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TheStreet Open House

Vivus Insiders Sell Stock Ahead of Crucial FDA Approval Decision

Stock quotes in this article: VVUS, ARNA

MOUNTAIN VIEW, Calif. ( TheStreet) --Three Vivus (VVUS) executives sold company stock valued at $12.5 million since the start of June even though U.S. regulators are expected to make an approval decision on weight-loss pill Qnexa next week.

Insider sales ahead of major FDA drug approvals decisions should always trigger alarm bells. For Vivus, the worry is that insiders -- CEO Leland Wilson, President Peter Tam and Chief Commercial Officer Michael Miller -- are selling stock now because they know or suspect Qnexa isn't going to be approved on July 17, as most investors expect it to be. This is the doomsday scenario being spread by shareholders of Arena Pharmaceuticals (ARNA), Vivus' rival in the ever-expanding weight-loss pill stock bubble. What's bad for Vivus is good for Arena, naturally.

The truth is likely less sinister. The Vivus executives have been selling stock under so-called 10b5-1 trading plans that are supposed to provide legal cover from allegations of insider trading. Unless someone at Vivus has a kamikaze-like death wish, it's more than likely that these recent stock sales are unrelated to any material, non-public knowledge about FDA's handling of the Qnexa review.

Still, it's totally legitimate for Vivus investors lacking "insider status" to look at the prices at which executives sold their shares and question whether that should set a price ceiling, even if Qnexa is approved next week.

Wilson, Tam and Miller were perfectly content to sell millions of dollars in company stock at prices ranging from $25 per share to $28 per share, according to regulatory filings. Stocks sale under 10b5-1 plans are scheduled in advance but then, many of these plans allow executives to cancel stock sales under certain conditions. Wilson, Tam and Miller apparently believed that Vivus at $25-28 per share was a good time to sell, so isn't that a signal for outside investors to also unload some stock at these same prices?

Vivus shares are up 2 cents to $28.53 in early Monday trading.

Here's a breakdown of the recent Vivus insider sales, most of which involved the exercising of options followed by immediate stock sales:

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