Seeking Alpha
Long/short equity, insider ownership
Profile| Send Message| ()  

The Health Care Select Sector ETF (XLV) was trading as low as $21.63 in March 2009. The index is currently trading at $47.51, or 119.6% above the low made in March 2009.

(click to enlarge)

In this article, I will feature two healthcare companies that have seen intensive insider selling during the last 30 days. Intensive insider selling can be defined by the following three criteria:

  1. The stock was sold by three or more insiders within one month.
  2. The stock was not purchased by any insiders in the month of intensive selling.
  3. At least two sellers decreased their holdings by more than 10%.

1. Isis Pharmaceuticals (ISIS) engages in the discovery and development of antisense drugs using antisense drug discovery platform.

(click to enlarge)

Insider selling by insider (last 30 days)

  • Stanley Crooke sold 140,683 shares on June 24-27 pursuant to a Rule 10b5-1 trading plan. Stanley Crooke currently controls 777,226 shares or 0.8% of the company. Stanley Crooke is Founder, Chairman and Chief Executive Officer of Isis Pharmaceuticals.
  • Richard Geary sold 47,049 shares on June 24-25 pursuant to a Rule 10b5-1 trading plan. Richard Geary currently holds 4,254 shares and 20,960 options or less than 0.1% of the company. Richard Geary is Senior Vice President of Development at Isis Pharmaceuticals.
  • Joseph Wender sold 5,447 shares on June 20 and currently holds 55,553 shares or less than 0.1% of the company. Joseph Wender serves as a director of the company.
  • Brett Monia sold 9,375 shares on June 11 pursuant to a Rule 10b5-1 trading plan. Brett Monia currently holds 5,695 shares or less than 0.1% of the company. Brett Monia is a founding member of Isis and Senior Vice President of Antisense Drug Discovery.

Insider selling by calendar month

Here is a table of Isis' insider trading activity by calendar month.

MonthInsider selling / sharesInsider buying / shares
June 2013202,5540
May 201310,0000
April 2013410,1940
March 2013126,8560
February 20138,1890
January 20137,8590

There have been 765,652 shares sold and zero shares purchased by the insiders this year.

Financials

The company reported the first-quarter financial results on May 7 with the following highlights:

Revenue$43.4 million
Net loss$1.7 million
Cash and investments$416.8 million
Debt$222.8 million

Outlook

Isis expects to end 2013 with a pro forma net operating loss in the mid $60 million range. Isis is also projecting to end the year with more than $325 million in cash.

Pipeline

The following table lists Isis' approved products and each of Isis' and Isis partners' drug development projects, their targets, disease indications and the development status of each.

(click to enlarge)

Upcoming milestones

The company plans to report clinical data on ISIS-CRPRx in patients with rheumatoid arthritis later this year.

Competition

Isis believes that of the drugs that are in development or on the market, Kynamro's closest competitor is Juxtapid. In December 2012, the FDA approved Juxtapid as an oral, once-a-day treatment for patients with homozygous familial hypercholesterolemia [HoFH]. Juxtapid is a small molecule drug that Aegerion Pharmaceuticals (AEGR) developed and commercialized to limit secretion of cholesterol and triglycerides from the intestines and the liver. The FDA approval for Juxtapid is supported by a Phase 3 study in 29 patients with homozygous FH. Aegerion states that the most common adverse reactions in the Phase 3 study were gastrointestinal, reported by 27 of 29 patients, or 93%. In earlier studies evaluating Juxtapid, patients discontinued use of Juxtapid at a high rate due to gastrointestinal adverse events, such as diarrhea, nausea and vomiting. In addition, some patients experienced elevations in liver enzymes and increased mean levels of fat in the liver, or hepatic fat, both of which Aegerion states it observed in its Phase 3 clinical trial of Juxtapid. Like Kynamro, Juxtapid is available only through a REMS program that restricts the access of Juxtapid to only patients with a clinical or laboratory diagnosis consistent with HoFH and both the Kynamro and Juxtapid labels contain a Boxed Warning citing the risk of liver toxicity.

My analysis

There have been four different insiders selling the shares and there have not been any insiders buying the shares during the past 30 days. There are four analyst buy ratings, four neutral ratings and one sell rating, with an average target price of $20.86. Before entering short this stock, I would like to get a bearish confirmation from the Point and Figure chart. The two main reasons for the proposed short entry are bearish analyst target prices and the intensive insider selling activity.

2. HeartWare International (HTWR), a medical device company, engages in developing and manufacturing miniaturized implantable heart pumps or ventricular assist devices [VAD] for the treatment of advanced heart failure in the United States and internationally.

(click to enlarge)

Insider selling by insider (last 30 days)

  • Lawrence Knopf sold 992 shares on June 26 pursuant to a Rule 10b5-1 plan. Lawrence Knopf currently holds 3,611 shares or less than 0.1% of the company. Lawrence Knopf joined HeartWare in March 2011 as Senior Vice President, General Counsel and Secretary.
  • Robert Yocher sold 1,162 shares on June 25 pursuant to a Rule 10b5-1 plan. Robert Yocher currently holds 3,352 shares and 11,200 options or 0.1% of the company. Robert Yocher joined HeartWare in June 2011 as Senior Vice President, Regulatory and Quality.
  • Jeffrey Larose sold 2,179 shares on June 17 pursuant to a Rule 10b5-1 plan. Jeffrey Larose currently holds 16,164 shares and 23,969 options or 0.3% of the company. Jeffrey Larose serves as HeartWare's Chief Scientific Officer and has been with the company since its inception.
  • Robert Thomas sold 2,656 shares on June 6 pursuant to a Rule 10b5-1 plan. Robert Thomas currently controls 20,452 shares or 0.1% of the company. Robert Thomas has been a director and non-executive chairman of HeartWare since November 2004.

Insider selling by calendar month

Here is a table of HeartWare's insider trading activity by calendar month.

MonthInsider selling / sharesInsider buying / shares
June 20136,9890
May 201362,2340
April 201300
March 20132,5000
February 20131,0000
January 201300

There have been 72,723 shares sold and zero shares purchased by the insiders this year.

Financials

The company reported the first-quarter financial results on April 29 with the following highlights:

Revenue$49.2 million
Net loss$13.0 million
Cash$228.9 million
Debt$101.9 million

Product

The HeartWare Ventricular Assist System obtained U.S. market approval in 2012 from the U.S. Food and Drug Administration as a bridge-to-transplant therapy for patients with advanced stage heart failure. The HeartWare System has been commercially available in other global markets including Europe and Australia, since 2009. To date, more than 2,500 patients worldwide have been treated with the HeartWare Ventricular Assist System.

Competition

HeartWare's principal competitors in the implantable cardiac assist space include Thoratec Corporation (THOR), Jarvik Heart, MicroMed Technology, Inc, Berlin Heart AG, Terumo Heart, Inc., Sunshine Heart (SSH), CircuLite, Inc., Evaheart Medical USA, Inc. and a range of other smaller, specialized medical device companies with devices at varying stages of development.

My analysis

There have been four different insiders selling the shares and there have not been any insiders buying the shares during the past 30 days. The company has an insider ownership of 1.30%. Before entering short this stock, I would like to get a bearish confirmation from the Point and Figure chart. The main reason for the proposed short entry is the intensive insider selling activity.

Source: 2 Healthcare Companies With Recent Intensive Insider Selling