Mary-Lynn Cesar, Kapitall: They can be volatile, but are there investing ideas among biotech stocks that insiders are buying? Biotech stocks are having quite the year. There were over 30 companies with IPOs so far, and the NASDAQ Biotechnology Index has grown by 67.8% over the last twelve months, more than double the 32.1% recorded by the benchmark S&P 500 index. (Read more on Biotech from Kapitall: Biotechs Climb and Crumble on Catalysts in 2013) However, the increased investment activity and skyrocketing stock prices have led to much talk of a bursting biotech bubble. Within the last month, Barron's, Bloomberg, Financial Times, Forbes, and The Wall Street Journal have all discussed the biotech industry, wondering if it's experiencing a bubble or a boom, and when the potential bubble may burst. This inspired us to run a screen for the investor who may believe that the biotech industry is experiencing a boom, and that there's no bubble in sight. We decided to look for an indicator amongst biotech stocks that good things may still come for these companies. Investing ideas To begin, we constructed a universe comprised of biotechnology stocks. We then looked for stocks with significant net insider purchases over the last six months representing 2% of share float or higher. Since insiders work at the companies in question, they have more knowledge about the firms than outsiders. Therefore, when they use their own money to purchase shares of their company's stock, it may indicate they are bullish about the firm's future and believe current share price is undervalued. We were left with three stocks on our list: Click on the interactive chart below to see analyst ratings over time. Do you think insiders are right with their bullish sentiment towards these stocks? Use this list as a starting point for your own analysis.
1. BioSpecifics Technologies Corp. ( BSTC): Involves in the development of an injectable collagenase for various indications.Market cap at $122.84M, most recent closing price at $19.39. Over the last six months, insiders were net buyers of 178,265 shares, which represents about 4.54% of the company's 3.93M share float. Since October 7 th, BioSpecifics Technologies has returned 0.73%, while fellow biotechnology companies Gilead Sciences Inc. (GILD) and Amgen Inc. (AMGN) have returned 9.05% and 2.82%, respectively. In the pipeline: On October 23 rd, BioSpecifics Technologies announced the start of its Phase 2a study for cellulite treatment. XIAFLEX, the company's injectable collagenase that is approved for treating Dupuytren's contracture in the US, is being used in the study, and results are expected to be released in the first quarter of 2015. Between 70-90% of women have cellulite (it's quite rare in men), and US consumers spend millions of dollars annually trying to get rid of it. The Food and Drug Administration (FDA) has yet to approve any pharmaceutical treatments for cellulite. 2. MannKind Corp. ( MNKD): Focuses on the discovery, development, and commercialization of therapeutic products for diabetes and cancer. Market cap at $1.33B, most recent closing price at $4.68. Over the last six months, insiders were net buyers of 39,896,322 shares, which represents about 24.14% of the company's 165.29M share float. MannKind has returned -7.71% over the last month. Its performance surpasses that of competitors Threshold Pharmaceuticals Inc. (THLD) and Merrimack Pharmaceuticals, Inc. (MACK), but falls short of Amgen's 2.82% and BioSpecifics Technologies' 0.73%. In the pipeline: At the end of October, the FDA acknowledged Mannkind's resubmitted new drug application for Afrezza, the company's highly anticipated inhalable insulin treatment. The FDA scheduled Afrezza's Prescription Drug User Fee Act (PDUFA) date for April 15, which is when Mannkind will have to pay fees for its New Drug Application. COO Hakan Edstrom viewed the PDUFA date as a positive development, stating "the FDA's two-week action to set the PDUFA date is the agency's regular positive response at this point in today's regulatory process." Presently 347 million people worldwide suffer from diabetes, and that number will only grow as the disease likely becomes the 7th leading cause of death by 2030. Furthermore, according to Research and Markets, the global diabetes drug industry is expected to swell to $56.9 billion in 2018.
3. ACADIA Pharmaceuticals, Inc. ( ACAD): Focuses on drug discovery and clinical development of novel treatments for central nervous system disorders.Market cap at $1.755B, most recent closing price at $20.89. Over the last six months, insiders were net buyers of 3,964,834 shares, which represents about 8.04% of the company's 49.34M share float. ACADIA Pharmaceuticals has returned -23.80% since October 7 th, falling considerably behind several industry peers including Gilead Sciences and Amgen, which returned 9.05% and 2.82% during the same time period. In the pipeline: During the company's third quarter earnings call, CEO Uli Hacksell stated that ACADIA is on track to submit a new drug application for its pimavanserin medication - specifically for the treatment of Parkinson's disease psychosis (PDP) – to the FDA near the end of 2014. Pimavanserin is also in clinical trials for the treatment of schizophrenia and Alzheimer's disease psychosis; ACADIA completed its Phase 2 trial for schizophrenia last year and will commence the Phase 2 trial for Alzheimer's disease psychosis (ADP) this month. Currently no drugs have been approved for the treatment of either PDP or ADP in the US. ( List compiled by Mary-Lynn Cesar, a Kapitall Writer. Insider data sourced from Yahoo! Finance. Analyst ratings data sourced from Zacks Investment Research. All other data sourced from Finviz)