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The healthcare sector has been the best-performing group in one year performance with a gain of 23.0% for the period.

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In this article, I will feature three biotech stocks that have seen intensive insider buying during the last 30 days. 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 increased their holdings by more than 10%.

1. Tetraphase Pharmaceuticals (TTPH) is a clinical-stage biopharmaceutical company using its proprietary chemistry technology to create novel antibiotics for serious and life-threatening multi-drug resistant infections. Tetraphase's lead product candidate, eravacycline, is a fully synthetic tetracycline derivative being developed as a broad-spectrum intravenous and oral antibiotic for use as a first-line empiric monotherapy for the treatment of multi-drug resistant infections, including multi-drug resistant Gram-negative infections.

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Insider buying by insider (last 30 days)

  • Cmea Ventures VI purchased 642,857 shares on March 25 pursuant to an initial public offering. Cmea Ventures VI LP currently holds 2,208,706 shares or 11.1% of Tetraphase.
  • Flagship Ventures purchased 491,824 shares on March 25 pursuant to an initial public offering. Flagship Ventures currently holds 1,839,748 shares or 9.3% of Tetraphase.
  • Mediphase purchased 285,713 shares on March 25 pursuant to an initial public offering. Mediphase currently holds 1,654,544 shares or 8.3% of Tetraphase.
  • Excel Medical Fund purchased 496,121 shares on March 25 pursuant to an initial public offering. Excel Medical Fund currently holds 1,468,505 shares or 7.4% of Tetraphase.
  • Skyline Venture Partners purchased 681,012 shares on March 25 pursuant to an initial public offering. Skyline Venture Partners currently holds 2,190,145 shares or 11.0% of Tetraphase.
  • Fmr LLC purchased 642,857 shares on March 25 pursuant to an initial public offering. Fmr LLC currently holds 642,857 shares or 3.2% of Tetraphase.

Insider buying by calendar month

Here is a table of Tetraphase's insider trading activity by calendar month.

MonthInsider buying / sharesInsider selling / shares
March 20133,240,3840
February 201300
January 201300

Tetraphase had its IPO on March 20.

Financials

The company reported the full year 2012 financial results with the following highlights:

Revenue$7.6 million
Net loss$15.1 million
Cash (pro forma)$76.4 million
Debt (pro forma)$11.5 million
Net tangible book value (pro forma)$3.23 per share

Competition

There are a variety of available therapies marketed for the treatment of multi-drug resistant infections that Tetraphase would expect would compete with eravacycline, including meropenem, which is marketed by AstraZeneca (AZN) as Merrem, imipenem/cilastatin, which is marketed by Merck (MRK) as Primaxin, tigecycline, which is marketed by Pfizer (PFE) as Tygacil, levofloxacin, which is marketed by Ortho-McNeil and Johnson & Johnson (JNJ) as Levaquin, and piperacillin/tazobactam, which is marketed by Pfizer as Zosyn. Many of the available therapies are well-established and widely accepted by physicians, patients and third-party payors. Insurers and other third-party payors may also encourage the use of generic products. If eravacycline is approved, it may be priced at a significant premium over other competitive products. This may make it difficult for eravacycline to compete with these products.

There are also a number of products in clinical development by third parties to treat multi-drug resistant infections, including ceftazidime/avibactam and ceftaroline/avibactam, which are being developed by AstraZeneca, and cefalozine/tazobactam, which is being developed by Cubist (CBST). If Tetraphase's competitors obtain marketing approval from the FDA or comparable foreign regulatory authorities for their product candidates more rapidly than Tetraphase, it could result in Tetraphase's competitors establishing a strong market position before Tetraphase is able to enter the market.

My analysis

The stock started trading on March 20 after the initial public offering. There were six different insiders buying the shares and there were no insiders selling the shares at the IPO. All current executive officers and directors as a group own 54.1% of the company.

Tetraphase expects to conduct two global Phase 3 clinical trials of eravacycline, one for the treatment of complicated intra-abdominal infections and one for the treatment of complicated urinary tract infections. Tetraphase expects to have top-line data from both of these clinical trials in the first quarter of 2015. The stock could be a good pick for a long-term portfolio.

2. Enanta Pharmaceuticals (ENTA) is a research and development-focused biotechnology company that uses its robust chemistry-driven approach and drug discovery capabilities to create small molecule drugs in the infectious disease field. Enanta is discovering and developing novel inhibitors designed for use against the hepatitis C virus [HCV]. These inhibitors include members of the direct acting antiviral [DAA] inhibitor classes - protease (partnered with AbbVie (ABBV)), NS5A (partnered with Novartis (NVS)) and nucleotide polymerase as well as a host-targeted antiviral [HTA] inhibitor class targeted against cyclophilin.

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Additionally, Enanta has created a new class of antibiotics, called Bicyclolides, for the treatment of multi-drug resistant bacteria, with a current focus on developing an intravenous and oral treatment for hospital and community MRSA (methicillin-resistant Staphylococcus aureus) infections.

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Insider buying by insider (last 30 days)

  • Gregory Verdine purchased 3,324 shares on March 26 pursuant to an intial public offering. Gregory Verdine currently holds 3,324 shares or less than 0.1% of Enanta. Gregory Verdine is a co-founder of Enanta, and has served as a member of the board of directors since 1996.
  • TVM V Life Science Ventures purchased 132,949 shares on March 26 pursuant to an intial public offering. TVM V Life Science Ventures currently holds 2,532,119 shares or 14.5% of Enanta.
  • Saints Capital Granite purchased 66,474 shares on March 26 pursuant to an intial public offering. Saints Capital Granite currently holds 2,071,975 shares or 11.9% of Enanta.
  • Terry Vance purchased 13,295 shares on March 26 pursuant to an intial public offering. Terry Vance currently holds 13,295 shares or less than 0.1% of Enanta. Terry Vance has served as a member of the board of directors since June 2011.

Insider buying by calendar month

Here is a table of Enanta's insider trading activity by calendar month.

MonthInsider buying / sharesInsider selling / shares
March 2013216,0420
February 201300
January 201300

Enanta had its IPO on March 21.

Financials

The company reported the full year 2012 financial results with the following highlights:

Revenue$41.7 million
Net income$1.4 million
Cash (pro forma)$103.5 million
Net tangible book value (pro forma)$6.79 per share

Competition

Enanta expects its current and future product candidates to face intense and increasing competition as new products enter the HCV and antibacterial markets and advanced technologies become available, particularly in the case of HCV in combinations with existing products and other new products. Two drug products, Incivek (telaprevir) of Vertex (VRTX) and Victrelis (boceprevir) of Merck, were approved in 2011 by the FDA for the treatment of HCV in combination with interferon and ribavirin, which in combination were the previous standard of care. These and other potential new treatment regimens may render Enanta's HCV product candidates noncompetitive. In particular, Enanta's HCV product candidates may not be able to compete successfully with other products in development in multiple classes of inhibitors of HCV, including protease inhibitors, polymerase inhibitors (nucleoside and non-nucleoside), NS5A inhibitors and cyclophilin inhibitors, under development by companies such as Achillion (ACHN), Astra-Zeneca, Boehringer Ingelheim, Bristol-Myers Squibb (BMY), Gilead (GILD), GlaxoSmithKline (GSK), Idenix (IDIX), Johnson & Johnson, Medivir (GM:MVRBF), Merck, Pfizer, Presidio, Roche (OTCQX:RHHBY) and Vertex, as well as by Enanta's collaborators.

Enanta's MRSA program faces competition from other therapeutic products that address serious Gram-positive bacterial infections, such as Cubicin, marketed by Cubist; vancomycin, marketed generically by AbbVie, Shionogi and others; and Zyvox, marketed by Pfizer, as well as future competition from drug candidates currently in clinical development.

My analysis

The stock started trading on March 21 after the initial public offering. There were four different insiders buying the shares and there were no insiders selling the shares at the IPO. Enanta's executive officers and directors and stockholders who owned more than 5% of outstanding common stock before the IPO will, in the aggregate, beneficially own shares representing approximately 69.82% of outstanding capital stock.

Total worldwide sales of HCV therapies were over $3.5 billion in 2011. Enanta is eligible to receive over the next several years an aggregate of $430 million based on potential future pre-commercialization milestones under its AbbVie and Novartis collaborations. Enanta's only product candidate that has advanced beyond Phase 2 clinical trials is ABT-450. Phase 3 trials of ABT-450 in combination therapy started in October 2012, and the full registrational program was announced in November 2012. Enanta estimates that it will likely be at least two years before a New Drug Application for one of its collaborators' combination therapies could be approved by the FDA. The stock could be a good pick for a long-term portfolio.

3. Inovio Pharmaceuticals (INO) engages in the discovery and development of synthetic vaccines and immune therapies focusing on cancers and infectious diseases.

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Insider buying by insider (last 30 days)

  • Angel Cabrera purchased 40,000 shares on March 22 and currently holds 115,000 shares or less than 0.1% of the company. Angel Cabrera serves as a director of the company.
  • Niranjan Sardesai purchased 25,000 shares on March 20 and currently holds 101,800 shares or less than 0.1% of the company. Niranjan Sardesai was appointed Chief Operating Officer of Inovio in January 2012.
  • Joseph Kim purchased 150,000 shares on March 20 - April 2 and currently holds 11,940,809 shares or 6.6% of the company. Joseph Kim was appointed President and CEO of Inovio Pharmaceuticals in June 2009.

Insider buying by calendar month

Here is a table of Inovio's insider trading activity by calendar month.

MonthInsider buying / sharesInsider selling / shares
April 201390,0000
March 2013125,0000
February 201300
January 2013100,0000
December 2012025,000
November 201204,961,020
October 20120922,524
September 201200
August 201275,0000
July 201200
June 201265,0000
May 201260,0000
April 201200
March 201250,0000

The month of March 2013 has seen the most insider buying since March 2012.

Financials

The company reported the full year 2012 financial results on March 18 with the following highlights:

Revenue$4.1 million
Net loss$19.7 million
Cash$13.8 million

Subsequent to year end, the company sold 8,222,966 shares of common stock under its ATM common stock sales agreement for net proceeds of $5.6 million.

On March 7, 2013, Inovio closed an underwritten offering of 27,377,266 shares of its common stock and warrants to purchase an aggregate of up to 13,688,633 shares of common stock. The net proceeds, after deducting the underwriters' discounts and other estimated offering expenses, and assuming no exercise of the warrants, were approximately $14.0 million.

Outlook

Inovio believes that current cash and cash equivalents plus short-term investments are sufficient to meet its planned working capital requirements through 2014.

Competition

There are several development-stage and established enterprises, including major pharmaceutical and biotechnology firms, which are actively engaged in infectious disease and cancer vaccine research and development. These include Crucell N.V (now part of J&J), Sanofi-Aventis (SNY), Novartis, GlaxoSmithKline, Merck, Pfizer, and MedImmune, a wholly owned subsidiary of AstraZeneca.

In addition, a number of companies are developing products to address the same diseases that Inovio is targeting. For example, Sanofi-Aventis, Novartis, MedImmune, GlaxoSmithKline, CSL (in collaboration with Merck), and others have products or development programs for influenza. Merck and GlaxoSmithKline have commercialized preventive vaccines against HPV to protect against cervical cancer; Advaxis (ADXS) has a therapeutic cervical dysplasia/cancer product in Phase II trials. Much of the development for HIV and malaria vaccines is being done by government and non-government organizations such as the NIH and Bill & Melinda Gates Foundation.

Inovio competes with companies that are developing DNA delivery technologies, such as viral delivery systems, lipid-based systems, or electroporation technology with an aim to carry out in vivo gene delivery for the treatment of various diseases. Currently there are five key DNA delivery technologies: viral, lipids, naked DNA, "gene gun" and electroporation. All of these technologies have shown promise, but they each also have their unique obstacles to overcome. Inovio believes its electroporation system is strongly positioned to succeed as the dominant delivery method for DNA-based vaccines.

Upcoming milestones

The company has the following upcoming milestones scheduled:

IndicationMilestone
Cervical Dysplasia (Therapeutic)1Q/2014 Phase II study data
Leukemia (Therapeutic)2013 Additional phase II data
HIV (Preventive/Therapeutic)1H/2013 Publication of phase I data
Influenza (Preventive)1H/2013 Phase I additional data
Malaria (Preventive)2014 Start phase I/IIa

My analysis

There have been three different insiders buying the shares and there have not been any insiders selling the shares during the last 30 days. There are seven analyst buy ratings, zero neutral ratings and zero sell ratings with an average target price of $1.17.

On April 2, Inovio announced the release of preliminary clinical trial results by its collaborator ChronTech AS of their open label phase II clinical study of ChronVac-C, ChronTech's vaccine to treat hepatitis C virus [HCV] infection. The initial results did not show a statistically significant difference between treatment outcomes of the vaccinated and non-vaccinated groups. Despite these results, Joseph Kim, President and CEO of Inovio, purchased 90,000 shares on April 2 after the data release.

Inovio has five pending catalysts for this and next year. I have a long position in the stock currently.

Source: 3 Biotechs With Recent Intensive Insider Buying