By Tom Bergin and Robin Respaut
(Reuters) – Biotech company Moderna Inc could earn tens of billions of dollars in sales and stock appreciation if it wins the race for a COVID-19 vaccine. If you lose, the value of the early stage business could collapse.
Meanwhile, the company’s chief executive officer pockets millions of dollars each month by selling shares that have tripled in price on news of Moderna’s development progress, a Reuters analysis of corporate filings shows. Sales, made by CEO Stéphane Bancel, his children’s trust, and the companies he owns, total around $ 21 million (£ 17 million) between January 1 and June 26, including $ 6 million in May .
The company’s chief medical officer, Tal Zaks, has cashed in most of its available shares and options, generating more than $ 35 million since January, according to filing documents.
For-profit settlements highlight unusually powerful incentives for biotech executives to highlight drug development milestones that are often never approved or sold, according to interviews with seven executive compensation experts. They said optimistic corporate statements about coronavirus vaccines could either make investors overpay for the company’s actions or create false hope among the public and health officials seeking new weapons to combat the pandemic.
Bancel established a fixed schedule for its share sales, known as a 10b5-1 plan, long before the pandemic occurred. Such executive stock sale plans are meant to protect against insider trading, preventing the possibility of executives selling before the bad news they know is coming, or postponing the sale until after a positive announcement.
Zaks sharply increased the pace of its sales with a new plan that launched on March 13. That was three days before Moderna announced that it had dosed the first human with a candidate vaccine, news that raised its stock price by 24% and noted that future development milestones could drive stocks higher.
The sales provide executives at the firm with an unusual opportunity to make big profits in what could be fleeting market optimism, said Jesse Fried, a Harvard Law School professor who wrote a book on executive compensation.
“This may be your only chance to make a lot of money if the vaccine doesn’t work,” Fried said. Executives have ample discretion to disclose information, he said, and Moderna’s bosses have a powerful motivation to “keep the stock price.”
Reuters found no evidence that Bancel, Zaks or Moderna have overstated the progress of the company’s vaccine.
Many media outlets have reported sales of Moderna executives following positive news of their vaccination efforts. Reuters is the first to report that Bancel and affiliates are selling 90,000 shares each month and that Zaks moved to dramatically increase its sales in March, three days before Moderna published news that was moving the market.
A Moderna spokesman said Bancel is liquidating only a small part of its holdings and that “substantially all of his family’s assets remain invested in Moderna.” This participation reflects Bancel’s “long-term commitment” to the company, the spokesperson said. Bancel, its companies, and its children’s trust own more than 24 million Moderna shares, making it the second largest shareholder, with approximately 8% of the company, slightly below the beginning of the year.
Zaks did not respond to requests for comment, and Moderna did not comment on its share sales.
The high frequency, volume and earnings of Bancel transactions, with around 90,000 shares per month, are unique among the CEOs of 26 companies identified by Reuters that develop vaccines or COVID-19 treatments and that regularly publish information on executive trade. of company shares.
Twenty-one of the firms have seen their shares rise since the end of January, just before the coronavirus spreads globally, and ten of them, including Moderna, have seen at least double their share prices. But only four of the CEOs of those companies, including Bancel, have sold shares of the company. Only one, Chad Robins of Adaptive Biotech, made substantial and regular sales under a 10b5-1 plan, such as Moderna’s Bancel. However, Adaptive Biotech has seen a much smaller recent rise in share price, around 50%, than Moderna. During May and June, Robins sold about $ 12 million in stock after Adaptive’s stock price increased with the news that he is investigating antibody therapies and a coronavirus test that offers faster results.
Adaptive Biotech declined to comment, referring to a company presentation that said Robins sold the shares to diversify its investments.
Most of Bancel’s sales have been carried out through plans in force since December 2018, according to the presentations. The transactions began in November 2019, when a trust of his children began selling 11,046 shares each week. This January, Bancel and two companies it controls began selling shares regularly. Since then, they have collectively sold around 90,000 shares of Moderna each month.
HIGH RISKS, REWARDS
Such scheduled sales are more common in early-stage biotech companies like Moderna, which face intense risk-reward scenarios, than in more established and diversified pharmaceutical companies, where executives frequently hold onto their assets until they leave the company.
Continuing executive sales are an effective hedge against the increased downside risk faced by companies like Moderna. Based in Cambridge, Massachusetts, the firm has more than 20 therapies and vaccines in development, but none is close to approval. According to the World Health Organization, investors see the company as a leader in creating a COVID-19 vaccine, but it faces 17 serious competitors with candidates in clinical evaluations and another 129 in earlier stages of development. Only a very small number of companies are expected to bring vaccines to the market, say biotech executives and health experts.
If Moderna successfully launches its coronavirus vaccine and a dozen of its most promising test medications, its stock price could rise to $ 279 based on new revenue, according to analysts at Morgan Stanley. That would give Bancel a fortune of about $ 10 billion, including currently uninvested stock options, Reuters analysis shows.
The company’s shares soared from $ 18 in late February, just before announcing that it had sent its vaccine candidate to the US government for trials, to close at $ 56.57 on July 2, down 5%. , after a report indicating the start of his big shot the trial would be delayed. That gives the company a market capitalization of nearly $ 23 billion. The stock peaked at $ 80 in May.
But Morgan Stanley also has a “bear case,” in which the company would be worth just as much as the cash on its balance sheet if all of its vaccine and drug candidates don’t hit the market.
‘SCIENCE BY PRESS RELEASE’
Bancel and Zaks have been optimistic about Moderna’s prospects in public statements.
Bancel calls the mRNA technology that the company uses for all vaccine development the “software of life,” with the potential to create “a new class of drugs.” He has also said that the Moderna process can create vaccines much faster and with a greater chance of “technical success,” and, by implication, regulatory approval, than other companies.
“We don’t know anyone else who can do this on this scale, with this approach, at this speed,” he told investors on June 2. Earlier in a earnings call on May 7, Bancel said, “I have never been so excited and optimistic about the future of Moderna.”
Many investors and analysts are also optimistic, but say it is difficult to assess Moderna’s prospects given the early stages of the trials.
The company was criticized by scientists for disclosing incomplete data from a trial conducted by the U.S. National Institutes of Health (NIH). On May 18, Moderna announced that its candidate vaccine had produced protective antibodies in a small subset of healthy test volunteers. The news caused Moderna’s shares to rise 20% to their $ 80 high.
Some scientists suggested that Moderna should have delayed publication until it had the results for all test subjects. “This was science per press release,” said Paul Offit, director of the Vaccine Education Center at the Children’s Hospital of Philadelphia. Without complete data, he said, “you have to read the tea leaves.”
Dr. Anthony Fauci, the nation’s leading infectious disease expert, shared the test results with US governors, Vice President Mike Pence said in a Twitter post the day of the Moderna announcement. But Fauci, who is conducting the Moderna trial, later said he did not like the company’s early release of incomplete data, according to an interview published by the STAT health news service. A spokeswoman for Fauci’s agency, the National Institute of Allergy and Infectious Diseases, did not comment beyond what Fauci said in the interview.
Bancel told investors at a June conference that Moderna’s leadership feared that many people would have seen the information, including at the NIH. He said the company released the partial findings because it was concerned that the data would leak, and considered the material information of incomplete results that all investors should receive at the same time. A company spokesperson told Reuters that the company believed it needed to disclose the information to comply with the rules of the Securities and Exchange Commission.
The day after the May 18 announcement, Zaks sold 125,000 shares, earning him nearly $ 10 million, priced at $ 78, up from $ 66 on the Friday prior to Monday’s press release. The company’s presentations show that the sale was carried out in accordance with the plan that Zaks launched on March 13.
(Reporting by Tom Bergin and Robin Respaut; Editing by Tom Lasseter and Brian Thevenot)
