Shares in Sirtex [ASX:SRX] dropped 22% in mid-May following poor results from a drug trial. The company has been steadily climbing back to its pre-crash price and yesterday saw it break through on the back of a 15.24% rise, followed by a further 4.49% today.
Why the sharp rise in share price for Sirtex?
Yesterday Sirtex announced it was shaking up its business. It has written off assets, downsized staff and improved structure. The company’s clinical and R&D departments were hit hardest, with a $90 million write-down. However, Sirtex says it is still performing within guidance, with dose sales up 5.5%.
CEO Andrew McLean said,
‘While the reduction in headcount across a number of business functions is regrettable, it must be noted that these structural changes in the business are designed to optimise the way we engage with our key clinician stakeholders and more effectively target new users.’
The staffing cuts also claimed Sirtex’s Chief Medical Officer, Dr David Cade, who served the company for 14 years. The company has stated that Dr Cade’s role will transition over the next three months as it searches for a replacement.
All in all, Sirtex has inflicted more short-term pain for long-term prospects. And the markets have agreed with the decision, which saw the rise in share value.
What next for Sirtex?
Sirtex will still have to endure the heavy costs of the cutbacks, namely $5.3 million worth of redundancies alongside the asset revaluation. Though FY17 reports will have some blemishes, the company is now on track to pursue new opportunities.
Sirtex’s focus is to shore up its core business model, targeting new and existing clients. It believes this will put it in a better position to capitalise on the market. It is also looking into the potential of expanding into Japan and China.
2017 financial results will be reported in full on 23 August. Until then, Sirtex has at least stemmed the bleeding.
Regards,
Ryan Clarkson-Ledward,
Junior Analyst, Money Morning
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