Analyzing Noteworthy Insider Trades Last Week In Regeneron, Covidien, And Other Healthcare Stocks

by: GuruFundPicks

We present here two noteworthy insider buys and eight noteworthy insider sells in the healthcare sector from Wednesday through Friday's (May 2nd, 3rd, and 4th, 2012) over 1,100 separate SEC Form 4 (insider trading) filings, as part of our daily and weekly coverage of insider trades (a prior article on insider trades during the same period in the basic materials & energy sector can be accessed by clicking on the above hyperlink, and successive articles on other insider trades in other sectors can be accessed later from our author page).

The filings are noteworthy based on the dollar amount sold, the number of insiders buying or selling, and based on whether the overall buying or selling represents a strong pick-up based on historical buying and selling in the stock (for more info on how to interpret insider trades, please refer to the end of this article):

Regeneron Pharmaceutical (NASDAQ:REGN): REGN develops medicines for the treatment of serious medical conditions. It has two products, ARCALYST and EYLEA, on the market, and additional in development to treat inflammatory conditions, allergic and immune conditions, and cancer. On Wednesday, three insiders filed SEC Form 4 indicating that they exercised options to buy 12,500 shares, and sold a total of 139,327 shares for $18.8 million, pursuant to 10b5-1 plans. In comparison, insiders sold 0.29 million shares in the past year.

REGN reported a strong Q1 (March) report the week before last, on Thursday, beating analyst revenue ($232 million v/s $173 million) and earnings estimates (37c earnings v/s 23c loss) by a wide margin, based on the strong launch of its EYLEA drug for the treatment of age-related macular degeneration. Based on the strong initial sales, the company raised EYLEA net product sales guidance to $500-$550 million for FY 2012, almost double the guidance of $250-$300 million they gave just three months ago.

REGN shares gapped up after the report, and currently trade at all-time highs, up over 100% YTD, and have been among the strongest performers in the biotech group this year. A number of brokers, including BMO Capital, Goldman Sachs, and Bank of America have made optimistic statements about the company, with Goldman putting a buy recommendation and a $144 price target, and Bank of America adding it to "U.S. 1 List" and calling it one of its top biotech picks for 2012.

Overall, of the sixteen brokers that cover the company, ten rate it at buy/strong buy and the remaining six rate it at hold, with a mean target of $145, just marginally above the current $131.40 closing price on Friday. It is likely that REGN stock can take a breather here from the recent powerful rally, but it is probably too early in the game to call it quits based on the strong performance and potential of its drug portfolio.

Covidien Plc (COV): COV is an Irish developer of medical devices, pharmaceuticals and imaging products, and medical supplies for the clinical and home settings. On Wednesday and Friday, three insiders filed SEC Forms 4 indicating that they exercised options to acquire 56,784 shares, and sold those and an additional 10,166 shares for $3.7 million. In comparison, insiders sold 141,000 shares in the past year.

COV reported its Q2 (March) report the week before last, on Friday, beating analyst revenue and earnings estimates ($1.05 v/s $1.02), and they reiterated their prior guidance for FY 2012. The stock is up over 40% YTD, trading within striking range of its all-time highs, at 11-12 forward P/E and 2.6 P/B compared to averages of 26.9 and 4.6 for its peers in the medical products group, while earnings are projected to rise at a respectable 8.1% annual rate from $3.97 in 2011 to $4.64 in 2013. The stock has been stuck in a trading range since its IPO in 2007, mostly between $35 and $55, while earnings in the meantime have increased from $2.63 in 2007 to $3.97 in 2011 and then a projected $4.64 in 2013. We believe that the stock is a good relative value to its peers, and an attractive buy at these levels.

Curis Inc. (NASDAQ:CRIS): CRIS is a development stage biotech company focused on the development of targeted cancer therapies that modulate signaling pathways controlling the repair and regeneration of tissues. On Wednesday, two insiders filed SEC Forms 4 indicating that they exercised options and sold the resulting 184,750 shares for $0.9 million. In comparison, insiders sold 0.34 million shares in the past year.

CRIS is scheduled to release its Q1 (March) earnings report this week, on Tuesday before the market opens. Its shares currently trade within striking range of 10-year highs, at 9.1 P/B compared to the 3.7 average for its peers in the biotech group. A number of brokers, including Piper Jaffray, Oppenheimer, BMO Capital, Brean Murray and others, have come out in support of the stock recently, after at the end of January its Erivedge Capsule (vismodegib) product gained FDA approval for the treatment of advanced basal cell carcinoma. Of the eleven brokers who currently cover the stock, all rate it at buy/strong buy, with a mean target of $7.65, well above Friday's closing price of $4.65.

On top of these, additional large insider sales last week on Wednesday through Friday in the healthcare sector included:

  • a $33.2 million sale in Sciclone Pharmaceuticals (NASDAQ:SCLN), a developer of therapies to treat life-threatening diseases such as cancer and infectious diseases, by 10% owner Paolo Cavazza of Lugano, Switzerland, on behalf of shares owned by Defiante Farmaceutica S.A., that is owned by Pomezia, Italy-based Sigma-Tau, with the sale reducing his position in the company to 2.73 million shares in direct and indirect holdings;
  • a $9.6 million sale by three insiders at ResMed Inc. (NYSE:RMD), that is a provider of medical equipment for treating and diagnosing sleep disordered breathing;
  • an $8.1 million sale by two insiders at Gilead Sciences Inc. (NASDAQ:GILD), a developer of therapeutics to treat viral, fungal, respiratory and cardiovascular diseases;
  • a $4.8 million sale by CFO Marshall Mohr at Intuitive Surgical Inc. (NASDAQ:ISRG), a pioneer in the field of surgical robotics, and the developer of the da Vinci Surgical System designed to aid surgeons in conducting minimally-invasive surgery by offering surgeons superior 3D HD visualization, enhanced dexterity, and greater precision and ergonomic comfort;
  • a $4.7 million sale by two insiders at Biogen Idec Inc. (NASDAQ:BIIB), that is engaged in the research, development and commercialization of therapies for the treatment of multiple sclerosis, cancer and auto-inflammatory diseases; and
  • a $1.2 million sale by two insiders at Biomarin Pharmaceuticals (NASDAQ:BMRN), that is a developer of enzyme replacement therapies and oral solutions to treat debilitating, life-threatening, chronic genetic disorders and other diseases and conditions.

Furthermore, insiders also reported noteworthy buys on Wednesday through Friday of last week in the healthcare sector in:

  • The Medicines Co. (NASDAQ:MDCO), a developer of biopharmaceutical products for use in critical care hospital settings, including for use in coronary interventions and anti-coagulation therapy, in which Director John Kelly purchased 9,150 shares for $0.2 million, increasing his holdings to 15,064 shares, and the only insider purchase this year; and
  • Quidel Corp. (NASDAQ:QDEL), a developer of rapid point-of-care diagnostic testing solutions for applications in infectious diseases, women's health and gastrointestinal diseases, in which CEO Douglas Bryant purchased 10,000 shares for $0.16 million, increasing his holdings to 0.20 million shares, and in comparison to 0.22 million shares purchased by insiders in the past year.

Credit: Fundamental data in this article and company descriptions are based on SEC filings, Zacks Investment Research, Yahoo, Thomson Reuters and The information and data is believed to be accurate, but no guarantees or representations are made.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Disclaimer: Material presented here is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities. Before buying or selling any stock you should do your own research and reach your own conclusion. Further, these are our 'opinions' and we may be wrong. We may have positions in securities mentioned in this article. You should take this into consideration before acting on any advice given in this article. If this makes you uncomfortable, then do not listen to our thoughts and opinions. The contents of this article do not take into consideration your individual investment objectives so consult with your own financial adviser before making an investment decision. Investing includes certain risks including loss of principal.