KERX does this yearly. The purpose of it is to get new investors and then, suddenly, while pulling wool over your eyes, release a surprise piece of negative news about the study, cash out on stoplosses, meanwhile everyone holds the bag.
This is what happened last year with Perifosine and it looks to be setting up the EXACT same way. Nothing but fluffy fake good news for the next drug until they say something like "safety study not sufficient" or "need more money for new study."
Let me say this again, these guys don't do "insider selling" per se. They in fact know how to gradually increase their stop losses and then release a piece of bad news and cash in. It's another way to cash in without tripping off any signals.
I know you thought you were safe to short because the market looked bleak for a day or two, but you just pulled the trigger on the wrong stock at the wrong time. If you had been on the long side, you would probably cash in now, but the chart looks like a deeply cut reverse head and shoulders, so you could end up trying to cover in the 4.38 range. If I were you, I'd go ahead and cover now and cut my losses (oh, and by the way, I would #$%$ also).