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3 Biotech Stocks Insiders Are Buying

|Includes: Abeona Therapeutics Inc. (ABEO), SCPH, SYRS

Death, taxes and childbirth! There's never any convenient time for any of them.” ― Margaret Mitchell, Gone with the Wind

JP Morgan (JPM) and the major banks have officially kicked off the first quarter earnings season.  Factset had profits dropping 4.3% on a year-over-year basis prior to Q1 reports coming in for the S&P 500.  Given the low bar analysts typically provide, profits will probably end up being down just a tad in the first quarter versus the year ago period.

It will be interesting to see if equities can continue to rally from here given the S&P 500 has already risen some 15% in 2019.  I personally expect a period of consolidation in the second quarter unless we get a U.S./China trade deal or earnings come in much better than expected.

So what are insiders still buying after the big gains in the first quarter in the market?  There seems to be some recent activity in the biotech sector.  Here are three small biotech concerns with significant and recent insider buying.

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Let's start with Syros Pharmaceuticals (SYRS).  A director scooped up $4 million in new shares at $7.50 apiece on April 9th.  While this occurred during a secondary offering that raised some $70 million, it was notable as it was the first insider buying this equity has seen since January of 2018.

The shares sold off on the announcement of the capital raise.  The company ended FY2018 with approximately $100 million of cash and marketable securities on the balance sheet.  Syros burned just under $20 million in cash in the fourth quarter for R&D and operating expenses.  With the capital raise, the company's funding needs have been addressed for some time.

Source: Company Presentation

The company has several compounds in development.  Of which, SY-1245 is the furthest along.  The company captured progress for this compound's development on its last conference call which laid some key milestones.

  • Syros announced that it plans to expand its ongoing Phase 2 trial to assess the safety and efficacy of SY-1425 in combination with azacitidine in RARA or IRF8 biomarker-positive patients with relapsed or refractory acute myeloid leukemia (AML). The Company expects this expansion to be open for enrollment in the third quarter.
  • Syros plans to complete enrollment in mid-2019 in the ongoing Phase 2 trial cohort evaluating the safety and efficacy of SY-1425 in combination with azacitidine in RARA or IRF8 biomarker-positive patients with newly diagnosed AML who are not suitable candidates for standard chemotherapy.
  • Syros plans to report updated data in the second half of 2019 from the ongoing Phase 2 trial of SY-1425 in combination with azaciditine in newly diagnosed unfit AML patients.

Source: Company Presentation

The company has gotten some good early results from this drug candidate.  The current median analyst price target on SYRS is $16.00 a share.  Piper Jaffray was the last analyst firm to chime in on the firm when it reiterated its Buy rating and $24.00 price target last week.  Piper believes Syros is 'developing potentially best-in-class CDK7 inhibitors'

Next up is another small biotech also selling with a $7 handle.  Two directors at Abeona Therapeutics Inc (ABEO) purchased almost $600,000 in new shares in three transactions between April 8th and April 11th.  This was the first insider buying in this New York based biotech concern focused on developing cell and gene therapies for life-threatening rare genetic diseases since 2016.

The company recently promoted its Chief Medical Officer to CEO.  The stock is selling at 40 cents on a dollar to where the shares were trading a year ago.  The equity does seem to be trying to form a floor (see above).

In early April the company received Fast Track designation from the FDA for its candidate ABO-101.  This is a one-time gene therapy targeting Sanfilippo syndrome type B (MPS IIIB).  Abeona has also received some positive analyst commentary of late as well.  The same day Abeona received Fast Track status, Mizuho Securities reissued their Buy rating and $17 price target on the stock.  Yesterday, H.C. Wainwright maintained its Buy rating and $30 price target on ABEO along with how they came up with their valuation on the stock

Valuation methodology, risks and uncertainties. We ascribe a total risk-adjusted net present value (rNPV) of $1.46B to Abeona’s technology platforms, which yields a price per share of $30.00 based on about 48M shares outstanding as of end-2019. We utilize an 85% probability of success for EB-101."

Finally, we have some insider buying in scPharmaceuticals Inc (SCPH), a microcap 'Busted IPO'.  This name has done little but destroy shareholder value since coming public late in 2017.  However, a beneficial owner seems to have some faith in the long-term prospects of the company as they add just over $1million in new shares to their core holdings on April 11th.  It should be noted that this is the first insider buy in the stock since it debuted on the public markets in November of 2017.

The company is focused on subcutaneous drug administration products, which is an optimized way to deliver infused therapies available through intravenous administration.  scPharmaceuticals lead product candidate is called Furoscix.  This is a neutral pH furosemide solution for subcutaneous administration via its injector and is a treatment candidate for edema in patients with heart failure.  The company received a CRL for its original application for this indication and is in the midst of conducting additional studies with the goal of refiling its NDA in 2020.  A couple of other Phase 3 trials are in the works for additional indications.   

scPharmaceuticals gets little coverage from the street.  Only three analyst firms have rated it that I can find over the past year.  BMO Capital and Jefferies have Buy ratings and similar $12 price targets on SCPH.  Leerink Partners has a Hold rating and $5 price target on the stock. 

The company ended FY2018 with approximately $90 million (more than its market cap) in cash and marketable securities on the balance sheet.  scPharmaceuticals is burning $5 million to $7 million per quarter for R&D and other expenses, so has more than adequate cash runway.

And those are some small biotech stocks seeing recent insider buying.

I don't do charity, I pay taxes instead.” ― Girish Kohli

Thank You & Happy Hunting,

Bret Jensen

Founder, The Biotech Forum, The Busted IPO Forum & The Insiders Forum

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