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Trader toolkit: Analyzing SEC Form 4 in biotech stocks

Kyle DennisKyle Dennis ·

Stocks listed on national exchanges follow stringent requirements and must report specific data directly to the Securities and Exchange Commission. Failing to meet those requirements runs the risk of being delisted, having the stock removed from the New York Stock Exchange or the NASDAQ, for example, to an over-the-counter (OTC) status which mandates less disclosure.

One of the filings that is most important is the SEC Form 4, which insiders and directors use to disclose whether they acquired or disposed of any securities related to the company.

Form 4 transactions can be an indication of where the stock price may be headed. For example, if you notice a trend of insider buying on a stock, it may be a sign that the company officers expect good things to happen; conversely, if they are selling, it may be ahead of trouble and a corresponding decline in price.

Here’s an example of a real SEC Form 4 filed by a CEO.


In this filing, Ludwig Hantson, the chief executive officer at Alexion Pharmaceuticals Inc. (ALXN) bought 10,000 shares of company stock at $116.72 per share, a total transaction worth more than $1.1 million.

This purchase was also ahead of a catalyst event, which was an indication that there could be a potential pop in the stock; the CEO’s purchase would be viewed in the market as if he is expecting good news. The A on this Form 4 stands for acquisition here, next to the amount of shares and the price. If there is a D in that box, it means that the insider disposed of, or sold, shares.

Here’s a snippet from another Form 4 covering an Alexion insider purchase in anticipation of positive data from the catalyst event.


Here’s what happened to the stock after the insider acquisitions.

Source: TradingView

The bottom line

SEC Form 4 filings and insider transactions are potential indicators of where a stock may be headed. It’s public information, with filings you can read to gain insight into what the corporate brass thinks about the direction of the stock.


  Keith Kern has been a full-time day-trader for 17 years; he moderates the Lightning Alerts chatroom at BiotechBreakouts.com.

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