Recent Form 4 filings with the U.S. Securities and Exchange Commission indicate that the management team of International Stem Cell Corporation (OTCQB: ISCO) is bullish on the company. Form 4 is a Statement of Changes of Beneficial Ownership of Securities which every officer, director or holder of 10 percent (insiders) must file to report the acquisition or disposition of a company’s non-derivative and derivative securities. Five Form 4s filed at the end of June this year report purchases of 239,534 shares. Things appear to be looking up at ISCO. Could it be the imminent start of clinical trials that has made insiders so sanguine?
The term ‘insider trading’ has come to mean the illegal practice of using information, not available to the public, to execute trades. However, it is neither immoral nor illegal for insiders to trade. So how can we tell when insiders are trading on private information? A lot depends on the circumstances. Sometimes it may be obvious; sometimes it is not. Therefore, to increase transparency, the SEC requires that share purchases by insiders be made public.
Previously, a Form 4 filing had to be made by the 10th day of the month following the actual transaction. Now, the Sarbanes-Oxley Act of 2002 mandates that a Form 4 must be filed electronically via EDGAR within two business days of each transaction. With regard to sales of shares by insiders, there may be further filing requirements, perhaps because share sales may signal adverse circumstances. A Form 144 must be filed by any insider (or outsider), who intends to sell more than 500 shares or $10,000 worth of restricted, unregistered securities within the next 90 days.
Share purchases by insiders, typically, signal good things ahead. Since insiders know more about their company, they can spot valuation anomalies in the market. Roger Martin, dean of the University of Toronto’s Rotman School of Management has said that, in mapping out an investment strategy, insider trading ‘is about the only thing I would pay attention to’. Prof. Martin is the co-author, with A.G. Lafley, of the best-selling Playing to Win: How Strategy Really Works that ‘outlines the strategic approach Lafley, in close partnership with… Martin, used to double P&G’s sales, quadruple its profits, and increase its market value by more than $100 billion’.
Backing that up is this Investopedia entry (http://dtn.fm/A3pAv):
‘Nejat Seyhun, a renowned professor and researcher in the field of insider trading at the University of Michigan found that when executives bought shares in their own companies, the stock tended to outperform the total market by 8.9% over the next 12 months. Conversely when they sold shares, the stock underperformed the market by 5.4%.’
Widespread share purchases by managements across the board are sure signs of a rising market. The Financial Times cites Ben Silverman, research director of InsiderScore, which tracks insider trades:
“… in the past 30 years, there has been no time when the market bottomed and rallied when it wasn’t preceded by a critical mass of insider buying”. As the saying goes: actions speak louder than words.
International Stem Cell Corporation recently published the results of a 12-month preclinical, non-human primate study. The data demonstrates the safety and efficacy of the company’s proprietary ISC-hpNSC® readily expandable neural stem cell derived treatment of Parkinson’s disease. The results of the study were published in the academic journal Cell Transplantation and end the preclinical stage of ISCO’s Parkinson’s disease program. The data provides further evidence that parthenogenetic neural stem cells can be effective in treating the symptoms of Parkinson’s disease and, along with the previously revealed safety data, formed the basis of ISCO’s application to the Australian regulatory authorities to move this program to the clinical stage.
The Phase I clinical study is a dose escalation safety and preliminary efficacy study of ISC-hpNSC®, intracranially transplanted into patients with moderate to severe Parkinson’s disease. The open-label, single center, uncontrolled clinical trial will evaluate three different dose regimens. A total of 12 participants with moderate to severe Parkinson’s disease will be treated. Following transplantation, the patients will be monitored for 12 months at specified intervals, to evaluate the safety and biologic activity of ISC-hpNSC®. PET scans will be performed at baseline, as part of the screening assessment, and at six and 12 months after surgical intervention. Clinical responses compared to baseline after the administration of ISC-hpNSC® will be evaluated using various neurological assessments such as the Unified Parkinson Disease Rating Scale (UPDRS) and the Hoehn and Yahr rating scales. The study will be performed at Royal Melbourne Hospital in Australia.
For more information, visit www.internationalstemcell.com
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