The healthcare sector has been the best-performing sector YTD with a gain of 21.3%.
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In this article, I will feature two healthcare companies that have seen intensive insider selling during the last 30 days. Intensive insider selling can be defined by the following three criteria:
The stock was sold by three or more insiders within one month.The stock was not purchased by any insiders in the month of intensive selling.At least two sellers decreased their holdings by more than 10%.1. Illumina (ILMN) develops, manufactures, and markets life science tools and integrated systems for the analysis of genetic variation and biological function in North America, Europe, Latin America, the Asia-Pacific, the Middle East, and South Africa.
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Insider selling by insider (last 30 days)
David Walt sold 15,000 shares on May 15 - June 12 pursuant to a 10b5-1 plan. David Walt currently holds 961,488 shares or 0.8% of the company. David Walt is one of the founders and has been a director and Chairman of Scientific Advisory Board since June 1998.Mostafa Ronaghi sold 24,000 shares on June 11 pursuant to a 10b5-1 plan. Mostafa Ronaghi currently holds 30,051 shares and 222,000 options or 0.2% of the company. Mostafa Ronaghi is Senior Vice President & Chief Technology Officer.Karin Eastham sold 10,000 shares on June 3 pursuant to a 10b5-1 plan. Karin Eastham currently holds 8,284 shares or less than 0.1% of the company. Karin Eastham has been a director since July 2004.Mark Lewis sold 13,000 shares on May 31 pursuant to a 10b5-1 plan. Mark Lewis currently holds 44,552 shares or less than 0.1% of the company. Mark Lewis is Senior Vice President and General Manager of Molecular Biology and ! PCR at Illumina.Michel Bouchard sold 20,517 shares on May 15-29 pursuant to a 10b5-1 plan. Michel Bouchard currently holds 29,961 shares or less than 0.1% of the company. Michel Bouchard is Vice President, Finance.Matthew Posard sold 2,836 shares on May 30 pursuant to a 10b5-1 plan. Matthew Posard currently holds 30,858 shares or less than 0.1% of the company. Matthew Posard is Senior Vice President and General Manager of Illumina's Translational & Consumer Genomics Business.Jay Flatley sold 24,000 shares on May 21-23 pursuant to a 10b5-1 plan. Jay Flatley currently holds 399,509 shares and 390,000 options or 0.6% of the company. Jay Flatley was appointed President and CEO of Illumina in 1999.Marc Stapley sold 2,843 shares on May 20 pursuant to a 10b5-1 plan. Marc Stapley currently holds 24,851 shares and 91,003 options or 0.1% of the company. Marc Stapley is Senior Vice President and Chief Financial Officer for Illumina.Nicholas Naclerio sold 2,000 shares on May 15 pursuant to a 10b5-1 plan. Nicholas Naclerio currently holds 24,559 shares and 181,000 options or 0.2% of the company. Nicholas Naclerio is Senior Vice President, Corporate Development.Insider selling by calendar month
Here is a table of Illumina's insider trading activity by calendar month.
| Month | Insider selling / shares | Insider buying / shares |
| June 2013 | 39,000 | 0 |
| May 2013 | 179,196 | 0 |
| April 2013 | 244,397 | 0 |
| March 2013 | 26,601 | 0 |
| February 2013 | 10,000 | 0 |
| January 2013 | 100,500 | 0 |
There have been 599,694 shares sold and zero shares purchased by the insiders this year.
Financials
The company reported the first-quarter financial results on April 22 with the following highlights:
| Revenue | $331.0 million |
| Net loss | $22.6 million |
| Cash | $1.1 billion |
| Debt | $860.7 million |
Outlook
For 2013 Illumina is projecting 15% total company revenue growth and non-GAAP earnings per fully diluted share of $1.55 to $1.62.
Competition
Illumina's competitors include Affymetrix (AFFX), Life Technologies Corporation (LIFE) and Luminex Corporation (LMNX). Here is a table comparing these companies.
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Illumina's P/S ratio is above the industry average, which could explain some of the insider selling.
My analysis
There have been nine different insiders selling the shares and there have not been any insiders buying the shares during the past 30 days. The company has an insider ownership of 1.52%. The stock is trading at a P/E ratio of 87.39 and a forward P/E ratio of 34.34. The company has a book value of $10.54 per share. The stock has a $61 price target from the Point and Figure chart. I believe there is an opportunity for a short entry with the $61 target price. I would place a stop loss at $75, which is the 52-week high. The three main reasons for the proposed short entry are relatively high P/S ratio, bearish Point and Figure chart and the intensive insider selling activity.
2. Alnylam Pharmaceuticals (ALNY), a biopharmaceutical company, engages in discovering, developing, and commercializing novel therapeutics based on RNA interference [RNAi].
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Insider selling by insider (last 30 days)
Akshay Vaishnaw sold 15,000 shares on June 11 pursuant to a Rule 10b5-1 trading plan. Akshay Vaishnaw currently holds 12,588 shares and 86,250 options or 0.2% of the com! pany. Aks! hay Vaishnaw is Executive Vice President and Chief Medical Officer.Laurence Reid sold 5,000 shares on May 28 pursuant to a Rule 10b5-1 trading plan. Laurence Reid currently holds 11,681 shares and 30,000 options or less than 0.1% of the company. Laurence Reid is Senior Vice President, Chief Business Officer.Barry Greene sold 22,822 shares on May 28 pursuant to a Rule 10b5-1 trading plan. Barry Greene currently holds 4,572 shares or less than 0.1% of the company. Barry Greene is President and Chief Operating Officer.Insider selling by calendar month
Here is a table of Alnylam's insider trading activity by calendar month.
| Month | Insider selling / shares | Insider buying / shares |
| June 2013 | 15,000 | 0 |
| May 2013 | 27,822 | 0 |
| April 2013 | 0 | 0 |
| March 2013 | 106,939 | 0 |
| February 2013 | 63,503 | 0 |
| January 2013 | 0 | 4,967 |
There have been 213,264 shares sold and 4,967 shares purchased by the insiders this year.
Financials
The company reported the first-quarter financial results on May 6 with the following highlights:
| Revenue | $18.6 million |
| Net loss | $9.0 million |
| Cash | $400.8 million |
Outlook
The company expects that its cash, cash equivalents and total marketable securities balance will be greater than $320 million at December 31, 2013.
Upcoming milestones
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Competition
Companies working on chemically synthesized siRNAs include Merck (MRK), through its subsidiary Sirna Therap! eutics, I! nc., Novartis (NVS), Takeda (TKPHF.PK), Kyowa Hakko Kirin, Marina Biotech, Inc., Arrowhead and its subsidiary, Calando, Quark, Silence Therapeutics plc, Tekmira (TKMR), Sylentis and Dicerna Pharmaceuticals, Inc.
My analysis
There have been three different insiders selling the shares and there have not been any insiders buying the shares during the past 30 days. The company has an insider ownership of 0.10% and the company has a book value of $5.01 per share. Before entering short this stock, I would like to get a bearish confirmation from the Point and Figure chart. The main reason for the proposed short entry is the intensive insider selling activity.
Disclosure: I have no positions in any stocks mentioned, but may initiate a short position in ILMN over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. (More...)
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