(Reuters) – Top executives at US pharmaceutical company Novavax Inc. are not waiting to see the COVID-19 vaccine work before taking out the financial benefits.
CEO Stanley Erck and three of his top lieutenants have sold about $ 46 million worth of company shares since early last year, according to a Reuters review of the stock presentation, which capitalized on a merger of about 3,000% in Novavax shares driven by successful investors of the developing plan.
Erck grossed $ 8.7 million throughout 2020, surpassing the $ 2.2 million in shares it sold the previous five years. The sale of shares exceeds more than 20% of its stake in Novavax, or less than 10% if you count the options on shares that have not yet been acquired, according to the review of applications, an analysis of the consultant Compensation Farient Advisors LLC and company spokesperson.
The lucrative settlements, which have not been previously reported, underscore the transformation of Novavax’s fortunes during the global pandemic and the opportunity for its executives to block big profits from market optimism.
There is no certainty that Novavax, which has not yet introduced a vaccine to the market, will be successful in its last effort. The 34-year-old has become a key candidate in a global race to develop COVID-19 vaccines thanks to the $ 1.6 billion funding the taxpayer received under Operation Warp Speed. of the United States government.
The Gaithersburg, Maryland-based company was worth only $ 250 million until about a year ago, when news of its experimental vaccine and its involvement in Operation Warp Speed boosted its valuation to $ 11 billion. of dollars.
A Novavax spokeswoman said executives were responsible for stock sales.
“Our leaders continue to be confident in the value and potential of our vaccines and are passionately committed to helping end the COVID-19 pandemic and improve public health around the world,” Novavax said in a statement. “They continue to maintain a substantial personal and professional interest in the success of Novavax and also in the financial.”
Executives did not respond to requests for comment. The Novavax spokeswoman did not make the executives available for the interview.
According to an analysis by consumer advocacy group Accountable.US, which only analyzed consumer advocacy group Accountable.US, only colleagues at rival biotech company Moderna Inc. have sold more shares than Novavax executives among the major companies that received funding from U.S. taxpayers to develop or manufacture COVID-19 vaccines. November 2020. The Modern COVID-19 vaccine is already being rolled out after it was approved by the U.S. Food and Drug Administration on December 18.
Certainly, many of the other vaccine racing companies are much larger than Moderna and Novavax, which limits the impact of the news on their actions.
The Pfizer Inc. vaccine was the first to be approved by the United States on December 11th. AstraZeneca Plc obtained approval in the UK for its vaccine on December 30, and Johnson & Johnson is scheduled to report trial data in January, aligning them for the US. authorization in February.
Novavax, meanwhile, announced last month that it had begun a final-phase trial of the COVID-19 vaccine in the United States, after delaying it twice due to problems in increasing its production. He expects to see the results of another trial in the final phase, in the UK, sometime in the first quarter of 2021.
Initial data from Novavax’s small clinical trial on its vaccine have shown that it produced high levels of antibodies to the virus and the company has already signed supply bids for that country with countries such as Japan, Canada, Australia and the United Kingdom, as well as with the United States. States.
Some corporate governance experts said Novavax provided a striking example of how boards use company actions to incentivize their management teams without always relating them to their long-term prospects.
“Board members should have insisted that executives stick to their actions,” said Sanjai Bhagat, a professor of finance at the University of Colorado. “Then they would have the incentive to do everything they could to get the vaccine out first.”
Novavax board 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 CEO Glass, Lewis & Co., said he did not believe it was inappropriate to reward executives during the drug development process.
“It can be a unique opportunity in life to make huge profits,” Fried said. “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 believe the actions were unreasonable, they will wonder what the board’s role was in overseeing this securities arrangement,” said Peter Kimball, head of advice and customer service at ISS Corporate Solutions, which advises companies in matters of corporate governance.
Certainly, last year Novavax awarded more than $ 85 million in stock options to executives, including $ 41.1 million to Erck, which are specifically tied to vaccine development and cannot be exercised until start acquiring in August. However, that award depended on the vaccine’s participation in a mid-stage clinical trial, not its final success, Reuters reported in July.
BUSINESS PLANS
Drug development milestones can lead to large stock price movements, so pharmaceutical executives sometimes adopt a fixed schedule for the sale of shares (known as the 10b5-1 plan) to avoid any suggestion of inside information.
Novavax executives revealed in regulatory documents that they sold some of their shares through these trading plans.
A Novavax spokeswoman said executives adopted the plans in the summer, but did not provide the exact dates.
Moderna and Pfizer disclosed the dates on which executives adopted business plans in their presentations. This disclosure is unnecessary and is less common in U.S. businesses, said Dan Taylor, a professor at the Wharton School at the University of Pennsylvania.
Of the approximately $ 46 million in shares sold, Novavax commercial director John Trizzino sold about $ 13 million, while Novavax head of research and development Greg Glenn sold about $ 13.4 million. of dollars, according to securities statements. The company’s legal director, John Herrmann, sold $ 10.9 million.
Emerging BioSolutions Inc. executives Pfizer and Johnson & Johnson, also beneficiaries of federal funds, sold shares worth $ 24, $ 10 million and $ 4 million, respectively, according to Accountable.US. According to Accountable.US, Moderna executives sold for $ 166 million.
Nina DeLorenzo, a spokeswoman for Emerging BioSolutions, said in a statement that most of the transactions were planned in advance under a 10b5-1 business plan adopted in February by the company’s chief executive, Fuad El-Hibri.
“Our executive team and board of directors meet the highest ethical standards and follow strict compliance with the company’s participation policies, as well as all laws and regulations governing financial transactions,” according to the statement. .
Pfizer and Moderna did not respond to requests for comment.
Report by Jessica DiNapoli in New York; Edited by Greg Roumeliotis and Carmel Crimmins