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Insider buying is often a sign of potential positive developments within a company, particularly if the insiders who are buying have a good track record with respect to their own buying. This is, however, only a secondary indicator and should not be relied upon solely when making the decision whether or not to purchase a security. Insider buying in and of itself will not make a stock go higher, but can provide a further clue if all the other pieces of the puzzle (e.g., earnings, sales, return on equity, profit margins, etc.) are in place.

I screened for companies in the healthcare sector where at least one insider made a buy filed on August 20-22. Here are the five stocks:

1. Vivus (VVUS) is a biopharmaceutical company commercializing and developing innovative, next-generation therapies to address unmet needs in obesity, sleep apnea, diabetes and sexual health for U.S., Europe and other world markets. Qsymia is also in Phase II clinical development for the treatment of Type 2 diabetes and obstructive sleep apnea.

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Insider buys

Ernest Mario purchased 5,000 shares on August 20 and currently holds 45,000 shares of the company. Ernest Mario serves as a director of the company.

Financials

The company reported the second-quarter financial results on August 7 with the following highlights:

Net loss$24.0 million
Cash$310.4 million

Upcoming milestones

The company has the following near-term catalysts:

  • On June 5, 2012, Vivus announced that the European Medicines Agency's (EMA) Committee for Medicinal Products for Human Use (CHMP) has rescheduled the decision process on the Marketing Authorization Application (MAA) for Qnexa, an investigational drug for the treatment of obesity. In April, Vivus submitted its response to the Day 180 List of Outstanding Issues from the CHMP, and was invited by the CHMP to participate in an oral hearing in order to provide additional explanations of the Day 180 response. An oral hearing is a customary part of the EMA approval process. Vivus requested additional time to prepare for the oral hearing, and the CHMP has agreed to schedule the hearing in September 2012. The CHMP opinion on the Qnexa MAA is now expected following the September meeting.
  • Stendra (avanafil) tablets for the treatment of erectile dysfunction (ED) is under review in Europe, with an anticipation of a decision sometime in the first part of next year (2013).

My analysis

The stock has seen heavy insider selling this year. Ernest Mario has been the only insider buying the shares. I believe the stock could re-test the $30 level after Qnexa approval in Europe. If the drug fails to gain European approval, we will likely dip below $15.

2. Apricus Bio (APRI) is a pharmaceutical company that develops and markets innovative treatments that help large patient populations across numerous, high-demand therapeutic classes. The company has four approved products and has developed a strong pipeline of multiple late-stage product candidates. With commercial operations in both the U.S. and Europe (France), Apricus Bio generates revenues and growth from sales of its commercial products and by out-licensing, in certain territories, its pipeline products and NexACT technology.

Apricus Bio's growth strategy is to acquire, develop, and commercialize new products through strategic partnerships. The company currently has commercial partnerships with multiple large pharmaceutical companies including Novartis (NVS), Abbott Laboratories (ABT), Sandoz, Warner Chilcott, Wockhardt, and Bracco, and co-promotes multiple products in France.

Insider buys

  • Edward Cox purchased 1,500 shares on August 20 and currently holds 158,541 shares of the company. Mr. Cox was named Vice President Corporate Development & Investor Relations in December 2009.
  • Bassam Damaj purchased 1,500 shares on August 20 and currently controls 1,361,985 shares of the company. Bassam Damaj, Ph.D., has been the President, Chief Executive Officer and a director since December 2009.
  • Rusty Ray purchased 4,000 shares on August 17 and currently holds 23,852 shares of the company. Rusty Ray has been a director since December 2009 and Chairman of the Board of Directors since April 2012.

Financials

The company reported the second-quarter financial results on August 8 with the following highlights:

Revenue$0.1 million
Net loss$4.9 million
Cash$17.9 million

Upcoming milestones

  • Commercialization of Vitaros in Canada. The company's Canadian partner, Abbott Laboratories, has indicated their intention to launch Vitaros for the treatment of erectile dysfunction in the second half of 2012. Apricus Bio has completed the transfer of the Canadian New Drug Submission to Abbott in preparation for the launch later this year.
  • Partnerships for multiple pipeline products in Europe. Apricus Bio continues to engage in partnership discussions for Vitaros, as well as its other pipeline products, throughout the remaining territories in Europe and looks forward to announcing signed partnerships with upfront cash, milestones, and royalties. The company is in commercial contract negotiations for several territories in Europe, some of which it currently expects to finalize in the third or fourth quarters of this year.
  • Additional Vitaros filings in Europe and Latin America. Apricus Bio currently intends to file its answers to its DCP in Europe and expects to file a response in September 2012. On the Latin American front, the company expects Mexico to be the first Latin American country in which it will file for Vitaros and it expects that filing to take place in the near future.
  • Regulatory guidance for Femprox development program. The company met with Health Canada regarding Femprox in July 2012 and is planning to meet with regulatory agencies in the U.S. and Europe in the third and fourth quarters of 2012. It hopes to obtain guidance regarding the suitability of the existing clinical, preclinical, and chemistry data to support approval filings in each territory.
  • Regulatory guidance for MycoVa development program. The company met with Health Canada regarding MycoVa in July 2012 and is planning to meet with regulatory agencies in the U.S. and Europe in the third and fourth quarters of 2012. It hopes to obtain guidance regarding the suitability of their existing clinical, preclinical and chemistry data to support approval filings in each territory.

My analysis

The company has not seen any insider buying before August 2012. The first insider buys could be a good sign together with the long list of upcoming milestones.

3. CardioNet (BEAT) is a leading provider of ambulatory, continuous, real-time outpatient management solutions for monitoring relevant and timely clinical information regarding an individual's health. CardioNet's initial efforts are focused on the diagnosis and monitoring of cardiac arrhythmias, or heart rhythm disorders, with a solution that it markets as Mobile Cardiac Outpatient TelemetryTM (MCOTTM).

Insider buys

Joseph Capper purchased 800 shares on August 21, 14,160 shares on August 20 and 9,800 shares on August 17. The shares were purchased via a Rule 10b5-1 trading plan. Joseph Capper currently holds 308,915 shares of the company. Joe Capper was appointed President and Chief Executive Officer of CardioNet in June 2010.

Financials

The company reported the second-quarter financial results on August 8 with the following highlights:

Revenue$27.5 million
Net loss$1.2 million
Cash$34.1 million

My analysis

Joseph Capper is the first insider buyer in the stock since May 2009. The stock has not seen any insider selling since February 2009. The company is currently trading at a Price/Sales ratio of 0.47 and has a cash position of $1.48 per share. I might take a long position in the stock in the near future.

4. AdCare Health Systems (ADK) is a recognized innovator in senior living and healthcare facility management. AdCare owns and manages long-term care facilities and retirement communities, and since the company's inception in 1988, its mission has been to provide the highest quality of healthcare services to the elderly, including a broad range of skilled nursing and sub-acute care services.

Insider buys

Christopher Brogdon purchased 5,645 shares on August 17 and currently holds 885,699 shares of the company. Christopher Brogdon serves as Chief Acquisition Officer/Vice Chairman.

Financials

The company reported the second-quarter financial results on August 7 with the following highlights:

Revenue$55.0 million
Net income$0.7 million
Cash$13.0 million

Outlook

Combining the company's current annualized run-rate with transactions in the process of closing, AdCare's estimated annualized revenue run-rate is expected to exceed $250 million. This would represent an increase of more than 65% over the company's revenues in 2011, and an increase of more than nine times revenues since initiating its M&A campaign. AdCare's expected annualized revenue run-rate does not include the potential revenues of the $20 million from the newly renovated sub-acute care facility in Arkansas.

My analysis

The stock has seen steady insider buying since July 2010. There has not been any insider selling since at least July 2010. The stock is currently trading at a forward P/E of 9.96 and Price/Sales ratio of 0.33. I would recommend buying the shares on pullbacks towards $4 level.

5. NeuroMetrix (NURO) is an innovative medical device company that develops and markets home use and point-of-care devices, associated consumables, and support software for the treatment and management of diabetes and its complications. The company is focused on nerve-related complications of diabetes, called diabetic neuropathies, which affect over 50% of people with diabetes. If left untreated, diabetic neuropathies trigger foot ulcers that may require amputation, cause disabling chronic pain, and increase the risk of falling in the elderly. The annual cost of diabetic neuropathies has been estimated at $14 billion in the United States. The company's products are used by physicians and other clinicians in retail health settings such as pharmacies, and by managed care organizations to optimize patient care and reduce healthcare costs. The company markets the NC-stat DPNCheck device, which is a rapid, accurate, and quantitative point-of-care test for diabetic neuropathy. This product is used to detect diabetic neuropathy at an early stage and to guide treatment. The company has received 510(k) clearance for its SENSUS pain management device from the U.S. Food and Drug Administration (FDA). The company has additional therapeutic products in its pipeline.

Insider buys

  • Thomas Higgins purchased 5,000 shares on August 21, 5,000 shares on August 13 and 5,000 shares on August 8. Thomas Higgins currently holds 46,304 shares of the company. Thomas Higgins serves as a Senior Vice President and Chief Financial Officer of the company.
  • Krishnamurthy Balachandran purchased 5,000 shares on August 10-13 and currently holds 35,449 shares of the company. Krishnamurthy Balachandran serves as the Chief Operating Officer of the company.

Financials

The company reported the second-quarter financial results on July 26 with the following highlights:

Revenue$2.2 million
Net loss$2.8 million
Cash$13.3 million
Shares outstanding12.6 million
Cash per share$1.06

My analysis

The stock is currently trading below the net cash of $1.06 per share. The stock has not seen any insider selling since December 2010. The company has additional therapeutic products in its pipeline with approvals expected in 2013 and 2014. The company is launching its SENSUS pain management device in the fourth quarter 2012.

Source: 5 Healthcare Companies With Insider Buying Filed On August 20 - 22