanding our business through our continued investment in resources and capabilities backed by a promising new product pipeline that provides a solid foundation for long term growth and business success.

The full ASX release can be viewed here:

http://www.asx.com.au/asx/statistics/displayAnnouncement.do?display=pdf&idsId=01382021

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