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In this article, I will feature one biotech stock that has seen intensive insider selling during the last 30 days. 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%.

Acadia Pharmaceuticals (ACAD) focuses on innovative treatments that address unmet medical needs in neurological and related central nervous system disorders.

(click to enlarge)

Insider selling during the last 30 days

Here is a table of Acadia's insider-trading activity during the last 30 days by insider.

NameTitleTrade DateShares SoldRule 10b5-1Current OwnershipDecrease In Ownership
Leslie IversenChairmanJan 260,000Yes13,500 shares + 7,277 options74.3%
Thomas AasenCFOJan 230,000Yes31,348 shares + 90,471 options19.8%
Laura BregeDirectorDec 1044,117Yes0 shares100%

There have been 134,117 shares sold by insiders during the last 30 days. All these shares were sold pursuant to a Rule 10b5-1 plan.

SEC Rule 10b5-1 is a regulation enacted by the United States Securities and Exchange Commission (SEC) in 2000. The SEC states that Rule 10b5-1 was enacted in order to resolve an unsettled issue over the definition of insider trading, which is prohibited by SEC Rule 10b-5. After Rule 10b5-1 was enacted, the SEC staff publicly took the position that canceling a planned trade made under the safe harbor does not constitute insider trading, even if the person was aware of the inside information when canceling the trade. This staff interpretation raises the possibility that executives can exploit this safe harbor by entering into 10b5-1 trading plans before they have inside information while retaining the option to later cancel those plans based on inside information.

For example, a CEO of a company could call a broker on January 1 and enter into a plan to sell a particular quantity of shares of his company's stock on March 1, find out terrible news about his company on February 1 that will not become public until April 1, and then go forward with the March 1 sale anyway, saving himself from losing money when the bad news becomes public. Under the terms of Rule 10b5-1(b) this is insider trading because the CEO "was aware" of the inside information when he made the trade. But he can assert an affirmative defense under Rule 10b5-1(c), because he planned the trade before he learned the inside information.

In general, it is a safer way for an insider to sell shares pursuant to a Rule 10b5-1 trading plan than without it.

Insider selling by calendar month

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

MonthInsider selling / sharesInsider buying / shares
January 201490,0000
December 201359,1170
November 201352,6920
October 201340,0000
September 2013248,4740
August 2013127,7710
July 201300

There have been 618,054 shares sold, and there have been zero shares purchased by insiders since July 2013.

Financials

Acadia reported the third-quarter financial results on November 6 with the following highlights:

Revenue$0.2 million
Net loss$10.7 million
Cash$196.2 million

Outlook

Acadia expects that its cash, cash equivalents and investment securities will be greater than $183 million at December 31, 2013.

Pipeline and upcoming milestones

Acadia's lead product candidate is pimavanserin, which is in Phase III development as a potential first-in-class treatment for Parkinson's disease psychosis.

(click to enlarge)

(Source: Acadia)

Acadia's upcoming milestones include the pimavanserin Parkinson's disease psychosis program NDA submission, which is anticipated near the end of 2014.

Competition

Acadia's competitors include AstraZeneca (AZN) with Seroquel, Eli Lilly (LLY) with Zyprexa, and Pfizer (PFE) with Xalatan. Here is a table comparing these companies.

CompanyACADAZNLLYPFE
Market Cap:2.30B73.75B55.20B197.80B
Employees:2651,70038,35078,400
Qtrly Rev Growth (yoy):-0.93-0.070.06-0.02
Revenue:1.49M26.15B23.26B56.25B
Gross Margin:N/A0.810.790.81
EBITDA:-32.89M9.90B7.26B24.62B
Operating Margin:-22.150.290.250.32
Net Income:-32.71M4.64B4.78B10.68B
EPS:-0.423.714.373.62
P/E:N/A15.8711.698.42
PEG (5 yr expected):-2.86-1.08-5.214.75
P/S:1,535.812.812.363.51

Acadia doesn't have any approved products yet.

Here is a table of these competitors' insider-trading activities this year.

CompanyInsider buying / sharesInsider selling / shares
AZNN/AN/A
LLY

0

122,646
PFE7581,268,368

Only Acadia has seen intensive insider selling during the last 30 days.

Conclusion

There have been three different insiders selling Acadia, and there have not been any insiders buying Acadia during the last 30 days. All three of these insiders decreased their holdings by more than 10%. Acadia has an insider ownership of 0.10%.

There are eight analyst buy ratings, one neutral rating, and zero sell ratings with an average price target of $25.25. Before entering short Acadia, 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 price targets, and the intensive insider-selling activity.

Source: Acadia Pharmaceuticals: 3 Different Insiders Have Sold Shares During The Last 30 Days