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Paul Manning Buys $1 Million Worth of Verrica Pharmaceuticals – Insider Weekends

  • July 30, 2023

When I saw the crop of top insider purchases this week I was initially not very thrilled because it consisted of the usual suspects like Asana (ASAN) and B. Riley (RILY), micro-cap companies and a regional bank.

The B. Riley insider purchase was related to a $115 million secondary offering priced at $55/share by the company. Insiders of the company picked up $7 million of shares in the offering, including a $4 million purchase by CEO Bryant Riley. According to the company, they expect to use the proceeds of the offering for “general corporate purposes, including funding future acquisitions and investments, repaying and/or refinancing indebtedness, making loans and/or providing guaranty or backstop commitments to clients in the ordinary course of business, making capital expenditures and funding working capital”. 

In other words, they can use the proceeds for anything or everything. While this move can be seen as positive for the holders of B. Riley’s baby bonds, which we discussed in more detail in the June 2023 Special Situations Newsletter, it did not instill a lot of confidence in holders of the company’s common stock.

The company that however caught my attention was Verrica Pharmaceuticals (VRCA). Verrica is a dermatology focused pharmaceutical company with a market cap of $242 million and an enterprise value of $182 million on account of $60 million in net cash on the balance sheet after excluding capital leases. Chairman of the Board, Paul Manning, purchased $1 million of shares last week at an average price of $5.02 per share. The name was familiar to me because I have seen him purchase shares of Verrica at much higher prices in the past as well as purchase shares of several other companies.

His profile on Verrica’s website provides a quick overview of his experience in the pharmaceutical industry:

Mr. Manning has served as the Chairman of the Verrica Pharmaceuticals Board of Directors since December 2017, and as a member since December 2015. He is the Chairman and CEO of PBM Capital Group, LLC, a private-equity investment firm he founded in 2010, focused on the healthcare- and life-science-related companies. Prior to that, Mr. Manning founded PBM Products in 1997, a producer of infant formula and baby food, which he sold to Perrigo Corporation in 2010. He was previously a Director of Dova Pharmaceuticals, Inc., a publicly traded pharmaceutical company that was purchased by Sobi, as well as various private companies, and has served on the Boards of Directors at Perrigo Corporation, Concordia Healthcare Corporation and AveXis, Inc. Mr. Manning received his BS in Microbiology from the University of Massachusetts.

I generally tend to avoid writing about micro-cap companies because it is a difficult pond to fish in. This is even more true of micro-cap clinical stage pharma or biotech companies. However what got me interested in Verrica is that their lead drug candidate, YCANTH (cantharidin), received FDA approval on July 21, 2023. YCanth in the FDA-approved drug for the treatment of viral skin infection molluscum contagiosum. According to the company,

Molluscum is a highly contagious viral skin disease that affects approximately six million people — primarily children — in the United States. Molluscum is caused by a pox virus that produces distinctive raised, skin-toned-to-pink-colored lesions that can cause pain, inflammation, itching and bacterial infection. It is easily transmitted through direct skin-to-skin contact or through fomites (objects that carry the disease like toys, towels or wet surfaces) and can spread to other parts of the body or to other people, including siblings. The lesions can be found on most areas of the body and may carry substantial social stigma. Without treatment, molluscum can last for an average of 13 months, and in some cases, up to several years. 

molluscum contagiosumOddly enough, the company’s stock dropped following FDA approval for its lead drug candidate. Movements in micro-cap companies often defy logic and one can only assume that the drop was related to a combination of factors including the time it will take the company to start commercial operations, the time it would take for insurance companies to start reimbursing for the drug, the company’s recent decision to get a $125 million term loan and compounding pharmacies already starting to use the underlying agent.

The two investment banks that follow the company, Needham and RBC, increased their price targets to $10 and $14 respectively and Needham also upgraded the stock to a buy rating. The Needham upgrade happened after Mr. Manning’s insider purchase and the stock shot up 11.58% to $5.78 on Friday. I plan to do additional work on the company to understand the potential market size for the company’s drug and its ability to commercialize the drug without partnering with a large pharma company in the next few weeks. Enterprising investors that don’t mind fishing in the micro-cap pond might want to take a closer look at the company.

Welcome to edition 692 of Insider Weekends. Insider buying decreased significantly last week with insiders purchasing $24.68 million of stock compared to $138.11 million in the week prior. Selling increased to $900.49 million compared to $619.34 million in the week prior.

Sell/Buy Ratio: The insider Sell/Buy ratio is calculated by dividing the total insider sales in a given week by the total insider purchases that week. The adjusted ratio for last week went up to 36.48. In other words, insiders sold more than 36 times as much stock as they purchased. This week, the Sell/Buy ratio was unfavorable, compared to the prior week when the ratio stood at 4.48.

Notable Insider Buys:

1. Asana, Inc. (ASAN): $23.35

President, CEO, & Chair Dustin A. Moskovitz acquired 320,000 shares of this work management platform, paying $22.34 per share for a total amount of $7.15 million. Mr. Moskovitz increased his stake by 0.79% to 40.87 million shares with this purchase.

You can view the list of recent insider transactions for Asana, Inc. here.

P/E: -13.04Forward P/E: -72.97Industry P/E: 24.70
P/S: 8.75Price/Book: 14.54EV/EBITDA: -13.57
Market Cap: $5.06BAvg. Daily Volume: 2,482,47952 Week Range: $11.32 – $29.51

2. Verrica Pharmaceuticals Inc. (VRCA): $5.78

Director Paul B. Manning acquired 200,000 shares of this clinical-stage dermatology therapeutics company, paying $5.02 per share for a total amount of $1 million. Mr. Manning increased his stake by 2.61% to 7,851,128 shares with this purchase.

You can view the list of recent insider transactions for Verrica Pharmaceuticals Inc. here.

P/E: N/AForward P/E: -5.12Industry P/E: 29.97
P/S: 28Price/Book: 3.73EV/EBITDA: -7.98
Market Cap: $241.91MAvg. Daily Volume: 357,88752 Week Range: $2.02 – $8.695

3. Martin Midstream Partners L.P. (MMLP): $2.39

Shares of this oil & gas storage and transportation company were acquired by 2 insiders:

  • Director Ruben S. Martin acquired 333,159 shares, paying $2.20 per share for a total amount of $731,435. These shares were purchased indirectly by Senterfitt Holdings Inc.
  • Executive Vice President/COO Randall Tauscher acquired 13,100 shares, paying $2.08 per share for a total amount of $27,248. Mr. Tauscher increased his stake by 16.45% to 92,726 shares with this purchase.

You can view the list of recent insider transactions for Martin Midstream Partners L.P. here.

P/E: N/AForward P/E: 47.8Industry P/E: 7.54
P/S: 0.1Price/Book: -1.46EV/EBITDA: 6.51
Market Cap: $93.01MAvg. Daily Volume: 51,10952 Week Range: $1.95 – $4.6

4. Rocky Mountain Chocolate Factory, Inc. (RMCF): $5.905

Shares of this confectionery franchisor were acquired by 3 insiders:

  • Director Jeffrey Richart Geygan acquired 81,668 shares, paying $5.75 per share for a total amount of $469,405. These shares were purchased indirectly by Global Value Investment Corporation.
  • CFO Allen A. Arroyo acquired 2,000 shares, paying $5.82 per share for a total amount of $11,640. Mr. Arroyo increased his stake by 13333.33% to 2,015 shares with this purchase.
  • Chief Executive Officer Robert J. Sarlls acquired 200 shares, paying $5.70 per share for a total amount of $1,140. Mr. Sarlls increased his stake by 3.45% to 6,000 shares with this purchase.

You can view the list of recent insider transactions for Rocky Mountain Chocolate Factory, Inc. here.

P/E: N/AForward P/E: 6.15Industry P/E: 23.09
P/S: 1.24Price/Book: 2.7EV/EBITDA: -8.17
Market Cap: $37.16MAvg. Daily Volume: 9,64052 Week Range: $4.77 – $7.29

5. Texas Capital Bancshares, Inc. (TCBI): $63.92

Director Robert W. Stallings acquired 2,000 shares of this regional bank, paying $61.98 per share for a total amount of $123,960. Mr. Stallings increased his stake by 0.78% to 259,000 shares with this purchase.

You can view the list of recent insider transactions for Texas Capital Bancshares, Inc. here.

P/E: 9.41Forward P/E: 16.06Industry P/E: 10.13
P/S: 2.44Price/Book: 1.13EV/EBITDA: 4.72
Market Cap: $3.07BAvg. Daily Volume: 479,36452 Week Range: $42.79 – $69.27

You can view the full list of purchases from this Insider Buying page.

Notable Insider Sales:

1. Morgan Stanley (MS): $91.57

Shares of Morgan Stanley were sold by 2 insiders:

  • Chairman and CEO James P. Gorman sold 125,000 shares for $95.19, generating $11.89 million from the sale.
  • Co-President/Head of IS Edward N. Pick sold 100,000 shares for $94.33, generating $9.43 million from the sale.

You can view the list of recent insider transactions for Morgan Stanley here.

P/E: 16.09Forward P/E: 12.36Industry P/E: 10.13
P/S: 2.86Price/Book: 1.68EV/EBITDA: 17.57
Market Cap: $151.91BAvg. Daily Volume: 7,485,77052 Week Range: $74.67 – $100.99

2. Salesforce, Inc. (CRM): $225.6

Shares of Salesforce were sold by 7 insiders:

  • Chair and CEO Marc Benioff sold 75,000 shares for $226.48, generating $16.99 million from the sale.
  • Co-Founder and CTO Parker Harris sold 4,061 shares for $225.77, generating $916,835 from the sale.
  • President/Chief People Officer Brent Hyder sold 3,678 shares for $226.72, generating $833,878 from the sale. These shares were sold as a result of exercising options immediately prior to the sale.
  • President and COO Brian Millham sold 2,400 shares for $226.77, generating $544,247 from the sale. These shares were sold as a result of exercising options immediately prior to the sale.
  • Pres/Chief Engineering Officer Srinivas Tallapragada sold 561 shares for $225.05, generating $126,255 from the sale. These shares were sold as a result of exercising options immediately prior to the sale.
  • President and CFO Amy E. Weaver sold 509 shares for $225.05, generating $114,552 from the sale. These shares were sold as a result of exercising options immediately prior to the sale.
  • EVP & Chief Accounting Officer Sundeep G. Reddy sold 164 shares for $225.05, generating $36,909 from the sale. These shares were sold as a result of exercising options immediately prior to the sale.

You can view the list of recent insider transactions for Salesforce, Inc. here.

P/E: 609.73Forward P/E: 27.82Industry P/E: 25.65
P/S: 6.83Price/Book: 3.84EV/EBITDA: 33.46
Market Cap: $219.73BAvg. Daily Volume: 6,624,11952 Week Range: $126.34 – $238.22

3. DraftKings Inc. (DKNG): $32.38

Shares of this digital sports entertainment and gaming company were sold by 2 insiders:

  • Chief Executive Officer and Chairman of the Board Jason Robins sold 450,000 shares for $30.99, generating $13.95 million from the sale. 11,587 of these shares were sold as a result of exercising options immediately prior to the sale.
  • Chief Legal Officer Stanton R. Dodge sold 52,777 shares for $30.99, generating $1.64 million from the sale. These shares were sold as a result of exercising options immediately prior to the sale.

You can view the list of recent insider transactions for DraftKings Inc. here.

P/E: -11.09Forward P/E: -42.05Industry P/E: 17.02
P/S: 5.77Price/Book: 14.68EV/EBITDA: -12.15
Market Cap: $14.96BAvg. Daily Volume: 11,217,96752 Week Range: $10.694 – $32.45

4. BlackRock, Inc. (BLK): $738.34

Chairman and CEO Laurence Fink sold 20,200 shares of BlackRock for $742.04, generating $14.99 million from the sale.

You can view the list of recent insider transactions for BlackRock, Inc. here.

P/E: 21.51Forward P/E: 18.22Industry P/E: 10.24
P/S: 6.36Price/Book: 2.93EV/EBITDA: 17.58
Market Cap: $110.31BAvg. Daily Volume: 636,32952 Week Range: $503.12 – $785.65

5. Bentley Systems, Incorporated (BSY): $53.3

Chairman, CEO & President Gregory S. Bentley sold 238,767 shares of this infrastructure engineering software solutions for $53.31, generating $12.73 million from the sale.

You can view the list of recent insider transactions for Bentley Systems, Incorporated here.

P/E: 106.6Forward P/E: 53.84Industry P/E: 25.65
P/S: 13.74Price/Book: 27.08EV/EBITDA: 61.8
Market Cap: $15.64BAvg. Daily Volume: 984,45052 Week Range: $30.51 – $55.37

You can view the full list of sales from this Insider Sales page.

The list of all insider purchases and sales by management people is only available to InsideArbitrage Premium and Plus members.

Disclaimer:  I hold a long position in Lions Gate Entertainment. Please do your own due diligence before buying or selling any securities mentioned in this article. We do not warrant the completeness or accuracy of the content or data provided in this article.