Buy activity from insiders can be a great indication that a company is fundamentally strong. Here’s a look at some of the latest insider buys in biotech, alongside a discussion of what’s likely driving the insiders’ decision to ramp up their exposure.
United Therapeutics Corporation (NASDAQ:UTHR)
This one’s a busy one. In the last week alone, five of United’s board of directors have picked up a position in excess of $120,000 spread across between 3,000 and 7,500 shares each. The company reported better than expected earnings at the end of October, coming in at $5.02 per share versus estimates of $2.44, on revenues of $386.2 million. The company’s lead commercial drug, Remodulin, generated $150 million revenues, and its secondary therapy, Orenitram, brought in $34.4 million. It is this latter therapy that serves as the most likely driver behind the board of directors increasing their respective exposures. The drug is generating double digit growth quarter over quarter, and between second and third quarters this year United reported a 22% increase in new patient starts. Back at the beginning of commercialization, there was some concern that these new patients would simply be patients switching from two of United’s other pulmonary hypertension (Orenitram’s approved indication) therapies – however reportedly 70% of new starts are patients that have previously not undertaken therapy. This is good news for United, and in turn, its shareholders.
Varian Medical Systems, Inc. (NYSE:VAR)
On November 6, Dow Wilson, President and CEO of Varian Medical Systems placed two separate buy orders for his company’s stock. Both orders saw him pick up 9,000 shares at a price per share of a little over $50, and totaled a combined $911,880. For those not familiar with the company, Varian is a medical device company that develops, builds and markets surgical and other type therapy implements, primarily in the cancer space. It is one of the biggest companies in the medical device sector, with a market capitalization just shy of $8 billion at last close. So what was the likely driver behind Wilson’s decision to pick up nearly $1 million worth of stock on Friday? Well, Varian is down more than 22% from 2015 highs, and the company posted an earnings miss at the end of last week. The miss initially translated to some intraday weakness, but revenues are up and fundamentally Varian looks sound, both from a product and a pipeline perspective. In all likelihood, Wilson saw the earnings miss and the overarching decline (driven primarily by wider market selling pressure) as an opportunity to increase his holding at a discount. The company just launched a new range of cancer products to general acclaim from the medical community, and from preliminary data, looks as though it will bring in record financials when it reports full year 2015. In other words, there is likely plenty of strength ahead.
Myriad Genetics, Inc. (NASDAQ:MYGN)
Finally, Myriad. The company’s Executive Vice President, General Counsel and Secretary, Richard Marsh, picked up 35,000 shares for a total of $802,550 on Thursday, bringing his total holding to 103,384 shares. This one was a pretty clever play – he unloaded 35,000 shares in September for a total value somewhere in the region of $1.44 million; a move that drove speculation that Myriad might be in trouble. However, with his latest buy, it now looks like he was simply booking profits on a longer term position in his own company, while fully intending to maintain his presell holding by replenishing on the downswing. Executed perfectly, he generated circa $700,000 on the sell high buy low. The company presented data yesterday American College of Rheumatology 2015 annual meeting – data relating to its proprietary treatment response blood test, Vectra DA. The data showed what looks to be efficacy across three separate presentations, and could be a near term catalyst for Myriad once markets digest its implications.
So there we go. Three big companies with large scale insider buying from executive level leadership. Biotech has corrected over the last couple of months, but as we have mentioned a number of times in the past, the healthcare sector is relatively inelastic to wider market sentiment. This has translated to an opportunity to pick up stocks at a discount in anticipation of capital injection into the sector, and from the looks of the purchases discussed here, c-suite agrees.