Major Insider Buying And Diversified Pipeline Has Me Interested In This Speculative Drug Stock

When looking for investments in the speculative small cap biotech and drug sectors, I look for several factors. (A) a promising pipeline, (B) a solid balance sheet, (C) rapidly growing sales and (D) insider buying. The stocks in these sectors are inherently volatile so I place a lot of small bets knowing that for every "home run", there will be some duds. Furiex Pharmaceuticals (FURX) is the type of equity that merits consideration based on this philosophy.

Possible catalysts for Furiex :
 

• Insiders have purchased over 800,000 shares in 2012.
• Takeda Pharmaceutical Company (TPKYY) just announced it has resubmitted New Drug Applications (NDAs) to the U.S. Food and Drug Administration (FDA) for alogliptin and fixed-dose combination therapy alogliptin and pioglitazone for the treatment of type 2 diabetes in adults. Furiex is eligible to receive a $25 million milestone payment for the approval of the first of these two NDAs, as well as potential royalties and sales-based milestones.
• The company's next earning report is in on Thursday. Estimates for the quarter have improved over the past two months. The conference call will be important for company guidance and updates on the Furiex's drug pipeline.

"Furiex Pharmaceuticals is a drug development collaboration company, engages in the compound partnering business in the United States and Europe. It collaborates with pharmaceutical and biotechnology companies to increase the value of their early stage drug candidates.." (Business description from Yahoo Finance).

Four reasons FURX makes sense as a speculative buy at under $20 a share:
 

The company has over $20mm in net cash on the balance sheet, which should be more than enough to get it through to 2013 when analysts expect it to post a profit for the year.

Analysts expect Furiex to increase revenues by approximately 50% to over $60mm in FY2013. The company has a half dozen drugs that are in or will be in Phase III trials by end of the year, both internally and with assorted partners.

Only two analyst firms cover the stock (Global Hunter Securities, Ladenburg Thalmann). Both have the shares rated a "Buy" and have price targets ($33, $35) significantly over the current price of the stock.

Consensus estimates have improved significantly over the past two months for both FY2012 and FY2013.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in FURX over the next 72 hours.