This Insider’s Last Buy Doubled – He Just Bought Another

Once again, a limited set of insider buys offered up little to choose from for this week’s highlighted company.

Heron Therapeutics, Inc. (HRTX) director Adam Morgan bought 2,486,744 million shares at $1.37 for a total investment of more than $3.4 million. (1) Although this is Morgan’s first HRTX trade, it’s his only other insider purchase that caught our attention. He bought another small biotech, Alimera Sciences, Inc. (ALIM) in mid-May 2023 at $1.70 and it’s doubled since, last trading at $3.40.

Heron engages in developing treatments to address unmet patient needs. The company’s product candidates utilize its proprietary Biochronomer, a drug delivery technology, which delivers therapeutic levels of a range of short-acting pharmacological agents over a period from days to weeks with a single administration.

It offers SUSTOL (granisetron), an extended-release injection for the prevention of acute and delayed nausea and vomiting associated with moderately emetogenic chemotherapy, or anthracycline and cyclophosphamide combination chemotherapy regimens; and CINVANTI, an intravenous formulation of aprepitant, a substance P/neurokinin-1 receptor antagonist for the prevention of acute and delayed nausea and vomiting associated with highly emetogenic cancer chemotherapy, as well as nausea and vomiting associated with moderately emetogenic cancer chemotherapy.

The company is also developing ZYNRELEF, a dual-acting local anesthetic that delivers a fixed-dose combination of the local anesthetic bupivacaine and a low dose of the nonsteroidal anti-inflammatory drug meloxicam; HTX-019, an investigational agent for the prevention of postoperative nausea and vomiting; and HTX-034 for postoperative pain management, as well as is in Phase Ib/II clinical study in patients undergoing bunionectomy.

According to straits research, “The chemotherapy market size was valued at USD $9.5 billion in 2022. It is projected to reach USD $17.61 billion by 2031, growing at a CAGR of 7.1% during the forecasted period.” (2)

Clearly Wall Street anticipates positive things in the biotech’s future with a one-year price target of $7.30 compared to its current price of $1.665 as of the close on July 31, 2023. Analysts don’t expect the small cap company to turn a profit anytime soon but do see sales increasing more than 34 percent next year at $174.33 million compared to this year’s estimate of $129.76 million. (3)

Heron Therapeutics currently trades at 1.55 times sales (P/S) (4), whereas the typical peer price to sales ratio is 2.8. HRTX has traded anywhere between 1.18 to 51.83 times sales while averaging 13.14 during the last five years.

If HRTX continues to trade at its current P/S valuation and hits next year’s revenue target, then shares would price out at $2.25 (35 percent). At the industry average P/S ratio and next year’s expected sales, HRTX would rise to $4.07 (147 percent). To hit the street’s $7.30 requires a P/S ratio of 5.03, which is well within the biotech’s recent history range.

OVERALL: Heron Therapeutics, Inc. (HRTX) could offer shareholders at the current price level attractive upside based on projected sales and the company’s five-year P/S history. Of course, as a small cap biotech, it is only appropriate for the most aggressive investors with a time horizon of at least 18 months.

Rich Meyers


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