Healthcare And Technology Stocks Experiencing Heavy And Unusual Insider Selling In December

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 |  Includes: ABT, AET, AKRX, CIEN, DELL, FRX, FTNT, HPQ, IONS, NTAP, NVDA, RVBD
by: GuruFundPicks

Insiders bought and sold stock in their companies in over 6,000 transactions in December, as filed on SEC Forms 3, 4, and 5, including almost 2,500 buy transactions and another over 3,500 sell transactions. We mined through those over 6,000 insider transactions and present below the most notable stocks that were sold in the technology and healthcare sectors, notable based on the dollar amount sold, the number of insiders selling, based on whether the shares sold represent a significant portion of that insiders holding in the company, or based on whether the overall selling represents a strong pick-up based on historical selling in the stock (for more info on how to interpret insider trades, please refer to the end of this article):

Akron Inc. (NASDAQ:AKRX): AKRX develops diagnostic and therapeutic pharmaceutical products, hospital drugs, and injectable pharmaceuticals in specialty areas such as ophthalmology, rheumatology, anesthesia and antidotes, among others. Insiders currently hold 6.5 million shares or 7.3% of outstanding shares. In December, two insiders sold a total of 145,751 shares for $1.55 million. The majority of the shares (95,751) were sold by SVP of National Accounts John Sabat, and he held 29,137 shares after the sale.

Also, an additional 50,000 shares were sold by CFO Timothy Dick, who acquired those shares by exercising options, and he held 13,962 shares after the sale. Overall, insiders sold only an additional 28,469 shares during the past year (buying 9,000 shares), so the insider sale is significant given the size of the sales, the number of insiders selling, the fact that the sale represented a significant portion of each insiders holdings in the company, and in that the sales represent a pick-up from prior months.

AKRX shares currently trade at all-time highs, up over twelve-fold from the 2009 lows, and at a premium 24-25 forward P/E and 6.8 P/B compared to averages of 13.2 and 2.9 respectively for its peers in the generic drugs group. The insider selling while understandable given the huge run-up implies that at least some insiders are not as sanguine about the prospects going forward. The stock has gone virtually straight up since sub-$1 in mid-2009, and it would be reasonable for it to consolidate here.

Isis Pharmaceuticals (ISIS): ISIS is a leading genomics-based drug discovery and development company that develops treatments for cardiovascular, metabolic and neurodegenerative diseases and cancer using its antisense drug discovery platform. Insiders currently hold 2.7 million or 2.8% of the outstanding shares. In December, four insiders sold a total of 123,462 shares for $0.85 million.

The vast majority of the shares (81,100) were sold by CEO Stanley Crooke, with the shares acquired by exercising options, and the sale made pursuant to a 10b5-1 plan. Also, following the sale, CEO Crooke held 0.88 million shares in indirect holdings in a trust. The second largest seller was Director Lynne Parshall, who also acquired the shares by exercising options and made the sale pursuant to a 10b5-1 plan, and she held 1,985 shares after the completion of the sale. Overall, insiders sold only an additional 11,000 shares in the past year (buying none).

ISIS shares currently trade near the lows, down almost 30% in the past year. The company is currently working with its partner Genzyme on preparing its submission of a new drug application to the FDA seeking approval for KYNAMRO, its lead drug for the treatment of homozygous familial hypercholesterolemia that is now scheduled for the first quarter of 2012. Genzyme is a fully owned subsidiary of French pharmaceutical giant Sanofi (NYSE:SNY). Also, analysts have a mean target of $11 on the stock; and of the ten analysts that cover the stock, four rate it at buy/strong buy and the remaining six rate it at hold.

Forest Labs Inc. (NYSE:FRX): FRX develops, manufactures, and sells both branded and generic forms of ethical drug products which require a physician's prescription, as well as non-prescription pharmaceutical products that are sold over-the-counter (OTC). Its principal products include Lexapro for major depressive disorder, Namenda for Alzheimer's disease, Bystolic for hypertension, Savella for fibromyalgia, and Teflaro for community-acquired bacterial pneumonia. Insiders hold 3.1 million or 1.1% of outstanding shares. In December, three insiders sold a total of 38,898 shares for $1.1 million. This included CFO Perier Francis (10,000 shares), SVP of Sales Jerome Lynch (14,000 shares) and EVP Elaine Hochberg (14,898 shares), all being regular sales (i.e., not part of any 10b5-1 plans). Overall, insiders sold only an additional 15,621 during the remaining eleven months of the year (buying none).

FRX has been weak recently, down over 25% from the $40 highs in June, and it trades at 25-26 forward P/E and 1.5 P/B compared to averages of 31.8 and 6.2 respectively for its peers in the drug manufacturers group, while both revenue and earnings are projected to collapse from $4.50 billion and $3.65 in 2012 and $3.33 billion and $1.19 in 2013 as it faces intense competition from generics.

Abbott Laboratories (NYSE:ABT): ABT is a developer of pharmaceuticals, diagnostic systems, nutritional supplements and vascular, ophthalmic and eye care products. Insiders currently hold 6.4 million or 0.4% of outstanding shares. In December, ten insiders sold a total of 1.0 million shares for $56.8 million. The majority of the sales (675,674) were by Chairman & CEO Miles White, acquired by exercising options, and he held 1.73 million shares after the sale. Other sales (all by EVP's, SVP's and VP's) were relatively minor, with each of them selling between 10,000 and 75,000 shares, with at least some being a part of 10b5-1 plans. Overall, insiders sold only an additional 0.67 million shares in the remaining eleven months of the year.

ABT stock has been strong lately, approaching its all-time highs from early in the last decade; however, long-term it up over six-fold in the last 20 years. The company is a consistent grower, with annual earnings up every year recently even through the 2008/09 recession. It sports a healthy dividend yield of 3.5%, and trades at 11-12 forward P/E, at par with the 11.3 average for the group. Furthermore, earnings growth is projected at 9.7% annual rate to $5.03 in 2012. Also, while the stock approaches its 2007 highs in the $60 range, its earnings are 70%-80% higher than they were then. The stock based on its dividend yield, and earnings growth and stability, has the characteristics that a wide cadre of investors would find attractive.

Aetna Inc. (NYSE:AET): AET is a diversified U.S. health care benefits company offering a range of health insurance products and related services, including medical, dental, pharmacy, behavioral health, group life, and disability plans as well as medical management capabilities and Medicaid health care management. Insiders hold 1.1 million or 0.3% of outstanding shares. In December, two insiders sold a total of 202,290 shares for $8.7 million. Of these, CEO Mark Bertolini exercised options and sold the resulting 200,000 shares for $8.6 million.

Insider selling is uncommon at AET, and in fact, over the past year, insiders sold only an additional 92,826 shares (buying 2,575 shares total). AET shares have fared well in recent years, currently trading within striking distance of its 3-year highs, and up almost three-fold from the depths of the 2008-09 market pullback, powered higher by earnings growth. It trades at 8-9 forward P/E and 1.5 P/B compared to averages of 11.1 and 1.9 respectively for its peers in the managed care group.

Other major sales in the healthcare and technology sector in December included a $1.3 million sale by eight insiders (include the CEO Gary Smith and seven VP's & SVP's) at telecom network equipment provider Ciena Corp. (NASDAQ:CIEN); a $8.0 million sale by EVP Ajay Puri at 3D graphics processor designer and developer NVIDIA Corp. (NASDAQ:NVDA); a $3.2 million sale by three insiders (including CEO Ken Xie and two VP's) at Fortinet Inc. (NASDAQ:FTNT), a provider of network security appliances and unified threat management systems for enterprises, service provider and government entities worldwide; a $6.4 million sale by two insiders (EVP Vyomesh Joshi and SVP James Murrin) at Hewlett-Packard Co. (NYSE:HPQ); and a $7.9 million sale by Director Daniel Warmenhoven at integrated network storage and data management hardware manufacturer NetApp Inc. (NASDAQ:NTAP); a $9.1 million sale by three insiders (including the CEO, CFO and CTO) at wide-area network (WAN) optimization solutions provider Riverbed Technology Inc. (NASDAQ:RVBD); and a $1.2 million sale by two insiders at Dell Inc. (NASDAQ:DELL).

Credit: Fundamental data in this article were based on SEC filings, I-Metrix® by Edgar Online®, Zacks Investment Research, Thomson Reuters and Briefing.com. The information and data is believed to be accurate, but no guarantees or representations are made.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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