Biogen Idec Execs Accelerated Stock Sales

Biogen Idec(BIIB Quote) executives with pre-arranged stock trading programs saw accelerated sales of their company stock options and other restricted shares within days of an Oct. 12 announcement that the biotech firm would seek a buyer, according to an independent report analyzing insider stock sales that was obtained by TheStreet.com.

Biogen Idec shares surged as high as $84.75 from $69 in the days following the disclosure that the company was putting itself up for sale.

Within that time period, six Biogen Idec executives sold just under 351,000 shares of stock, the largest block of insider selling at the company since May, according to 3DAdvisors, an independent equity-research firm that examines and analyzes insider sales activity.

The 3DAdvisors report does not specify the profit made by these executives, but if the 351,000 shares were sold at $80 a share, for example, the executives would have grossed $28 million.

All six Biogen Idec executives had so-called 10b5-1 stock-trading plans in place, which are planned stock sales agreements that specify in advance the number of shares an executive can sell, or the timing of those sales, on a regular basis.

The Securities and Exchange Commission allowed for the creation of 10b5-1 plans in 2000 so that executives could be protected against accusations of selling stock based on confidential, or inside, information.

More recently, academic studies have shown that executives who sell stock through pre-arranged plans do better than those who do not. And allegations of abuse and manipulation of 10b5-1 plans by companies and their executives have prompted the SEC to re-examine the issue and consider tightening the rules.

Biogen Idec executives have not been accused of any wrongdoing in connection to their 10b5-1 plans. Biogen Idec spokeswoman Naomi Aoki says insider sales following the Oct. 12 announcement were likely triggered because the stock hit a prearranged price target.

Preplanned or not, the stock sales by Biogen Idec executives were well timed, because on Dec. 12, the company announced that it was remaining independent after failing to draw bidders for the company. The news sent Biogen Idec shares tumbling.

The 3DAdvisors report finds that this was not the first time that Biogen Idec executives with prearranged stock-sale plans have managed to sell shares after a rally in the stock.

The firm issued its report on Nov. 2. It was sent to institutional investor clients of the research firm. Based on insider selling and other factors, 3DAdvisors predicted that a sale of Biogen Idec was unlikely.

The firm identified five instances since May where insider selling immediately followed a rally in Biogen Idec's stock price. Four of these jumps in the stock price, including the Oct. 12 announcement, were started by Biogen Idec announcements.

The table below, from the 3DAdvisors report, lays out the key corporate announcements and the subsequent insider selling:

Source: 3DAdvisors

In total, an analysis of Biogen 10b5-1 sales this year found that 65% came within two days of bullish news announcements and 75% of the 1.14 million shares came within two weeks of the same announcements, according to 3DAdvisors.

Looking at Biogen Idec's insider sales activity, the 3DAdvisor report concluded, "We have not found 10b5-1 trade timing with stronger correlation to news-related rallies since the inception of the rule in 2000. Given this, the notion that these 10b5-1 trades are simply routine selling for diversification needs should be considered highly suspect."

Source: 3DAdvisors

Here is some recent selling by the following Biogen Idec insiders:

• Mark Wiggins, executive vice president, corporate and business development; on Oct. 15, Wiggins sold 90,000 shares, his largest sale of Biogen Idec stock since he became a registered insider in 2004. In all of 2007, Wiggins sold 99% of his Biogen stock available for sale under his trading plans.
• Hans Peter Hasler, executive vice president, global neurology; Hassler sold 11,000 shares under a trading plan in the first half of the year, but then he unloaded 174,000 shares, or 96% of his available holdings, between July 25 and Oct. 15. Hasler sold 108,750 shares, his largest block of stock, on Oct. 15, the day Biogen Idec shares soared following the announcement it was seeking a buyer for the company.
• Burt Adelman, executive vice president, portfolio strategy; Adelman sold 60,500 shares at $82 on Oct. 15.
• Lynn Schenk, director; on Oct. 15, Schenk sold 63,000 Biogen Idec shares, accounting for 61% of her holdings. This was only the second sale of Biogen Idec stock in the past 10 years. Her ownership is now at its lowest level since 1999.