BioSci Rounds Report: Improving Fundamentals To Catapult Omeros And Restorbio

Summary

• Omeros Corporation rallied due to the favorable amendment terms of its credit facility.
• Restorbio experienced substantial insider purchases.
• The FDA approved the first medical device that uses an artificial intelligence algorithm to detect the eye disease associated with diabetes (retinopathy).

Arrangements between partners are tricky and rely on a combination of brains, judgment, and trustworthiness. - Charlie Munger

Trading Analytics

Welcome to another edition of Integrated BioSci Rounds Report for April 11, 2018. As usual, we’ll elucidate notable trading analytics for the day, recent insider transactions, and interesting market developments. Without further ado, let’s dive into the first notable trade with Omeros Corporation (NASDAQ:NASDAQ:OMER), a company focusing on the therapeutics innovation to treat both large as well as rare diseases. Notably, the shares exchanged hands $1.29 higher at $14.67 for +9.6% profits.

Today, the company disclosed that it entered into an amendment for the credit facility with a healthcare-focused investment firm (“CRG LP”). Under the covenant, it was determined that Omeros met the minimum requisite revenues or market capitalization for the continuance to borrow up to $45M (on or before May 20 this year if needed). Continuing to apply to 2019 and beyond, the agreement lowered the requirements for Omeros. In specific, the minimum market cap was reduced from 6.4X to 3.0X the total loans outstanding.

Figure 1: Notable BioSci movers. (Source: Morningstar).

Despite the robust appreciation for stocks under Integrated BioSci Investing’s coverage, the broader bioscience market traded with mixed sentiments. The iShares of NASDAQ Biotechnology Index (NASDAQ:IBB) traded down $0.37 at $105.33 (for +1.21% losses). Moreover, the SPDR S&P Biotech (NYSE:XBI) exchanged hands $0.68 higher at $89.15 (for +0.77% gains). Regardless of the daily inclination, there are substantial prospects in the bioscience sector: one that delivers hope for patients while rewarding supporters with substantial wealth in the long haul.

Insider Transactions

In monitoring insider transactions, one should analyze the data with a grain of salt. That being said, we wish to share with you the quote from the Former Fidelity-Magellan Manager (Peter Lynch): “Insiders might sell their shares for any number of reasons, but they buy them for only one... they think the price will rise.” As shown in table 1, three interesting transactions that made our list came from Restorbio (NASDAQ:NASDAQ:TORC) - a bioscience focusing age-related diseases. On April 11, 2018, the President and CEO (Schor Chen) bought 2K shares for $16.9K to increase his stakes to 1.88M counts. The Director (Jonathan Silverstein) purchased 533.3K shares (on Jan. 30) for $7.9M which upped his shares count to 4.8M. Moreover, the Director and 10% owner (Orbimed Advisors) accumulated the same amount and at the same time as Mr. Silverstein.

Table 1: Notable insider transactions. (Source: Openinsider)

Based in Boston, MA, Restorbio is developing molecules targeting the aging immune system to tackle various age-related diseases. The company focuses the mechanism target of rapamycin (“mTOR”) pathway - an evolutionarily conservative approach that regulates aging - and, specifically, the inhibition of the target of rapamycin complex 1 (TORC1). Of note, the elderly population is rapidly growing. And, Restorbio is catering to the 150M people (age 65 or older) as well as the 20M people in the 85 years or older group (in the USA, Europe, and Japan).

Bioscience Catalysts

The US FDA announced the marketing approval of IDx-DR - the first medical device that uses artificial intelligence (“AI”) to detect an eyes disease associated with diabetes (i.e. diabetic retinopathy). Taking tolls on over 30M Americans affected by diabetes, retinopathy is due to the uncontrolled blood sugar the damages the small blood vessels of the eyes. Dr. Malvina Eydelman (Director of the Division of Ophthalmic) enthused,

Early detection of retinopathy is an important part of managing care for the millions of people with diabetes, yet many patients with diabetes are not adequately screened for diabetic retinopathy since about 50 percent of them do not see their eye doctor on a yearly basis. Today’s decision permits the marketing of a novel artificial intelligence technology that can be used in a primary care doctor’s office. The FDA will continue to facilitate the availability of safe and effective digital health devices that may improve patient access to needed health care.

Manufactured by IDx LLC, IDx-DR is a software program that uses AI to analyze images of the eyes taken by a specialized camera (Topcon NW400). The program then made the appropriate analysis to alert the information to the doctors to assist in determining whether the patient should seek a specialist. This presents a big step toward AI applications and computer algorithms in diagnostic management. Despite our optimism, only time can attest to the efficacy and long-term disease outcomes. One certainty is that the FDA has been working tirelessly to assist firms to deliver the top-notched care for patients.

Final Remarks

In all, the bioscience market is experiencing trading reversal to be more bullish despite mixed market results for the day. The overall analytics gives us better context as to how various companies perform. Be that as it may, one of the keys to successful bioscience investing is to focus on the individual firm’s performance and its underlying fundamentals. Moreover, it’s imperative to employ a long-term approach. Regarding specific notable movers of the day, we are highly optimistic on Omeros. The credit facility amendment works in Omeros’ favor to give the company more cash needed to advance OMS-721 - a lead molecule with a robust chance of procuring blockbuster sales in the foreseeable future. Furthermore, the insider purchases witnessed for (Restorbio), should prompt investors to take a closer look at these firms: it can be potential big winners going forward. After all, the management and whales certainly believed that is the case.

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