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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 24-28. Here are the five stocks:

1. Merrimack (MACK) is a biopharmaceutical company discovering, developing and preparing to commercialize innovative medicines paired with companion diagnostics for the treatment of serious diseases, with an initial focus on cancer. Merrimack applies Network Biology, its proprietary systems biology-based approach to biomedical research, throughout the research and development process. Merrimack currently has five targeted therapeutic oncology candidates in clinical development.

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Insider buys

James Quigley purchased 12,500 shares on August 24. James Quigley serves as a director of the company.

Financials

The company reported the second-quarter financial results on August 10 with the following highlights:

Revenue$12.1 million
Net loss$20.1 million
Cash$106.7 million

Merrimack expects its existing cash and cash equivalents and investments on hand to be sufficient to fund operations into the second half of 2013.

Upcoming milestones

Merrimack anticipates the following milestones in the next 12 months:

  • Presentation on a Phase 1 study of MM-111 in combination with multiple agents and a Phase 1 study of MM-121 in combination with paclitaxel at ESMO 2012;
  • Presentation on a Phase 1 monotherapy study of MM-302;
  • Phase 1 initiation for MM-141, Merrimack's IGF signaling inhibitor;
  • Phase 1 initiation for MM-DX-929, an imaging diagnostic for Merrimack's nanotherapeutics;
  • Completion of enrollment in multiple Phase 2 trials; and
  • Top-line data announcement of multiple MM-121 Phase 2 studies.

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My analysis

James Quigley's insider buys were the first ones since the IPO in April 2012. The stock has not seen any insider selling since the IPO. I have a neutral bias for the stock currently.

2. Durect (DRRX) is a specialty pharmaceutical company developing innovative drugs for pain and chronic diseases, with late-stage development programs including Remoxy, Posidur, Eladur, and Transdur-Sufentanil. Durect's proprietary oral, transdermal and injectable depot delivery technologies enable new indications and superior clinical/commercial attributes such as abuse deterrence, improved convenience, compliance, efficacy and safety for small molecule and biologic drugs.

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Insider buys

  • Jon Saxe purchased 5,000 shares on August 23. Jon Saxe serves as a director of the company.
  • Armand Neukermans purchased 20,000 shares on June 14, and currently holds 95,000 shares through a family trust. Armand Neukermans, Ph.D. has served as a director since March 2001.
  • Felix Theeuwes purchased 190,113 shares during May 2012 and currently holds 2,182,714 shares by a family trust. Felix Theeuwes is Chairman, co-founder, and Chief Scientific Officer at Durect Corporation.
  • David Hoffmann purchased 25,000 shares on May 10. David Hoffmann has served as a director since December 2002 and as a Lead Independent Director since December 2010.
  • James Brown purchased 20,000 shares on March 14 by Brown trust. James Brown currently holds 1,764,530 shares directly and 560,000 shares by family trust. James Brown, D.V.M. co-founded Durect in February 1998 and has served as President, Chief Executive Officer, and a director since June 1998.

Financials

The company reported the second-quarter financial results on August 6 with the following highlights:

Revenue$4.8 million
Net loss$4.3 million
Cash$23.7 million

Upcoming milestones

The company has the following potential key drivers during the next 12 - 18 months according to an investor presentation dated August 7:

Remoxy

  • Pfizer (PFE) planning for FDA meeting in Q4 2012
  • Support Pfizer to complete activities required for resubmission to CRL
  • Once resubmitted, 6 month review by FDA
  • If approved, launch by Pfizer

Posidur

  • Submission of NDA in late 2012 or early 2013
  • Potential PDUFA date in late 2013

Relday (risperidone)

  • Initiated Phase I in July 2012, with data in 2012

Potential New Collaborations and Programs

  • Posidur, Sufentanil Patch, Eladur, Oradur-ADHD, other undisclosed programs
  • Feasibility projects and undisclosed internal programs

My analysis

The stock has seen only insider buying this year. The last insider sell was on November 2005. The company could receive two drug approvals during 2013. If both Remoxy and Posidur get approved the stock would likely trade above $3.

3. Daxor Corporation (DXR) manufactures and markets the BVA-100, which is used in conjunction with Volumex, Daxor's single use diagnostic kit.

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Insider buys

Joseph Feldschuh has purchased 3,657 shares during August 2012 with the latest transaction on August 23. Joseph Feldschuh currently holds 3,090,412 shares of the company. The company has 4.2 million shares outstanding which makes Joseph Feldschuh a 73.8% owner of the company. Joseph Feldschuh serves as the President and CEO of the company.

Financials

For the three months ended March 31, 2012, the company's revenue from the sale of Volumex Kits increased by 12% from the quarter ended March 31, 2011. There were 64 Blood Volume Analyzers in service at March 31, 2012 versus 56 instruments at March 31, 2011. There will be additional disclosure regarding the company's Volumex Kit Sales and other operations in the Form N-CSR for the six months ended June 30, 2012.

Dr. Joseph Feldschuh, the President of Daxor, said:

"We don't know if this improvement in the sale of Volumex Kits will continue. We realize there are no guarantees but remain hopeful that members of the medical community will understand the need for measuring patients' blood volume precisely rather than using surrogate tests and clinical guesstimates which can be grossly inaccurate."

My analysis

The stock has seen only insider buying since November 2011. The last insider sell was in November 2011. The company has a book value of $8.61 per share. I am not expecting the stock to dip below the book value.

4. Halozyme Therapeutics (HALO) is a biopharmaceutical company dedicated to developing and commercializing innovative products that advance patient care. With a diversified portfolio of enzymes that target the extracellular matrix, the company's research focuses primarily on a family of human enzymes, known as hyaluronidases, that increase the absorption and dispersion of biologics, drugs and fluids. Halozyme's pipeline addresses therapeutic areas, such as diabetes, oncology and dermatology that have significant unmet medical need. The company markets Hylenex recombinant (hyaluronidase human injection) and has partnerships with Roche, Baxter, ViroPharma and Intrexon. Halozyme is headquartered in San Diego, CA.

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Insider buys

Kenneth Kelley purchased 20,000 shares on August 27 and currently holds 150,000 shares of the company. Kenneth Kelley serves as Chairman of the Board of Directors.

Financials

The company reported the second-quarter financial results on August 6 with the following highlights:

Revenue$7.8 million
Net loss$14.0 million
Cash$102.0 million

The company's 2012 cash burn guidance is $55-$60 million.

Upcoming milestones

  • Baxter (BAX) received a complete response letter for the HyQ Biologics License Application (BLA) requesting additional preclinical data to support the application. Baxter plans to file an amendment to the HyQ BLA following additional discussions with the Blood Products division.
  • Roche (RHHBY.OB) announced that the Phase 3 study of the subcutaneous (SC) formulation of MabThera (rituxumab with rHuPH20) met its primary endpoint of non-inferior MabThera serum concentrations after SC injection, compared with MabThera IV infusion in patients with follicular lymphoma. Roche also confirmed that data from this trial will be presented by the end of the year.

My analysis

The stock has seen steady insider buying since March 2008. There has been no insider selling since March 2008. I have a neutral bias for the stock currently.

5. Stellar (OTC:SLXCF) and its subsidiary, Tribute Pharmaceuticals, is an emerging Canadian specialty pharmaceutical company focused on the acquisition, licensing, development and management of pharmaceutical and healthcare products with its primary focus on the Canadian market. Stellar markets Gelfoam, Bezalip SR (bezafibrate), Soriatane (acitretin), NeoVisc (1.0% sodium hyaluronate solution), Collatamp G (gentamicin impregnated sponge) and Uracyst (sodium chondroitin sulfate solution 2%) in the Canadian market. Additionally, NeoVisc and Uracyst are commercially available and are sold globally through various international partnerships.

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Insider buys

  • Steven Goldman purchased 40,000 shares on August 27 and currently controls 965,146 shares of the company. Mr. Goldman is an accomplished lawyer and business leader who became a Director in April 2010.
  • Arnold Tenney purchased 20,000 shares on August 27 and currently controls 904,200 shares of the company. Arnold Tenney serves as Chairman of the Board and Financial Advisor of the company.

Financials

The company reported the second-quarter financial results on August 14 with the following highlights:

Revenue$2.9 million
Net loss$0.7 million
Cash$3.4 million

Upcoming milestones

The company met with the FDA in the United States in March 2012 to discuss the process for US approval of Bezalip SR, a product with significant growth potential in the US.

My analysis

The stock has a $8.69 price target from the Point and Figure chart. The stock has not seen any insider selling this year. The stock did see a 100% rally in three days following a press release on August 23 for a new product. I would recommend only a very small position in the stock currently.

Source: 5 Healthcare Companies With Insider Buying Filed On August 24 - 28