© Reuters. FILE PHOTO: A small shopping basket with vials labeled "COVID-19 – Coronavirus Vaccine" and medical sryinges sits on top of a Novavax logo
Posted by Jessica DiNapoli
(Reuters) – Top executives at the US pharmaceutical company Novavax (NASDAQ 🙂 Inc don't wait to see how well their COVID-19 vaccine is performing before taking advantage of the financial benefits.
Chief Executive Stanley Erck and three of his top lieutenants have sold approximately $ 46 million worth of company shares since early last year. This emerges from a Reuters review of security filings that benefited from a nearly 3,000% rally in Novavax shares fueled by investors pointing to the success of the shot in development.
Erck paid out $ 8.7 million over the course of 2020, surpassing the $ 2.2 million in stock he'd sold over the past five years. The share sale is more than 20% of its vested interest in Novavax, or less than 10% if stock options that are not yet vested, based on a review of filings, analysis by compensation advisor Farient Advisors LLC and a company spokeswoman.
The lucrative liquidations, which have not yet been reported, underscore the change in Novavax's wealth 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 brought a vaccine to market, will be successful in its recent endeavor. The 34-year-old company has become a major competitor in a global race for the US government thanks to the $ 1.6 billion in tax revenue it received from the US government's Operation Warp Speed program Development of vaccines against COVID-19 developed.
The Gaithersburg, Maryland-based company was valued at just $ 250 million until news of its experimental vaccine and participation in Operation Warp Speed was valued at up to $ 11 billion about a year ago increased.
A Novavax spokeswoman said executives were responsible for selling the shares.
"Our leaders remain confident in the value and potential of our vaccines and are passionate about ending the COVID-19 pandemic and improving public health around the world," Novavax said in a statement. "You continue to have significant personal and professional interests in Novavax's success, as well as a financial one."
Executives did not respond to requests for comments. The Novavax spokeswoman did not make the executives available for an interview.
Only colleagues from competing biotech companies Moderna (NASDAQ 🙂 Inc sold more shares than Novavax executives among large corporations that used US taxpayers' money to develop or manufacture COVID-19 vaccines, according to an analysis by consumer protection group Accountable.US, which examined transactions from May to November 2020 have received. Moderna's COVID-19 vaccine is already being launched after it was approved by the U.S. Food and Drug Administration on December 18.
Of course, many of the other companies in the vaccine race are far 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 US on December 11th. AstraZeneca Plc received UK approval for its vaccine on December 30, and Johnson & Johnson (NYSE 🙂 is expected to report trial data in January and is pending US approval in February.
Novavax announced last month that it had begun late testing of its COVID-19 vaccine in the US after delaying it twice due to problems scaling its manufacturing. The results of another late-stage trial in the UK are expected to be available sometime in the first quarter of 2021.
Data from Novavax's small clinical trial of its early-stage vaccine has shown it produces high levels of antibodies against viruses, and the company has already signed supply deals with countries like Japan, Canada, Australia and the UK, as well as the States .
Some corporate governance experts said Novavax provides a striking example of how boards of directors use company stocks to incentivize their management teams without always tying them closely to their long-term prospects.
"The board members should have insisted that executives hold onto their shares," said Sanjai Bhagat, a finance professor at the University of Colorado. "Then they would have the incentive to do everything possible to get the vaccine out early."
Novavax chief executive officer 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 at Proxy Advisor Glass, Lewis & Co., said he did not consider it inappropriate to reward executives during the drug development process.
"It could be a golden opportunity to make huge profits," Fried said. "I have no problem with them making a lot of money even though they haven't got a drug yet."
Investors will be able to share their thoughts on the stock sales this summer at Novavax's annual general meeting. There they will be asked to approve the board of directors and executive compensation of the company.
"If investors believe the measures were inappropriate, they will wonder what role the board of directors played in overseeing this sale," said Peter Kimball, director of advice and customer service at ISS Corporate Solutions, of the company on questions advises the management.
Of course, Novavax issued more than $ 85 million worth of stock options to executives last year, including $ 41.1 million to Erck, that are specifically tied to the development of the vaccine and cannot be exercised until August. That award, however, was contingent on the vaccine's entry into a mid-stage clinical trial, not its eventual success, Reuters reported in July.
Drug development milestones can trigger large price moves, so pharmaceutical executives sometimes set a fixed schedule for selling stocks, known as a 10b5-1 plan, to avoid any hint of insider trading.
Novavax executives announced in regulatory filings that they had sold a portion of their shares using such trading plans.
A Novavax spokeswoman said executives accepted the plans over the summer but did not provide the exact dates.
Moderna and Pfizer (NYSE 🙂 announced the dates that business plans were accepted by executives on their filings. Such disclosure is not required and is less common in U.S. companies, said Dan Taylor, professor at the University of Pennsylvania's Wharton School.
Of the approximately $ 46 million shares sold, John Trizzino, Novavax's Chief Commercial Officer, sold approximately $ 13 million, while Greg Glenn, Head of Research and Development at Novavax, sold approximately $ 13.4 million, according to securities filings. Dollars sold. 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 of shares, respectively, according to Accountable.US. Moderna executives sold $ 166 million worth of money, according to Accountable.US.
Nina DeLorenzo, a spokeswoman for Emergent BioSolutions, said in a statement that the bulk of the transactions were planned under a 10b5-1 trading plan approved by the company's CEO Fuad El-Hibri in February.
"Our leadership team and board of directors are subject to the highest ethical standards and strictly adhere to company policies for stock holding and all laws and regulations governing financial transactions," the statement said.
Pfizer and Moderna did not respond to requests for comment.