Here's this afternoon's Livewire Markets posting - visit www.livewiremarkets.com. Livewire is Australia’s source of financial intelligence.
Days like today make me wish I was back in stockbroking because Sirtex's 'Trading Update' has created the kind of contrarian play I love. Thanks to slower SIR-Spheres sales, Sirtex's constant currency EBITDA in 1H17 will fall 9-16%. As I write Sirtex stock is down 41%, making people think the world's just ended for this company. I argue, by contrast, that nothing serious has gone wrong. Yes, you heard me right. Sirtex has cited increased competition for patients, a new drug approval for salvage metastatic colorectal cancer, and tighter reimbursement. None of these should really worry Sirtex management because once SIR-Spheres are used for more than salvage therapy, Sirtex's growth profile will be assured. We know from numerous small studies that the product works in liver cancer. That's started to be borne out in the larger studies Sirtex has designed to move SIR-Spheres from 'last line' to first line', which is where the big money is. We at NDF Research don't cover Sirtex (yet), but I suggest investors taking a medium-term view may find a lot to be encouraged about.
Note - the usual disclaimers apply - click here.
Last week NDF Research initiated coverage on Resonance Health, a Perth-based company which over a decade ago developed the world’s first non-invasive diagnostic for iron overload, an MRI-based test called FerriScan. This test, approved in the US and Europe since 2005, has been the basis of a small but growing business for Resonance currently worth A$2.0-2.5m p.a. in revenue. A subsequent MRI-based product, called HepaFat-Scan, for the measurement of the liver fat fraction, gained FDA approval in December 2013 and CE Mark in July 2014 and Resonance continues to work on groundbreaking new MRI-based diagnostics. Resonance currently has a market capitalisation of only ~A$10m. We believe this is because the full potential of FerriScan has yet to be realised as a result of reimbursement challenges. That said, we also believe that Resonance is currently undervalued and that with increased usage and potential reimbursement wins for FerriScan, increased awareness and uptake of HepaFat-Scan, and the introduction of new products, there is potential for the market to re-rate the company over time. To read our initiation report on Resonance Health click here.