How Moderna Executives Profit From Speculation About COVID-19 Vaccine Stocks

(Reuters) – Biotechnology company Moderna Inc. could reap tens of billions of dollars in sales and inventory appreciation if it wins the race for the COVID-19 vaccine. If lost, the value of the start-up business could collapse.

In the meantime, the company’s CEO is pocketing millions of dollars every month by selling stocks that have tripled in price when Moderna’s development progress was announced, according to a Reuters analysis of documents filed by the companies. corporations. Sales – by CEO Stéphane Bancel, his children’s trust and the businesses he owns – amount to approximately $ 21 million between January 1 and June 26, including $ 6 million in May.

The company’s chief medical officer, Tal Zaks, has cashed the majority of his available shares and options, grossing more than $ 35 million since January, according to the documents.

The lucrative liquidations underscore the unusually powerful incentives for biotechnology leaders to highlight stages of drug development that often never get approved or sold, according to interviews with seven executive compensation experts. Statements by optimistic companies about coronavirus vaccines, they said, could prompt investors to pay too much for the company’s actions or create false hopes among the public and health officials for news. weapons to fight the pandemic.

Bancel set a fixed timetable for its share sales – known as the 10b5-1 plan – long before the pandemic broke out. These plans to sell shares to executives are intended to protect against insider trading, to prevent executives from selling before the bad news they know is coming, or to suspend the sale until after a positive announcement. .

Zaks has greatly accelerated the pace of its sales with a new plan that it implemented on March 13. It was three days before Moderna announced it had dosed the first human with a candidate vaccine, news that boosted share prices by 24% and signaled that future development milestones could push stocks on the rise.

The sales give cabinet executives an unusual opportunity to make big profits on what may be fleeting market optimism, said Jesse Fried, a professor at Harvard Law School, who has written a book on executive compensation.

“It may be their only chance to make a lot of money if the vaccine doesn’t work,” said Fried. Executives have broad discretion in disclosing information, he said, and Moderna executives have strong motivation to “keep the share price”.

Reuters has found no evidence that Bancel, Zaks or Moderna has exaggerated the progress of the company’s vaccine.

Numerous media outlets have announced sales of Moderna executives following positive news about its vaccine efforts. Reuters is the first to report that Bancel and its affiliates are selling 90,000 shares each month and that Zaks decided to sharply increase sales in March, three days before Moderna published news that disrupts the market.

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A spokesperson for Moderna said that Bancel liquidated only a small part of its assets and that “almost all of his family’s assets remained invested in Moderna”. The acquisition reflects Bancel’s “long-term commitment” to the company, said the spokesperson. Bancel, its companies and its children’s trust hold more than 24 million Moderna shares, making it the second largest shareholder, with around 8% of the business, slightly down from the start of the year .

Zaks did not respond to requests for comment and Moderna did not comment on its share sales.

The frequency, volume and high profits of Bancel’s transactions – at around 90,000 shares per month – are unique among the CEOs of 26 companies identified by Reuters as developing COVID-19 vaccines or treatments and who regularly publish transaction information executive actions of the company.

Twenty-one of the companies have seen their stocks increase since the end of January, just before the spread of the coronavirus worldwide, and ten of them, including Moderna, have seen their share prices at least double. But only four of the CEOs of these companies, including Bancel, sold shares of the company. Only one – Chad Robins of Adaptive Biotech – made substantial and regular sales as part of a 10b5-1 plan, like Bancel de Moderna. However, Adaptive Biotech has seen a much smaller recent increase in stock prices – around 50% – than Moderna. In May and June, Robins sold approximately $ 12 million in stocks after Adaptive’s share price rose as a result of its research into antibody therapies and a more successful coronavirus test fast.

Adaptive Biotech declined to comment and referred to a company file which said that Robins had sold the stock to diversify its investments.

Most of Bancel’s sales have been made thanks to plans in place since December 2018, the documents show. Transactions began in November 2019, when a trust owned by her children started selling 11,046 shares each week. In January, Bancel and two companies it controls began to regularly sell stocks. Since then, they have collectively sold approximately 90,000 Moderna shares each month.


Such scheduled sales are more common in start-up biotechnology companies such as Moderna – who face intense risk-return scenarios – than in more established and diversified pharmaceutical companies, where executives frequently hold equity until they leave the company.

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The current sales of executives are an effective hedge against the greatest downside risk faced by companies like Moderna. Based in Cambridge, Massachusetts, the company has more than 20 therapies and vaccines in development – but none close to approval. Investors see the company as a precursor in the creation of a COVID-19 vaccine, but it faces 17 serious competitors with candidates for clinical evaluation and 129 others in earlier stages of development, according to the World health. Only a very small number of companies are expected to put vaccines on the market, according to biotechnology executives and health experts.

If Moderna successfully launches its coronavirus vaccine and a dozen other of its most promising test drugs, its share price could reach $ 279 depending on new revenues, according to analysts at Morgan Stanley. According to Reuters analysis, this would give Bancel a fortune of around $ 10 billion, including the currently unvested stock options.

The company’s stock climbed $ 18 in late February – just before it announced it had shipped its candidate vaccine to the United States government for testing – to close at $ 56.57 on July 2, down 5%, after a report that the start of his large vaccine trial would be delayed. This gives the company a market capitalization of nearly $ 23 billion. The stock hit a high of $ 80 in May.

But Morgan Stanley also has a “bear case,” in which the company is only worth the money on its balance sheet if all of its candidate vaccines and drugs don’t hit the market.


Bancel and Zaks were optimistic about Moderna’s prospects in public statements.

Bancel calls the mRNA technology that the company uses for all vaccine development “life software”, with the potential to create “a new class of drugs”. He also said that the Moderna process can create vaccines much faster and with better chances of “technical success” – and, by implication, regulatory approval – than other companies.

“We don’t know anyone else who can do it on this scale, with this concentration, at this speed,” he told investors on June 2. 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 has been criticized by scientists for publishing incomplete data from a trial conducted by the National Institutes of Health (NIH) in the United States. On May 18, Moderna announced that its vaccine candidate had produced protective antibodies in a small subset of healthy volunteers in the trial. The news pushed Moderna’s inventory up 20% to its peak of $ 80.

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Some scientists have suggested that Moderna should have suspended publication until it has all the results of the test subjects. “It was science by press release,” said Paul Offit, director of the Vaccine Education Center at the Children’s Hospital of Philadelphia. Without complete data, he said, “you still have to read the tea leaves.”

Dr. Anthony Fauci – the country’s best infectious disease expert – shared the test results with U.S. governors, said Vice President Mike Pence in a Twitter message on the day of Moderna’s announcement. But Fauci – who heads the Moderna trial – later declared that he did not like the early publication of incomplete data by the company, according to an interview published by the STAT health service. A spokesperson for Fauci’s agency, the National Institute of Allergies and Infectious Diseases, did not comment beyond what Fauci said in the interview.

Bancel told investors at a conference in June that Moderna’s leadership was concerned that the news might have been seen by too many people, including the NIH. He said the company released the partial findings because it feared the data would leak – and it viewed the incomplete results as important information that all investors should receive at the same time. A spokesperson for the company told Reuters that the company believes it should 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 – bringing him close to $ 10 million – at a price of $ 78, up from $ 66 on the Friday before Monday’s press release. The documents filed by the company show that the sale was carried out in accordance with the plan implemented by Zaks on March 13.

Source: Reuters

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