Gilead Sciences: 5 Different Insiders Have Sold Shares This Year

Feb.13.14 | About: Gilead Sciences, (GILD)

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%.

Gilead Sciences (NASDAQ:GILD) discovers, develops, and commercializes human therapeutics for the treatment of life threatening diseases in North America, Europe, and Asia.

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Insider selling during the last 30 days

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

Name Title Trade Date Shares Sold Rule 10b5-1 Current Ownership Decrease In Ownership
Paul Carter EVP Feb 10 16,728 Yes 15,133 shares + 24,632 options 29.6%
John Martin CEO Feb 3 140,625 Yes 4,256,267 shares + 1,406,258 options 2.4%
Gregg Alton EVP Jan 21-Feb 3 153,000 Yes 85,516 shares + 58,367 options 51.5%
Kevin Young EVP Jan 23 100,000 Yes

216,418 shares + 107,508 options

23.6%
Norbert Bischofberger CSO Jan 14 90,000 Yes 0 shares + 90,000 options 50.0%
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There have been 500,353 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 Gilead's insider-trading activity by calendar month.

Month Insider selling / shares Insider buying / shares
February 2014 190,353 0
January 2014 599,225 0
December 2013 477,242 0
November 2013 1,676,793 0
October 2013 477,242 0
September 2013 537,842 0
August 2013 570,962 0
July 2013 713,842 0
June 2013 422,242 0
May 2013 312,242 0
April 2013 326,210 0
March 2013 416,346 0
February 2013 312,242 10,000
January 2013 267,671 0
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There have been 7,300,454 shares sold, and there have been 10,000 shares purchased by insiders since January 2013.

Financials

Gilead reported the full-year 2013 financial results on February 4 with the following highlights:

Revenue $11.2 billion
Net income $3.1 billion
Cash $2.6 billion
Debt $6.7 billion
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(Source: Earnings presentation)

Outlook

Gilead's guidance for the full-year 2014 is as follows:

Net product sales $11,300 - $11,500 million
Non-GAAP product gross margin 75%-77%
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(Source: Earnings presentation)

Upcoming milestones

Gilead has the following upcoming milestones in 2014.

HIV

(Source: Earnings presentation)

Liver Disease

(Source: Earnings presentation)

Oncology/Inflammation

(Source: Earnings presentation)

Cardiovascular

(Source: Earnings presentation)

Competition

Gilead's competitors include GlaxoSmithKline (NYSE:GSK), Pfizer (NYSE:PFE), and Roche Holding AG (OTCQX:RHHBY). Here is a table comparing these companies.

Company GILD GSK PFE RHHBY
Market Cap: 125.85B 131.25B 205.45B 242.01B
Employees: N/A N/A N/A 85,080
Qtrly Rev Growth (yoy): 0.21 0.02 N/A 0.01
Revenue: 11.20B 42.60B 51.58B 52.08B
Gross Margin: 0.57 0.70 0.82 0.75
EBITDA: 4.88B 13.45B 23.11B 20.03B
Operating Margin: 0.41 0.26 0.33 0.34
Net Income: 3.07B 8.74B 11.34B 11.96B
EPS: 1.81 3.55 3.20 3.46
P/E: 45.29 15.41 9.91 20.57
PEG (5 yr expected): 0.64 2.00 6.60 2.45
P/S: 11.21 3.05 4.01 4.68
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Gilead has the highest P/S ratio among these four companies.

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

Company Insider buying / shares Insider selling / shares
GSK N/A N/A
PFE 0 160,000
RHHBY N/A N/A
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Only Gilead has seen intensive insider selling during the last 30 days.

Conclusion

There have been five different insiders selling Gilead, and there have not been any insiders buying Gilead during the last 30 days. Four of these five insiders decreased their holdings by more than 10%. Gilead has an insider ownership of 0.40%.

Gilead has a $69 price target from the Point and Figure chart. I believe there is an opportunity for a short entry with the $69 price target. I would place a stop loss at $85, which is the all-time high. The three main reasons for the proposed short entry are bearish Point and Figure chart, relatively high P/S ratio, and the intensive insider-selling activity.

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Disclosure: I have no positions in any stocks mentioned, but may initiate a short position in GILD over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.