Last week (May 7th to 11th, 2012), insiders made noteworthy buys in several biotech and other healthcare companies making strong moves. In this article, we review noteworthy insider buys in two plunging and one surging healthcare stock, in addition to noteworthy trades in several other healthcare companies.
Insider buys-- especially unusually large ones-- in such stocks that have plunged recently, may give bulls comfort that the long-term fundamentals may be intact and that a turn may be under-way in the next couple of quarters. On the other hand, sells at depressed prices after the plunge may lend even further credence to the bear thesis. Similarly, noteworthy buys in surging stocks may give investors some confidence that knowledgeable insiders are finding value at such elevated prices after a strong surge.
The transactions in this article were selected based on a review of over 1,850 separate SEC Form 4 (insider trading) filings last week, as part of our daily and weekly coverage of insider trades. 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 :
Merge Healthcare Inc. (MRGE): MRGE develops medical imaging, clinical workflow process and patient information management software applications. The medical imaging software solutions support end-to-end business and clinical workflow for radiology department and specialty practices, imaging centers and hospitals. The patient information management software applications improve their customers' productivity and enhance the quality of the patient experience. On Wednesday, Thursday, and Friday of last week, six insiders filed SEC Forms 4 indicating that they purchased a total of 542,100 shares for $1.5 million, with the largest purchase (422,600 shares) by Chairman Michael Ferro, also a 10% owner via shares held by his limited liability company Merrick RIS, LLC. In comparison, insiders purchased 0.59 million shares in the past year.
MRGE shares have been in a strong downtrend for the last six-plus weeks, falling from a high of almost $7 in late-May to $2.75 at the close on Friday, also down about 44% YTD. The slide began in early-April and accelerated to the downside during the month, finally (possibly) culminating in another massive plunge this past Tuesday after the company reported a disappointing Q1 (March) in which it missed on both analyst revenues and earnings estimates (3c vs. 4c). Perhaps even more damaging, the company also announced that it was withdrawing its FY 2012 financial guidance on account of the difficultly in predicting the short-term impact of the shift to a subscription pricing model. The shares currently trade at 9-10 forward P/E and 2.6 P/B compared to averages of 36.9 and 6.5 for its peers in the medical information systems group. However, keep in mind that the low P/E could be a mirage in light of the negative report as consensus analyst estimates are down to 28c from 43c just a week ago.
Repros Therapeutics Inc. (RPRX): RPRX is a clinical-stage biotech company engaged in the development of small molecule drugs to treat hormonal and reproductive system disorders. On Friday, Joseph Edelman, on behalf of New York-based biotech-focused hedge fund Perceptive Advisors, an insider by virtue of its 10% ownership of RPRX, filed SEC Form 4 indicating that it purchased 325,000 shares for $1.6 million, increasing its ownership to 2.63 million shares.
RPRX shares surged on Thursday and Friday, up a cumulative 85%, after the company indicated on Wednesday afternoon after the market-close that it had reached an agreement with the FDA finalizing the trial design of its Androxal registration program. Androxal is one of two key products in its pipeline, the other being Proellux, for the treatment of uterine fibroids. The Androxal treatment targets men with secondary hypogonadism resulting in low levels of testosterone, with the secondary nomenclature implying that the defect or problem is in the brain, whereas in primary hypogonadism the problem is in the testicles. The potential market for secondary hypogonadism is believed to be huge as it is believed to be responsible for large majority of the incidences of low testosterone in the U.S.
Adventrx Pharmaceuticals (ANX): ANX is a biopharmaceutical research and development company focused on oncology treatments based on improving existing drugs and addressing limitations with their safety. On Thursday, Director David Ramsay filed SEC Form 4 indicating that he purchased 50,000 shares for $28,099, a new holding for him. In comparison, insiders purchased 75,500 shares in the past two years. ANX shares closed Friday at its all-time lows, at 54c-- down 80% in the past year. The shares have never recovered since they plunged last August when the company reported that the FDA had rejected its application, issuing a complete response letter for its ExelbineTM treatment for non-small cell lung cancer.
On top of these, insiders also reported noteworthy sales last week in the healthcare sector stocks in:
- Mako Surgical Corp. (MAKO), that develops proprietary advanced robotic arm solutions and orthopedic implants used in minimally invasive orthopedic knee procedures, in which Director John Savarese sold 1.26 million shares for $32.0 million, in comparison to 1.76 million shares sold by insiders in the past year;
- Vertex Pharmaceuticals (VRTX), that engages in the discovery, development and commercialization of small molecule drugs for the treatment of hepatitis C, cystic fibrosis, epilepsy and other life-threatening diseases, in which six insiders sold 0.39 million shares for $21.2 million, in comparison to 0.78 million shares sold by insiders in the past year;
- Incyte Corporation (INCY), that develops small molecule drugs for hematologic and oncology indications, and inflammatory and autoimmune diseases, in which CEO Paul Friedman sold 225,000 shares for $5.1 million, in comparison to 0.51 million shares sold by insiders in the past year;
- Amgen Inc. (AMGN), that develops therapeutics based on cellular and molecular biology to treat anemia, cancer, and inflammatory diseases, in which SVP David Beier sold 55,000 shares for $3.9 million;
- Watson Pharmaceuticals (WPI), a developer of generic and branded drugs, including oral contraceptives, analgesics, and smoking cessation aids, in which two insiders sold 24,000 shares for $1.8 million, in comparison to 0.14 million shares sold by insiders in the past year.
- Biomarin Pharmaceuticals (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, in which two insiders sold 35,708 shares for $1.3 million;
- Merck & Co. (MRK), a research-driven global pharmaceutical company engaged in developing prescription drugs to treat asthma, osteoporosis, cardiovascular, metabolic and other disorders, and also a developer of vaccines, biological therapies, animal health, and consumer products, in which EVP Richard Bowles sold 27,377 shares for $1.1 million; and
- PSS World Medical Inc. (PSSI), that distributes medical products and equipment to physician offices, long-term care facilities, and home-care providers, in which EVP John Sasen sold 45,000 shares for $1.0 million.
Credit: Fundamental data in this article and company descriptions are based on SEC filings, Zacks Investment Research, Yahoo, 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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