Biotech Values

[AlpineBV_Miller]

I'll note not all 10b5 plans are created equal. Some are hard sell plans, meaning when the date or price trigger is hit a prespecified number of shares are sold and the executive cannot cancel the sales.

At least half the plans we are seeing are "soft" plans (our word). When the trigger is hit, the insider has the OPTION to sell. In some cases, the optional part comes in the form of a range of shares they have to sell.

The SEC has apparently blessed these "soft" plans as compliant, but to me they are a violation of at least the spirit of the rule.

So when some exec tells us "don't worry about the sale, it was part of a programmed 10b-5" they are often surprised when we grill them further. Also interesting is the number of companies who won't tell you in advance whether their plans are hard or soft.

Since the Titan Pharma crookedness, we ask every company we cover about executive hedges, collars, and 10b-5 plans. Some pretty interesting conversations sometimes. For the record, only Titan and Discovery Labs admitted to the collars. With DSCO, it was actually a true collar where they couldn't profit from the downside and still had a portion of the downside risk. With Titan, they profited all the way down from $65 to $2.

Happily, most companies we speak with who did not have prohibitions against hedges and collars put them into place after we tell the story.

Still working on convincing them to convert soft 10b-5s to hard ones...