PARS post-mortem:
>>I'll be vastly more hesitant in the future about rationalizing massive insider selling, and a BOD with virtually no ownership stake. In the luxury of hindsight, these were red flags the size of Wyoming.<<
The size of Montana, perhaps..
I don’t read the Yahoo PARS board, but this has been a big topic on the COR board in the past few days. Some posters there seem to have an inkling of understanding about this matter, but they stop short of connecting the dots. Let me try to do that.
Sponsoring companies often have access to the clinical results of a blinded trial as long as the data remain blinded, i.e., as long as there is no indication of which patients were in the active-drug arm and which were in the control arm. I do not know if PARS’ executives had access to the blinded TBI data prior to the insider selling, but even such a management apologist as Dr. Tracy (a.k.a. ‘NeuroInvest’) concedes, in a post on the COR board, that they might have.
With only the blinded data in hand, it is nearly impossible to know if a trial succeeded. However –and this is the crux of the matter—it can be relatively easy to know from only the blinded data that a trial probably failed.
To take a hypothetical case for the sake of illustration, consider the data set where every patient had an identical clinical outcome according to the primary efficacy endpoint. Then, even though the data are blinded, you would know that the drug produced absolutely no benefit relative to placebo.
In a real-world variation on the above, you might see blinded data where there is a dispersion of clinical outcomes, but not as much dispersion as was expected. This would, of course, be a negative signal, and the strength of the signal would depend on the degree to which dispersion fell short of expectations.
If multiple insiders sell shares around the time that clinical data are mature, although still in blinded form, this is a strong signal that the data will not be stellar. Under these circumstances, it is eminently reasonable for ordinary shareholders to follow suit by selling their own shares.
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