Business Summary Sirtex Medical Limited (SRX) is a biotechnology and medical device group whose primary objective is to provide effective liver cancer treatments utilising small particle technology to approved markets in Asia Pacific, Americas, Europe, Middle East and Africa (EMEA). SRX's key product is SIR-Spheres microspheres, the treatment for liver cancer. SIR-Spheres microspheres: SIR-Spheres microspheres is a targeted radioactive treatment for liver cancer. This treatment is called Selective Internal Radiation Therapy (SIRT) being a minimally invasive surgical procedure performed by an interventional radiologist. The SIR-Spheres microspheres lodge in the small blood vessels of the tumour where they destroy it from the inside over a short period while sparing the surrounding healthy tissue. During the year, the Group sold 8,561 doses worldwide representing less than 2% of the addressable market. SIR-Spheres Evolution Program: The program is focused on two areas in order to develop solutions. The simplification and reliability of basic delivery system used to administer SIR-Spheres microspheres is the first major focus. The second major focus is a new patient treatment planning system to enable a highly tailored, patient-specific therapy planning prior to the administration of SIR-Spheres microspheres. The program involves the development of a new patient treatment planning system to enable tailored, patient-specific therapy planning prior to the administration of SIR-Spheres microspheres. Currently, the key component of the SIR-Spheres Evolution Program is the new delivery apparatus to facilitate administration of SIR-Spheres microspheres. The new delivery apparatus will make it easier for the new users who will be administering SIR-Spheres microspheres for the first time, reduce the complexity of administration process and give more control to the administering physician. The new delivery system is undergoing exhaustive testing ahead of formal submissions to regulatory authorities. Latest Research CDH Launches Counter Bid Sirtex has now confirmed an indicative, non-binding counter bid to the Scheme Of Arrangement bid from Varian Medical Systems (NYSE:VAR). The scheme meeting was to have taken place next Monday. The new bidder is CDH Investments. CDH is a well known China based asset manager with over US$20bn of capital under management. The company has extensive investments in healthcare in China, Asia and the US. The CDH bid to acquire 100% of Sirtex at $33.60 cash per SRX share represents a 20% premium over the Varian bid of $28/share cash. We note the recent Independent Expert valued SRX in the range of $23.41 to $29.42. The SRX Board has resolved to engage with CDH in an effort to secure a binding offer. In the mean-time, the SRX Board continues to support the Varian Offer, however, it will seek an adjournment of the scheme meeting to a later date. The indicative proposal is subject to a number of conditions including approval by CDH's Investment Committee following completion of satisfactory confirmatory due diligence and entering into of formal transaction documents. Any acquisition of Sirtex by CDH would also be conditional on approval of Australia's Foreign Investment Review Board. The FIRB did not oppose the sale to Varian. The other conditions as outlined above do not appear too onerous. Based on these observations, GICS - Pharm/Biotech Sirtex Medical Limited ASX Code: SRX Price: $29.80 12 Mth Target Price: $33.60 Rating: Hold Important Disclaimer - This may affect your legal rights: Because this document has been prepared without consideration of any specific client's financial situation, particular needs and investment objectives, a Bell Potter Securities Limited investment adviser (or the financial services licensee, or the proper authority of such licensee, who has provided you with this report by arrangement with Bell Potter Securities Limited) should be consulted before any investment decision is made. While this document is based on the information from sources which are considered reliable, Bell Potter Securities Limited, its directors, employees and consultants do not represent, warrant or guarantee, expressly or impliedly, that the information contained in this document is complete or accurate. Nor does Bell Potter Securities Limited accept any responsibility to inform you of any matter that subsequently comes to its notice, which may affect any of the information contained in this document. This document is a private communication to clients and is not intended for public circulation or for the use of any third party, without the prior approval of Bell Potter Securities Limited. This is general investment advice only and does not constitute advice to any person. Disclosure of Interest: Bell Potter Securities Limited receives commission from dealing in securities and its authorised representatives, or introducers of business, may directly share in this commission. Bell Potter Securities and its associates may hold shares in the companies recommended. Snapshot Date Market Cap. Shares on issue 12 Month High 12 Month Low 7 June 2018 $1,662m 55.8m $30.75 $11.06 Rating Rating 12 Mth Target Price Capital Gain Gross Yield Implied Total Return Hold $33.60 12.9% NA% 12.9% Investment Fundamentals FYE 30 Jun 2016A 2017F 2018F 2019F Profit $m 53.5 42.4 51.8 58.0 Profit (norm)* $m 53.5 42.4 51.8 58.0 EPS* ¢ 93.5 74.5 92.4 103.5 EPS Growth % 34.5 -20.4 24.2 12.0 P/E* x 31.8 40.0 32.2 28.7 P/E Relative % 0.0 0.0 0.0 0.0 DPS ¢ 30.0 30.0 0.0 0.0 Yield % 1.0 1.0 0.0 0.0 Franking % 75.0 0.0 100.0 100.0 * Adjusted for goodwill and unusual items Source: Based on Bell Potter estimates Share Price Chart Total Return on $10,000 Investment
Transcript
Business SummarySirtex Medical Limited (SRX) is a biotechnology and medical device groupwhose primary objective is to provide effective liver cancer treatmentsutilising small particle technology to approved markets in Asia Pacific,Americas, Europe, Middle East and Africa (EMEA). SRX's key product isSIR-Spheres microspheres, the treatment for liver cancer.
SIR-Spheres microspheres: SIR-Spheres microspheres is a targetedradioactive treatment for liver cancer. This treatment is called SelectiveInternal Radiation Therapy (SIRT) being a minimally invasive surgicalprocedure performed by an interventional radiologist. The SIR-Spheresmicrospheres lodge in the small blood vessels of the tumour where theydestroy it from the inside over a short period while sparing the surroundinghealthy tissue. During the year, the Group sold 8,561 doses worldwiderepresenting less than 2% of the addressable market.
SIR-Spheres Evolution Program: The program is focused on two areas inorder to develop solutions. The simplification and reliability of basic deliverysystem used to administer SIR-Spheres microspheres is the first major focus.The second major focus is a new patient treatment planning system to enablea highly tailored, patient-specific therapy planning prior to the administrationof SIR-Spheres microspheres. The program involves the development of anew patient treatment planning system to enable tailored, patient-specifictherapy planning prior to the administration of SIR-Spheres microspheres.Currently, the key component of the SIR-Spheres Evolution Program is thenew delivery apparatus to facilitate administration of SIR-Spheresmicrospheres. The new delivery apparatus will make it easier for the newusers who will be administering SIR-Spheres microspheres for the first time,reduce the complexity of administration process and give more control to theadministering physician. The new delivery system is undergoing exhaustivetesting ahead of formal submissions to regulatory authorities.
Latest ResearchCDH Launches Counter Bid
Sirtex has now confirmed an indicative, non-binding counter bid to theScheme Of Arrangement bid from Varian Medical Systems (NYSE:VAR).The scheme meeting was to have taken place next Monday. The newbidder is CDH Investments. CDH is a well known China based assetmanager with over US$20bn of capital under management. The companyhas extensive investments in healthcare in China, Asia and the US.
The CDH bid to acquire 100% of Sirtex at $33.60 cash per SRX sharerepresents a 20% premium over the Varian bid of $28/share cash. We notethe recent Independent Expert valued SRX in the range of $23.41 to$29.42.
The SRX Board has resolved to engage with CDH in an effort to secure abinding offer. In the mean-time, the SRX Board continues to support theVarian Offer, however, it will seek an adjournment of the scheme meetingto a later date. The indicative proposal is subject to a number of conditionsincluding approval by CDH's Investment Committee following completion ofsatisfactory confirmatory due diligence and entering into of formaltransaction documents. Any acquisition of Sirtex by CDH would also beconditional on approval of Australia's Foreign Investment Review Board.The FIRB did not oppose the sale to Varian. The other conditions as
outlined above do not appear too onerous. Based on these observations,
Important Disclaimer - This may affect your legal rights: Because this document has been prepared without consideration of any specific client's financial situation, particular needs and investmentobjectives, a Bell Potter Securities Limited investment adviser (or the financial services licensee, or the proper authority of such licensee, who has provided you with this report by arrangement withBell Potter Securities Limited) should be consulted before any investment decision is made. While this document is based on the information from sources which are considered reliable, Bell PotterSecurities Limited, its directors, employees and consultants do not represent, warrant or guarantee, expressly or impliedly, that the information contained in this document is complete or accurate.Nor does Bell Potter Securities Limited accept any responsibility to inform you of any matter that subsequently comes to its notice, which may affect any of the information contained in this document.This document is a private communication to clients and is not intended for public circulation or for the use of any third party, without the prior approval of Bell Potter Securities Limited. This is generalinvestment advice only and does not constitute advice to any person.Disclosure of Interest: Bell Potter Securities Limited receives commission from dealing in securities and its authorised representatives, or introducers of business, may directly share in thiscommission. Bell Potter Securities and its associates may hold shares in the companies recommended.
Snapshot
DateMarket Cap.Shares on issue12 Month High12 Month Low
7 June 2018$1,662m55.8m$30.75$11.06
RatingRating12 Mth Target Price
Capital GainGross Yield
Implied Total Return
Hold$33.6012.9%NA%12.9%
Investment FundamentalsFYE 30 Jun 2016A 2017F 2018F 2019F
DPS ¢ 30.0 30.0 0.0 0.0Yield % 1.0 1.0 0.0 0.0Franking % 75.0 0.0 100.0 100.0* Adjusted for goodwill and unusual itemsSource: Based on Bell Potter estimates
Share Price Chart
Total Return on $10,000 Investment
our initial view is that the CDH bid should be taken seriously and stands areasonable chance of success. As yet there is no response from Varian.
Important Disclaimer - This may affect your legal rights: Because this document has been prepared without consideration of any specific client's financial situation, particular needs and investmentobjectives, a Bell Potter Securities Limited investment adviser (or the financial services licensee, or the proper authority of such licensee, who has provided you with this report by arrangement withBell Potter Securities Limited) should be consulted before any investment decision is made. While this document is based on the information from sources which are considered reliable, Bell PotterSecurities Limited, its directors, employees and consultants do not represent, warrant or guarantee, expressly or impliedly, that the information contained in this document is complete or accurate.Nor does Bell Potter Securities Limited accept any responsibility to inform you of any matter that subsequently comes to its notice, which may affect any of the information contained in this document.This document is a private communication to clients and is not intended for public circulation or for the use of any third party, without the prior approval of Bell Potter Securities Limited. This is generalinvestment advice only and does not constitute advice to any person.Disclosure of Interest: Bell Potter Securities Limited receives commission from dealing in securities and its authorised representatives, or introducers of business, may directly share in thiscommission. Bell Potter Securities and its associates may hold shares in the companies recommended.
Snapshot
DateMarket Cap.Shares on issue12 Month High12 Month Low
7 June 2018$1,662m55.8m$30.75$11.06
RatingRating12 Mth Target Price
Capital GainGross Yield
Implied Total Return
Hold$33.6012.9%NA%12.9%
Investment FundamentalsFYE 30 Jun 2016A 2017F 2018F 2019F
DPS ¢ 30.0 30.0 0.0 0.0Yield % 1.0 1.0 0.0 0.0Franking % 75.0 0.0 100.0 100.0* Adjusted for goodwill and unusual itemsSource: Based on Bell Potter estimates
Top 5 Substantial ShareholdersDeutsche Bank AG and its related bodies Corporate 9.9%Yarra Capital Management Holdings Pty Ltd 6.4%UBS Group AG and its related bodies corporate 6.1%Allan Gray Investment Management 5.2%
* Source: Morningstar. This chart shows the spread of recommendations from thosebroker analyst's in Australia with research coverage of this stock.
Principals & DirectorsPrincipals
Company Secretary Mr Darren Smith
Directors
Dr Katherine Leslie Woodthorpe(Non-Executive Director)Mr Andrew McLean(Chief Executive Officer,Managing Director)Mr Neville Mitchell(Non-Executive Director)Dr John Alan Eady(Non-Executive Deputy Chairman,Non-ExecutiveDirector,Interim Chairman)Mr Grant Desmond Boyce(Non-Executive Director)Mrs Helen Kurincic(Non-Executive Director)
To access further Research or for information regarding our recommendations and ratings please seewww.bellpotter.com.au
