If insiders at a company are selling their shares, it can pay to approach the stock with caution. Insider sales can be a signal that the stock is overvalued or that the outlook for the company is deteriorating.
In this report, we are going to highlight some bearish insider sales at Sedana Medical (SEDANA:SS). Sedana is a Swedish medical technology company that is developing a range of products designed to facilitate the simple delivery of volatile anesthetics to invasively ventilated patients. The company is preparing to launch its products in Europe later this year. It is listed on the OMX Nordic Exchange Stockholm and currently has a market capitalization of SEK 9.6 billion.
Sedana Medical: Insider Selling
Our data shows that in recent weeks, two insiders at Sedana Medical have offloaded stock.
Since 30 August, Robert Vom Dorp, Vice President Business Development, has made three large sales, reducing his holding from 100,000 shares to 30,000 shares.
Meanwhile, since 31 August, Chief Medical Officer Peter Sackey has made two large sales, reducing his holding from 105,172 shares to 40,072 shares.
This insider activity looks a little concerning, in our view. The reason we say this is that both Vom Dorp, who joined the company in 2005, and Sackey, who joined in 2018, are top-level insiders. Both of these individuals are likely to have a superior level of information in relation to the company’s operations. The fact that both insiders have reduced their positions significantly suggests that the outlook for the company may not be as attractive as some investors believe it is.
Share Price Rise
Sedana Medical’s share price has jumped from SEK 80 to above SEK 100 recently after the company announced on 27 August that the results of its pivotal study Sedaconda (SED001) had been published in the scientific journal, the Lancet Respiratory Medicine.
The results from the study – which involved 301 mechanically-ventilated patients in need of sedation – demonstrated that isoflurane administered via the company's anesthetic delivery device ‘AnaConDa’ reduces the need for opioids, facilitates spontaneous breathing, and enables a faster and more predictable awakening compared with intravenous propofol. The study results will form the basis for Sedana Medical's European market approval.
The share price reaction indicates that investors clearly liked the news here and that they are confident the outlook for the stock is attractive. However, the insider transaction activity over the last few weeks suggests that those within the company are not so confident.
Given that two top-level insiders here have dumped a substantial amount of stock, we think caution is warranted towards Sedana Medical stock right now.