Is It All Over at Genentech?

After playing the share price masterfully, Genentech insiders are signaling the end of the salad days.
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From the "it pays to be an insider" file:

Most agree that

Roche Holdings'

recent handling of



has been nothing short of masterful. For those who missed it: In June, Roche, having already established a majority position in Genentech back in 1990, announced plans to acquire the remaining 33% still outstanding for $3.75 billion, or $82.50 per share.

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The very next month, Roche offered back to the public 17% of the company at $97 per share, thus raising $2.1 billion. Finally, having convinced the Street that Genentech should be valued on cash earnings per share rather than reported earnings, Roche announced plans to reissue an additional 20% in October at a rousing $143.50 per share. By so doing, Roche re-established its holdings at 66% and in the process raked in another $2.87 billion. Not bad for a few months' work.

How did Genentech insiders fare? Not too bad from the looks of it. And some apparently aren't waiting to cash in. From Oct. 21 through Nov. 5, four high-level Genentech officers filed intentions to sell a combined 346,000 shares at indicated prices ranging from $70.50 to $83.56 per share (values adjusted to reflect a recent 2-for-1 stock split). For the record, that's nearly $60 million in stock at prices 75% higher than the July IPO price. Among those signaling their intentions to sell: Chairman and CEO Arthur Levinson, CFO Louis Lavigne and Senior VP of Research Dennis Henner. Even recently resigned COO William Young made out, selling more than 450,000 shares for more than $32 million.

At last, a deal that works for everyone. Everyone, that is, except the little guy who forked over his shares back in June and missed out on the meteoric rise that followed.

The market has soared on little news. Breadth remains poor and valuations are extended. But at least some investors are taking heart from a slowing in the pace of insider selling, which in the past has signaled a green light for the overall market's direction.

That would be true at any other time, but the fact is that insider selling almost always slows down at year-end. The reason is simple: tax planning. What tax adviser wants to be suddenly faced with thousands, or even millions, in capital gains -- and only a few weeks to work his magic? So, at least for the next few weeks, investors seeking clues to the market's next turn will have to look elsewhere for guidance -- unless, of course, they pull a sudden about-face.

Bob Gabele has been tracking and analyzing insider trading since 1978, most recently for First Call/Thomson Financial. This column is not meant as investment advice; it is instead meant to provide insight into the methods of insider trading. At time of publication, Gabele held no position in any of the companies discussed in this column, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Gabele appreciates your feedback at