Novavax chiefs receive $ 46 million, COVID-19 vaccine trials still ongoing

(Reuters) – Top executives at US pharmaceutical company Novavax Inc. are not waiting to see how well the COVID-19 vaccine works before reaping the financial rewards.

CEO Stanley Erck and three of his first lieutenants have sold about $ 46 million worth of company shares since early last year, according to a Reuters review of securities deposits, capitalizing on a nearly 3,000% rally in Novavax shares. by investors betting on the success of developing photography.

Erck grossed $ 8.7 million in 2020, eclipsing the $ 2.2 million in shares it sold in the past five years. The sale of shares amounts to more than 20% of its shareholding in Novavax or less than 10% if the stock options to be acquired are counted, according to the review of deposits, an analysis by clearing consultant Farient Advisors LLC and company spokesperson.

Profitable liquidations, which have not been reported before, highlight the transformation of Novavax’s assets during the global pandemic and the possibility for its directors to block large 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 latest effort. The 34-year-old company has become a key competitor in a global race to develop COVID-19 vaccines, thanks to $ 1.6 billion in taxpayer funding it received under Operation Warp Speed ​​”of the US government.

The Gaithersburg, Maryland-based company was valued at just $ 250 million until about a year ago, when news of its experimental vaccine and participation in Operation Warp Speed ​​raised its valuation to $ 11 billion. .

A Novavax spokeswoman said directors are responsible for stock sales.

“Our leaders remain 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 have a substantial personal and professional interest in Novavax’s success, as well as a financial one.”

Directors did not respond to requests for comment. The Novavax spokesman did not make the directors available for interview.

Only colleagues at rival biotechnology company Moderna Inc. sold more shares than Novavax executives among major firms that received funding from U.S. taxpayers to develop or manufacture COVID-19 vaccines, according to a consumer support group analysis. Accountable November 2020. The Modern COVID-19 vaccine is already launched after being approved by the US Food and Drug Administration on December 18.

Certainly, many of the other vaccine companies are much larger than Moderna and Novavax, limiting 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 study data in January, aligning them for US authorization in February.

Novavax, meanwhile, announced last month that it had begun a late-stage study of its COVID-19 vaccine in the United States, after delaying it twice due to problems with expanding its production. He expects to see the results of another trial at a late stage in the UK, sometime in the first quarter of 2021.

Data from the early stages of the small Novavax vaccine trial showed that it produced high levels of antibodies to the virus, and the company has already entered into supply deals with countries such as Japan, Canada, Australia and the United Kingdom, as well as the United States. State.

Some corporate governance experts said Novavax set a striking example of how boards use the company’s actions to stimulate their management teams without always tying them closely 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 in their power to get the vaccine sooner.”

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 at Glass Proxy Counselor Lewis & Co., said he did not think it was inappropriate to reward directors during the drug development process.

“It can be a once in a lifetime opportunity to make huge profits,” Fried said. “I don’t have a problem making a lot of money, even if they don’t have a drug yet.”

Investors will be able to express their views on share 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 find the actions unreasonable, they will ask what the board’s role was in overseeing this share provision,” said Peter Kimball, head of consulting and client services at ISS Corporate Solutions, which advises companies on corporate governance.

To be sure, last year Novavax granted stock options worth more than $ 85 million to executives, including $ 41.1 million to Erck, which are specifically related to vaccine development and cannot be exercised until they will not start investing in August. However, this award was conditioned by the vaccine that entered a mid-stage clinical trial, not by its final success, Reuters reported in July.

TRADING PLANS

Drug development milestones can trigger large changes in stock prices, so pharmaceutical directors sometimes adopt a fixed program for stock sales – known as the 10b5-1 plan – to avoid any suggestion of preferential trading.

Novavax’s directors disclosed in the regulatory documents that they sold some of their shares using such trading plans.

A Novavax spokeswoman said directors adopted the plans in the summer but did not provide accurate data.

Moderna and Pfizer disclosed the dates on which the trading plans were adopted by the directors in their files. Such a disclosure is not necessary and is less common among US companies, 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’s head of research and development, Greg Glenn, sold about $ 13.4 million. , according to security documents. The company’s legal director, John Herrmann, sold $ 10.9 million.

Managing directors of Emergent BioSolutions Inc., Pfizer and Johnson & Johnson, beneficiaries of federal funds, sold shares worth $ 24 million and $ 10 million and $ 4 million, respectively, according to Accountable.US. Moderna executives sold for $ 166 million, according to Accountable.US.

Nina DeLorenzo, a spokeswoman for Emergent BioSolutions, said in a statement that most transactions were planned in advance based on a 10b5-1 trading plan adopted in February by Fuad El-Hibri’s chief executive.

“Our executive team and board of directors are held to the highest ethical standards and strictly adhere to the company’s policies for equity participation, as well as all laws and regulations governing financial transactions,” the statement said.

Pfizer and Moderna did not respond to requests for comment.