What happened?

Shares of 9 Meters Biopharma (NMTR.Q), a clinical-stage biotech company, are trading higher on Wednesday after the company filed documents with the U.S. Securities and Exchange Commission (SEC) indicating that several of its executives have recently purchased shares of the company. As of 1:24 p.m. EDT, 9 Meters Biopharma's stock was up by 10.8% after jumping by as much as 18% earlier in the day.

So what

The SEC Form 4 filings 9 Meters Biopharma released yesterday disclose that the company's CEO, John Temperato, bought 100,000 shares of the company's stock for $1 per share on April 5. Following the deal, Temperato owned a little over 1 million shares of the company. Also, the biotech's CFO, Edward Sitar, acquired 50,000 shares of the company for $1 per share, bringing the total number of shares he owns to almost 180,000; this transaction occurred on April 5. Finally, Mark Sirgo, chairman of 9 Meters Biopharma's board of directors, bought 300,000 shares of the company's stock on the same date and for the same price and now owns over 1 million shares.

Rolled up dollar bills stacked in a ladder pattern.

Image source: Getty Images.

Now what

No one knows the inner workings and the prospects of a company better than its top executives. That's why investors pay close attention to insider buys. Three different high-ranking members of 9 Meters Biopharma's leadership team deciding to purchase more shares of the company sends the message that the biotech's future is bright, which explains why investors are bidding up its shares today. 

However, those focused on the long term should consider 9 Meters Biopharma's overall prospects, and not just the fact that its executives are adding to their ownership of the company. How does 9 Meters Biopharma's investment thesis look? The company develops treatments for rare diseases with an unmet need. Its leading pipeline candidates are larazotide, a potential medicine for adult celiac disease; and NM-002, an experimental treatment for short bowel syndrome. 

The company expects top-line data from a phase 3 clinical trial for larazotide in the second half of the year, while it plans to initiate phase 2 and phase 3 studies for NM-002 sometime this year. While these programs could pan out, investors should keep in mind that this biotech currently has no products on the market and is still at least a year (at best) from launching any.

Moreover, negative results from its phase 3 study for larazotide would send its stock crashing. Given that brief overview, 9 Meters Biopharma looks a bit too risky at the moment. There are plenty more promising biotech stocks to consider buying.