Investing in biotech stocks can be risky, particularly in the clinical stage, since their success often hinges on the results of trial data and regulatory developments. Additionally, it can take years for pre-revenue companies to bring a potential blockbuster drug from the pipeline stage to the point where it generates meaningful profits. So, while biotech companies carry the potential for significant returns for patient investors, there's also the potential for significant volatility and risk when investing in this corner of the market.
One way to find higher-conviction picks is by tracking insider buying activity, which refers to purchases of company stock made by executives, board members, and major shareholders. When these investors buy stock with their own money, it's typically viewed as a bullish signal by the market.
With this in mind, here's a look at two biotech stocks - Dyne Therapeutics (DYN) and Relmada Therapeutics (RLMD) - that are breaking out technically, and were recently targeted for insider buying by their own CEOs.
#1. Dyne Therapeutics
Dyne Therapeutics (DYN) is a clinical-stage biotech company known for its proprietary FORCE platform, which it's using to develop a portfolio of therapeutic candidates aimed at addressing the challenges of genetically driven muscle diseases.
The company's programs focus on conditions such as myotonic dystrophy type 1, Duchenne muscular dystrophy (DMD), and facioscapulohumeral dystrophy, each designed to target and potentially transform the treatment landscape for these serious disorders. The biotech company has a market cap of $3.0 billion.
Dyne's shares have been on a stellar run over the past year, soaring more than 273% in the past 52 weeks, and up 160% in 2024 alone. However, the stock has pulled back about 27% from its August highs.
CEO John Cox seems to like the stock around current levels, as the top executive purchased 32,000 shares of DYN on Sept. 4 at an average price of $33.04 per share, totaling an investment of just over $1 million. This marked the first insider buying activity on DYN since December 2022, and came almost immediately after the biotech stock dropped more than 30% in one session on Sept. 3.
DYN's nasty sell-off on Sept. 3 was sparked by a pair of updates that failed to impress investors. First, the company's Phase 1/2 DELIVER Trial of DYNE-251 in DMD patients yielded generally positive results, with “meaningful improvements in multiple functional endpoints”; however, there were also adverse safety events noted.
Perhaps most significantly for investors, the company announced the departure of several high-ranking executives simultaneously with the trial data, including its chief medical officer, chief operating officer, and chief business officer - which, for those who like to follow the moves of top company executives, provides noteworthy context for the next day's insider buying by the CEO.
As of the second quarter, DYN had a cash position of $778.8 million, which the company expects to fund operations into the second half of 2026.
DYN stock still has a unanimous "strong buy" rating from all 10 Wall Street analysts in coverage. The mean price target is $53, indicating expected upside potential of 53.2%.
#2. Relmada Therapeutics
Relmada Therapeutics (RLMD) is another clinical-stage biopharmaceutical company developing novel therapies for treating central nervous system (CNS) diseases. The company's lead product, REL-1017, is an NMDA receptor channel blocker currently in advanced clinical trials for the treatment of major depressive disorder. The company's market cap is a modest $91.4 million.
RLMD stock is down 15.8% on a YTD basis, but the shares have been gaining some serious momentum lately. The shares have spiked 85% from the 52-week lows set just last month, and RLMD is up more than 15% in today's session.
Today's rally is thanks to an upgrade to “buy” from “hold” at Jefferies, with the firm seeing a more favorable risk/reward ahead of expected Phase 3 trial results.
"REL-1017's two refined Phase III studies (RELIANCE-2/RELIGHT) in adjunct MDD may have a real chance of succeeding in YE:24/early 2025 and mid-2025, respectively," wrote analyst Andrew Tsai, who sees up to 10x potential for the shares, and raised his price target to $13 from $3.50.
Significantly, Jefferies isn't the only name feeling upbeat about RLMD. The biotech has been the subject of heavy insider buying this month, including by CEO Sergio Traversa, who purchased roughly $395,000 worth of shares at $2.82 each on Sept. 11. That marked the CEO's first purchase since January. Other notable insiders scooping up RLMD this September include CFO Maged Shenouda, Chair Charles Casamento, and Director Paul Kelly.
In Q2, the company reduced its research and development (R&D) expenses to $10.7 million, down by about 21% year over year as two Phase 3 trials concluded. Management projects that it has a sufficient cash position to fund operations through key milestones into 2025.
In addition to REL-1017, there's more in the pipeline. The REL-P11 trial is on pace to enter a Phase 1 study in Canada by the end of this year for its modified-release formulation of psilocybin, targeting metabolic diseases.
Analysts are slowly warming up to RLMD. Ahead of today's upgrade, the consensus stood at a "hold" rating for Relmada stock, consisting of 2 "strong buys," 2 "holds," and 1 "strong sell" rating.
The mean price target for RLMD is $10.12, representing a premium of about 189% to current levels.
On the date of publication, Nauman Khan did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
