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There was intensive insider selling in Align Technology (ALGN) in August, 2012. The stock peaked at $39.50 on September 14, 2012 and plunged all the way to $23.45 on December 6, 2012 or 40.6% below the September, 2012 highs.

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With this episode in mind, I screened for stocks which have seen recent intensive insider selling. Intensive insider selling can be defined by the following three criteria:

  1. The stock was sold by three or more insiders within one month.
  2. The stock was not purchased by any insiders in the month of intensive selling.
  3. At least two sellers decreased their holdings by more than 10%.

In this article, I will feature three stocks that met these three criteria of intensive insider selling in the last 30 days.

1. Acadia Pharmaceuticals (ACAD), a biopharmaceutical company, focuses on small molecule drugs that address unmet medical needs in neurological and related central nervous system disorders.

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Insider selling by insider (last 30 days)

  • Glenn Baity sold 123,163 shares on April 2-17 pursuant to a Rule 10b5-1 trading plan. Glenn Baity currently holds 40,000 shares or less than 0.1% of the company. Glenn Baity is Acadia's Vice President, General Counsel and Secretary and has been with Acadia since July 2004.
  • Thomas Aasen sold 80,000 shares on April 1-11 pursuant to a Rule 10b5-1 trading plan. Thomas Aasen currently holds 44,500 shares or less than 0.1% of the company. Thomas Aasen is Acadia's Executive Vice President, Chief Financial Officer, and Chief Business Officer and has been at Acadia since April 1998.
  • Roger Mills sold 58,584 shares on April 1 pursuant to a Rule 10b5-1 trading plan. Roger Mills currently holds 14,017 shares or less than 0.1% of the company. Roger Mills has served as Acadia's Executive Vice President, Development since June 2006.
  • Uli Hacksell sold 56,729 shares on April 1-16 pursuant to a Rule 10b5-1 trading plan. Uli Hacksell currently controls 109,049 shares or 0.1% of the company. Uli Hacksell has served as Acadia's Chief Executive Officer since September 2000 and as a director of Acadia since October 2000.

Insider selling by calendar month

Here is a table of Acadia's insider trading activity by calendar month.

MonthInsider selling / sharesInsider buying / shares
April 2013318,4760
March 201300
February 201300
January 201300

The month of April has seen all of the insider selling.

Financials

The company reported the full year 2012 financial results on March 12 with the following highlights:

Revenue$4.9 million
Net loss$20.8 million
Cash$108.0 million

News

On April 11, Acadia announced that the U.S. Food and Drug Administration has agreed that the data from the pivotal Phase III -020 study, together with supportive data from other studies with pimavanserin, are sufficient to support the filing of a New Drug Application for the treatment of Parkinson's disease psychosis [PDP]. As a result, Acadia will no longer conduct the Phase III -021 study that was planned as a confirmatory trial and was scheduled to be initiated later this month.

Competition

Acadia faces, and will continue to face, intense competition from pharmaceutical and biotechnology companies, as well as numerous academic and research institutions and governmental agencies, both in the United States and abroad.

Even if Acadia and Acadia's collaborators are successful in developing their product candidates, the resulting products would compete with a variety of established drugs in the areas of Parkinson's disease psychosis, schizophrenia, Alzheimer's disease psychosis, chronic pain, and glaucoma. For example, Acadia's potential product for the treatment of Parkinson's disease psychosis will compete with off-label use of antipsychotic drugs, including Seroquel, marketed by Astra-Zeneca (AZN), and clozapine, a generic drug.

My analysis

There have been eight insider sell transactions and there have not been any insider buy transactions during the last 30 days. Acadia is currently targeting an NDA submission for pimavanserin near the end of 2014. Before entering short this stock, I would like to get a bearish confirmation from the Point and Figure chart. The main reason for the proposed short entry is the intensive insider selling activity.

2. Alkermes (ALKS), an integrated biopharmaceutical company, develops medicines that enhance patient outcomes.

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Insider selling by insider (last 30 days)

  • Floyd Bloom sold 20,000 shares on March 28 - April 11 pursuant to a Rule 10b5-1 trading plan. Floyd Bloom currently holds 110,281 shares or less than 0.1% of the company. Floyd Bloom is a founder of Alkermes and has been a director of Alkermes since 1987.
  • Kathryn Biberstein sold 25,000 shares on April 12 pursuant to a Rule 10b5-1 trading plan. Kathryn Biberstein currently holds 42,665 shares or less than 0.1% of the company. Kathryn Biberstein serves as Alkermes' in-house General Counsel and Secretary, and Chief Compliance Officer.
  • Paul Mitchell sold 20,000 shares on March 28 - April 2 pursuant to a Rule 10b5-1 trading plan. Paul Mitchell currently holds 8,000 shares or less than 0.1% of the company. Paul Mitchell has been a director of Alkermes since April 2003.
  • Robert Breyer sold 5,000 shares on April 1 pursuant to a Rule 10b5-1 trading plan. Robert Breyer currently holds 58,106 shares or less than 0.1% of the company. Robert Breyer has been a director of Alkermes since July 1994.
  • Gordon Pugh sold 18,747 shares on March 20 pursuant to a Rule 10b5-1 trading plan. Gordon Pugh currently holds 9,833 shares or less than 0.1% of the company. Gordon Pugh leads the quality, regulatory affairs, proprietary product development and information technology functions for Alkermes.

Insider selling by calendar month

Here is a table of Alkermes' insider trading activity by calendar month.

MonthInsider selling / sharesInsider buying / shares
April 201350,0000
March 201393,9990
February 201395,0000
January 2013490,0910

There have been 729,090 shares sold and zero shares purchased this year.

Financials

The company reported the fiscal 2013 third-quarter, which ended December 31, 2012, financial results on January 31 with the following highlights:

Revenue$135.9 million
Net income$16.3 million
Cash$239.3 million
Debt$369.1 million

Outlook

Alkermes' outlook for fiscal 2013 is as follows:

  • Alkermes expects total revenues to range from $520 million to $545 million.
  • Alkermes expects GAAP net income to range from break-even to positive $15 million.
  • Alkermes expects free cash flow to range from $115 million to $135 million.

Upcoming milestones

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Competition

There are other companies developing extended-release product platforms. In many cases, there are products on the market or in development that may be in direct competition with Alkermes' products or product candidates. In addition, Alkermes knows of new chemical entities that are being developed that, if successful, could compete against Alkermes' product candidates. These chemical entities are being designed to work differently than Alkermes' product candidates and may turn out to be safer or to be more effective than Alkermes' product candidates.

My analysis

There have been five insider sell transactions and there have not been any insider buy transactions during the last 30 days. There are eight analyst buy ratings, four neutral ratings and zero sell ratings with an average target price of $25.45. The stock is trading at a forward P/E ratio of 25.62. On April 17, Alkermes announced positive preliminary topline results from a phase 2 study of ALKS 5461, its novel drug compound for major depressive disorder in patients who have an inadequate response to standard therapies for clinical depression. The stock jumped 16% from this news. Before entering short this stock, I would like to get a bearish confirmation from the Point and Figure chart. The two main reasons for the proposed short entry are bearish analyst target prices and the intensive insider selling activity.

3. Gap, Inc. (GPS) operates as an apparel retail company. It offers apparel, accessories, and personal care products for men, women, children, and babies under the Gap, Old Navy, Banana Republic, Piperlime, Athleta, and Intermix brands.

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Insider selling by insider (last 30 days)

  • Glenn Murphy sold 500,000 shares on April 9-12 pursuant to a Rule 10b5-1 trading plan. Glenn Murphy currently holds 67,926 shares or less than 0.1% of the company. Glenn Murphy joined Gap as Chairman of the Board and Chief Executive Officer in July 2007.
  • John Keiser sold 49,796 shares on April 12 pursuant to a Rule 10b5-1 trading plan. John Keiser currently holds 6,685 shares or less than 0.1% of the company. John Keiser is Gap's Executive Vice President and Chief Information Officer.
  • Jack Calhoun sold 31,773 shares on March 18-22 and currently holds 2,215 shares or less than 0.1% of the company. Jack Calhoun is global president of Banana Republic.
  • Colin Funnell sold 9,000 shares on March 18 and currently holds 6,593 shares or less than 0.1% of the company. Colin Funnell is Executive Vice President of Global Supply Chain for Gap.

Insider selling by calendar month

Here is a table of Gap's insider trading activity by calendar month.

MonthInsider selling / sharesInsider buying / shares
April 2013549,7960
March 2013700,4350
February 201300
January 201300

There have been 1,250,231 shares sold and zero shares purchased this year.

Financials

The company reported the full year 2012, which ended February 2, financial results on February 28 with the following highlights:

Revenue$15.7 billion
Net income$1.1 billion
Cash$1.5 billion
Debt$1.2 billion

Outlook

The company expects diluted earnings per share to be in the range of $2.52 to $2.60 for fiscal year 2013, or an 8 to12 percent increase from the prior year.

Competition

Gap's competitors include American Eagle Outfitters (AEO) and The TJX Companies (TJX). Here is a table comparing these companies.

CompanyGPSAEOTJXIndustry Average (Apparel Stores)
Market Cap:17.33B3.69B34.46B23.62B
Employees:136,0007,000179,0006.88K
Qtrly Rev Growth (yoy):0.100.090.150.19
Revenue:15.65B3.48B25.88B9.17B
Gross Margin:0.390.400.280.40
EBITDA:2.51B564.57M3.62B1.76B
Operating Margin:0.120.130.120.10
Net Income:1.14B264.10M1.91BN/A
EPS:2.331.162.551.60
P/E:16.0116.3818.6733.86
PEG (5 yr expected):1.501.101.472.19
P/S:1.121.081.332.58

Gap's valuation is in line with its direct competitors.

My analysis

There have been six insider sell transactions and there have not been any insider buy transactions during the last 30 days. The stock is trading at a P/E ratio of 16.01 and a forward P/E ratio of 12.89. The company has a book value of $6.25 per share and the stock has a dividend yield of 1.59%. Before entering short this stock, I would like to get a bearish confirmation from the Point and Figure chart. The main reason for the proposed short entry is the intensive insider selling activity.

Source: 2 Biotechs And A Retailer With Recent Intensive Insider Selling