Analyzing Thursday's Noteworthy Insider Buys And Sells In Healthcare And Tech Sectors

by: GuruFundPicks

Insiders reported on Thursday that they bought and sold stock in over 350 separate transactions in over 170 different companies. These transactions have to be reported within two days of the trade, so the transactions occurred sometime this week. We culled through these 350 or so insider buys and sells (based on SEC Forms 3, 4, and 5 filings), as part of our daily and weekly coverage of insider trades, and present here the most notable trades reported on Thursday in the healthcare and technology sectors; notable based on the dollar amount sold, the number of insiders selling, and based on whether the overall buying or selling represents a strong pick-up based on historical buying and selling in the stock (for more info on how to interpret insider trades, please refer to the end of this article):

Gilead Sciences Inc. (NASDAQ:GILD): Gilead is a developer of therapeutics to treat viral, fungal, respiratory and cardiovascular diseases. On Thursday, four insiders filed SEC Form 4 indicating that they sold a total of 212,450 shares for $11.7 million. Of these, the majority of the sales were reported on the Form 4 filed by Chairman & CEO John Martin, indicating that he exercised options and sold the resulting 145,450 shares, pursuant to a 10b5-1 plan, ending with 1.95 million shares after the sale. The other sellers included Director Etienne Davignon (12,000 shares), SVP Kristen Metza (30,000 shares), and CFO Robin Washington (25,000 shares), with some most of the shares sold by these insiders also resulting from the exercise of options, and the shares sold by Mr. Washington being pursuant to a 10b5-1 plan. In comparison, GILD insiders sold a total of 1.4 million shares in the past year.

GILD last week reported new preliminary data on its lead hepatitis C drug that were encouraging, with the company disclosing that all genotype 1 hepatitis C patients treated with the experimental drug and ribavirin had no detectable signs of the virus after four weeks of the treatment. The stock is up almost 10% since the news came out on Friday (or almost $4 billion in market-cap), and is up almost 30% YTD; even with the huge run-up, its shares still trade at a discount 12 forward P/E, and at 5.9 P/B, compared to averages of 22.2 and 11.3 for its peers in the biotech group.

Medivation Inc. (NASDAQ:MDVN): MDVN develops novel small molecule drugs for the treatment of prostate cancer, Alzheimer's disease and Huntington's disease. On Thursday, three insiders filed SEC Forms 4 indicating that they sold a total of 220,000 shares for $15.6 million, with about a quarter of those shares sold resulting from the exercise of options. The majority, 100,000 shares each, were sold by CEO David Hung and CFO Clarence Machado, with the remaining 20,000 shares sold by Director Kim Blickenstaff. In comparison, MDVN insiders sold 1.0 million shares in the past year.

MDVN shares have been among the biotech group's best performers lately, up over four-fold in the rally that began last November. The shares have risen on the back of positive results on its late-stage prostate cancer drug MDV3100 that last week was reported as having met all efficacy endpoints in its phase 3 AFFIRM trial; the shares are also up based on the possibility of a take-out by partner Astellas Pharma (OTCPK:ALPMF).

Merck & Co. (NYSE:MRK): MRK is a research-driven global pharmaceutical company engaged in developing prescription drugs to treat asthma, osteoporosis, cardiovascular, metabolic and other disorders. It also develops vaccines, biological therapies, animal health, and consumer products. On Thursday, EVP Willie Deese filed SEC Form 4 indicating that he exercised options and sold the resulting 42,466 shares for $1.6 million, ending with 78,750 shares in direct and 627 shares in indirect holdings after the sale (not including derivative securities). In comparison, MRK insiders sold 0.17 million shares in the past year.

MRK just last week reported a mixed Q4, beating earnings and missing on revenues. Its shares have generally fared poorly since their peak in late-2000 at $96, and while there are still looming concerns over patent expirations, which are expected to continue pressuring the top-line over the next few years, valuation seems to have finally caught up. While the stock has been stuck in a trading range, with current prices at the lower end of that range, earnings have continued to rise in recent years, going up from $2.61 in 2004 to a projected $3.81 in 2012 at an average annual growth rate of 4.9%. The stock however is trading at bottom-range valuation at 10 forward P/E and 2.1 P/B compared to the averages of 11.3 and 4.2 for the big pharmaceuticals group. Besides, MRK also offers an attractive dividend yield of 4.4%, well above the 3.3% average for the group.

Netlist Inc. (NASDAQ:NLST): NLST manufactures DRAM ICs, NAND flash memory components, ASICs and other components assembled on PCBs for the data center, high-performance computing and communications markets. On Thursday, CFO Gail Sasaki filed SEC Form 4 indicating that she exercised options and sold the resulting 64,468 shares, and an additional 3,750 shares, for a total of 67,968 shares for $0.28 million, ending with 9,375 shares (not including derivative securities). In comparison, insiders sold only an additional 110,000 shares in the past year. NLST stock currently incurs losses, and it trades at 5.8 P/B and 1.9 PSR compared to averages of 2.3 and 1.5 for its peers in the storage computer storage devices group.

On top of these, some additional large insider sales on Thursday included a $3.1 million sale by Director Lydia Marshall at hard disk drive manufacturer Seagate Technology (NASDAQ:STX); and a 66.4 million sale by 10% owner and co-founder Donald Yonce at Solarwinds Inc. (NYSE:SWI), a developer and marketer of network, applications, and storage management software. Also, insiders bought shares on Thursday in semiconductor manufacturer Texas Instruments (NYSE:TXN), with Director Christine Todd Whitman (also the former Governor of New Jersey), that she purchased 1,000 shares for $33,538; insider buying is rare at TXN, with the last insider purchase (of 1,000 shares) in early-to-mid-2010, almost two years ago. Also, as a note, on Thursday, Director Ruth Simmons at TXN also filed SEC Form 4 indicating that she sold 10,000 shares for $0.33 million; however, it is not considered as significant as insiders sold over 2.7 million shares in the past year.

Credit: Fundamental data in this article were based on SEC filings, Zacks Investment Research, Thomson Reuters and The information and data is believed to be accurate, but no guarantees or representations are made.

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