Insider Buying Sends Annexon Stock Higher. But Does That Make It a Buy?
Shares of Annexon (ANNX) have gained more than 35% since an insider increased shareholding in the company earlier this month. Usually, insider buying is considered a positive sign for the...
Shares of Annexon (ANNX) have gained more than 35% since an insider increased shareholding in the company earlier this month. Usually, insider buying is considered a positive sign for the company's growth prospects, but given ANNX's weak fundamentals and unfavorable analyst estimates, will it be wise to buy the stock? Read on to learn our view….
Annexon, Inc. (ANNX) is a clinical-stage biopharmaceutical company. The company is engaged in developing complements for patients suffering from serious complement-mediated autoimmune, neurodegenerative, and ophthalmic disorders. Its pipeline includes three clinical-stage assets across three therapeutic franchises: Autoimmune, Neurodegeneration, and Ophthalmology.
Earlier this month, ANNX's Director Muneer A. Satter bought 2.45 million shares worth $9.42 million. In his previous filing to the Securities and Exchange Commission (SEC) dated February 12, 2021, Muneer A. Satter had 1,954,978 or 5.1% shares of the company. As of July 7, 2022, the director has increased his shareholding to 4.40 million shares, or 11.4% of the company's outstanding shares.
On July 11, 2022, ANNX announced closing its private placement, garnering gross proceeds of $130 million. Along with the company's current cash, cash equivalents, and marketable securities, its proceeds from the private placement are expected to fulfill its working capital and general corporate purposes.
ANNX's President and CEO Douglas Love said, "This financing is an important strategic advancement for Annexon, providing meaningful funds to fuel our pipeline of multiple fit-for-purpose product candidates, including our first-of-its-kind oral, small molecule complement agent, ANX1502, for the treatment of classical complement-mediated autoimmune diseases. With an operating runway extended into the second half of 2025 and 2023, we believe we are well-positioned to execute both our near and long-term goals."
ANNX's stock has gained 37.2% since the insider buying and 74.6% over the past month. However, it has lost 54.4% year-to-date to close the last trading session at $5.24. It is currently trading 77.8% below its 52-week high of $23.61, which it hit on September 17, 2021.
Here's what could influence the performance of ANNX in the upcoming months:
ANNX's loss from operations widened 35.2% year-over-year to $35.42 million for the first quarter ended March 31, 2022. The company's net loss widened 35.7% year-over-year to $35.37 million. Also, its loss per share widened 35.3% year-over-year to $0.92.
In addition, its comprehensive loss widened 36.3% year-over-year to $35.56 million. Its cash, cash equivalents, and restricted cash declined 45.1% year-over-year to $113.99 million.
Unfavorable Analyst Estimates
ANNX's EPS is expected to remain negative for fiscal 2022 and 2023. It failed to surpass its Street EPS estimates in each of the trailing four quarters.
Lower-than-industry Valuation and Weak Profitability
In terms of forward P/B, ANNX's 0.90x is 67.3% lower than the 2.75x industry average.
ANNX's ROCE, ROC, and ROA are negative.
POWR Ratings Reflect Bleak Prospects
ANNX has an overall D rating, equating to Sell in our POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. ANNX is currently graded D for Stability and Momentum.
Despite the recent insider buying helping the stock soar, ANNX's weak financials and unfavorable analyst estimates make its near-term prospects bleak. So, it is best avoided now.
How Does Annexon, Inc. (ANNX) Stack Up Against Its Peers?
ANNX has an overall POWR Rating of D, equating to a Sell. Therefore, one might want to consider investing in other Biotech stocks with an A (Strong Buy) or B (Buy) rating, such as Vertex Pharmaceuticals Incorporated (VRTX), Amgen Inc. (AMGN), and Biogen Inc. (BIIB).
ANNX shares were unchanged in premarket trading Thursday. Year-to-date, ANNX has declined -54.40%, versus a -16.09% rise in the benchmark S&P 500 index during the same period.
About the Author: Dipanjan Banchur
Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master's degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.
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