Shares of life-sciences company Sirtex Medical Limited (ASX: SRX) have been hit particularly hard today, despite the absence of any further bad news. The stock has fallen 5.8% which compares to the 1% decline experienced by its benchmark, the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) index.
The most likely explanation for the stock's decline is profit-taking by investors who are justifiably concerned about what might be revealed by the company in May, when it releases the final results for its SIRFLOX study.
After the preliminary results for the trial were released last week, the stock plummeted by as much as 62% during the day to a low of $14.80, down from $39. The stock then regained as much as 55% of its value (hitting a high of $23.01) but has since retreated to its current price tag of $20.26. While the final results could reveal a positive surprise for investors, it's not surprising that some investors are now getting cold feet.
The risks involved in investing in the biotechnology sector are well-known. Although enormous profits can be made when trials succeed, the losses can also be catastrophic in the event things don't go according to plan. While Sirtex is one of Australia's best and most promising biotechs, it's still not one suitable for the more risk-averse investor.
