For many private investors there's a certain attraction to the junior biotech and healthcare space, often it's the potential to make huge profits if a smart investment goes on to be a big winner on the global stage.
Innovative cancer treatment Sirtex Medical Limited (ASX: SRX) is one such business recommended by The Motley Fool's Share Advisor service in April 2012 when shares traded for $6.24, compared to $39.40 today.
The investment thesis rested on the idea that the company should grow dose sales of its radioactive SIR-spheres as the global community of oncologists became more cognisant of the SIR-spheres' effectiveness in treating liver cancer. The thesis turned out correct and dose sales have been on a tear ever since.
Next stop $50?
The company has also been investing and researching to promote the potential of its SIR-Spheres treatment. It is due to release the initial results of its SIRFLOX clinical trial most likely next week.
The initial announcement will show whether the mean progression free survival time of cancer trial patients showed a statistically improved significance.
The announcement will include the release of the SIRFLOX trial's 'P' value data, where a <0.05 rate of statistical significance will indicate the trial's primary endpoint has been met. The announcement will therefore have an effectively binary outcome.
The second part of the trial data will not be released until late May at the earliest and this announcement will include the Hazard Ratio, which will define the strength of the improvement seen in patients.
Assuming success (far from guaranteed) the Hazard ratio's strength will be a core determinant as to how persuasive the case is to significantly promote the treatment's use.
Two strong results will likely see sales of the SIR-spheres go through the roof.
Investors must remember there is the potential for the trial results to disappoint, so any holding in Sirtex should be part of a balanced portfolio.
Although, credible analysts have slapped a probability weighted valuation of $63.80 on the stock, alongside a 12-month price target of $50.40.
How to win at investing
Of course the institutional analysts woke up to Sirtex's potential nearly two whole years after The Motely Fool!
The huge gains have already been made by Share Advisor subscribers who followed the Foolish philosophy to buy and hold quality companies over the long term.
I personally bought Sirtex stock at nearly triple the Share Advisor recommended price, but have still easily doubled my money in less than a year.
This goes to show the value of thinking about the long term as an investor and not being tempted to take profits due to concerns over short-term price falls or daily market gyrations.
It also touches on the psychology of not being intimidated by 52-week highs, as Sirtex unsurprisingly was close to a 52-week high when recommended at $6.24 and any investors waiting for a pullback would have missed out on gains of 500% plus!
Moreover, the value of following the wealth-creating excellence of The Motley Fool's Share Advisor service is clear to see.
