2 Biotech Stocks With Recent Intensive Insider Buying

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 |  Includes: ESPR, PTCT, XBI
by: Markus Aarnio

The SPDR S&P Biotech Index ETF (NYSEARCA:XBI) was trading as low as $43.06 in March 2009. The index is currently trading at $109.14, or 153.5% above the low made in March 2009.

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In this article, I will feature two biotechs 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 increase their holdings by more than 10%.

1. PTC Therapeutics (NASDAQ:PTCT), a biopharmaceutical company, engages in the discovery, development, and commercialization of orally administered and proprietary small-molecule drugs for patients living with serious and life-threatening conditions, including genetic and neuromuscular disorders, cancer, and infectious diseases.

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Insider buying by insider (last 30 days)

  • Adam Koppel purchased 1,250,000 shares on June 25 by Brookside Capital Partners pursuant to the initial public offering. Brookside Capital Partners currently controls 2,333,333 shares or 9.4% of PTC Therapeutics. Adam Koppel has served as a member of PTC's board of directors since March 2013. Dr. Koppel has served as a Managing Director of Brookside Capital, the public equity affiliate of Bain Capital.
  • Hbm Healthcare Investments (Cayman) Ltd. purchased 666,676 shares on June 25 pursuant to the initial public offering. Hbm Healthcare Investments currently controls 2,508,171 shares or 10.1% of PTC Therapeutics.
  • Michael Schmertzler purchased 533,333 shares by Section Six Partners, L.P. on June 25 pursuant to the initial public offering. Michael Schmertzler currently holds 26,766 shares and 60,000 options or 0.3% of the company. Section Six Partners, L.P. currently controls 1,297,369 shares or 5.2% of PTC Therapeutics. Michael Schmertzler has served as a member of PTC's board of directors since August 2001 and as the Chairman of the board of directors since November 2004. Mr. Schmertzler is a general and limited partner of, and trustee of certain family trusts holding interests in, Section Six Partners, L.P. Mr. Schmertzler disclaims beneficial ownership of the shares held by Section Six Partners, L.P. except to the extent of any pecuniary interest therein.
  • Mark Rothera purchased 25,000 shares on June 25 pursuant to the initial public offering. Mark Rothera currently holds 25,000 shares and 180,000 options or 0.8% of the company. Mark Rothera has served as Chief Commercial Officer since April 2013.
  • Axel Bolte purchased 20,000 shares on June 25 pursuant to the initial public offering. Axel Bolte currently holds 20,000 shares or less than 0.1% of the company. Axel Bolte has served as a member of the board of directors since December 2003.
  • Richard Aldrich purchased 466,667 shares by Longwood Fund LP and 300,000 shares by RA Capital Biotech Fund LP on June 25 pursuant to the initial public offering. Richard Aldrich currently controls 1,350,000 shares or 5.4% of the company. Richard Aldrich has served as a member of PTC's board of directors since March 2013. Mr. Aldrich has served as a partner of Longwood Fund, LP, a venture capital investment fund, since 2010. He founded RA Capital Management LLC, a hedge fund, in 2001.
  • Michael Kranda purchased 333,333 shares by Vulcan Ventures Inc. on June 25 pursuant to the initial public offering. Vulcan Ventures Inc. currently controls 1,701,731 shares or 6.8% of PTC Therapeutics. Michael Kranda has served as a member of PTC's board of directors since December 2003. Since September 2006, Mr. Kranda has served as a consultant to Vulcan Capital, the private investment group of Vulcan Inc.

Insider buying by calendar month

Here is a table of PTC Therapeutics' insider trading activity by calendar month.

Month Insider buying / shares Insider selling / shares
June 2013 3,595,009 0
May 2013 0 0
April 2013 0 0
March 2013 0 0
February 2013 0 0
January 2013 0 0
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The company had its IPO in June.

Financials

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

Revenue $7.1 million
Net loss $6.5 million
Cash $168.9 million
Debt $3.8 million
Tangible book value $6.26 per share
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Pipeline

PTC's lead product candidate is ataluren for the treatment of patients with genetic disorders that arise from a type of genetic mutation known as a nonsense mutation. PTC has retained worldwide commercialization rights to ataluren for all indications in all territories. Ataluren is in late stage clinical development for the treatment of Duchenne muscular dystrophy caused by nonsense mutations [nmDMD] and cystic fibrosis caused by nonsense mutations [nmCF]. The European Medicines Agency has designated ataluren as an orphan medicinal product and the U.S. Food and Drug Administration has granted orphan drug designation to ataluren for the treatment of both nmDMD and nmCF.

PTC has initiated a confirmatory Phase 3 clinical trial of ataluren for the treatment of nmDMD. PTC dosed the first patient in this trial in April 2013. In October 2012, PTC submitted a marketing authorization application to the EMA for conditional approval of ataluren for the treatment of nmDMD. PTC is also planning a confirmatory Phase 3 clinical trial of ataluren for the treatment of nmCF. PTC plans to begin enrolling trial sites for this trial in the second half of 2013, and PTC expects to dose the first patient in this trial in the first half of 2014, subject to the conclusion of the company's ongoing discussions with regulatory authorities regarding its proposed trial design. PTC has completed a Phase 2b clinical trial of ataluren for the treatment of nmDMD and a Phase 3 clinical trial of ataluren for the treatment of nmCF. PTC did not achieve the primary efficacy endpoint in either trial with the pre-specified level of statistical significance. However, PTC believes that the collective data from these trials, including retrospective and subgroup analyses that the company has performed, provide strong support for concluding that ataluren was active and showed clinically meaningful improvements over placebo in these trials.

Competition

The competition for ataluren includes the following:

Ataluren for nmDMD. There are currently no marketed therapeutics approved to treat the underlying cause of nmDMD. Current treatments seek to address symptoms through supportive care measures, such as bracing, joint stretching exercises, tendon release surgery, wheelchair use and assisted ventilation. Corticosteroids, such as prednisone and deflazacort are often prescribed to treat some of the symptoms of the disease. PTC believes that ataluren is the only product candidate in clinical trials that is designed to treat the underlying cause of nmDMD by restoring dystrophin activity. Other biopharmaceutical companies are developing treatments for Duchenne muscular dystrophy based on a different scientific approach known as exon skipping. Prosensa Therapeutics is developing a product candidate, PRO051, based on exon skipping that is currently in Phase 3 clinical development in collaboration with GlaxoSmithKline (NYSE:GSK). Sarepta Therapeutics (NASDAQ:SRPT) is developing a product candidate, Eteplirsen, based on exon skipping that is currently in Phase 2b clinical development. PTC does not believe that either PRO051 or Eteplirsen is applicable for the treatment of patients with nmDMD. Summit Corporation also has a product candidate in early clinical development designed to increase the production of the protein utrophin, which is functionally similar to dystrophin, to treat Duchenne muscular dystrophy. In addition, Pfizer (NYSE:PFE) has a potentially muscle-enhancing product candidate in Phase 2 clinical development for muscular dystrophy.

Ataluren for nmCF. There are currently no marketed therapeutics approved to treat the underlying cause of nmCF. In 2012, the FDA approved Kalydeco (ivacaftor), a CFTR potentiator developed by Vertex Pharmaceuticals (NASDAQ:VRTX), as a treatment for cystic fibrosis in patients six years of age and older who have a type of mutation in the CFTR gene known as a gating mutation. PTC does not believe that Kalydeco, which is designed for the treatment of patients with a mutation other than a nonsense mutation, is applicable for the treatment of patients with nmCF, except possibly in very rare instances in which a patient is heterozygous with both a nonsense mutation and a gating mutation. Other current treatments for cystic fibrosis are designed to alleviate the symptoms of the disease and depend upon the stage of the disease and the organs involved. Clearing mucus from the lungs is an important part of the daily cystic fibrosis treatment regimen. Chest physical therapy is a form of airway clearance that involves vigorous clapping on the back and chest to dislodge the thick mucus from the lungs. Other treatments for cystic fibrosis include TOBI (tobramycin), an aerosolized antibiotic used to treat lung infections that is marketed by Chiron Corporation, and Pulmozyme, a mucus-thinning drug shown to reduce the number of lung infections and improve lung function, that is marketed by Genentech, Inc. PTC believes that ataluren is the only product candidate in clinical trials that is designed to treat the underlying cause of nmCF by restoring CFTR activity. Vertex Pharmaceuticals also is developing two other product candidates for the treatment of cystic fibrosis in patients who have a type of mutation in the CFTR gene known as a processing block mutation, one of which is in Phase 2 clinical development in combination with Kalydeco.

My analysis

The stock started trading on June 20 after the initial public offering. There have been seven different insiders buying the shares and there have not been any insiders selling the shares since the IPO. The next major catalyst for the stock will be the EMA decision for Ataluren later this year. I have a cautiously bullish bias for the stock currently based on the intensive insider buying.

2. Esperion Therapeutics (NASDAQ:ESPR), a biopharmaceutical company, focuses on the research, development, and commercialization of therapies for the treatment of patients with low-density lipoprotein cholesterol and other cardiometabolic risk factors.

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Insider buying by insider (last 30 days)

  • Alta Partners VIII L.P. purchased 235,714 shares on July 1 pursuant to the initial public offering. Alta Partners VIII L.P. currently controls 2,052,189 shares or 14.1% of Esperion Therapeutics.
  • Longitude Capital Partners purchased 216,676 shares on July 1 pursuant to the initial public offering. Longitude Capital Partners currently controls 1,934,396 shares or 13.3% of Esperion Therapeutics.
  • Timothy Mayleben purchased 5,000 shares on July 1 pursuant to the initial public offering. Timothy Mayleben currently holds 28,814 shares or 0.2% of Esperion Therapeutics. Timothy Mayleben is President and Chief Executive Officer and has been a member of the board of directors since February 2010.
  • Roger Newton purchased 42,346 shares on July 1 pursuant to the initial public offering. Roger Newton currently holds 629,683 shares or 4.3% of Esperion Therapeutics. Roger Newton is founder, Executive Chairman and Chief Scientific Officer of Esperion.
  • Louis Lange purchased 14,214 shares on July 1 pursuant to the initial public offering. Louis Lange currently controls 215,517 shares or 1.5% of Esperion Therapeutics. Louis Lange has served as a member of the board of directors since February 2010.
  • Aisling Capital II LP purchased 238,119 shares on July 1 pursuant to the initial public offering. Aisling Capital II LP currently controls 2,054,594 shares or 14.1% of Esperion Therapeutics.

Insider buying by calendar month

Here is a table of Esperion Therapeutics' insider trading activity by calendar month.

Month Insider buying / shares Insider selling / shares
July 2013 752,069 0
June 2013 0 0
May 2013 0 0
April 2013 0 0
March 2013 0 0
February 2013 0 0
January 2013 0 0
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The company had its IPO in June.

Financials

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

Revenue $0
Net loss $4.2 million
Cash $83.9 million
Tangible book value $5.68 per share
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Pipeline

Esperion is a biopharmaceutical company focused on the research, development and commercialization of therapies for the treatment of patients with elevated levels of low-density lipoprotein cholesterol (LDL-C) and other cardiometabolic risk factors. ETC-1002, Esperion's lead product candidate, is a novel, first in class, orally available, once-daily small molecule therapy designed to target known lipid and carbohydrate metabolic pathways to lower levels of LDL-C and to avoid many of the side effects associated with existing LDL-C lowering therapies. To date, Esperion has treated 275 subjects in six completed clinical trials, including three Phase 2a trials. Esperion owns the exclusive worldwide rights to ETC-1002.

The following table summarizes the current status of Esperion's product development pipeline:

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Competition

The industry is highly competitive and subject to rapid and significant technological change. Esperion's potential competitors include large pharmaceutical and biotechnology companies, specialty pharmaceutical and generic drug companies, academic institutions, government agencies and research institutions. Key competitive factors affecting the commercial success of Esperion's product candidates are likely to be efficacy, safety and tolerability profile, reliability, convenience of dosing, price and reimbursement.

The market for cholesterol regulating therapies is especially large and competitive. The product candidates Esperion is currently developing, if approved, will face intense competition, either as monotherapies or as combination therapies.

My analysis

The stock started trading on June 26 after the initial public offering. There have been six different insiders buying the shares and there have not been any insiders selling the shares since the IPO. The next catalyst for the stock will be the top-line data from a Phase 2a (ETC-1002-007) study which is expected in the third quarter. I have a cautiously bullish bias for the stock currently 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.