Every investor knows that the road to profit lies in buying low and selling high. It is a basic rule for any economic trading system. The trick, though, is to recognize when the stock is low enough to buy. The best time to buy is when the stock hits the bottom; it will maximize the return when the stock price starts to rise again.
There are a wealth of possible clues investors can use to find the price base; today we will look at insider buying trends.
Insiders – business leaders, board members and others ‘knowledgeable’ – not only manage the companies, they know the details. Legally, they are not meant to trade that knowledge or openly trade it, and government disclosure rules help keep insiders honest. However, their honest stock transactions can be very informative. These are the people with the deepest knowledge of particular stocks. So when buying or selling, especially in bulk, be aware of that.
As George Muzea, a former market adviser to George Soros, recently commented, after a career studying and investing in insider trading, “Insiders are fundamental value investors. They buy into price weakness …”
So let’s put this into practice. We have used the tool Insiders Hot Stocks at TipRanks to find stocks with recent ‘informative’ insider purchases – and we have further sorted them to find three whose stock prices have fallen. Let’s take a closer look.
Mersana Therapeutics (MRSN)
We start with Mersana Therapeutics, a clinical-phase biopharmaceutical company focusing on the development of antibody-drug conjugates (ADCs) for the treatment of various cancers. These proprietary drug candidates take a highly targeted approach to combating tumor growth, combining monoclonal antibodies with existing anti-cancer drugs. The result is a cancer drug that attacks specific antigens on tumor cell surfaces. A presumed benefit is a greater tolerability for patients.
But in September last year, Mersana reported the second patient death in its ongoing Phase 1 clinical trial with upifitamab rilsodotine (UpRi). This drug candidate is a potential treatment for ovarian cancer – but the report of another death – like the first was due to pneumonia – scared investors and shares fell sharply. Over the past 12 months, Mersana shares have fallen 64%.
On the positive side, preliminary data from almost 100 patients involved in the clinical trial showed a 34% objective response rate (ORR), a positive indication on a key measurement for an early trial.
The insiders are clearly focused more on UpRi’s potential. Andrew Hack, of Mersana’s Board of Directors, made a major purchase this week, spending over $ 10 million to buy 1,690,000 shares of MRSN.
Hack is not the only bullish here. BTIG analyst Kaveri Pohlman notes that this company’s drug platform has a well-known safety profile that increases the tolerability of traditional cancer drugs. Pohlman writes: “Mersana has what appears to be the safest payload technology, and we believe the world has just begun to notice it. Mersana’s safety profile allows it to combine its drugs with previous toxic chemotherapies. , which remains the SOC for most tumor types. This is important as the cancer treatment landscape becomes more focused on combination therapies. Similarly, the immunosynthesis technology (STING agonist that delivers antibodies) looks promising and the company is likely to receive little credit for this approach. . “
Pohlman describes MRSN as a top choice for the year and rates it as a purchase. Its $ 26 price target represents an upside of 292% over the next 12 months. (To see Pohlman’s track record, click here)
Overall, MRSN has garnered 6 reviews from Street analysts, and they split into 5 Buys and a single Team, for a Strong Buy consensus rating. The stock is currently trading at $ 6.63 and has an average price target of $ 22.67, for an upside of ~ 242% over the next 12 months. (See MRSN stock analysis on TipRanks)
BridgeBio Pharma (BBIO)
Some medical research firms have a narrowly focused approach, while others are developing a broader research program. BridgeBio is one of the latter; it is working on ‘pioneering medicine’ to treat genetic diseases with high unmet medical needs. The company was founded in 2015, but has already expanded its pipeline to 19 separate drug development programs. The pipeline is divided into several tracks, including precision oncology, precision cardiorenal and gene therapy.
With so many pipeline programs, it’s no wonder BridgeBio has more catalysts on the way. First out is an initial proof-of-concept clinical reading from Ph1 / 2 trials of low-dose infigratinib, which is expected to occur in 1H22.
The second clinical trial to see is the Phase 1/2 study of drug candidate BBP-631. This drug trial is testing a new treatment for congenital adrenal hyperplasia or CAH, and the company plans to release the first data from the trial by the middle of this year.
In other news, however, BridgeBio does not look so rosy. The company recently reported results from the Phase 3 clinical trial of acoramidis, its leading drug candidate and a potential treatment for transthyretin amyloid cardiomyopathy (ATTR-CM). These data were eagerly awaited – but they were disappointing. The data indicated that acoramidis did not improve patient outcomes – and that disappointment caused the stock to plummet.
BBIO shares had fallen during the year, but after the publication of the acoramidis data, the shares fell by about 70%. Overall, the stock has fallen 77% in the last 52 weeks.
While the shares are down, insiders are making purchases. Of these purchases, three of the board members James Momtazee, Brent Saunders and Fred Hassan are considered informative. Last week, Momtazee spent $ 1.16 million on 80,000 shares, Hassan spent over $ 270,000 on buying 19,300 shares, while Hassan bought 17,600 shares for $ 254,848.
In coverage of JPMorgan, analyst Anupam Rama notes the company’s recent stock price debacle, but adds that the upcoming catalysts are numerous.
“Looking ahead, we see an interesting catalyst path, but we recognize that gains need to be emitted from the broader pipeline to change the mood. This, combined with the current valuation, forms the basis for our maintenance of our overweight rating.”
The overweight rating (ie Buy) comes with a price target of $ 36, suggesting that BBIO has room to grow by an impressive 141% in the coming year. (To see Rama’s track record, click here)
Overall, it is clear from the Strong Buy consensus assessment that Street’s stock professionals have remained calm on this one, even after the disappointment in the clinical trial. The 9 reviews here are all positive, giving the stock a strong buy-consensus rating. The stock is trading at $ 16.31 and the average target of $ 27.40 indicates that there is room to rise a further 83%. (See BBIO stock analysis on TipRanks)
Reata Pharmaceuticals (JUST)
Last on the list, Reata Pharmaceuticals, is another biopharmaceutical researcher in the clinical phase. Reata has two main research tracks, in the treatment of chronic kidney disease and of neurological diseases, and each track has a separate drug candidate. Bardoxolone methyl is shown on the renal track, while omaveloxolone is on the neurological track. Both drugs target the Nrf2 transcription factor and have several effects on targeted cells, including restoration of mitochondrial function, reduced oxidative stress, and reduction of inflammation.
Reata’s stock was hit hard recently. The stock has fallen 76% over the past year, and the majority of it came in the first and second weeks of last December. The reason for that hit is worth a look.
The company had submitted its NDA to the Food and Drug Administration for bardoxolen methyl, based on a completed Phase 3 clinical trial. In December, the FDA’s advisory committee published its findings – with a unanimous 13-0 no to the drug candidate. In the Committee’s view, bardoxolone was ineffective for its targeted use, the treatment of chronic kidney disease due to Alport’s syndrome. The FDA’s final decision approving bardoxolone-methyl expires on February 25, and although the agency is not bound by the Advisory Committee’s vote, it takes that into account. This was a major setback for Reata.
However, this is not the last for the company. In November 2021, Reata received the FDA’s Fast Track designation for its second major candidate, omaveloxolone, for the treatment of the neurological condition Friedreich’s ataxia. The Fast Track designation aims to speed up the development and revision process of new drugs. The company plans to submit NDA for omaveloxolone in 1Q22.
The 5-star analyst Charles Duncan points out in his coverage or RETA for Cantor Fitzgerald that the FDA has left open the possibility of a new Phase 3 trial of bardoxolone to address trial design issues raised by the Advisory Committee and that Reata’s The omaveloxolone program stays on track.
“Some members of AdCom expressed hope that there might still be a way forward for bard ‘i AS with a better designed trial and perhaps by using a precision medicine strategy that focuses on the patients who are younger and with a lower baseline eGFR To reflect this possibility, we maintain a 15% probability of success in our bard market models and postpone the expected commercial launch year to 2025 from 2022 in our US AS model and to 2027 from 2024 in our former US AS model. also on omaveloxolone (omav ‘) in Friedreich’s ataxia (FA), which is now the main contributor to our 12-month price target, ”Duncan said.
This $ 68 price target represents an upside of 140% in the coming year. Duncan rates the shares as overweight or a buy. (To see Duncan’s track record, click here)
Wall Street generally gives this stock a moderate buy rating, based on a 6 to 3 split among recent reviews, in Buy versus Hold. The stock is selling at $ 28.32, and its average price target of $ 93.67 – actually more bullish than the Cantor view – suggests a one-year upward potential of ~ 231%. (See RETA share forecast on TipRanks)
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Disclaimer: The opinions in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.