The U.S. Securities and Exchange Commission requires all companies’ officers, Board members and shareholders owning at least a 10%-stake to disclose any purchases or sales of their companies’ shares. Insider Monkey strongly believes that the individuals running a company have a competitive edge over non-insiders when it comes to trading that company’s securities, so the investment community should pay close attention to heavy or noteworthy insider buying. However, retail investors should take notice of who is buying the shares, as Chief Executive Officers’ share purchases on the open market are far more informative and indicative of future performance than those conducted by hedge fund managers or activists (especially considering their recent underperformance). All in all, directors and executives generally buy shares of their company on the open market because they consider those shares attractively priced, or simply undervalued. That being said, this article will digest the recent insider buying witnessed at three companies, as well as discuss the recent performance of those companies.
Academic research has shown that certain insider purchases historically outperformed the market by an average of seven percentage points per year. This effect is more pronounced in small-cap stocks. Another exception is the small-cap stock picks of hedge funds. Our research has shown that imitating the 15 most popular small-cap stocks among hedge funds outperformed the market by nearly a percentage point per month between 1999 and 2012 (read more details here).
Executives and Board Members at ADMA Biologics Participate In Public Offering – Vote Of Confidence
To start with, ADMA Biologics Inc. (NASDAQ:ADMA) saw four different insiders purchase shares earlier this week. James Mond, Chief Scientific and Medical Officer, purchased 700 shares on Tuesday for $6.50 each, slightly lifting his holding to 3,389 shares. Chief Financial Officer Brian Lenz snapped up 2,500 shares on the same day at $6.50 apiece, which boosted his ownership to 8,500 shares. More importantly, President and Chief Executive Officer, Adam S. Grossman, bought a whopping amount of 200,000 shares on Tuesday, all of which are held indirectly through Areth LLC and Hariden LLC. After the recent purchase, the CEO holds an indirect ownership stake of 843,668 shares. Lastly, Director Jerrold B. Grossman, former CEO of ADMA Biologics on a part-time basis between 2007 to October 2011, filed Thursday to disclose the purchase of 45,769 shares at $6.50 apiece, all of which are held by the 2012 Nevada Trust.
The aforementioned members of management and Board of Directors purchased shares through an underwritten public offering of 1.89 million shares, so this cluster of buying is not the type of insider buying investors should look for. However, insiders’ participation in excess of 10% in the offering may point to their confidence in the future prospects of the late-stage biopharmaceutical company. ADMA Biologics Inc. (NASDAQ:ADMA) focuses on developing specialty plasma-based biologics for the treatment and prevention of certain infectious diseases.
The company’s lead product candidate, called RI-002, has been designed for the treatment of Primary Immune Deficiency Disease, a genetic disorder that causes a deficient or absent immune system. ADMA Biologics has completed a pivotal Phase III clinical study on this drug candidate, after which the company submitted a Biologics License Application (BLA) for RI-002 to the U.S. FDA during the third quarter. The FDA could approve the BLA within one year of the filing date, which means it could be approved by the end of this summer, with possible first commercial sales occurring starting from the fourth quarter. Dennis Purcell’s Aisling Capital owned 3.61 million shares of ADMA Biologics Inc. (NASDAQ:ADMA) on December 31.