(Reuters) – Top executives at the American pharmaceutical company Novavax Inc are not waiting to see how their COVID-19 vaccine works before reaping the financial rewards.
Chief Executive Stanley Erck and three of his top lieutenants have sold about $ 46 million in company stock since the beginning of last year, according to a Reuters review of bond records, capitalizing on an increase of nearly 3,000% in Novavax shares fueled by investors who are betting on the success of the shooting in development.
Erck withdrew $ 8.7 million over 2020, exceeding the $ 2.2 million in shares he sold in the previous five years. The sale of shares is equivalent to more than 20% of its stake acquired in Novavax, or less than 10% if the stock options not yet acquired are counted, according to the review of the files, an analysis made by the compensation consultant Farient Advisors LLC and a company spokesperson.
The lucrative liquidations, which were not previously reported, underscore the transformation in Novavax’s fortunes during the global pandemic and the opportunity for its executives to make big profits from market optimism.
There is no certainty that Novavax, which has not yet launched a vaccine on the market, will succeed in its latest venture. The 34-year-old company has become a key competitor in a global race to develop vaccines against COVID-19, thanks to $ 1.6 billion in taxpayer funding it received in the United States government program “Operation Warp Speed” .
The Gaithersburg, Maryland-based company was only worth $ 250 million until about a year ago, when news of its experimental vaccine and its participation in Operation Warp Speed raised its valuation to as much as $ 11 billion.
A Novavax spokeswoman said the executives were responsible for selling the shares.
“Our leaders remain confident in the value and potential of our vaccines and are strongly committed to contributing to ending the COVID-19 pandemic and improving public health worldwide,” said Novavax in a statement. “They continue to have a substantial personal and professional interest in the success of Novavax, as well as financially.”
The executives did not respond to requests for comment. The Novavax spokeswoman did not make the executives available for an interview.
Only colleagues at rival biotech company Moderna Inc sold more shares than Novavax executives among large companies that received US taxpayer funding to develop or manufacture COVID-19 vaccines, according to an analysis by consumer advocacy group Accountable.US , which analyzed transactions from May to November 2020. Moderna’s COVID-19 vaccine is already being launched after it was approved by the U.S. Food and Drug Administration on December 18.
Certainly, many of the other companies in the vaccine race are much larger than Moderna and Novavax, limiting the impact of the news on their actions.
The vaccine from Pfizer Inc was the first to be approved by the United States on December 11. AstraZeneca Plc obtained approval in Britain for its vaccine on December 30, and Johnson & Johnson is scheduled to report the test data in January, aligning it to the US authorization in February.
Novavax, meanwhile, announced last month that it had started a final stage test of its COVID-19 vaccine in the United States, after delaying it twice due to problems in increasing its production. She expects to see the results of another final-stage test in the UK sometime in the first quarter of 2021.
Early-stage data from Novavax’s small clinical trial with its vaccine showed that it produced high levels of anti-virus antibodies and the company has already closed supply agreements with countries such as Japan, Canada, Australia and the United Kingdom, as well as with states United States.
Some corporate governance experts said Novavax offered a striking example of how boards use company shares to encourage their management teams, without always closely linking them to their long-term prospects.
“Board members should have insisted that executives keep their shares,” said Sanjai Bhagat, professor of finance at the University of Colorado. “So they would have the incentive to do everything they can to get the vaccine out early.”
Novavax chairman James Young did not respond to requests for comment.
Jesse Fried, a professor at Harvard Law School and a member of the research advisory board of proxy consultant Glass, Lewis & Co., said he did not feel it was inappropriate to reward executives during the drug development process.
“It can be a once-in-a-lifetime opportunity to make huge gains,” said Fried. “I have no problem with them making a lot of money, even though they don’t have a drug yet.”
Investors will be able to express their views on stock sales this summer at Novavax’s annual shareholders’ meeting, where they will be asked to approve the company’s board of directors and executive compensation.
“If investors feel that the shares were unreasonable, they will ask what the board’s role was in overseeing this share sale,” said Peter Kimball, head of consulting and customer services at ISS Corporate Solutions, which advises companies on corporate governance .
To be sure, last year Novavax awarded more than $ 85 million in stock options for executives, including $ 41.1 million for Erck, which are specifically tied to vaccine development and cannot be exercised until they begin. exercise in August. However, this award depended on the vaccine entering an intermediate clinical trial, not on its eventual success, Reuters reported in July.
NEGOTIATING PLANS
Drug development milestones can trigger large movements in stock prices, so that pharmaceutical executives sometimes adopt a fixed schedule for stock sales – known as the 10b5-1 plan – to avoid any insider trading suggestions.
Novavax executives revealed in regulatory documents that they sold some of their shares using these trading plans.
A Novavax spokeswoman said the executives adopted the plans in the summer, but did not provide the exact dates.
Moderna and Pfizer have disclosed the dates on which the trading plans were adopted by the executives in their records. Such disclosure is not mandatory and is less common in American companies, said Dan Taylor, a professor at the University of Pennsylvania’s Wharton School.
Of the approximately $ 46 million in shares sold, Novavax’s commercial director, John Trizzino, sold about $ 13 million, while Novavax’s head of research and development, Greg Glenn, sold about $ 13.4 million. , according to securities records. The company’s legal director, John Herrmann, sold $ 10.9 million.
Executives at Emergent BioSolutions Inc, Pfizer and Johnson & Johnson, also recipients of federal funds, sold $ 24 million, $ 10 million and $ 4 million in shares, respectively, according to Accountable.US. Moderna executives sold $ 166 million, according to Accountable.US.
Nina DeLorenzo, spokesman for Emergent BioSolutions, said in a statement that most transactions were planned in advance according to a 10b5-1 trading plan adopted in February by the company’s chief executive, Fuad El-Hibri.
“Our executive team and board of directors follow the highest ethical standards and strictly follow the company’s policies for share ownership, as well as all laws and regulations that govern financial transactions,” according to the statement.
Pfizer and Moderna did not respond to requests for comment.
Jessica DiNapoli reporting in New York; Editing by Greg Roumeliotis and Carmel Crimmins