Inside Track: Numerous Biotechnology Executives Purchase Shares of Their Ailing Stocks
By DANIELLE SESSA Staff Reporter of THE WALL STREET JOURNAL
Some executives at biotechnology companies, taking their own medicine, are snapping up shares of their ailing stocks. Since late last year, ImClone Systems Inc., Cell Therapeutics Inc., Gene Logic Inc. and Organogenesis Inc. have all seen their insiders dig into their pockets and buy company stock. The sizes of the purchases aren't earthshaking. And the executives certainly have bought shares of their companies before. But the scope of the companies and the number of insiders buying are notable, leading some analysts to suggest that investors could consider cautiously nibbling themselves.
"I do think it's a sign that there [are] good things coming," said Rachel Leheny, an analyst at Warburg Dillon Read, though she doesn't expect "massive amounts of money coming into the group." Still, in light of the recent merger talks between Warner-Lambert Co. and Agouron Pharmaceuticals Inc., some analysts suggest downtrodden biotechnology firms could be potential takeover targets. "There appears to be a buying trend developing among insiders at some of the smaller, more beaten-down biotech stocks," said Paul Elliot, research analyst at First Call-Investnet, a Rockville, Md., concern that monitors insider-trading activity. "It's interesting to see insiders buying," Mr. Elliot added. "Any small biotech company with a good pipeline could be a good target" for a potential takeover.
In the past, the shares of some biotechnology stocks have taken off after insider purchases. That's what happened at Pathogenesis Corp. and Scios Inc., where the stocks rose shortly after executive purchases. Several insiders bought shares of Pathogenesis during the summer when the stock was trading around $26. The shares ended 1998 at $58. In the most recent round of buying, Cell Therapeutics, a Seattle cancer and cancer-related drug developer, had the most executives purchasing shares. Seven insiders bought 116,520 shares from Nov. 18 to Dec. 14 at $3 to $3.50 per share, according to First Call-Investnet.
The top buyers included Chief Executive Officer and President James Bianco, who scooped up 29,630 shares, and vice president Robert Lewis, who bought 22,000 shares. Since the company went public only in March 1997, there is little history to judge the insider activity. But Mr. Elliot of First Call-Investnet calls the purchases "aggressive" because of the high number of executives buying at the same time. Mr. Bianco attributes the company's most recent round of buying to the advanced development of a cancer-treatment product and closing of the window period that allows executives to purchase stock. This year "will be a breakout year for the company and the stock and we saw it would be the best investment we could make," he said.
Three insiders at Gene Logic snatched up 160,000 shares from Nov. 17 to Dec. 24. Of those, Chairman Alan Walton bought 125,000 shares at $3.94 to $4.13. Insiders initially bought in October when the stock hit a low of $3, and have continued to buy as the stock has come back up. The Gaithersburg, Md.-based company distributes gene information to pharmaceutical companies. A Gene Logic spokesman said the firm's executives believed "it was a good investment."
Four executives at ImClone bought a more modest 49,603 shares between Oct. 2 to Dec. 29. Director David Kies led the way, buying 31,603 shares. Mr. Elliot was particularly impressed by the consistency of Mr. Kies's purchases. Mr. Kies exercised options to buy stock and then bought shares on the open market when the stock price fell below the options price, Mr. Elliot said. "Some might say he was wrong, but his persistency impressed us -- it shows a sign of confidence," he added.
Organogenesis insiders bought 32,000 shares between Sept. 2 and Dec. 17. The majority of the total was picked up by the director, Albert Erani, who bought 20,000 shares at $11.50. Five other executives bought smaller chunks of 500 and 1,000 shares. The tissue-engineering company, based in Canton, Mass., makes skin-like tissue to cover ulcers and open wounds. Evan Sturza at Sturza's Medical Research isn't particularly impressed by the purchases at Organogenesis. He calls the buying "window dressing" and said "if they stuck up and bought 20,000 shares, I'd be more impressed, but 500 shares doesn't do much to me." But Organogenesis chief strategic officer Alan Tuck, who bought 1,000 shares, contends "the insider buying is a reflection that things are going right." |
