Insiders made noteworthy buys in three healthcare sector stocks this past week (June 4-8, 2012), and sold eight others. These, along with insider buys and sells in other sectors and groups (discussed in prior articles on the basic materials sector and the energy sector), were selected based on a review of over 1,600 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 whether the overall buying or selling represents a strong pickup based on historical buying and selling in the stock.
Coventry Health Care (CVH): CVH is a provider of managed healthcare services through HMO, PPO and POS plans, and Medicare and Medicaid products. This past week, two insiders filed SEC Forms 4 indicating that they sold 197,618 shares for $6.05 million, with 157,618 of those shares acquired by the exercise of options. The sellers included EVP Harvey Demovick (180,000 shares) and EVP Kevin Conlin (17,618 shares). In comparison, insiders sold 0.31 million shares in the past year.
In its latest Q1 (March) about six weeks ago, CVH beat revenues and missed analyst earnings estimates (62 cents vs. 63 cents), while guiding FY 2012 earnings to $3.10-$3.30 vs. the estimates of $3.29. The stock took a dive on the report, responding not to the overall numbers, which were positive, but to the "Kentucky" situation. Specifically, the company's medical loss ratio (the ratio of total losses incurred in claims plus adjustment expenses divided by the total premiums earned) for its Kentucky Medicaid contract was 120.9%, meaning that it paid out $1.21 in claims for every $1 in premium it took in from its Kentucky contract. That's not a sustainable business model, to say the least.
The stock has since recovered most of the losses, trading just slightly below the closing price just before the Q1 report came out, and up about 10% YTD, not a bad accomplishment given the extreme mayhem in May. Its shares currently trade at a forward 10 P/E and 1.0 P/B compared to averages of 10.6 and 1.9 for its peers in the HMO group, while earnings are projected to rise slightly from $3.01 in 2011 to $3.26 in 2013.
In addition to CVH, insiders also reported noteworthy sales last week in the healthcare sector in:
- Gilead Sciences (GILD), a developer of therapeutics to treat viral, fungal, respiratory and cardiovascular diseases, in which two insiders filed SEC Forms 4 indicating that they sold 153,450 shares (all pursuant to 10b5-1 plans) for $7.5 million, with all but 1,000 shares acquired by the exercise of options. In comparison, insiders sold 1.56 million shares in the past year.
- McKesson (MCK), a provider of ethical drugs, health and beauty care products and medical supplies and equipment to pharmacies and hospitals, in which EVP Paul Julian filed SEC Form 4 indicating that he exercised options and sold the resulting 36,250 shares for $3.2 million, pursuant to a 10b5-1 plan, and in comparison to 0.87 million shares sold in the past year.
- Biogen Idec (BIIB), that is engaged in the research, development and commercialization of therapies for the treatment of multiple sclerosis, cancer and auto-inflammatory diseases, in which five insiders filed SEC Forms 4 indicating that they sold 12,151 (all pursuant to 10b5-1 plans) for $1.6 million, with 7,400 of those shares acquired by the exercise of options. In comparison, insiders sold 0.24 million shares in the past year.
- Molina Healthcare (MOH), a provider of managed healthcare services to 1.6 million members via government-sponsored programs for low-income families, in which CFO John Molina filed SEC Form 4 indicating that he sold 45,000 shares, including 15,000 shares owned indirectly via the Molina Siblings Trust, for $1.1 million. In comparison, insiders sold 0.31 million shares in the past year.
- Alexion Pharmaceuticals (ALXN), a commercial-stage biotech focused on serving patients with severe and ultra-rare disorders, in which three insiders filed SEC Forms 4 indicating that they sold 90,000 shares for $8.1 million, with 80,000 of those shares acquired by the exercise of options. In comparison, insiders sold 1.03 million shares in the past year.
- Watson Pharmaceuticals (WPI), developer of generic and branded drugs, including oral contraceptives, analgesics, and smoking cessation aids, in which Director Jack Michelson filed SEC Form 4 indicating that he exercised options to acquire 10,000 shares, and sold those and an additional 10,000 shares for $1.4 million. In comparison, insiders sold 175,372 shares in the past year.
- SXC Health Solutions (SXCI), that is a provider of pharmacy benefits management services and healthcare IT solutions to the healthcare benefits management industry, in which four insiders filed SEC Forms 4 indicating that they sold 29,404 shares for $2.6 million, with most of the shares sold acquired by the exercise of options. In comparison, insiders sold 0.35 million shares in the past year.
On top of those, insiders also reported noteworthy buys this past week in the healthcare sector in:
- Sciclone Pharmaceuticals (SCLN), a developer of therapies to treat life-threatening diseases such as cancer and infectious diseases, in which CEO Friedhelm Blobel filed SEC Form 4 indicating that he purchased 1,000 shares for $3,842, in comparison to 10,983 shares purchased in the past year.
- Nanosphere (NSPH), that is a developer of an advanced molecular diagnostic platform to enable low-cost and highly sensitive genomic and protein testing, in which Director Mark Slezark filed SEC Forms 4 indicating that he purchased 0.46 million shares for $0.80 million, in comparison to 1.02 million shares purchased by insiders in the past year.
- Rockwell Medical Technology (RMTI), a provider of hemodialysis concentrate solutions and dialysis kits, as well as other ancillary products, to hemodialysis providers, in which 10% owner David Hagelstein filed SEC Form 4 indicating that he purchased 6,000 shares for $52,632, in comparison to 10,000 shares purchased by insiders in the past year.
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.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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