Sometimes, insiders rush to the market to buy their company stock when prices get whacked. We like it when executives from established companies go bargain hunting. That wasn’t the case last week as the market got pummeled thanks to the Federal Reserve, bad jobs numbers, and Covid.
Instead, we have a speculative biotech that crashed to consider, which makes it a pair of high-risk ideas to start 2022; not really the way we hoped to roll in the New Year.
BridgeBio Pharma, Inc. (BBIO) shareholders took a beating right after Christmas. The stock closed at $40.62 on December 23rd and started the day at $12.64 when the market reopened on December 27th.
The lump of coal in the BBIO stocking was naughty news about a treatment for transthyretin amyloid cardiomyopathy, a condition in which the heart sees an increase of abnormal protein. Unfortunately, the treatment didn’t outperform the placebo group. (1)
A half-dozen insiders bought BBIO following the nosedive on the bad news. (2) BridgeBio finds, develops, and delivers breakthrough medicines for genetic diseases. Including ATTRibute-CM, the company has built a portfolio of transformative drugs ranging from pre-clinical to late-stage development in multiple therapeutic areas including genetic dermatology, oncology, cardiology, neurology, endocrinology, renal disease, and ophthalmology. (3)
The six BBIO insiders combined to purchase 136,164 shares between $13.18 and $16.36, totaling $1,975,872. Director James Momtazee did the heavy lifting, acquiring 80,000 shares for $1.16 million. This is a first for Momtazee, all of his previous insider activity was limited to options. (4) A million-dollar buy is a heck of first purchase.
A seven-figure buy is one of the three Cs in our 3CP approach to evaluating insider buys, commitment. It’s self-explanatory, investing a million dollars or more takes a lot of commitment and is at a completely different level than $1,000 or $10,000 or even $100,000.
The six-pack of BBIO insiders also gets another C, for cluster. That’s when a group of executives (we usually look for at least three) all buy in a short timeframe. The other C is for change of heart, which is when habitual sellers suddenly turn into buyers. The P is for past performance; neither is in play here.
BBIO’s stock performance is going to be news dependent. Wall Street expects the biotech to lose $3.81 in 2022 with revenue climbing from $81 million last year to $108 million this year.
OUTLOOK: With their pipeline, there will be plenty of opportunities for news to drive BridgeBio Pharma, Inc. (BBIO). Unfortunately, as investors learned during the holidays, biotech news can cut both ways. Positive news can send a stock soaring and bad news can be painful, very painful.
From our experience, would-be investors and shareholders need to have two prices on their minds, $11.20 and $18.13. The post-crash low and high. If BBIO closes below $11.20, then it’s likely to head lower. If traders can take the stock above $18.13, then the biotech could begin the process of “closing the gap”. That’s the big fall from $40.62 to $12.64 while the market was closed.
BridgeBio Pharma, Inc. (BBIO) is only appropriate for investor with the highest level of risk tolerance and time horizons of at least 12-18 months.
1 – https://investor.bridgebio.com/news-releases/news-release-details/bridgebio-pharma-reports-month-12-topline-results-phase-3
2 – https://www.secform4.com/insider-trading/1743881.htm
3 – https://www.bridgebio.com/pipeline
4 – https://www.secform4.com/insider-trading/1209181.htm
5 – https://finance.yahoo.com/quote/BBIO/analysis?p=BBIO