FUGAZI, Here is a WSJ item which discusses the underperformance of the biotech sector. Insider buying in the sector might indicate it is time for a turn around.
nside Track
Biotech Insiders Buy Shares
As Firms Hit Bargain Prices
By LAURA SAUNDERS EGODIGWE
Staff Reporter of THE WALL STREET JOURNAL
Some biotechnology insiders have been snapping up their companies' shares in recent weeks as the stocks hit bargain-basement prices.
The chairman and president of Regeneron Pharmaceuticals Inc. increased their stakes March 31, while the president of Abaxis Inc. added shares in February. And a Cor Therapeutics Inc. director increased his indirectly held stake in February in a timely purchase before the company received positive news April 2 from the Food and Drug Administration that sent the shares surging nearly 80%.
<Picture: [Go]>See more-detailed information about insider transactions.
Biotech stocks have "periods of insider buying because they tend to be inefficiently priced, and insiders can't resist such low prices," said James McCamant, editor of Medical Technology Stock Letter in Berkeley, Calif.
The volatile sector has bedeviled Wall Street and underperformed in the bull market. Analysts say biotech stocks are hard to evaluate by traditional methods of evaluation; very few of the companies are profitable, some don't have revenue and their value is built on the risky ground of their chances for drug approvals. With the group out of favor for the past year and a half, Mr. McCamant considers those midsize stocks with market values under $300 million "clearly undervalued."
The buying at Regeneron, Abaxis and Cor Therapeutics occurred near all three stocks' 52-week lows. On the Nasdaq Stock Market Tuesday, Regeneron closed at $8.375, up 12.5 cents; Abaxis closed at $1.969, up 3.125 cents; and Cor at $19.875, down $1.125.
"Insiders tend to be buyers on weakness," said Anthony Marchese, general partner of Laidlaw Insiders Trend Fund L.P. "They invest when they see value, not when Wall Street decides it's fashionable to invest" in a stock, he said.
On March 31, Regeneron Chairman P. Roy Vagelos, a former chairman of Merck & Co., and President Leonard S. Schleifer each purchased 50,000 shares at $7.50 apiece. Dr. Vagelos holds 600,000 restricted shares, whose sales are limited, as well as options to purchase 285,000 shares. Dr. Schleifer holds 1.8 million Class A shares and options to buy 240,000 shares.
"I believe our stock price is low compared with the technology we have in hand and our strong financial picture," Dr. Vagelos said.
Tarrytown, N.Y.-based Regeneron has more than a few things going for it: a well-known chairman, about $125 million in the bank and a development partner with deep pockets. Dr. Schleifer put the aggregate value of the company's three agreements with Cincinnati-based Procter & Gamble Co. at $175 million over the first five years. Regeneron develops biotechnology-based compounds for the treatment of neurodegenerative diseases, peripheral neuropathies and nerve injury.
Analysts say Regeneron has recovered from some previous setbacks, including a cash crunch and the failed trial last year of an experimental drug it was testing with partner Amgen Inc. for Lou Gehrig's disease.
Regeneron is "very technology-rich and suffers from a bit of a discount" because of the failures, said Franklin Berger, biotechnology analyst at Salomon Smith Barney Inc. in New York. But those troubles seem to be behind the company, he said.
Meanwhile, at Abaxis, President Clinton Severson bought 10,000 shares from Feb. 2 to Feb. 27 at $1.97 to $2.44 apiece. The purchases increased his holdings of common stock to 38,000 shares. Mr. Severson cited the low stock price for his purchases. Abaxis makes portable blood-analysis systems.
Sometimes insiders, like biotech investors, can get lucky. Witness the purchase of 500,000 Cor shares by director Robert Momsen as part of a venture-capital partnership. Mr. Momsen bought the indirectly held shares from Feb. 2 to Feb. 13 at $10.25 to $11.68 apiece.
On Thursday, the company said the FDA plans to approve its anticlotting drug for patients with unstable angina. Cor surged $9.8438 that day to close at $22.3125. "We have invested in Cor and believed in the company all along," Mr. Momsen said. "It looked undervalued at $10 a share." |
