Showing exquisite timing, five major officers of
, including the chief executive, sold company stock near its peak six weeks before a partner pulled away from its cancer deal and the biotech shelved the drug.
Agouron has skidded since Tuesday, when it announced that it was axing its
drug for cancer because of unspectacular results in an interim look at an ongoing trial. The same day partner
, the U.S. division of the Swiss drug behemoth
, canceled its development deal with the La Jolla, Calif., biotech.
This came as no surprise to several short-sellers who had predicted for several months that Thymitaq's lack of efficacy rendered it not long for this world. Short-sellers have been piling into (and on) the once-soaring stock, believing that expectations for
, a fast-selling protease inhibitor for treating AIDS, have gotten out of hand.
Selling fever hit Agouron after the company reported strong fiscal first-quarter earnings on Oct. 7. And President and CEO Peter Johnson wasn't alone: The general counsel, the head of marketing and sales, the head of research and the head of drug development all sold off parts of their holdings.
The sheer number of major officers who sold raises eyebrows, though Agouron says the insider sales were handled appropriately. In a statement Wednesday, Agouron said it was "shocked" about the stock's steep drop after the Thymitaq announcement.
"We never planned to dump Thymitaq and we never looked at the interim data until Monday," says Donna Nichols, the head of investor relations. "It was a very hard decision to make" because it had benefits in cancer but the company decided to focus its resources on earlier-stage compounds with greater promise, she says.
Since hitting a 52-week high of 56 1/2 on Oct. 8, Agouron stock has fallen 48% to close Thursday at 29 1/8, including a 22% drop Tuesday. Once up 59% this year, the stock is now
13% for the year.
In mid-October, Johnson exercised options and sold 125,000 shares, which amounted to 14% of his stake, leaving 874,000 shares and options. Johnson sold at $52 a share between Oct. 15 and 21.
Johnson's sale dwarfs any of his previous ones. He last sold stock -- a modest 15,000 shares -- in April and before that had only unloaded in "dribs and drabs," says Joy Schmitt, a spokeswoman for the biotech.
Agouron has a policy that prevents trading around material events, but Nichols would not comment on when the window opens and for how long. "We don't give that out. It varies. We are extremely cautious about it."
As for Johnson's sales, she says, "That was the period of time when the window was open. He could have sold more shares. He has not done much selling."
"Peter has been with the company many years," says Schmitt. "He wanted to diversify his financial holdings as the company reached a critical corporate milestone" of profitability. "It was the same rationale for the others," she adds.
The other officers' sales were more modest:
Barry Quart, the head of drug development, sold 8,000 shares on Oct. 21 at 52 1/8, and now has 227,000 shares and options remaining.
Gary Friedman, the general counsel, registered to sell 50,000 shares and filed that he sold 20,000 between 52 1/8 and 52 1/2 on Oct. 21 and 22, leaving him a balance of 333,000.
Bill Denby, the head of marketing and sales, sold 8,000 shares between Oct. 10 and 14, and now has options on 72,600 shares.
Mike Varney, the head of research, sold 10,000 shares on Oct. 10 at 51.9062 and has 110,600 shares and options remaining.