2 Healthcare Companies With Recent Intensive Insider Buying

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Includes: AMBI, OFIX
by: Markus Aarnio

The healthcare sector has been the best-performing sector YTD with a gain of 22.3%.

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In this article, I will feature two healthcare companies 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. Orthofix International N.V. (NASDAQ:OFIX), a medical device company, designs, develops, manufactures, markets, and distributes medical equipment used principally by musculoskeletal medical specialists for spine and orthopedic applications.

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Insider buying by insider (last 30 days)

  • Brad Mason purchased 5,000 shares on May 17 and currently holds 15,000 shares or less than 0.1% of the company. Brad Mason became the President and Chief Executive Officer of Orthofix in 2013.
  • Emily Buxton purchased 750 shares on May 20 and currently holds 6,039 shares or less than 0.1% of the company. Emily Buxton is Chief Financial Officer of the company.
  • Kenneth Weisshaar purchased 1,000 shares on May 17 and currently holds 7,073 shares or less than 0.1% of the company. Kenneth Weisshaar became a non-executive Director of Orthofix International N.V. in December 2004.
  • Michael Mainelli purchased 500 shares on May 14 and currently holds 6,419 shares or less than 0.1% of the company. Michael Mainelli was elected to the Orthofix International Board of Directors in 2009.
  • James Gero purchased 20,000 shares on May 14 and currently holds 156,630 shares or 0.8% of the company. James Gero became Chairman of Orthofix International N.V. on Jan. 1, 2005.

Insider buying by calendar month

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

Month Insider buying / shares Insider selling / shares
May 2013 27,250 0
April 2013 0 0
March 2013 0 0
February 2013 3,000 0
January 2013 0 0
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The month of May has seen the most insider buying this year.

Financials

The company reported the first-quarter financial results on May 8 with the following highlights:

Revenue $100.3 million
Net income $2.1 million
Cash $33.7 million
Debt $20.0 million
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Outlook

For the second quarter, the company expects revenues to be between $104 million and $107 million.

Competition

Orthofix's competitors include Smith & Nephew (NYSE:SNN) and Stryker Corporation (NYSE:SYK). Here is a table comparing these companies.

Company OFIX SNN SYK Industry Average (Medical Appliances & Equipment)
Market Cap: 520.46M 10.76B 25.45B 1.52B
Employees: 892 10,500 22,010 810.00
Qtrly Rev Growth (yoy): -0.14 -0.00 0.01 0.18
Revenue: 446.53M 4.13B 8.69B 1.47B
Gross Margin: 0.80 0.74 0.68 0.62
EBITDA: 89.73M 1.18B 2.07B 280.86M
Operating Margin: 0.16 0.22 0.21 0.07
Net Income: 46.63M 713.00M 1.25B N/A
EPS: 2.12 3.95 3.27 0.82
P/E: 12.59 15.06 20.57 20.11
PEG (5 yr expected): 1.33 1.92 1.89 1.36
P/S: 1.16 2.60 2.95 3.83
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Orthofix is trading below the industry average P/S ratio, which could explain some of the insider buying.

My analysis

There have been five different insiders buying the shares and there have not been any insiders selling the shares during the last 30 days. The company has an insider ownership of 1.25%. There are two analyst buy ratings, four neutral ratings and one sell rating, with an average target price of $29.50. The stock is trading at a P/E ratio of 12.59 and a forward P/E ratio of 12.41. The company has a book value of $20.67 per share, which could be a good entry point for the stock.

2. Ambit Biosciences Corporation (NASDAQ:AMBI), a biotechnology company, engages in the discovery, development, and commercialization of small molecule therapeutics for the treatment of cancer.

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Insider buying by insider (last 30 days)

  • David Bonita purchased 680,471 shares by Orbimed Advisors on May 21 pursuant to the initial public offering. Orbimed Advisors LLC currently beneficially owns 2,071,284 shares or 11.3% of Ambit Biosciences. David Bonita has served as a director of Ambit Biosciences since October 2012. David Bonita is a principal on the private equity team at OrbiMed Advisors LLC.
  • Steve Elms purchased 423,635 shares by Perseus-Soros Biopharmaceutical Fund, L.P. on May 21 pursuant to the initial public offering. Perseus-Soros Biopharmaceutical Fund, L.P. currently beneficially owns 1,670,676 shares or 9.4% of Ambit Biosciences. Steve Elms has served as a director of Ambit Biosciences since 2001. Steve Elms is a managing director of the Perseus-Soros Biopharmaceutical Fund, L.P.
  • Allan Marchington purchased 431,527 shares by Apposite Healthcare Fund LP on May 21 pursuant to the initial public offering. Allan Marchington currently beneficially owns 1,550,877 shares or 8.6% of Ambit Biosciences. Allan Marchington has served as a director of Ambit Biosciences since October 2007. Allan Marchington is a partner at Apposite Capital LLP.
  • Standish Fleming purchased 263,301 shares by Forward Ventures IV, L.P. on May 21 pursuant to the initial public offering. Standish Flemin currently beneficially owns 1,038,219 shares or 5.8% of Ambit Biosciences. Standish Fleming has served as a director of Ambit Biosciences since June 2001. Standish Fleming is a managing member at Forward Ventures.

Insider buying by calendar month

Here is a table of Ambit Biosciences' insider trading activity by calendar month.

Month Insider buying / shares Insider selling / shares
May 2013 1,798,934 0
April 2013 0 0
March 2013 0 0
February 2013 0 0
January 2013 0 0
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Ambit Biosciences had its IPO in May.

Financials

The company reported the pro forma first-quarter financial results with the following highlights:

Revenue $6.6 million
Net loss $12.0 million
Cash $92.2 million
Debt $3.1 million
Net tangible book value $3.32 per share
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Competition

Competition for Quizartinib

  • Pfizer's (NYSE:PFE) Sutent (sunitinib) and Bayer's (OTCPK:BAYZF) and Onyx's (NASDAQ:ONXX) Nexavar (sorafenib), two multi-kinase inhibitors that inhibit the FLT3 kinase, are approved for the treatment of certain solid tumors; however, these drugs also inhibit other kinases with equal or greater potency and are not approved for the treatment of AML.

Competition for AC410

  • Pfizer's Xeljanz (tofacitinib), a pan-JAK inhibitor, was recently approved in the United States for the treatment of RA, becoming the first inhibitor of the JAK family of kinases to be approved worldwide to treat an inflammatory disease.

Competition for CSF1R

  • Ambit Biosciences is not aware of any commercialized products that target CSF1R.

Competition for CEP-32496

  • Daiichi-Sankyo's (OTCPK:DSKYF) and Roche's (OTCQX:RHHBY) Zelboraf (vemurafenib), a BRAF kinase inhibitor, was approved by the FDA in 2011 for the treatment of metastatic melanoma patients harboring the V600E BRAF mutation, becoming the first BRAF kinase inhibitor to be approved worldwide.

Pipeline

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My analysis

The stock started trading on May 16 after the IPO. There have been four different insiders buying the shares and there have not been any insiders selling the shares since the IPO. All current executive officers and directors as a group own 34.1% of Ambit Biosciences. The company's pipeline is still in a relatively early stage. The stock could be a good long-term play based on the intensive insider buying.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.