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Spectral Diagnostics: 4 Different Insiders Have Purchased Shares During The Last 30 Days

August 02, 2014 | About:
maarnio

maarnio

2 followers

1 The Company

One healthcare company has seen intensive insider buying during the last 30 days. Intensive insider buying can be defined by the following three criteria:

  1. The stock is purchased by three or more insiders within one month.
  2. The stock is sold by no insiders in the month of intensive purchasing.
  3. At least two purchasers increase their holdings by more than 10%.

Spectral Diagnostics (DIAGF) develops and commercializes theranostic treatment for severe sepsis in North America.

Shares outstanding (March 31, 2014)

134,462,607

Share price

$0.36

Market cap

$48.7 million

Enterprise value

$45.0 million

P/S

17.5

P/B

17.6

Tickers

DIAGF,TSX:SDI

1.1 History

  • The company was incorporated on July 29, 1991.
  • The company’s diagnostic product, EAA, was approved in 2003.
  • On March 6, 2009, Spectral signed a license agreement with Toray Industries (TRYIY) of Japan, granting Spectral the exclusive development and commercial rights in the U.S. for PMX.
  • On October 19, 2010, Spectral initiated the EUPHRATES trial.

1.2 Business Model

Spectral is focused on the development and commercialization of a treatment for severe sepsis utilizing its Endotox in Activity Assay (EAA) and the Toraymyxin therapeutic (PMX). If approved, this will be the first theranostics product, a targeted therapy guided by a specific diagnostic, in the area of sepsis. The company also manufactures and sells certain proprietary reagents.

2 Management

The CEO Paul Walker is a pioneer in the area of endotoxin and its role in sepsis, and the co-inventor of the Endotoxin Activity Assay (EAA). Paul Walker has been CEO since April 2001. Collectively, Spectral’s directors and executive officers have over 140 years of industry experience.

2.1 Insider Ownership

Spectral’s directors and executive officers own 2.7% of the company.

Here is a table of Spectral’s insider activity during the last 30 days.

Name

Title

Trade Date

Shares Purchased

Public Offering

Current Ownership

Increase InShares

Kevin Giese

Director

July 25

682,593

Yes

2,364,052 shares

+40.6%

Medwell Capital

10% Owner

July 25

2,047,781

Yes

17,335,281 shares

+13.4%

Toray Industries

10% Owner

July 25

17,064,846

Yes

33,731,513 shares

+102.4%

Laine Woollard

Director

July 25

170,648

Yes

244,648 shares

+230.6%

There have been 19,965,868 shares purchased by insiders during the last 30 days. All four of these insiders increased their holdings by more than 10% each.

Here is a table of Spectral’s insider activity by calendar month.

Insider buying / shares

Insider selling / shares

July 2014

19,965,868

0

June 2014

0

0

May 2014

5,000

0

April 2014

0

0

March 2014

0

0

February 2014

0

0

January 2014

0

0

December 2013

0

0

November 2013

0

0

October 2013

54,000

0

September 2013

0

0

August 2013

150,111

0

July 2013

81,250

0

June 2013

0

0

May 2013

150,000

0

April 2013

16,676,667

0

March 2013

0

0

February 2013

0

0

January 2013

4,000

0

There have been 37,086,896 shares purchased and there have been zero shares sold by insiders since January 2013. The month of July 2014 has seen the most insider buying.

2.2 Compensation

Here is a table of the management’s compensation during the last three years.

nimetön.png

(Source: Management information circular)

The management’s total compensation was highest in 2013.

3 Financial Summary

3.1 Current Situation

Spectral reported the first-quarter financial results on May 15 with the following highlights:

Revenue

C$844,000

Net loss

C$3,175,000

Cash

C$3,730,000

The revenue increased 19.2% compared to the prior quarter. On July 25, Spectral closed a C$13.2 million financing.

3.2 Historical Developments

Here is a table of Spectral’s revenue and earnings since 2006.

Year

2006

2007

2008

2009

2010

2011

2012

2013

Revenue (C$ millions)

2.2

3.0

3.0

3.3

2.8

2.4

2.6

2.7

Net income / loss (C$ millions)

+3.7

-1.7

-1.5

-2.8

-6.6

-6.7

-8.5

-11.3

EPS

+0.16

-0.07

-0.06

-0.11

-0.10

-0.07

-0.08

-0.09

The revenue has averaged C$2.8 million during the last eight years. The net losses started growing after Spectral signed the license agreement with Toray Industries on March 6, 2009.

4 Shares

Here is a table of Spectral’s number of shares since 2006.

Year

2006

2007

2008

2009

2010

2011

2012

2013

Number of shares (millions)

22.9

24.1

24.1

24.1

67.2

90.9

113.9

128.3

Spectral’s number of shares have grown 460% since 2006. The number of shares started growing in 2009 after Spectral started preparing for the EUPHRATES trial by raising funds.

5 Outlook

Spectral expects to generate sales in 2014 pursuant to its existing commercial arrangements for EAA and its proprietary biological reagents. The strategic focus continues to be on the successful implementation and completion of the EUPHRATES trial.

nimetön.png

(Source: Investor presentation)

Spectral expects to complete enrolment of the EUPHRATES trial by the end of the first half of 2016.

6 Market Opportunity

The market opportunity for Spectral is large, as the combined diagnostic and therapeutic product is expected to fulfill a major unmet need for the approximately 350,000 patients who develop severe sepsis or septic shock in the U.S. each year. Over half of these patients potentially have highly elevated levels of endotoxin. The U.S. market potential for this treatment is estimated at over $1 billion.

nimetön.png

(Source: Investor presentation)

7 Risks

The main risk is negative earnings. I don’t expect the company to be profitable before it receives the FDA approval for its theranostics product. Spectral is also a penny stock.

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8 Conclusion

There have been four different insiders buying Spectral and there have not been any insiders selling Spectral during the last 30 days. The four insiders purchased their shares at C$0.293. I believe Spectral could be a good pick below C$0.293 based on the intensive insider buying.

Disclosure: The author has no positions in any stocks mentioned.

About the author:

maarnio
I have 15 years of investing experience. I have traded stocks, commodities and Forex markets.

Rating: 5.0/5 (1 vote)

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