In this article, I will feature one healthcare stock that has seen intensive insider selling during the last 30 days. Intensive insider selling can be defined by the following three criteria:
- The stock was sold by three or more insiders within one month.
- The stock was not purchased by any insiders in the month of intensive selling.
- At least two sellers decreased their holdings by more than 10%.
Intercept Pharmaceuticals (ICPT) focuses on the development and commercialization of novel therapeutics to treat chronic liver diseases utilizing its proprietary bile acid chemistry.
Insider selling during the last 30 days
Here is a table of Intercept's insider-trading activity during the last 30 days by insider.
|Name||Title||Trade Date||Shares Sold||Rule 10b5-1||Current Ownership||Decrease In Ownership|
|Srinivas Akkaraju||Director||Jan 16||3,250||Yes||2,916 shares + 8,749 options||21.8%|
|Barbara Duncan||CFO||Jan 15||5,625||Yes||10,708 shares + 16,875 options||16.9%|
|Mark Pruzanski||CEO||Jan 16||10,000||Yes||430,298 shares + 240,960 options||1.5%|
|David Shapiro||CMO||Jan 8||4,928||Yes||8,663 shares + 98,339 options||4.4%|
|Luciano Adorini||CSO||Jan 7||1,634||Yes||6,392 shares + 8,000 options||10.2%|
|Lorenzo Tallarigo||Director||Jan 7||1,839||Yes||5,940,530 shares||0.03%|
There have been 27,276 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 Intercept's insider-trading activity by calendar month.
|Month||Insider selling / shares||Insider buying / shares|
There have been 2,012,787 shares sold, and there have been zero shares purchased by insiders since January 2013.
Intercept reported the third-quarter financial results on November 14 with the following highlights:
|Net loss||$6.2 million|
Based upon currently expected level of operating expenditures, Intercept believes that it will be able to fund its operations through early 2016.
On January 9, Intercept announced that the FLINT trial of obeticholic acid (OCA) for the treatment of nonalcoholic steatohepatitis had been stopped early for efficacy based on a planned interim analysis showing that the primary endpoint of the trial had been met.
Pipeline and upcoming milestones
Intercept's product candidates have the potential to treat orphan and more prevalent liver and intestinal diseases for which there currently are limited therapeutic solutions.
(Source: January presentation)
Intercept has the following upcoming milestones:
(Source: January presentation)
Intercept doesn't have any approved products yet.
Here is a table of these competitors' insider-trading activities during the last 12 months.
|Company||Insider buying / shares||Insider selling / shares|
Only Intercept has seen intensive insider selling during the last 30 days.
There have been six different insiders selling Intercept, and there have not been any insiders buying Intercept during the last 30 days. Three of these six insiders decreased their holdings by more than 10%. Intercept has an insider ownership of 33.10%.
Before going short Intercept, 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.