Unhappy Healthcare Companies

Joel Anderson |

Healthcare can be a difficult sector to traverse, fraught with competition and often involving uncertain technologies that require lengthy periods of R&D with little to no guarantee of results. Because of this, it’s typically important that healthcare companies sit on sound financial footing, ready to deal with whatever comes their way. Unfortunately, not all healthcare companies are made the same, and some may not be as well-suited for long-term growth as others.

It’s with this in mind that we present five potentially-troubled healthcare companies. Each of these companies has a current and quick ratio under one, representing the presence of liabilities that exceed their assets. This lack of cash on hand could make it difficult for these companies to weather the storms that their sector is heir to. These companies also have relatively low insider ownership. Given that healthcare companies often require lengthy stretches with low profits, high insider ownership can represent company leadership that believes in the business and is in it for the long haul.

Clearly, each of these companies has their own story to tell, and it’s entirely possible that they’re destined for great things despite their liabilities currently exceeding assets or a lack of insider ownership. But these numbers are still a reason to raise serious questions.

Brookdale Senior Living, Inc. (BKD)

Market cap: $3.27 billion

Current ratio: 0.40

Quick ratio: 0.40

Insider ownership: 2.6 percent

Based out of Brentwood, TN, Brookdale has been operating residences for senior citizens since its founding in 1978. Currently the largest owner and operator of senior and living communities in the country, Brookfield has 550 locations housing over 52,000 residents with 32,000 employees to care for them. Brookdale’s lack of assets on hand also shows up in its troubling Price to Cash ratio of 105.11. Also, Director W.E. Sheriff recently divested himself of  93,000 shares to the tune of $2.5 million. However, owners of Brookdale certainly haven’t been complaining, though: shares are up over 11 percent in the last year and have more than quintupled in value since December of 2008.

Express Scripts Holding Company (ESRX)

Market cap: $53.55 billion

Current ratio: 0.60

Quick ratio: 0.80

Insider ownership: 0.1 percent

Express scripts is a Fortune 100 company, ranking as the 24th-largest in the United States and the single largest pharmacy benefits management organization. Specializing in processing pharmaceutical claims, this St. Louis, MO company has been in operation since 1986. While the current and quick ratios may leave room for doubt regarding Express Scripts long-term prospects, the company also boasts an attractive price to free cash flow ratio of 13.31 and a price to sales ratio of 0.50. Shares are up over 22 percent so far in 2013.

Healthways, Inc. (HWAY)

Market cap: $638.44 million

Current ratio: 0.90

Quick ratio: 0.90

Insider ownership: 1.7 percent

This Franklin, TN-based company provides individualized health and wellness solutions. Targeting each member of a population separately, Healthways is committed to bringing their customers an improved sense of well-being. However, the company’s long-term prospects could be hurting its shareholders sense of well-being. With a PEG of 61.87 and a debt to equity ratio of 0.96 to go along with its troubling quick and current ratios, Healthways should clearly have some concerns about its liabilities. Shares have taken a hit lately, off over 15 percent from the opening of the markets on Wednesday to their close on Tuesday. However, this could just be hiccup as the stock’s up almost 75 percent since the start of the year.

Ligand Pharmaceuticals Inc. (LGND)

Market cap: $960.72 million

Current ratio: 0.40

Quick ratio: 0.40

Insider ownership: 2.4 percent

Ligand is a biotechnology company focused on developing, patenting, and selling pharmaceutical solutions to the unmet medical needs for patients with a wide spectrum of diseases. The company’s currently in the midst of a strong year, with shares up over 125 percent since January. However, the company’s fundamentals could provide investors with reason for concern. Along with the current and quick ratios of 0.40, the debt to equity ratio is just 0.58, the price to sales ratio reaches 23.11, and the price to book ratio is at 24.23.

MannKind Corporation (MNKD)

Market cap: $1.77 billion

Current ratio: 0.10

Quick ratio: 0.10

Insider ownership: 0.6 percent

No, no relation to the wrestler with the sock puppet. This MannKind is a development-stage biopharmaceutical company focused on the discovery, development, and commercialization of products to treat diabetes and cancer. The company currently has four drugs in its product pipeline,  and shares are up over 150 percent this year. However, MannKind shows an area for concern with its lack of assets on hand. Current and quick ratios are very low, and the price to cash ratio comes in at a troubling 58.5. These could be factors that contributed to Bank of America’s (BAC) Steve Byrne recent downgrade of the stock from neutral to underperform with the price target dropping from $8 a share to $5 a share.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
ESRX Express Scripts Holding Company 76.76 0.05 0.07 1,618,766
BKD Brookdale Senior Living Inc. 11.94 0.39 3.38 2,575,149
BAC Bank of America Corporation 22.09 0.25 1.12 91,241,647
LGND Ligand Pharmaceuticals Incorporated 107.02 0.51 0.48 134,679
MNKD MannKind Corporation 0.65 0.07 12.23 4,846,076
HWAY Healthways Inc. 23.28 0.08 0.32 264,891
DIOSF Dios Exploration Inc 0.08 0.00 0.00 0

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