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When insiders accumulate a stock intensively, the stock can be expected to outperform the market during the next six months. Insiders tend to buy more often than usual before large price increases.

Intensive insider buying can be defined by the following three criteria:

  1. The stock is purchased by three or more insiders within one month.
  2. The stock is sold by no insiders in the month of intensive purchasing.
  3. At least two purchasers increase their holdings by more than 10 percent.

In this article I will feature three healthcare stocks that met these three criteria of intensive insider buying during the last 30 days.

1. NovaBay Pharmaceuticals (NYSEMKT:NBY), a clinical-stage biotechnology company, engages in the development of various product candidates for the therapeutic needs of the anti-infective market.

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Insider buys

  • David Stroman purchased 10,000 shares on December 6 pursuant to a public offering. David Stroman currently holds 22,000 shares or less than 0.1% of the company. Dr. David Stroman joined NovaBay in October 2011 as Senior Vice President of Ophthalmic Drug Development.
  • Thomas Paulson purchased 10,000 shares on December 6 pursuant to a public offering. Thomas Paulson currently holds 63,855 shares or 0.2% of the company. Thomas Paulson has served as NovaBay's Chief Financial Officer since January 2008.
  • Ramin Najafi purchased 20,000 shares on December 6 pursuant to a public offering. Ramin Najafi currently controls 3,217,695 shares or 10.8% of the company. Ramin Najafi is the founder and Chairman of NovaBay. He has served as President since July 2002, and as Chief Executive Officer since November 2004.

Financials

The company reported the third-quarter financial results on November 1 with the following highlights:

Revenue$3.6 million
Net income$0.1 million
Cash$11.9 million

NovaBay received approximately $6.34 million from the public offering which closed on December 6.

Upcoming milestones

Ophthalmology

• Viral conjunctivitis (unmet medical need)

- Phase 2b global 450 patient trial. Results from the global trial expected 2H13.

• Bacterial conjunctivitis (new clinical target)

- Phase 2a proof-of-concept bacterial conjunctivitis trial, facilitating ultimate goal of one product for the treatment of both viral and bacterial conjunctivitis.

Dermatology - Impetigo

• Partner Galderma S.A. initiated Phase 2b global trial of NVC-422 for treatment of impetigo, a highly contagious skin infection, in September 2012. Galderma expects to report results in mid 2013.

Urology - UCBE

• Ongoing Phase 2 clinical trial for treatment of urinary catheter blockage and encrustation [UCBE]. Clinical data expected 1H13.

Chronic Non-Healing Wounds - NeutroPhase

• Secured agreement with Pioneer Pharma to market NeutroPhase throughout China in January 2012; expanded agreement to include Southeast Asia in September 2012. NeutroPhase recently utilized as part of successful new therapeutic technique for management of necrotizing fasciitis (NF, or "flesh-eating bacteria"). First commercial shipment of NeutroPhase to Southeast Asia completed in December 2012. Additional marketing agreements expected worldwide in 2013.

My analysis

The stock is currently trading below its 200-day moving average. There have been three insider buy transactions and there have not been any insider sell transactions during the last 30 days. There is one analyst buy rating, 0 neutral ratings and 0 sell ratings with a average target price of $3.50. The company is going to present results from three different phase 2b trials during 2013. The outlook for these results is positive based on the insider trading activity. I would expect each of these three results to move the stock at least 20% up or down. I have a long position in the stock currently.

2. Zogenix (NASDAQ:ZGNX) is a pharmaceutical company commercializing and developing products for the treatment of central nervous system disorders and pain. Zogenix's first commercial product, Sumavel DosePro (sumatriptan injection) Needle-free Delivery System, was launched in January 2010 for the acute treatment of migraine and cluster headache. Zogenix's lead investigational product candidate, Zohydro ER (hydrocodone bitartrate) is an oral, novel extended-release formulation of various strengths of hydrocodone without acetaminophen intended for administration every 12 hours for around the clock management of moderate to severe chronic pain. Zogenix's second DosePro investigational product candidate, Relday, is a proprietary, long-acting injectable formulation of risperidone for the treatment of schizophrenia. In May 2012, Zogenix submitted to the FDA a New Drug Application for Zohydro ER and an Investigational New Drug Application for Relday. The FDA assigned a PDUFA target action date of March 1, 2013 for the Zohydro ER NDA.

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Insider buys

  • Cynthia Robinson purchased 50,000 shares on December 13 and currently holds 52,746 shares or less than 0.1% of the company. Cynthia Robinson has served as the company's Chief Development Officer since April 2008.
  • Cam Garner purchased 70,000 shares on December 12 and currently holds 296,750 shares or 0.3% of the company. Cam Garner is one of the company's co-founders and has served as chairman of the company's board of directors since August 2006.
  • Ann Rhoads purchased 17,500 shares on December 12 and currently holds 150,742 shares or 0.2% of the company. Ann Rhoads has served as Executive Vice President, Chief Financial Officer, Treasurer and Secretary since March 2010.
  • Erle Mast purchased 10,000 shares on December 11 and currently holds 16,721 shares or less than 0.1% of the company. Erle Mast has served as a member of the company's board of directors since May 2008.

Financials

The company reported the third-quarter financial results on November 8 with the following highlights:

Revenue$8.5 million
Net loss$19.3 million
Cash$49.6 million
Debt$28.4 million

Outlook

The company's full year 2012 financial guidance is as follows:

  • Total revenue expected to be approximately $45.5 million
  • Net product revenue expected to be approximately $37 million
  • Product gross margin expected to be approximately 48% - 49%
  • Research and development expenses expected to be approximately $22 million
  • Selling, general and administrative expenses expected to be approximately $50 million
  • Net interest expense to be approximately $10 million for 2012

News

Zogenix announced on December 7 that the U.S. Food and Drug Administration's Anesthetic and Analgesic Drug Products Advisory Committee voted 2-11 [with 1 abstention] against the approval of Zohydro ER.

My analysis

The stock dipped on December 10 after the negative vote for Zohydro ER. There have been four insider buy transactions and there have not been any insider sell transactions during the last 30 days. It is important to note that all the insider transactions were made after the negative vote for Zohydro. There are four analyst buy ratings, one neutral rating and 0 sell ratings with a average target price of $6.00. I have a long position in the stock currently.

3. AVEO Oncology (NASDAQ:AVEO) is a cancer therapeutics company committed to discovering, developing and commercializing targeted therapies to impact patients' lives.

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Insider buys

  • Henri Termeer purchased 44,501 shares on December 12-13 and currently holds 44,501 shares or 0.1% of the company. Henri Termeer has served as a director of AVEO since April 2011 and is Chairman of the Board.
  • Robert Young purchased 3,621 shares on December 3-13 and currently holds 8,010 shares or less than 0.1% of the company. Robert Young has served as a director of the company since July 2009.
  • Tuan Ha-Ngoc purchased 75,000 shares on December 12-13 and currently holds 314,640 shares or 0.7% of the company. Tuan Ha-Ngoc has served as president and chief executive officer of AVEO and as a member of the board of directors since June 2002.

Financials

The company reported the third-quarter financial results on October 30 with the following highlights:

Revenue$1.0 million
Net loss$30.1 million
Cash$189.7 million
Debt$25.9 million

Outlook

AVEO expects to end 2012 with approximately $135 million in cash, cash equivalents and marketable securities. Based on its revised operating plan, AVEO anticipates that this capital is sufficient to fund its operations through 2013.

News

AVEO Oncology and Astellas Pharma announced on November 28 that the U.S. Food and Drug Administration had accepted for filing the New Drug Application for tivozanib with the proposed indication for the treatment of patients with advanced renal cell carcinoma. Tivozanib is an investigational medicine and is not currently approved in any country. According to the timelines established by the Prescription Drug User Fee Act, the review of the NDA is expected to be complete by July 28, 2013.

My analysis

The stock made a new 52 -week low last week. There have been four insider buy transactions and there have not been any insider sell transactions during the last 30 days. There are two analyst buy ratings, four neutral ratings and one sell rating with a average target price of $12.50. The next major catalyst for the stock will be the July 28, 2013 PDUFA date. I am expecting the stock to start trending higher as we move closer to the PDUFA date based on the insider trading activity.

Source: 3 Healthcare Stocks With Recent Intensive Insider Buying