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 22-23. Here are the five stocks:
1. Echo Therapeutics (ECTE) is a transdermal medical device company with deep expertise in advanced skin permeation technology. Echo is developing its Prelude SkinPrep System as a platform technology to allow for significantly enhanced skin permeation that will enable both needle-free drug delivery and analyte extraction. Utilizing the patented, core skin permeation technology found in Prelude, Echo is developing its needle-free Symphony tCGM System as a non-invasive, wireless, transdermal continuous glucose monitoring (tCGM) system for use in hospital critical care units and for people with diabetes.
James Smith purchased 20,000 shares on August 22-23 and currently holds 59,500 shares of the company. James Smith serves as a director of the company.
The company reported the second-quarter financial results on August 10 with the following highlights:
|Net loss||$3.2 million|
LifeTech Capital gave a Echo research update on August 16:
We are maintaining a Strong Speculative Buy with a Price Target of $5.00: Our target price is based on 35x projected 2014 EPS and discounted 30% for risk resulting in a market capitalization of approximately $200 million. This is a significant discount to DexCom (DXCM) (see Competition), the only pure-play comparable, which has FDA approval for their invasive, implantable biosensors with a market capitalization of approximately $850 million.
This week's insider buy was the first one in the stock since January 2008. The stock is still making lower lows and lower highs. I would recommend only a small speculative position in the stock currently. I wrote an article about Echo on May 29.
2. Biolase (BIOL), the world's leading dental laser company, is a medical technology company that develops, manufactures and markets dental lasers and also distributes and markets dental imaging equipment; products that are focused on technologies that advance the practice of dentistry and medicine. The company's laser products incorporate approximately 290 patented and patent pending technologies designed to provide biologically clinically superior performance with less pain and faster recovery times. Its imaging products provide cutting-edge technology at competitive prices to deliver the best results for dentists and patients. Biolase's principal products are dental laser systems that perform a broad range of dental procedures, including cosmetic and complex surgical applications, and a full line of dental imaging equipment. Biolase has sold more than 20,100 lasers among 16,000 customers. Other products under development address ophthalmology and other medical and consumer markets.
- Frederick Furry purchased 5,000 shares on August 21-23. Frederick Furry was appointed Chief Financial Officer in November 2010 and added the role of Chief Operating Officer in October 2011.
- Alexander Arrow purchased 10,000 shares on August 14 and currently holds 102,575 shares of the company. Alexander Arrow, M.D., CFA, was appointed to the Board of Directors in July 2010.
The company reported the second-quarter financial results on August 8 with the following highlights:
|Net loss||$1.9 million|
Biolase expects GAAP revenue for the third quarter of 2012 of approximately $13.5 million to $15.0 million. On a non-GAAP adjusted basis, 2012 third quarter revenue is expected to increase approximately $1.3 million to $2.8 million, or 11 to 23 percent, compared to the same period last year after excluding product revenues totaling approximately $900,000 associated with the irrevocable one-time purchase orders from Schein for the 2011 third quarter. Full-year gross revenue guidance for 2012 remains $57 million to $60 million, excluding the $1.1 million reduction in net revenue for the inventory re-purchase from Schein during the 2012 second quarter. Excluding equipment sales to Schein to satisfy one-time prepaid purchase orders of approximately $5.9 million during 2011, the midpoint of the company's guidance of $58.5 million represents an increase of 36 percent, year over year. In addition, Biolase's goal remains to be cash flow positive in the fourth quarter of 2012.
The stock has seen mostly insider buying since November 2003. There has only been two insider sells since 2003, one in September 2010 and one in October 2010. I might take a long position in the stock.
3. Progenics Pharmaceuticals (PGNX) is a biopharmaceutical company dedicated to developing innovative medicines to treat disease, with a focus on cancer and related conditions. Progenics' pipeline candidates include PSMA ADC, a human monoclonal antibody-drug conjugate in phase 1 testing for treatment of prostate cancer, and preclinical stage novel multiplex phosphoinositide 3-kinase (PI3K) inhibitors for the treatment of cancer. Progenics has exclusively licensed development and commercialization rights for its first commercial product, Relistor, to Salix Pharmaceuticals (SLXP) for markets worldwide other than Japan, where Ono Pharmaceutical Co., holds an exclusive license for the subcutaneous formulation. Relistor (methylnaltrexone bromide) subcutaneous injection is a first-in-class treatment for opioid-induced constipation approved in more than 50 countries for patients with advanced illness.
Mark Baker purchased 815 shares on August 22 pursuant to a 10b5-1 trading plan. Mr. Baker joined Progenics in 2005 as senior vice president and general counsel and secretary, and has since served as executive vice president, president, and was appointed to the board of directors. Mr. Baker serves currently as Chief Executive Officer of the company.
The company reported the second-quarter financial results on August 9 with the following highlights:
|Net loss||$10.7 million|
On July 27, Progenics and Salix announced that the FDA issued a Complete Response Letter (CRL) following its review of a supplemental New Drug Application for subcutaneous Relistor in adult patients with chronic, non-cancer pain. Salix has requested an End-of-Review meeting with the FDA to better understand the contents of the CRL.
The stock has seen more insider selling than buying since January 2011. I believe it is still too early to call a bottom for the stock.
4. American Bio Medica Corporation (ABMC.PK) develops, manufactures and markets accurate, cost-effective immunoassay test kits, including some of the world's most effective point of collection tests for drugs of abuse. The company and its worldwide distribution network target the workplace, government, corrections, clinical and educational markets. ABMC's Rapid Drug Screen, Rapid ONE, RDS InCup, Rapid TOX and Rapid TOX Cup II test for the presence or absence of drugs of abuse in urine, while OralStat and Rapid STAT test for the presence or absence of drugs of abuse in oral fluids. ABMC's Rapid Reader is a compact, portable device that, when connected to any computer, interprets the results of an ABMC drug screen, and sends the results to a data management system, enabling the test administrator to easily manage their drug testing program.
Mp Biomedicals LLC purchased 583,000 shares on August 21 and currently holds 3,397,273 shares of the company. The company has 21.8 million shares outstanding which makes Mp Biomedicals a 15.6% owner of the company.
The company reported the second-quarter financial results on August 14 with the following highlights:
|Net loss||$0.08 million|
ABMC Chief Executive Officer Stan Cipkowski stated on August 14:
"We are achieving sales growth in certain markets but, as a US manufacturer, we continue to struggle to be cost-competitive in other markets. I remain confident that our investments in sales and marketing in the first quarter of 2012 and our investments in new product development will enable us to see more positive results later this year and into 2013."
The stock has seen steady insider buying since January 2012. There has not been any insider selling in the stock this year. I would recommend only a small position in the stock currently.
5. Digirad (DRAD) is a leading provider of diagnostic imaging products. Digirad also provides the ability for its physician customers to lease its qualified personnel, imaging systems and related items required to perform nuclear imaging in their own offices.
Jeffrey Eberwein purchased 10,000 shares on August 21-22 and currently holds 122,985 shares of the company. Jeffrey Eberwein serves as a director of the company.
The company reported the second-quarter financial results on July 26 with the following highlights:
|Net loss||$0.9 million|
Digirad CEO Todd Clyde commented on July 26:
"To reiterate our goals for 2012, we expect to generate positive cash flow from our DIS business and are focused on increasing sales of both our cardiac and ergo cameras. Management and the Board's newly formed Strategic Advisory Committee continue to explore various strategic options, including examining where our core solid state camera technologies can be applied with greater success in the marketplace."
The stock has seen more insider buying than selling this year. The last insider sell was in May 2012. The company has a book value of $2.05 per share and net cash of $1.42 per share. I am not expecting the stock to fall below the net cash per share level.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in BIOL over the next 72 hours.