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Insider Invests in Versartis

- By Kyle Ferguson

Srinivas Akkaraju, director of Versartis Inc. (VSAR), purchased 571,429 shares of the company on March 24 for $12.25 per share according to an SEC filing.

Akkaraju now owns 582,904 total shares of the company following the transaction.

Headquartered in Redwood City, California, Versartis is an endocrine-focused biopharmaceutical company. It develops long-acting therapeutic proteins for the treatment of endocrine disorders. The company develops new therapeutic proteins utilizing the novel half-life extension technology XTEN developed by Ammunix.

Versartis has a market cap of $737.73 million, an enterprise value of $645.79 million, a price-book (P/B) ratio of 4.95, a current ratio of 3.77 and a quick ratio of 3.77.

The company has a 7 of 10 financial strength rating with no debt. Its Altman Z-Score of 5.6 suggests it is not under financial stress.

The company has a 3 of 10 profitability and growth rating with a return on equity (ROE) of -65.72%, a return on assets (ROA) of -55.40% and a return on capital (ROC) of -27,163%.

Over the past five years, Versartis averaged a 124.99% increase in net income and a 49.51% increase in cash flow by raising money through investors and its initial public offering on March 20, 2014.

Versartis is focused on the drug somavaratan, which is an investigational, novel, long-acting form of recombinant human growth hormone (rhGH). Somavaratan is designed to help people with growth hormone deficiency, an orphan disease.

According to the company's website, children with growth hormone deficiency may receive over 2,500 daily growth hormone injections in their lifetime.

Versartis hopes to solve the current problem by injecting GHD patients with somavaratan, which, according to its most recent K-10 filing, "is intended to reduce the burden of daily treatment by requiring significantly fewer dosing events and injections, potentially improving adherence and, therefore, treatment outcomes."

Phase three trial enrollment is completed with top-line data expected in September.

Versartis would be the first pediatric long-acting RHGH on the market to provide children with bimonthly treatments instead of daily injections.

The company had $201 million in cash and equivalents at year-end 2016.

Versartis CEO Jay Shepard praised the company's performance and noted its achievements positioned it well for the year ahead.

"We now have compelling safety and efficacy data from up to three years of somavaratan dosing in pediatric patients, have established a strong alliance with Teijin for commercialization in Japan -- one of the largest global markets for GHD -- and reinforced our strong financial position which supports somavaratan development beyond near-term data and a planned BLA filing next year," Shephard said.

Guru Jim Simons (Trades, Portfolio) more than doubled his stake in the company during fourth-quarter 2016. Since then, the stock has gained an estimated 67%.

The Peter Lynch chart below shows Versartis is trading below its intrinsic value.

Disclosure: Author does not own any shares of this company.

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This article first appeared on GuruFocus.