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The healthcare sector has been the top performing group during the last six months, with a 7.6% gain during that period.


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Based on this observation I screened for companies in the healthcare sector where at least one insider made a buy transaction during the November month. Here is a look at the five stocks that I found.

1. Opko Health (OPK) is a multinational biopharmaceutical and diagnostics company that seeks to establish industry leading positions in large, rapidly growing markets by leveraging its discovery, development and commercialization expertise and novel and proprietary technologies.


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Insider buys

Phillip Frost purchased 75,000 shares on November 1. Phillip Frost has purchased 532,500 shares since October 19 and currently controls 48.8% of the company. Phillip Frost is the CEO and chairman of the company. Mr. Frost has been a buyer almost every day this year. His net worth was $2.4 billion as of September 2012.

Financials

The company reported the second-quarter financial results on August 9 with the following highlights:

Revenue $10.2 million
Net loss $10.8 million
Cash $55.3 million

Upcoming Milestones

  • The company expects to begin marketing its test for Alzheimer's disease in 2013. The company believes that this test could initially be useful in stratifying patients for ongoing clinical trials of potential Alzheimer's drugs, as well as to confirm the diagnosis in a clinical setting and to track the progression of the disease or effectiveness of a therapeutic in a clinical trial.
  • In December 2011, the company commenced a multi-center study in the U.S. for the PSA test, which is designed for 510(k) clearance and potential waiver under The Clinical Laboratory Improvement Amendments of 1988. The company intends to submit its application to the Food and Drug Administration for clearance of the PSA test in 2012 and expects to begin marketing the test in the U.S. in 2013.

News

On October 19 OPKO Health entered into a definitive agreement to acquire Prost-Data, doing business as OURLab, a Nashville-based CLIA laboratory with 18 phlebotomy sites throughout the U.S. and an experienced national sales force calling primarily on urologists.

OURLab provides OPKO with a commercial platform to support the near-term U.S. commercial launch of its novel panel of kallikrein biomarkers and associated algorithm (4Kscore) for the detection of prostate cancer. The OPKO 4Kscore is the result of a decade of research by scientists in Europe and the U.S. and has been demonstrated in more than 10,000 patients to predict the probability of positive biopsies in men suspected of having prostate cancer. Extensive studies have shown that the use of the 4Kscore may reduce the number of unnecessary prostate biopsies by 50% or more, avoiding the frequent complications of pain, bleeding, and infection, which sometimes require hospitalization. The data indicate that even with the significant reduction in the number of biopsies performed, the probability of delaying diagnosis of a high grade cancer was only 0.6%. Men whose 4Kscore is low enough to not lead to biopsies would be followed with active surveillance by the urologist.

My Analysis

The stock has a $2.75 price target from the Point and Figure chart. Phillip Frost has been buying 5-15% of the shares traded each day for months already. The stock has three buy ratings, 0 neutral ratings and 0 sell ratings from analysts. I have a neutral bias for the stock currently.

2. Tesaro (TSRO) is an oncology-focused biopharmaceutical company dedicated to improving the lives of cancer patients. The company was founded in March 2010 by former executives of MGI Pharma, an oncology and acute-care focused biopharmaceutical company, which was bought by Japanese drug maker Eisai (OTC:ESALF) on December 2007 for $3.9 billion in cash.

Tesaro's product portfolio currently consists of three oncology-related product candidates:

  • Rolapitant, a potent and long-acting neurokinin-1 [NK-1] receptor antagonist currently in Phase 3 clinical trials for the prevention of chemotherapy induced nausea and vomiting [CINV];
  • Niraparib, formerly known as MK-4827, is an orally active and potent poly (ADP-ribose) polymerase [PARP] inhibitor that has undergone a Phase 1 clinical trial in cancer patients as a monotherapy and is currently under evaluation by Merck (MRK) for use in combination with temozolomide for the treatment of solid tumors. The company intends to evaluate niraparib for the treatment of patients with solid tumors; and
  • TSR-011, an orally available anaplastic lymphoma kinase [ALK] inhibitor (targeted anti-cancer agent) currently in phase 1 development. The company plans to test TSR-011 in clinical trials as a treatment for non-small cell lung cancer [NSCLC] and potentially other cancer indications.


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Insider buys

  • Lawrence Alleva purchased 3,240 shares on November 1 and 11,481 shares on July 3 pursuant to the Initial Public Offering. Lawrence Alleva currently holds 18,050 shares of the company. Lawrence Alleva was appointed to Tesaro's Board of Directors in March 2012.
  • Leon Moulder purchased 10,000 shares on August 30 and currently holds 1,006,428 shares of the company. Leon Moulder has served as Chief Executive Officer and as a member of the company's Board of Directors since co-founding Tesaro in March 2010.
  • Beth Seidenberg purchased 222,222 shares on July 3 pursuant to the Initial Public Offering and currently controls 2,192,665 shares of the company. Beth Seidenberg, M.D., has served as a member of Tesaro's board of directors since June 2011.
  • Arnold Oronsky purchased 444,444 shares on July 3 pursuant to the Initial Public Offering and currently controls 3,071,701 shares of the company. Arnold Oronsky, Ph.D., has served as a member of Tesaro's board of directors since June 2011.
  • New Enterprise Associates 13 LP purchased 1,111,111 shares on July 3 pursuant to the Initial Public Offering and currently holds 11,499,255 shares (or 43%) of the company.

Financials

The company reported the third-quarter financial results on October 25 with the following highlights:

Revenue $0
Net loss $13.6 million
Cash $138.6 million

Upcoming milestones


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Rolapitant is a potent and long-acting NK-1 receptor antagonist that is being developed as a supportive care product for the prevention of CINV and is currently being studied in Phase 3 clinical trials. Tesaro is investigating whether a single dose of rolapitant will, when administered along with the current standard of care for CINV (a 5-HT3 receptor antagonist plus a corticosteroid), significantly increase the control of both nausea and vomiting over the 5-day period of risk for cancer patients receiving emetogenic chemotherapy as compared to the current standard of care alone. The company presented data from a 454-patient, randomized, placebo controlled Phase 2 clinical trial that evaluated rolapitant in patients at high risk of CINV at the American Society of Clinical Oncology conference in June 2012. The company expects to report top line results from the ongoing Phase 3 clinical program for rolapitant during the second half of 2013.

Chemotherapy induced nausea and vomiting [CINV] has the potential to afflict up to 90% or more of cancer patients undergoing chemotherapy, depending upon the type of chemotherapy administered, the dosing schedule of the chemotherapy and the patients' gender, among other predisposing factors. Prolonged nausea and vomiting may result in unwanted weight loss, dehydration and malnutrition as well as hospitalization. If not prevented, CINV may result in a delay or even discontinuation of chemotherapy treatment.

My analysis

The company had an initial public offering in July at $13.50 share price. There have been six insider buy transactions and there have not been any insider sell transactions this year. The company expects to report top line results from the ongoing Phase 3 clinical program for rolapitant during the second half of 2013. If the results are positive the stock could be trading above $20. With negative results the stock would likely dip below $10. I might take a long position in the stock closer to the year end.

3. Exact Sciences (EXAS) is a molecular diagnostics company focused on colorectal cancer. The company has exclusive intellectual property protecting its non-invasive, molecular screening technology for the detection of colorectal cancer. Stool-based DNA technology is included in the colorectal cancer screening guidelines of the American Cancer Society and the U.S. Multi-Society Task Force on Colorectal Cancer.


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Insider buys

  • Kevin Conroy purchased 2,000 shares on November 2 and currently holds 81,477 shares of the company. Kevin Conroy was named President and Chief Executive Officer of Exact Sciences in April 2009. He also serves as a director of the company.
  • Maneesh Arora purchased 1,000 shares on November 2 and currently holds 41,439 shares of the company. Maneesh Arora was appointed Senior Vice President and Chief Financial Officer of Exact Sciences in April 2009.
  • Lionel Sterling purchased 5,500 shares on November 1 and currently holds 71,271 shares of the company. Lionel Sterling has served as a director of the company since July 2010.

Financials

The company reported the third-quarter financial results on October 30 with the following highlights:

Revenue $1.0 million
Net loss $13.0 million
Cash $118.6 million

Outlook

The company's 2012 cash utilization guidance is $42 million to $43 million.

Upcoming milestones

The company's pivotal DeeP-C clinical trial has the following upcoming milestones according to the third quarter earnings conference call on October 30:

Timing DeeP-C clinical trial
November 15, 2012 Trial enrollment concludes
December 2012 Submit first FDA module
February 2013 Submit second FDA module
March 2013 Announce top line results

My analysis

The stock has a $5.5 price target from the Point and Figure chart. There have been three insider buy transactions and there have not been any insider sell transactions this year. The next major catalyst for the stock will be the pivotal DeeP-C clinical trial results due in March 2013. With positive results the stock could be trading at $15. If the results are negative the stock could drop well below $5. I might take a long position in the stock closer to the year end.

4. Targacept (TRGT) is developing a diverse pipeline of innovative NNR Therapeutics for difficult-to-treat diseases and disorders of the nervous system. NNR Therapeutics selectively modulate the activity of specific neuronal nicotinic receptors, unique proteins that regulate vital biological functions that are impaired in various disease states. Targacept's clinical pipeline includes multiple Phase 2 product candidates, all representing first-in-class opportunities. Targacept leverages its scientific leadership and proprietary drug discovery platform Pentad to fuel its pipeline and attract significant collaborations with global pharmaceutical companies.


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Insider buys

  • Bvf Partners L P purchased 139,700 shares on October 31 - November 2 and currently controls 3,802,440 shares of Targacept. Targacept has 33,430,481 shares outstanding which makes Bvf Partners L P a 11.4% owner of Targacept.
  • John Richard purchased 7,500 shares on June 8. John Richard serves as a director of the company.

Financials

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

Revenue $33.6 million
Net income $14.5 million
Cash $205.9 million
Debt $1.6 million
Net cash $204.3 million
Shares outstanding 33.6 million
Net cash per share $6.08

Outlook

With the upfront payment from AstraZeneca (AZN) becoming fully recognized in the second quarter of 2012, Targacept projects its net operating revenues for the remainder of 2012 to be substantially lower than for the first six months of the year.

On October 8 Targacept provided details of a previously announced workforce reduction that will affect approximately 38% of current employees. The company further announced that it will close its laboratory operations by the end of 2012. Targacept is implementing these measures to align its resources more closely with corporate objectives that include realizing the value potential of its clinical programs and conserving capital to best position the company for future opportunities. The reduction in force and changes to operations are expected to generate annual savings of approximately $9.6 million beginning in 2013.

Targacept estimates one-time severance and other charges related to the reduction in force of approximately $1.5 million will be incurred in the fourth quarter of 2012. Targacept expects these actions together with steps implemented earlier this year, will generate annual savings of approximately $22.5 million on a going forward basis. Targacept currently has cash and investments of approximately $195.0 million and continues to expect that its cash resources will be sufficient to fund its operating requirements through at least 2015.

News

On September 17 Targacept announced top-line results from a Phase 2 trial of TC-5619 as a treatment for inattentive-predominant attention deficit/hyperactivity disorder [ADHDi]. In the trial, TC-5619 did not meet the primary outcome measure, change from baseline on the inattention subscale of the Conners' Adult ADHD Rating Scale-Investigator-Rated (CAARS-INV), after four weeks of treatment versus placebo.

My analysis

The stock is currently trading at its 52 -week lows. There have been two insider buy transactions and there have not been any insider sell transactions this year. The stock is currently trading at a 33% discount to its net cash per share value. I like the stock as a value play below the net cash level.

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.


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Insider buys

Jeffrey Eberwein purchased 2,549 shares on October 31 - November 1, 5,000 shares on October 26, 10,000 shares on October 24-25, 6,960 shares on October 22-23, 6,639 shares on October 18-19, 2,280 shares on October 16-17, 2,000 shares on October 12-15, 3,460 shares on October 10-11, 9,013 shares on October 5-9, 10,000 shares on October 3-4 and 10,000 shares on October 1-2 pursuant to a Rule 10b5-1 trading plan entered into by the reporting person on August 6, 2012. Jeffrey Eberwein currently holds 320,886 shares of the company. Jeffrey Eberwein serves as a director of the company.

Financials

The company reported the third-quarter financial results on November 1 with the following highlights:

Revenue $11.8 million
Net loss $0.9 million
Cash $27.2 million

Outlook

Digirad CEO Todd Clyde commented on November 1:

"The Digirad Imaging Solutions [DIS] business continued to generate cash in the 2012 third quarter, though revenues in the period lagged slightly due to a lower-than-normal number of days serviced during the summer season. In addition, hospital and cardiology practice camera sales continued to be soft, although we have seen orders and unit sales begin to rebound recently, delivering positive momentum to kick off the fourth quarter."

Competition

The medical device industry, including the market for nuclear and ultrasound imaging systems and services, is highly competitive. Digirad's business in the private practice and hospital sectors continues to face the challenge of a decline in demand for nuclear imaging equipment and services, which Digirad believes reflects in part, the impact of the Deficit Reduction Act on the reimbursement environment and the 2010 Healthcare Reform laws, decline in the overall economy and competition from competing imaging modalities, such as CT (computed tomography) angiography, PET (positron emission tomography), and hybrid technologies. Digirad believes that the principal competitive factors in its market include acceptance by physicians, budget availability, qualification for reimbursement, pricing, ease-of-use, reliability and mobility.

My analysis

There have been 33 insider buy transactions and five insider sell transactions this year. The company has a book value of $2.04 per share and a net cash position of $1.42 per share. The stock is currently trading right at its 200-day moving average, which could be a good entry point for the stock.

Source: 5 Healthcare Companies With Insider Buying During November 2012