A Promising $5 Biotech Stock With Major Insider Buying

| About: Amicus Therapeutics, (FOLD)

M&A activity has declined significantly in the first half of the year. The one exception is in the biotech sector with Bristol-Myers Squibb's (NYSE:BMY) $5.3B acquisition of Amylin Pharmaceuticals (AMLN). This is just latest purchase of a promising biotechnology company by a major pharma firm looking to fill its sparse future pipeline. BMY paid $31 a share to acquire Amylin, more than three times its price at the end of last year. My regular readers know I prefer to take a "shotgun" approach to biotech investing by taking lots of small positions in myriad promising firms. One biotech stock that had strong insider buying, Horizon Pharma (NASDAQ:HZNP), I highlighted in May is up more than 75% since the article ran. A similar stock that has insiders making significant purchases recently is Amicus Therapeutics (NASDAQ:FOLD).

"Amicus Therapeutics a biopharmaceutical company, focuses on the discovery, development, and commercialization of orally-administered, small molecule drugs for the treatment of lysosomal storage disorders and diseases of neurodegeneration." (Business description from Yahoo Finance)

Six reasons to pick up FOLD at $5.50 a share:

  1. Insiders have bought more than 1mm new shares in May and June.
  2. The company has over $100mm in net cash on its books (approximately 40% of market capitalization).
  3. The five analysts that cover the stock have a median price target on $9 a share. The low price target on FOLD is $8 a share. ThinkEquity also just slapped a "Buy" rating on the stock and JP Morgan upgraded the stock to "Overweight" in May as well.
  4. The company continues to post losses, but it has beat earnings estimates each of the last three quarters and consensus earnings estimates for FY2012 and FY2013 have improved over the last ninety days.
  5. Revenues are projected to increase over 60% in FY2012 and Amicus has more than two years of internal funding at current burn rates.
  6. GlaxoSmithKline (NYSE:GSK) has an important partnership with Amicus and it owns approximately 20% of its joint venture on rare diseases. The company has several drugs, that are in phase II and III trials. It recently announced positive preliminary results from a Phase II trial on it enzyme replacement therapy targeting Pompe disease.

Disclosure: I am long HZNP.