With Friday's S-3 shelf filing by Zogenix (ZGNX) giving the company the ability to raise $75 million by selling securities at some date over the next three years, it is the perfect time to do an analysis of the current outstanding share ownership of ZGNX. What this research shows is that Zogenix shares are being bought at an aggressive rate over the last six months by institutions and insiders leaving only a very small float available. (For a more detailed fundamental analysis of Zogenix, my top biotech pick of 2012, please refer to my first article on this company).
As of November 1, 2011, ZGNX has 65,184,844 outstanding shares of common stock. Remarkably, Zogenix's executive officers and directors and their affiliates together control approximately 56% of the outstanding common stock, or approximately 36.4 million shares.
Of the approximately 28.7 million outstanding shares not owned by insiders, 25,683,077 million of those shares (39% of outstanding shares) are owned by 49 non-insider institutions. That leaves a float of only around 3 million shares, or 5% of outstanding shares.
226% Increase in Institutional Ownership
There has been a remarkable rise in institutional buying of ZGNX shares over the last six months. Before June 30, 2011, only 14 institutions owned 7,869,428 shares of ZGNX. Since June 30, 2011, 35 institutions have initiated new positions or added to their existing ZGNX positions in the amount of 17,813,649 shares, an institutional ownership increase of 226%.
In that same time period, only 8 institutions decreased their ZGNX positions in an insignificant scale of only 94,445 shares. That is a institutional buy to sell ratio of 188 to 1.
The top ten, recent institutional buying activity of ZGNX includes:
Firefly Value Partners
Royce & Associates
GRT Capital Partners
Increased Insider Buying
Also over the last six months while institutions were buying 28% (17,813,649) of the outstanding shares, ZGNX insiders were buying an additional 14% (9,165,000 shares) of outstanding shares raising their ownership to 56% of outstanding shares. Those recent insider purchases included the following increases in insider holdings:
In summary, those who look for investment ideas based on extraordinary institutional and insider buy to sell imbalance should take notice of Zogenix. With an insider & institutional buy to sell ratio of 285 to 1 (26,978,649 shares bought to 94,450 shares sold) over the last six months, the cumulative insider knowledge and institutional due diligence conducted proceeding these buys should give any potential ZGNX investor or current shareholder great faith in the bright future for this exciting specialty biotech company.
The shelf filing is only a welcome opportunity for more institutions and insiders to initiate or add to their current ZGNX positions. With only 5% of the outstanding shares currently available, how else are they going to get an opportunity to buy a piece of the top biotech pick of 2012.
Disclosure: I am long ZGNX.