Cellceutix (CTIX.OB), an emerging bio-pharmaceutical company, has posted a 2,370% gain in just two years. As of June 30, 2012, Cellceutix's executive officers and directors together owned approximately 72% of the outstanding shares.
There has already been a German study that reached the following conclusion:
Using a data set of 245 companies for the year 2003 we find evidence for a positive and significant relationship between corporate performance, as measured by stock price performance as well as by Tobin’s Q, and insider ownership. This relationship seems to be rather robust. Specifically, the sign and significance of the relationship does not change, even if
we account for endogeneity by applying a 2SLS regression approach. Moreover, we also find outside block ownership as well as more concentrated insider ownership to have a positive impact on corporate performance. Overall the results indicate that ownership structure might be an important variable explaining the long term value creation in the corporate sector.
In hoping to find similar success stories, I screened for healthcare stocks, which have over 50% insider ownerships. In this article, I will feature three such companies.
1. AcelRx Pharmaceuticals (ACRX) is a specialty pharmaceutical company focused on the development and commercialization of innovative therapies for the treatment of acute and breakthrough pain. AcelRx's lead product candidate, the Sufentanil NanoTab PCA System (ARX-01), which is currently in Phase 3 clinical development, is designed to solve the problems associated with post-operative intravenous patient controlled analgesia. The problems it attempts to address are the side effects of morphine, the invasive IV route of delivery and the complexity of infusion pumps. AcelRx has two additional product candidates which have completed Phase 2 clinical development: ARX-02 for the treatment of cancer breakthrough pain, and ARX-03 for mild sedation, anxiety reduction and pain relief for patients undergoing painful procedures in a physician's office. AcelRx has initiated a Phase 2 study for a fourth product candidate, ARX-04, a sufentanil formulation for the treatment of moderate-to-severe acute pain, funded through a grant from U.S. Army and Medical Research and Materiel Command [USAMRMC].
The company reported the third-quarter financial results on November 6 with the following highlights:
|Net loss||$8.6 million|
On December 14, 2012, AcelRx closed a $44.2 million financing deal.
AcelRx anticipates that research and development expenses for the fourth quarter of 2012 and the first half of 2013 will increase as AcelRx conducts and completes the Phase 3 clinical trials for ARX-01. Development of ARX-04 through Phase 2 clinical work and Phase 3 preparatory work is expected to be fully funded by a grant from USAMRMC. The development of ARX-04 beyond Phase 2 and initial preparations for Phase 3 is dependent on the identification of additional funding from USAMRMC or other sources. Additionally, AcelRx anticipates modest increases in general and administrative expenses due to costs associated with expansion of its corporate infrastructure to support ongoing development of its product candidates.
The company is developing ARX-01, the Sufentanil NanoTab PCA System, for the management of acute post-operative pain in adult patients during hospitalization. The company believes that ARX-01 would compete with a number of opioid-based treatment options that are currently available. The market for opioids for post-operative pain is large and competitive. The primary competition for ARX-01 is the IV PCA pump, which is widely used in the post-operative setting. Leading manufacturers of IV PCA pumps include Hospira (HSP), CareFusion Corporation (CFN), Baxter International (BAX), Curlin Medical and Smiths Medical. The most common opioids used to treat post-operative pain are morphine, hydromorphone and fentanyl, all of which are available as generics. Also available on the market is the Avancen Medication on Demand, Oral PCA Device developed by Avancen MOD Corporation. Also in development is MoxDuo, an orally administered, fixed ratio combination of morphine and oxycodone being developed by QRx Pharma (QRXPF.PK), an Australian company. This product is also in development as an IV product.
The company has the following upcoming milestones in 2013.
|ARX-01||Pivotal Phase 3 placebo -controlled trial results (abdominal pain)||1Q/2013|
|ARX-01||Pivotal Phase 3 placebo -controlled trial results (orthopedic)||1Q/2013|
|ARX-01||NDA submitted in post-operative pain||3Q/2013|
|ARX-04||Phase 2 trial results||2013|
The stock has a $9.5 price target from the Point and Figure chart. The company has a 69.51% insider ownership. There are six analyst buy ratings, zero neutral ratings and zero sell ratings, with an average target price of $9.00. I have a bullish outlook for the stock currently based on the data released from the first ARX-01 Phase III trial.
2. Acasti Pharma (ACST) is a Canadian-based biopharmaceutical company dedicated in the research, development and commercialization of innovative proprietary active pharmaceutical ingredients for the management of cardiometabolic disorders, from prevention to treatment, bridging the treatment gap in lipid management. Acasti produces dyslipidemic prescription drugs (CaPre) and medical foods (Onemia) customized to enter the $30 billion dyslipidemia market.
The company reported the fiscal 2013 third-quarter financial results on January 15 with the following highlights:
|Net loss||$1.6 million|
To date, the company has financed its operations primarily through the exercise of rights and warrants issued to its shareholders as well as to Neptune (NEPT) and its shareholders, the private offerings of shares, as well as research tax credits, revenues from sales and research contracts, as well as interest income. The future profitability of the company is dependent upon such factors as the success of the clinical trials, the approval by regulatory authorities of products developed by the company, the ability of the company to successfully market, sell and distribute products, and the ability of the company to obtain the necessary financing to complete its projects.
CaPre is designed to target the reduction of moderate and very high triglycerides. Preclinical research has indicated though that CaPre may also normalize blood lipids overall by also reducing LDL (bad cholesterol) and increasing HDL (good cholesterol).
There are competing products in the marketplace to treat hypertriglyceridemia, including products that have been manufactured from omega-3 fish oil. However, CaPre is the only omega-3 phospholipid product being developed with a high potential to demonstrate a clear clinical superiority. No competing product currently on the market, including Lovaza, AMR101 or Epanova has demonstrated efficacy in treating all three indications.
- The second Phase 2 open label clinical study for CaPre should be completed by the end of the first quarter of 2013.
- In the current year the company will be preparing an IND (Investigational New Drug) submission for a Phase 3 clinical trial for CaPre in the U.S.
The company has a 79.43% insider ownership. The initial data from the CaPre Phase II trial has been positive. I have a cautiously positive outlook for the stock currently based on the already announced clinical trial data.
3. Advanced Medical Isotope Corporation (ADMD.OB) engages in the production and distribution of medical isotopes and medical isotope technologies.
The company reported the third-quarter financial results on November 13 with the following highlights:
|Net loss||$2.4 million|
The company expects to continue to experience net operating losses. Historically, the company has relied upon investor funds to maintain its operations and develop its business. The company anticipates raising additional capital within the next twelve months from investors for working capital as well as business expansion, although the company can provide no assurance that additional investor funds will be available on acceptable terms. If the company is unable to obtain additional financing to meet its working capital requirements, the company may have to curtail its business.
The company's directors, executive officers and principal stockholders beneficially own approximately 53.7% of the outstanding shares of the company's stock as of March 12, 2012. There have been three small insider buy transactions during the past 12 months. There have not been any insider sell transactions since at least January 2009.
The suppliers of radioisotopes for diagnosis, treatment, and research for a wide variety of diseases, in particular cancer, vary in size and product offerings. Competition is limited because there are many barriers to entry, including regulatory hurdles, including licensing, government approvals and capital outlays associated with starting an isotope company. Many current competitors are international companies.
Further, competition is limited as some suppliers are closing their facilities or limiting their production. At one time, the U.S. government was supposed to be the source of medical isotopes, but over the course of the last two decades, it has either closed or failed to adequately fund its production facilities.
About 90% of the entire non PET radioisotopes used in the United States are imported from two companies, Nordion (NDZ) and Covidien (COV). The remaining 10% that are produced in the United States are manufactured in a fragmented, piecemeal manner with companies producing a single isotope instead of a wide variety.
- Polymer seeds / Radiogel to market - 2013
- $5-$15 million revenue initial 2-3 years for each
- Growth to $75-$100 million range/year for U.S. alone
- Additional licensing fee revenue from Europe, Asia, South America
- Each is revenue producer within year one of funding
- Cyclotron - $1.5 million per year
- Center For Molecular Research - $6 million per year
- Other isotopes - $1 million per year
- $12-$28 million after five years from first funding date
- $24-$56 million after seven or eight years from first funding date
The company has a 53.7% insider ownership. The company has several upcoming milestones but needs more funding to move them forward. I have a cautiously bullish bias for the stock currently based on the high insider ownership.