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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%.

Biogen Idec (NASDAQ:BIIB) discovers, develops, manufactures, and markets therapies for the treatment of neurodegenerative diseases, hemophilia, and autoimmune disorders in the United States and internationally.

(click to enlarge)

Insider selling during the last 30 days

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

NameTitleTrade DateShares SoldRule 10b5-1Current OwnershipDecrease In Ownership
Lynn SchenkDirectorJan 151,000Yes6,425 shares13.5%
William YoungDirectorJan 815,000Yes18,509 shares44.8%
Robert PangiaDirectorJan 66,250Yes

14,003 shares + 6,250 options

23.6%
Stephen SherwinDirectorJan 25,500Yes3,960 shares + 16,675 options21.0%

There have been 27,750 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 Biogen Idec's insider-trading activity by calendar month.

MonthInsider selling / sharesInsider buying / shares
January 201427,7500
December 20131,4390
November 20137,2390
October 201318,2690
September 2013147,7150
August 20136,6070
July 20132,2390
June 201323,3630
May 201383,4480
April 201325,2100
March 201365,1530
February 201314,0980
January 201300

There have been 422,530 shares sold, and there have been zero shares purchased by insiders since January 2013.

Financials

Biogen Idec reported the third-quarter financial results on October 28 with the following highlights:

Revenue$1.8 billion
GAAP net income$487.6 million
Cash$1.0 billion
Debt$698.3 million

(Source: Earnings presentation)

Outlook

Biogen Idec's full-year 2013 financial guidance is as follows:

Revenue growth23% to 25%
Non-GAAP EPS$8.65-$8.85
GAAP EPS$7.50-$7.70

(Source: Earnings presentation)

Pipeline and upcoming milestones

Biogen Idec's approved products include Tecfidera, Tysabri, Avonex, Rituxan, and Fampyra. Biogen Idec has several product candidates in the pipeline.

(click to enlarge)

(Source: Earnings presentation)

Biogen Idec's upcoming late stage pipeline events include the following.

(click to enlarge)

(Source: Earnings presentation)

Competition

Biogen Idec's competitors include Teva Pharmaceutical Industries (NYSE:TEVA), GlaxoSmithKline (NYSE:GSK), and Pfizer (NYSE:PFE). Here is a table comparing these companies.

CompanyBIIBTEVAGSKPFE
Market Cap:69.45B36.80B129.29B202.01B
Employees:5,95045,94899,48878,400
Qtrly Rev Growth (yoy):0.32-0.01-0.00-0.02
Revenue:6.38B20.05B42.44B56.25B
Gross Margin:0.890.530.700.81
EBITDA:2.73B5.67B14.92B24.62B
Operating Margin:0.360.200.260.32
Net Income:1.70B419.00M6.25B10.68B
EPS:7.120.492.543.62
P/E:41.3089.4321.178.60
PEG (5 yr expected):1.641.091.564.77
P/S:10.981.853.033.59

Biogen Idec has the highest P/S ratio among these four companies.

Here is a table of these competitors' insider-trading activities during the last 12 months.

CompanyInsider buying / sharesInsider selling / shares
GSKN/AN/A
PFE

0

1,428,368
TEVAN/AN/A

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

Conclusion

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

Before entering short Biogen Idec, I would like to get a bearish confirmation from the Point and Figure chart. The two main reasons for the proposed short entry are relatively high P/S ratio, and the intensive insider-selling activity.

Source: Biogen Idec: 4 Different Insiders Have Sold Shares This Year