One would think, in the same time that Martha Stewart sat in the big house (only to be released to the confines of her bigger house) on a conviction for acts surrounding illicit trades on ImClone (Nasdaq: IMCL ) , that people with inside knowledge at biotech companies would have understood the downside of acting on -- or more to the point, near -- inside information.
Thomas J. Bucknum, executive vice president and general counsel for Biogen IDEC (Nasdaq: BIIB ) , resigned yesterday amid a probe by regulators into an extremely well-timed stock sale.
Unless you've been living under a rock, you've certainly seen the massive drop in Biogen IDEC and Elan (NYSE: ELN ) stock after the companies pulled multiple sclerosis drug Tysabri from the market following the death of one patient from a rare but deadly brain disorder called progressive multifocal leukoencephalopathy (PML), with another patient suspected (since confirmed) of having the same. Biogen and Elan informed the Food and Drug Administration on Feb. 18 and then made the public announcement to pull the drug on Feb. 25, causing both companies' shares to submarine.
Coincidentally enough, on Feb. 18, Bucknum exercised options on about $6 million worth, or 89,700, Biogen IDEC shares, and immediately sold them. The transaction netted Bucknum a profit of more than $2 million. Bucknum denied any wrongdoing. He said that he was resigning to keep from becoming "a distraction to the business of Biogen."
In his role, Bucknum was considered senior management. The doctor who treated the first PML patient said in an interview that he had notified Biogen IDEC and Elan immediately after the second patient had come into the hospital with PML on Feb. 7. This means that many at the company may have known the potential for problems before they informed the FDA.
That's all conjecture. But the timing of the sale of such a large stake -- which, according to the Form 4 at the Securities and Exchange Commission, represented nine times the amount of shares Bucknum retains -- is suspicious. Biogen IDEC failed miserably to have any procedures put into place to lock down the fort in times of trouble. And that, to paraphrase Martha, is a bad thing.
See also Charly Travers' "After the Crash, Is Biogen IDEC a Buy?" or his "Elan and Biogen File for Approval."
Bill Mann owns shares of Elan. His full list of holdings can be found in his profile.