2 Small Biopharmas With Case of 'Hiccups'

A lot of small biotech stocks have started to break down a bit over the past few weeks. This is understandable given the huge run the sector has had so far in 2017 after significantly underperforming the market in 2015 and 2016. One of the many things I like about the small biotech part of the market is that it has frequent hiccups, enabling patient investors to accumulate positions over time, taking advantage of lower entry points on these pullbacks. When sentiment turns on a dime in this high-beta area of the market, which it frequently does, there are always dozens of good holdings to add to. One way I determine which of my small biotech holdings will be blessed with a few more shares in these sort of blips is to look at insider activity. The drug discovery and development process is one of the most complex of any industry, with high rates of failure. Who better than insiders to know how pipeline development is truly going? Based on historical experience, they seem to have a better handle on their companies' prospects than analysts. Here are a couple of small biopharma names I, along with their beneficial owners and insiders, have added to. I added a few shares to my stake in Intra-Cellular Therapies this week. The stock has come down recently due to both the overall softness in the small biotech area of the market and it also did a secondary offering in early October to raise additional funding. One encouraging thing about that funding raise was a beneficial owner through three separate transactions took $12 million of the new shares. In addition, the company has some positives on the development front over the past few months. In August, the company announced the FDA was satisfied with its answers regarding toxicity observed in dogs exposed to its primary drug candidate, lumateperone, in nonclinical studies. This was not surprising given that dogs and humans metabolize lumateperone differently and this compound has demonstrated a favorable safety and tolerability profile throughout human trials. Then, in September, the company announced positive results from a six-week open-label safety switching study. Lumateperone demonstrated statistically significant improvements in body weight, cardiometabolic, and endocrine parameters vs. standard-of-care (SOC) antipsychotics (e.g., risperidone) that reversed when patients switched back to SOC therapies. Also, symptoms of schizophrenia showed statistically significant improvement over SOC treatments, especially with regard to negative symptoms. These developments essentially green-lit a mid-2018 new-drug application filing for the schizophrenia indication. The stock has received three Buy ratings from analysts over the past month, with price targets proffered in the $27 to $33 range. The shares currently exchange hands for $16 apiece. I have also added a few shares to a much smaller ocular concern named Aldeyra recently. As can be seen above, the company has a diverse portfolio with multiple shots on goal. It is well funded after a secondary offering a month ago and has an array of potential positive trial milestones over the next year and a half. A beneficial owner took almost $1.5 million of that funding raise. He also bought over $1.3 million in new shares in late June at significantly lower levels. Recent analyst price targets on this equity have ranged from $14 to $27. The stock hovers around $6.50 a share.

2 Small Biopharmas With Case of 'Hiccups'

Insiders are taking advantage of opportunities in Intra-Cellular Therapies and Aldeyra.

Columnist Conversation

Fibocall: WORK -- Buy, Sell or Hold?

Fibocall: Key Support Levels to Know

Monday Morning Fibocall for 7/6/2020

COLUMNIST TWEETS

Please Join or Log In to manage and receive alerts.