CEO Loads Up – Buy Signal for RMTI?

Michal is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

In what may be a very bullish sign for Rockwell Medical (RMTI), SEC filings reveal that CEO Rob Chioni on June 18, 2013, purchased 300,000 shares of his company’s stock. Although the exact reason for the transaction is not known, such a large investment in the weeks before data is expected from the CRUISE trials signals management’s confidence in the trial results. This represents a major purchase for the CEO, bringing his total holdings in RMTI to 1,398,333 shares. Rockwell has announced that Phase III data from two large trials of soluble ferric pyrophosphate (SFP) will be available in July of this year. Patients on dialysis lose iron through the process and become anemic for a variety of reasons. The kidneys of dialysis patients do not make enough erythropoietin, so this is usually given as a very expensive supplement. SFP is designed to give dialysis patients a bio-available source of iron that is delivered directly with the dialysate. The Phase II PRIME data for SFP is supportive of a positive outcome for the CRUISE trials.

Favorable Risk-Reward

While this significant insider buying ahead of CRUISE data is a signal for Rockwell investors, I believe it also highlights the risk-reward proposition for this stock. Investors are certainly interested in the SFP trials and the upcoming launch Calcitriol, the company’s vitamin-D supplement for dialysis. However, Rockwell already has a line of dialysis products and distribution agreements with a major dialysis provider. So, I am bullish about the company’s prospects when it comes to SFP and Calcitriol, but there is a core business supporting RMTI stock that is not dependent on these product launches. For me, this is the core of the positive risk-reward profile for Rockwell. In the midst of a bull market, RMTI stock has been cut in half this calendar year, and the drop has un-coupled from the company’s news flow. I believe that the stock has become over-sold and that positive data from the CRUISE trials in July could create positive momentum heading into the launch of Calcitriol later this year.

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