Many leading funds, including SAC Capital, Fidelity Investments, and Wellington Management, filed forms 13-D and 13-G (and form 4) with the SEC last week (May 7th to 11th, 2012), indicating that they had amended their ownership in U.S. traded public companies. Based on our analysis, the following are two of the most noteworthy filings in the healthcare sector (three prior articles discussing last week's institutional 5% ownership filings in the basic materials and energy group, telecom group and the tech sector can be accessed by clicking on the above hyperlink), in which institutions accumulated stocks in companies in the group that were surging higher (for more info on Forms 13-D and 13-G, and how to interpret that, please refer to the end of this article):
Ariad Pharmaceuticals Inc. (ARIA): ARIA is engaged in the development of drugs that treat aggressive and advanced-stage cancer by regulating cell signaling with small molecules. It is also developing small-molecule drugs that block signal transduction pathways in cells responsible for osteoporosis and immune and inflammatory diseases.
On Wednesday, billionaire star fund manager Stephen Cohen's hedge fund SAC Capital Advisors, with over $15.7 billion in 13-F assets, filed another SEC Form SC 13G indicated that he raised his position in ARIA to 8.3 million shares, an increase from the 7.9 million shares he indicated holding in an earlier filing on April 27th, and a significant increase from the 2.6 million shares he held at the end of Q4. With the added shares, SAC now stands as the third largest institutional holder of ARIA shares, behind mutual fund powerhouse Fidelity Investments (23.1 million shares) and Montreal-based Swiss and Canadian healthcare-focused investment firm Sectoral Asset Management (9.0 million shares).
ARIA reported its Q1 (March) last week, on Wednesday, posting a higher loss than analyst estimates (35c v/s 23c). Its shares have been surging, up about 40% YTD and up about 20-fold from the lows in 2008-09 to twelve-year highs. While much of the surge is on account of investor enthusiasm about the potential of its ponatinib treatment for chronic myeloid leukemia (CML) and Philadelphia chromosome positive (Ph+) acute myeloid leukemia (ALL), with the company planning for a marketing approval submission in the U.S. and Europe for Q3 of 2012, investors are also enthusiastic about some of the earlier stage candidates in its pipeline, most notably AP26113 for lung cancer and other tumors.
ARIA shares retreated briefly in late March after the company received negative news that the Oncologic Drugs Advisory Committee voted against recommending Taltorvic (ridaforolimus) for the treatment of adult and pediatric patients with metastatic soft tissue sarcoma or bone sarcoma. However, investors took the cue to buy on the weakness, focusing instead on the potential of ponatinib, as shares are back to new highs after a brief 16% retreat from the negative Taltorvic news. It seems based on the actions of SAC Capital that at least one guru investor shares this sentiment, boldly and aggressively adding it to his portfolio in Q1, and again last week, as the stock ascends to all-time highs.
SXC Health Solutions (SXCI): SXCI is a provider of pharmacy benefits management services and healthcare IT solutions to the healthcare benefits management industry. On Thursday, Fidelity Investments filed SEC Form SC 13G/A indicating that it holds 9.4 million shares, an increase from the 4.9 million shares it held at the end of Q4, thereby making it the largest institutional holder of SXCI, ahead of mega fund T Rowe Price Associates that has 9.0 million shares.
SXCI reported its Q1 the week before last, on Thursday, beating analyst revenue and earnings estimates (52c v/s 51c), and reaffirming FY 2012 revenue and earnings guidance. Subsequent to that, last Wednesday, the company announced a dilutive 4.34 million share offering, later upping it to 5.20 million shares at $90.60, with the proceeds to be used to pay for a portion of the cash consideration of its previously announced merger with Catalyst Health Solutions, and for general corporate purposes. The shares have stayed strong despite the offering, trading within 9% of the all-time $100.50 high it hit just last month, and up about 65% YTD.
SXCI shares were already in rally mode trading at all-time highs when the company announced a merger with Catalyst Health Solutions (CHSI) on April 18th, with the shares rising up another 25% at its highs following the merger announcement. It seems that investor enthusiasm is unperturbed despite the dilutive offering, as the merger that will create the fourth largest entity in the PBM industry is expected to be highly accretive starting in FY 2013. SXCI shares currently trade at 30-31 forward P/E and 8.2 P/B, while earnings are projected to rise at a strong 36.1% annual rate from $1.63 in 2011 to $3.02 in 2013.
Besides the two above, institutional investors also made major moves, accumulating stock in positions in the following two healthcare stocks with plunging stock prices:
- Accretive Health Inc. (AH), a provider of patient registration, insurance verification, documentation, bill preparation, and collection services, in which SAC Capital Advisors filed SEC Form SC 13G indicating that it holds 5.0 million or 5.0% of outstanding shares, an increase from the 0.6 million shares it held at the end of Q4; and
- Sequenom Inc. (SQNM), that operates in the field of industrial genomics, providing products, services, diagnostic testing, applications, and genetic analysis products that translate the results of genomic science into solutions for biomedical research, translational research, molecular medicine applications, and agricultural and livestock research, in which SAC Capital Advisors filed SEC Form SC 13G indicating that it holds 6.1 million or 5.4% of outstanding shares, an increase from the 32,765 shares it held at the end of Q4.
Additional major insider filings last week in the healthcare sector include:
- Affymax Inc. (AFFY), that is a biotech company developing a pipeline of synthetic peptide-based drug candidates for the treatment of serious and life-threatening conditions, including for the treatment of kidney diseases, in which Fidelity Investments filed SEC Form SC 13G/A indicating that it holds 2.7 million or 7.4% of outstanding shares, a decrease from the 4.6 million shares it held at the end of Q4;
- Align Technology Inc. (ALGN), a medical device company that develops its proprietary Invisalign System for treating malocclusion or misalignment of the teeth, in which New York-based Bank of New York Mellon Corp., with over $1.2 trillion in assets under management, filed SEC Form SC 13G/A indicating that it holds 3.8 million or 4.7% of outstanding shares, a decrease from the 4.5 million shares it held at the end of Q4;
- Brookdale Senior Living (BKD), an operator of assisted living, retirement centers and continuing care retirement communities, in which Fidelity Investments filed SEC Form SC 13G/A indicating that it holds 12.1 million 9.96% of outstanding shares, a decrease from the 18.1 million shares it held at the end of Q4;
- Cardinal Health, Inc. (CAH), that is a distributor of pharmaceutical and medical products; operator of medical services facilities; and developer medical and surgical products including disposable kits, drapes, gowns and other products, in which mega fund Wellington Management, with $254 billion in 13-F assets, filed SEC Form SC 13G/A indicating that it holds 35.0 million or 10.1% of outstanding shares, an increase from the 33.9 million shares it held at the end of Q4; and
- Exelixis Inc. (EXEL), that develops small-molecule therapies for the treatment of cancer. in which Wellington Management filed SEC Form SC 13G/A indicating that it holds 7.7 million or 5.2% of outstanding shares, a decrease from the 15.3 million shares it indicated that it held in a prior SC 13G/A filing in March.
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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