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Why Diplomat Pharmacy, Inc. Shares Are Falling 13.6% Today

By Todd Campbell – Oct 26, 2016 at 8:23AM

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The departure of two senior executives is raising concerns among investors in this specialty pharmacy stock.

Image source: Diplomat Pharmacy, Inc.

What happened

After reporting that its president and chief financial officer are leaving the company at the end of 2016, shares of Diplomat Pharmacy (DPLO) are tumbling 13.6% as of 1:15 p.m EDT.

So what

The specialty pharmacy company has announced that President Gary Kadlec is retiring in December, and that he'll be replaced by company executive Paul Urick in November. Diplomat Pharmacy also says that Sean Whelan, its CFO, will be gone as of Dec. 31.

The C-suite shake-up ahead of the company's approaching third-quarter earnings release next week has investors wondering if there's more to the story. Unfortunately, the company's press release announcing these moves offers up little insight into the timing of their departure.

Now what

Investors should get more insight into the reasons behind these changes during the company's third-quarter earnings conference call on Nov. 2. In the meantime, investors may want to keep in mind that Kadlec isn't disappearing altogether. He plans to remain on as a member of the company's board of directors through the rest of his term. It also shouldn't be too surprising that Kadlec is retiring after a 45-year career.

It may also be reassuring to know that Urick is far from a rookie, too. He's been Diplomat's senior vice president of industry relations, pharmaceutical account management, and payer strategy, and prior to joining Diplomat, he was a senior vice president at Cigna.

Further, Whelan's exit as chief financial officer isn't immediate, and there's little reason to think that the reason given for his leaving "to spend more time with his family" isn't accurate. It's also good news to hear that Whelan will be involved in transitioning his responsibilities to others.

Overall, while it's disappointing that two senior executives are leaving at the same time, and that there could be some short-term headaches tied to this transition, investors might want to focus more on the long-term opportunity that's ahead for this company. Since development of complex biologics and biosimilars is at record highs, and that means that there's a big opportunity to manage prescriptions for an increasingly larger and longer-living population, stepping in and buying shares for long-haul portfolios might be a good idea.  

Todd Campbell has no position in any stocks mentioned. Todd owns E.B. Capital Markets, LLC. E.B. Capital's clients may have positions in the companies mentioned. Like this article? Follow him on Twitter where he goes by the handle @ebcapital to see more articles like this.

The Motley Fool recommends Diplomat Pharmacy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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