CEOs and other executives of pharmaceutical companies that are in the race to develop a Covid vaccine are making a financial killing, even before the vaccines become approved by the FDA.
As the Boston Globe reports, drug company insiders of a dozen companies have sold more than $1.3 billion in company stock. Compare this amount to the same time last year, when executives unloaded $74 million.
Is getting rich off of, in many cases U.S. taxpayer-funded research, illegal? Is it against the law to sell company stock when the share price of your company has skyrocketed only based on preliminary trials rather than FDA approval. The answer is no, it’s not illegal. However, without doubt, the optics look bad. Many people would argue that these executives in question, particularly from Regeneron, Moderna and Vaxart, which accounted for $1.1 billion of the $1.3 billion in stock sales, should wait until after the vaccines are fully developed and have reached the market.
Which is why Moderna’s Chief Medical Officer, Tal Zaks, was heavily criticized for cashing in on 100% of his company stock. The pre-planned trades, claims Boston Globe, made Zaks approximately $1 million wealthier per week. Moderna, as of August, had received nearly $2.5 billion from the U.S. government in the form of research and development as well as supply funding, FiercePharma.com reports.
Last week, Vaxart’s stock soared over 21 percent after the San Francisco-based biotech company announced positive results in a preclinical trial with an oral Covid vaccine. The two-dose vaccine reduced viral load in hamsters. Although testing on human subjects is imminent, the oral vaccine won’t complete phase 3 trials until perhaps the end of 2021, predicts Yahoo Finance. And if the vaccine does make it to market, it probably won’t do so until early 2022. What sets Vaxart apart from the competition is it’s the only Covid vaccine for contention that’s in oral form rather than an injectable one. Another thing going for Vaxart’s contention is that because it’s in oral form, it does not require the logistical challenges of sub-freezing storage and transport.
Despite the initial optimism of an oral vaccine, Vaxart faces shareholder lawsuits. Shareholders accuse the company of misleading investors while a hedge fund with ties to board members cashed in hundreds of millions of dollars in stock, BostonGlobe.com reports.
Should execs at these Covid kickstarters be able to dump shares of their company’s stock and enrich themselves on the back of receiving U.S. government funding? Again, no executive has been accused of impropriety; until legislation is introduced and passed against such behavior, pharmaceutical executives cannot be prosecuted for financial malfeasance in this instance.
BostonGlobe also reports that Stéphane Bancel, Moderna’s chief executive, has sold $58 million worth of company shares since March. Early data from Moderna’s phase 3 Covid vaccine trial sent the stock market soaring earlier this week. The Cambridge, MA-based company’s early data showed 94.5% effectiveness (although the results have as of yet been peer-reviewed). Moderna joins Pfizer as the only Covid vaccine contender to have announced results from large phase 3 trials. Ten other candidates have reached phase 3 testing.
It’s not unethical for a company insider to unload stock, say, if he or she needs to acquire a new yacht. But as the BostonGlobe points out, “When senior executives and board members liquidate significant portions of company stock, it can raise questions about their faith in the company’s prospects.”
The overwhelming majority of vaccine candidates are unlikely to cross the finish line. Therefore, when shareholders of a certain pharmaceutical company see an unusually high amount of shares being sold, it could give the impression that the drug (vaccine) will be unsuccessful. This is true even if a certain company receives positive media spin from clinical trials; the likelihood of a vaccine reaching the market is statistically like finding the proverbial needle in a haystack.
And even if a company’s vaccine does manage to get FDA approval and reach the marketplace, there’s no guarantee that sales of the drug will justify current inflated stock prices.
Back in June, a watchdog group, Accountable.US, requested that the Securities and Exchange Commission investigate Moderna for selling tens of millions in stock, after the company announced initial results from its experimental Covid vaccine. The SEC has thus far not investigated.
In their defense, executives of publicly-traded companies may be required to sell stock using automatic trading plans that are set up in advance. However, BostonGlobe reports that securities filings prove that trading plans of some Moderna executives were modified after Moderna began work on a coronavirus vaccine.
Regeneron is another company whose executives have gotten fabulously wealthy because of the pandemic. The company is best known for serving the experimental Covid antibody cocktail taken by President Trump after his Covid diagnos. Execs at the company, reports BostonGlobe, have sold over $500 million in stock since the pandemic started.
The development and deployment of a safe and effective Covid vaccine seems to be the key first step to ending the pandemic. However, should executives of vaccine front-runners be required to hold shares longer, especially if their company receives federal dollars from Operation Warp Speed? Perhaps if the SEC receives enough public comments, or if enough constituents reach out to their respective Congresspersons, new trading guidelines and regulations will be instituted.