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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%.

Bluebird Bio (NASDAQ:BLUE) focuses on the development, manufacture, and marketing of therapies to treat various human diseases.

click to enlarge images

Insider selling during the last 30 days

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

NameTitleTrade DateShares SoldRule 10b5-1Current OwnershipDecrease In Ownership
Jeffrey WalshCOOJan 106,000Yes0 shares + 223,307 options2.6%
Nick LeschlyCEOJan 25,000Yes324,318 shares1.5%
David DavidsonCMODec 16-Jan 330,000Yes0 shares + 127,239 options19.1%
Linda BainVPDec 16-Jan 37,000Yes0 shares + 58,516 options10.7%
Mitchell FinerCSODec 1618,000Yes0 shares + 91,769 options16.4%

There have been 66,000 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 Bluebird's insider-trading activity by calendar month.

MonthInsider selling / sharesInsider buying / shares
January 201431,0000
December 201335,0000
November 201300
October 201300
September 201300
August 201300
July 201300
June 201300

There have been 66,000 shares sold, and there have been zero shares purchased by insiders since June 2013.

Financials

Bluebird reported the third-quarter financial results on November 14 with the following highlights:

Revenue$6.4 million
Net loss$6.1 million
Cash$216.8 million

Pipeline

Bluebird has clinical-stage programs in development for childhood cerebral adrenoleokodystrophy (CCALD), beta-thalassemia and sickle cell disease as well as a preclinical oncology program in the chimeric antigen receptor T cells field under a collaboration with Celgene (NASDAQ:CELG).

(Source: Bluebird)

Competition

Bluebird's competitors include Sangamo BioSciences (NASDAQ:SGMO), and GlaxoSmithKline (NYSE:GSK). Here is a table comparing these companies.

CompanyBLUESGMOGSK
Market Cap:503.13M822.52M127.17B
Employees:768499,488
Qtrly Rev Growth (yoy):74.120.16-0.00
Revenue:13.93M26.20M42.44B
Gross Margin:0.700.860.70
EBITDA:-25.08M-21.30M14.92B
Operating Margin:-1.85-0.840.26
Net Income:-20.96M-21.96M6.25B
EPS:-3.16-0.412.54
P/E:N/AN/A20.82
PEG (5 yr expected):1.51N/A1.59
P/S:36.1231.993.00

Bluebird doesn't have any approved products yet.

Here is a table of these competitors' insider-trading activities during the last 30 days.

CompanyInsider buying / sharesInsider selling / shares
SGMO080,000
GSK

N/A

N/A

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

Conclusion

There have been five different insiders selling Bluebird, and there have not been any insiders buying Bluebird during the last 30 days. Three of these five insiders decreased their holdings by more than 10%.

Before entering short Bluebird, 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: Bluebird Bio: 5 Different Insiders Have Sold Shares During The Last 30 Days