Many leading funds, including Fidelity Investments, T Rowe Price and First Pacific Advisors, filed forms 13-D and 13-G (and form 4) with the SEC this week, on Monday and Tuesday, indicating that they had amended their ownership in U.S. traded public companies operating in the healthcare sector. The following are the most notable institutional trades based on our analysis of those filings (for more info on Forms 13-D and 13-G, and how to interpret that, please refer to the end of this article):
Alkermes Plc (ALKS): Alkermes, an integrated biotech company, develops injectable and oral products for the treatment of central nervous system disorders, addiction, diabetes and autoimmune disorders. On Tuesday, T Rowe Price Associates filed SEC Form SC 13G indicating that it holds 15.5 million shares, an increase from the 6.2 million shares it held at the end of Q4. This makes T Rowe the third largest institutional holder of ALKS, behind Wellington Management and Fidelity Investments that hold 17.1 and 17.0 million shares respectively.
ALKS reported its Q4 about two months ago, beating revenues and earnings estimates, with revenues continuing to be on a strong growth trajectory, up 74% quarter-over-quarter, and up 185% year-over-year, while also continuing to post losses. Analysts continue to project strong revenue growth going forward, with another 35% growth from FY ending March 2012 to FY 2013. The stock trades at 2.5 P/B and 7.4 PSR (price-to-sales ratio), compared to averages of 10.0 and 68.9 for the biotech group.
Chelsea Therapeutics Intl (CHTP): CHTP is a clinical-stage biotech that is developing prescription products in multiple therapeutic categories such as rheumatoid arthritis, psoriasis, and other inflammatory conditions. On Tuesday, Fidelity Investments filed SEC Form SC 13G/A indicating that it holds 4.6 million or 6.8% of outstanding shares, a decrease from the 7.4 million shares it held at the end of Q4, thereby relegating it to from the first to the fourth largest institutional holder of CHTP after the sale.
CHTP shares have taken a nasty tumble this year, down over 60% YTD, in response to the unfolding drama surrounding the FDA decision on its Northera drug, designed as a treatment for symptomatic neurogenic orthostatic hypotension (NOH) in patients with Parkinson's disease, as well as other norepinephrine related conditions and diseases. The stock first took a near-60% tumble in mid-February on the release of FDA briefing documents ahead of the scheduled February 23rd FDA advisory committee meeting to review its NDA for Northera, that highlighted safety concerns and a recommendation that it not be approved.
CHTP shares subsequently catapulted to double, nadir-to-peak, at the end of February after the FDA's cardiovascular and renal drugs advisory committee voted 7-4 to recommend approval of Northera. And then, finally, shares took a tumble again at the end of March, breaking recent lows, after the company received a Complete Response Letter from the FDA on Northera. A number of brokers, including Needham and Ladenburg, have since downgraded the stock, and it continues to currently trade at the lows. We believe that outside of a dead-cat-bounce, an investment in CHTP is unlikely to yield much in the short-term due to the lack of any near-term catalysts.
Besides CHTP, Fidelity also filed SC 13Gs for:
- Allscripts Healthcare Solutions (MDRX), a provider of clinical, connectivity and patient information software applications for healthcare providers, in which it reported holding 8.2 million shares, a decrease from the 22.5 million shares it held at the end of Q4;
- Viropharma Inc. (VPHM), that develops products for the treatment of diseases impacting patients with few if any treatment options, including drugs for hereditary angioedema, clostridium difficle infection and seizures in children and adolescents, in which it reported holding 8.0 million shares, an increase from the 1.9 million shares it held at the end of Q4;
- Targacept Inc. (TRGT), a development-stage biotech that discovers and develops NNR Therapeutics, a new class of drugs for the treatment of CNS diseases and disorders, in which it reported holding 3.9 million shares, an increase from the 1.4 million shares it held at the end of Q4; and
- Oncogenex Pharma Inc. (OGXI), a biotech company engaged in the development of new cancer therapies that address treatment resistance in cancer patients, in which it reported holding 1.4 million shares, an increase from the 0.2 million shares it held at the end of Q4.
Lexicon Pharmaceuticals (LXRX): LXRX is a development stage biotech company focused on the discovery and development of protein drugs to treat various human diseases. It is a leader in defining the functions of genes for drug discovery using large-scale knockout mouse technology, and it invented high-throughput gene trapping technology to discover thousands of genes and expand its OmniBank library of tens of thousands of mouse clones. On Tuesday, New York-based Invus Public Equities Advisors filed SEC Form SC 13D/A indicating that it now holds 250.4 million or 52.1% of outstanding shares, a decrease from the 280.2 million shares it held at the end of Q4. LXRX shares are currently up over 40% YTD, and they trade at 2.6 P/B compared to the average of 3.8 for its peers in the biotech group.
Other major institutional filings this week in the healthcare sector included:
- Dynavax Technologies (DVAX), a clinical-stage biotech company that is engaged in the discovery and development of novel products to prevent and treat infectious and inflammatory diseases, in which Blackrock Inc. filed SEC Form SC 13G/A indicating that it held 6.7 million shares; and
- Omnicare Inc. (OCR), that provides pharmacy distribution and consulting services to long-term care centers and hospitals in 47 states and D.C., in which legendary fund manager First Pacific Advisors filed SEC Form SC 13G indicating that it held 6.1 million shares, an increase from the 5.2 million shares it held at the end of Q4.
Form 13-D is commonly referred to as "beneficial ownership report," and is required when a person or a group of persons acquires beneficial ownership of more than 5% of the voting class of a company's equity securities; form 13-G is the abbreviated version of the form that is allowed under certain circumstances.
The information in forms 13-D and 13-G is extremely timely as it is required to be filed within ten days after the purchase, in contrast to 13-F quarterly filings by Institutions that are filed every three months. The information contained in 13-F filings, thereby, can as much as eighteen weeks old by the time it is disseminated to the public. Furthermore, by virtue of their 5% ownership in public companies, the information contained in the 13-D and 13-G filings indicates only high confidence or high conviction moves by institutions and insiders, and hence can be interpreted to be of greater relevance to the investment community than the 13-F quarterly filings. Furthermore, 13-D and 13-G filings often are a precursor to hostile takeover, company breakups and other "change of control" events, and often they will include a letter to management explaining the reason for their taking a large stake in the company.
Credit: Fundamental data in this article were based on SEC filings, Zacks Investment Research, Thomson Reuters and Briefing.com. The information and data is believed to be accurate, but no guarantees or representations are made.
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Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.