(Reuters) – Top executives at US pharmaceutical company Novavax Inc don’t wait to see how well their COVID-19 vaccine works before reaping the financial rewards.
Chief Executive Stanley Erck and three of his top lieutenants have sold approximately $ 46 million in company stock since early last year, according to a Reuters evaluation of the securities filings. success of the shot in development.
Erck cashed $ 8.7 million over the course of 2020, eclipsing the $ 2.2 million in stock he sold in the previous five years. The stock sale is more than 20% of its acquired interest in Novavax, or less than 10% if stock options still to be acquired are included, according to the assessment of the filings, an analysis by compensation advisor Farient Advisors LLC and a spokeswoman for Company.
The lucrative liquidations, not previously reported, underscore the transformation of Novavax’s fortunes during the global pandemic and the opportunity for its executives to reap large profits from market optimism.
It is not certain that Novavax, which is not yet to market a vaccine, will be successful in its latest effort. The 34-year-old company has become a major contender in a global race to develop COVID-19 vaccines thanks to $ 1.6 billion in tax dollars it received under the US government’s “Operation Warp Speed” program.
The Gaithersburg, Maryland-based company was worth only $ 250 million until about a year ago, when news of its experimental vaccine and its participation in Operation Warp Speed pushed its valuation to a whopping $ 11 billion.
A Novavax spokeswoman said executives were responsible for the sale of shares.
“Our leaders remain confident in the value and potential of our vaccines and are passionately committed to contributing to ending the COVID-19 pandemic and improving public health around the world,” Novavax said in a statement . “They still have significant personal and professional interests in Novavax’s success, 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 peers of rival biotech company Moderna Inc have sold more shares than Novavax executives among major corporations that have received US taxpayer funding to develop or manufacture COVID-19 vaccines, according to an analysis by consumer advocacy group Accountable. November 2020. Moderna’s COVID-19 vaccine is being rolled out after it was approved by the US Food and Drug Administration on Dec. 18.
Certainly, many of the other companies in the vaccine race are much larger than Moderna and Novavax, which limits the impact of news on their stocks.
Pfizer Inc’s vaccine was the first to be approved by the United States on Dec. 11. AstraZeneca Plc received approval in the UK for its vaccine on December 30, and Johnson & Johnson is expected to report research data in January to list it in the US. authorization in February.
Novavax, meanwhile, announced last month that it had begun a late-stage trial of the COVID-19 vaccine in the United States, after having been delayed twice due to problems scaling up production. It expects to see results from another late phase, in the UK, sometime in the first quarter of 2021.
Early-stage data from Novavax’s small clinical trial with its vaccine has shown it to produce high levels of virus-fighting antibodies, and the company has already signed supply agreements for it with countries such as Japan, Canada, Australia and the UK, as well as the United States. States. States.
Some corporate governance experts said Novavax provided a striking example of how boards use corporate stocks to drive 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, a finance professor at the University of Colorado. “Then they would have the incentive to do everything they can to get the vaccine out sooner.”
Novavax chairman James Young did not respond to requests for comment.
Jesse Fried, a professor at Harvard Law School and member of the research advisory board at proxy adviser Glass, Lewis & Co., said he did not consider it inappropriate to reward executives during the drug development process.
“It could be a unique opportunity to make huge profits,” said Fried. “I have no problem with them making a lot of money, even if they don’t have any medicine yet.”
Investors will voice their views on the stock sales this summer at Novavax’s annual shareholders meeting, where they will be asked to approve the company’s board of directors and management compensation.
“If investors think the actions were unreasonable, they will ask what the role of the board was in overseeing this sale of shares,” said Peter Kimball, chief advisory and customer service at ISS Corporate Solutions, which advises companies on corporate governance.
To be sure, Novavax granted more than $ 85 million in stock options to executives last year, including $ 41.1 million to Erck, which are specifically related to vaccine development and cannot be exercised until they vest in August. . However, this award depended on whether the vaccine was participating in a mid-stage clinical trial, not its ultimate success, Reuters reported in July.
TRADE PLANS
Drug development milestones can trigger large price movements, so pharmaceutical executives sometimes adopt a set schedule for stock sales – known as a 10b5-1 plan – to avoid any suggestion of insider trading.
Novavax executives disclosed in regulatory documents that they have sold a portion of their shares through such trading plans.
A Novavax spokeswoman said executives passed the plans in the summer but failed to provide the exact dates.
Moderna and Pfizer disclosed the dates trading plans were adopted by executives in their filings. Such disclosure is not required and is less common among U.S. companies, said Dan Taylor, a professor at the University of Pennsylvania Wharton School.
Of the approximately $ 46 million shares sold, Novavax chief commercial officer John Trizzino sold approximately $ 13 million, while Novavax’s head of research and development, Greg Glenn, sold approximately $ 13.4 million, according to the filings. The company’s chief legal officer, 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. According to Accountable.US, Moderna executives have sold $ 166 million.
Nina DeLorenzo, a spokeswoman for Emergent BioSolutions, said in a statement that the majority of the trades were planned in advance under a 10b5-1 trading plan adopted in February by the company’s executive chairman Fuad El-Hibri.
“Our executive team and board of directors are held to the highest ethical standards and follow strict adherence to corporate share ownership policies as well as all laws and regulations related to financial transactions,” the statement said.
Pfizer and Moderna did not respond to requests for comment.
Reporting by Jessica DiNapoli in New York; Editing by Greg Roumeliotis and Carmel Crimmins