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Insider Insights: Evaluating the Investment Risks of Beam Therapeutics vs. Intensity Therapeutics

In biotech investing, distilling exceptional opportunities from the average (or worse) ventures requires a keen eye on insider activities, financial health, and clinical progress. Beam Therapeutics (BEAM) presents a case that demands caution, with insider stock sales, a substantial accumulated deficit, and limited clinical advancements raising significant concerns. In contrast, Intensity Therapeutics (INTS) is an example of prudent management and efficient capital use, making noteworthy clinical strides with far fewer resources and zero insiders cashing out.

While a direct comparison of the two companies has little meaning, comparing the conduct of the CEOs and the other insiders of the companies is a useful exercise for potential investors. Combining knowledge of insider selling with other research is the best approach for developing a more informed picture of risks and opportunities.

One striking example of a biotech company infested with insider selling is Invitae Corp. At one point, Invitae was valued at approximately $13 billion, with expectations built around the company’s potential in genetic testing, particularly during the pandemic. However, the company’s actual performance, characterized by significant losses and a lack of distinctive products, led to a reassessment of its value and growth prospects. The market’s initial enthusiasm did not align with the company’s financial realities, contributing to its challenges. The company entered bankruptcy in 2024. How could an investor have better judged the risks inside this failing company? Observe the following:

Insider Sales: A Red Flag at Beam

Consider this statement made by BEAM’s CEO, John Evans, in 2023: “We really think of this as a very attractive platform. That’s why we’re investing so aggressively in it because we think that the long-term  productivity of it and frankly again the impact we can have on many patients is really there.” According to records filed with the SEC, John Evans has sold more than $25 million of stock during his tenure, in addition to his annual cash compensation of approximately $1 million, half of which is described by the company as a “bonus.” The truth is that Mr. Evans has invented nothing, risked nothing and invested nothing and has yet to guide BEAM to the simple milestone of dosing a single patient in a Phase 1 trial, as of December 31, 2023.  In contrast, INTS dosed over 200 patients before it IPO’d, and many of those patients received actual clinical benefit.

BEAM’s pattern of insider stock sales emerges as a critical red flag, suggesting a lack of confidence in the company’s future among those who know it best. Such activity, particularly against the backdrop of the company’s slow progress in groundbreaking yet unproven gene editing technology, heightens the investment risk. The biotech sector’s inherent uncertainties make insider conviction a key part of risk assessment.

In fact, all the senior executives have been dumping the company’s stock in recent years without a single instance of an open market cash purchase  even after the company’s stock declined by more than 50% last year.

From December 31, 2020, to December 31, 2023, the total number of common shares surged from 57,254,178 to 81,632,496—a 43% increase in shares, reflecting significant dilution borne by shareholders. Mr. Evans is earnestly urging these same shareholders to maintain their long-term faith in the company all the while he and his team are dumping nearly $100 million of shares on the open market. What could CEO Evans possibly need with $25 million in addition to his $1 million cash salary?

Intensity’s Contrasting Approach

INTS, under the stewardship of CEO and founder Lew Bender, provides a stark contrast. Bender’s commitment, demonstrated through his personal investment and leadership, from inception to Phase 3 clinical trials, highlights a strategic and efficient approach to biotech development. This hands-on leadership and judicious use of capital, without the shadow of insider sales, underscore a company moving confidently toward its goals. There has not been a single stock sale recorded from an insider with the SEC since the company went public in 2023. Update: Lew reminded me he invested $100,000 into the IPO even though he already owned 2,000,000 shares.

Bender’s Vision and Leadership

Lew Bender’s personal investment along the support from a select group of private investors have been pivotal in INTS’s focused and agile development strategy in its early years. Achieving significant clinical milestones using his own intellectual property and funds along with limited external funding (pre-IPO) not only showcases Bender’s strategic acumen but also preserves the company’s equity value, aligning with long-term shareholder interests. This approach, contrasting with BEAM’s challenges, emphasizes the importance of leadership commitment and strategic resource allocation in the biotech industry.

 

The following is an example of stellar clinical progress, deploying approximately $53 million of funds (or about 5% of the amount deployed by BEAM), as of December 31, 2023:

INTS’s pipeline is focused on realizing the full potential of INT230-6 in metastatic and local disease settings to help cancer patients with major unmet medical need. The company is exploring the use of INT230-6 across multiple cancer types (including those types that do not normally respond to immunotherapy) and “hot” tumors (cancer types that are more likely to respond to immunotherapy).

Based on data generated in IT-01 and the INVINCIBLE-2 studies, the company’s current forward pipeline consists of:


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Insider Insights: Evaluating the Investment Risks of Beam Therapeutics vs. Intensity Therapeutics was last modified: April 12th, 2024 by Simons Chase