Biotech stocks can make compelling investments if investors can pick the right ones. One way to find these winners is to look at the stocks corporate insiders are buying. While an investment decision shouldn’t be made solely on the basis of insider activity, it is an important factor to consider. We are taking a closer look at 3 biotech stocks showing positive insider signals.
AVROBIO, Inc. (AVRO)
AVRO is a phase 2 clinical-stage gene therapy company that develops treatments for rare diseases such as Fabry Disease, a lysosomal disease that affects the kidneys, heart and skin.
Following the announcement on July 19 that it closed its underwritten public offering of 7,475,000 shares of common stock, both the director, Bruce Booth, and Atlas Venture Fund X, L.P. bought over $15 million worth of the stock. Each bought 810,811 shares at an average price of $18.50 per share, with both becoming 24% owners.
AVRO plans to use the money generated from the offering for its current Fabry Disease, Gaucher Disease, Cystinosis and Pompe Disease programs as well as to fund further research and development.
The purchase comes after top analyst, Difei Yang, reiterated her Buy rating and $28 price target on July 16, suggesting 25% upside. The Mizuho Securities analyst said “AVROBIO has a $4.0 billion total addressable market (TAM). Available clinical data in Fabry disease has shown encouraging results with initial patients treated achieving meaningful improvements in enzyme activity levels and two patients discontinuing enzyme replacement therapy so far (the standard of care).”
Another analyst, Debjit Chattopadhyay, also reiterated his Buy rating and $40 price target on July 16. He believes AVRO could soar by as much as 78% over the next twelve months. “While our price target reflects uncertainties stemming from the clinical update from the Fabry program (AVR-RD-01), resulting in: (1) a push out of our launch estimate into 2H-2022, vs. prior 2H-2021; and (2) lower Fabry POS of 25% from 30%, we believe the company is still poised for substantial long-term growth,” the H.C. Wainwright analyst said.
The Street is also bullish on AVRO. The stock boasts a ‘Strong Buy’ analyst consensus and $34 average price target, indicating 51% upside potential.
Esperion Therapeutics, Inc. (ESPR)
ESPR specializes in developing lipid management treatments for patients with high cholesterol.
On July 23, BIOTECH TARGET N V, bought 50,000 shares at an average price of $42.65 per share, bringing the total purchase price to over $2 million. This makes Biotech Target a 13% owner of the company.
The buy comes after ESPR announced that it entered into a $200 million funding agreement with Oberland Capital on June 26. The agreement is based on net revenues from ESPR’s bempedoic acid and the bempedoic acid/ezetimibe combination tablet sales with $125 million given upfront, $25 million upon FDA approval and $50 million at Esperion’s option after launch.
Cowen & Co. analyst, Chris Shibutani, argues that this funding will drive continued growth. On July 18, he maintained his Buy rating and $80 price target. He believes share prices could surge by as much as 92% over the next twelve months.
On June 27, analyst, Michael Yee, said, “Esperion's debt financing brings in an immediate $125M, lifting the company's total pro-forma cash to $355M, and gives it flexibility going into 2020. We view the deal as a non-dilutive, fundamentally good access to cash, that helps shore up Esperion's balance sheet in case of uncertainty and macro risk in 2020.” The Jefferies analyst maintained his Buy rating and $85 price target, suggesting 104% upside potential.
ESPR has a ‘Moderate Buy’ analyst consensus, and $85 average price target, indicating 103% upside.
Forty Seven, Inc. (FTSV)
On July 22, both FTSV’s director, Jeffrey W. Bird, and Lightspeed Venture Partners X, L.P. increased their stakes in the cancer-fighting biotech company formerly known as CD47 Sciences, Inc. Bird purchased 750,000 shares for $6 million while Lightspeed bought 625,000 shares for $5 million at an average price of $8 per share.
The purchase fell on the same day as the company’s announcement that it closed its public offering of 10,781,250 shares. The offering included 1,406,250 shares that could be bought by the underwriters.
The buy also occurred shortly after news broke of its license agreement with Ono Pharmaceutical. On July 11, it was announced that FTSV would get the exclusive right to develop, manufacture and commercialize the 5F9 monoclonal antibody that targets CD47, a protein that can cause tumors.
Analyst Swayampakula Ramakanth believes the licensing agreement could drive share price growth of 130% over the next twelve months. The H.C. Wainwright analyst maintained a Buy rating and $21 price target on July 12. “We derive our price target based on a risk-based NPV (rNPV) analysis of projected 5F9 revenues through 2030 assuming a 12% discount rate and a 3% terminal growth rate. We derive rNPV of $1.1B for 5F9 and add in cash, cash equivalents, and short-term investments of $114M to arrive at a 12-month price target of $20.57 per diluted share, which we round to $21.00,” Ramakanth added.
JonesTrading analyst, Soumit Roy, reiterated his Buy rating and $30 price target on June 14. He believes share prices could jump by an impressive 228% over the next twelve months. “We think share prices are going to recover following the success of the company’s anti-PD(L)-1 drugs,” he said.
FTSV has a ‘Strong Buy’ analyst consensus and $26 average price target, suggesting 188% upside potential.