Sirtex Medical Limited (ASX: SRX) has had yet another year of impressive growth, but what happens over the next year may completely open the company's future up. The company develops liver cancer treatments that specifically can target cancerous cells amongst healthy tissue. It has been in strong demand for a number of years and currently it is used as a secondary step if regular chemotherapy and radiation don't seem to be effective for some patients.
Becoming a primary cancer treatment
The game changer is that if current clinical trials being conducted are successful, it may become a "first line" treatment, which would cause an increase in the number of doses being used. Sales and potential profits could jump up if this occurs.
Product demand could explode if trial results successful
The initial results of the trials are expected to be out around March 2015, but Sirtex is already taking steps to increase marketing as well as production capacity in expectation the findings show its product should be a first line treatment.
Sirtex's stock hitting new highs
Sirtex's stock has hit new highs, sending its price-earnings ratio to 47. Looking past the sky-high price multiple, long-term investors have to look at how much business the company may be doing 5 -10 years from now.
In the US alone, imagine the number of people with liver cancer. Instead of a small percentage of them getting Sirtex's treatment, now imagine that a very large percentage receive it as a routine cancer therapy. If the company is scrambling right now to prepare for a potentially large increase in demand, maybe investors should be getting ready, too.
If you don't want to pay today's heady price, then it is okay to wait for the news hype to die down a little. Prices may cool off, but then may be the time to start building a position. If news that the trial results are good comes out, there may be another sudden jump in price which could be more permanent.
