This combination of file images shows signs for the pharmaceutical companies Pfizer and Moderna, both in Cambridge, Massachusetts; Executives at both Novavax and Novavax have raised questions by selling millions of shares in the pandemic

Pfizer, Moderna, Novavax: Executives of several American laboratories developing COVID-19 vaccines recently bagged millions of dollars selling stakes in their companies – raising questions about the appropriateness of such a move amid a national health crisis.

On the day pharmaceutical company Pfizer announced preliminary data showing that its vaccine is 90 percent effective against the coronavirus, its managing director Albert Bourla sold $ 5.6 million in shares.

There was nothing illegal about that, Pfizer said: The sale was made under rules that allowed the company’s heads to sell shares at a pre-determined price or at a pre-determined price based on set criteria in order to suspect inside training avoid.

Under the same rules, several Moderna officials have sold more than $ 100 million worth of shares in the past few months.

This company hasn’t launched a single product since it was founded in 2010, but the federal government is committed to paying up to $ 2.5 billion if its vaccine proves effective.

Moderna shares have risen from $ 19 at the start of the year to $ 90 today.

For his part, the head of Novavax sold $ 4.2 million worth of shares on Aug. 18, just over a month after announcing it would receive $ 1.6 billion in public funding.

Accountable US, a bipartisan taxpayer advocacy group, has calculated that from the start of the federally coordinated vaccine development effort on May 15 through August 31, officials at five drug companies sold more than $ 145 million in shares have earned.

“Legally questionable”

Pfizer and Moderna executives operated under a rule set by the Securities and Exchange Commission in 2000 that allowed company employees to sell stocks without incurring insider trading fees.

A technician sorts blood samples in a laboratory in Hollywood, Florida during a Covid-19 vaccine study on August 13, 2020

A technician sorts blood samples in a laboratory in Hollywood, Florida during a Covid-19 vaccine study on August 13, 2020

It enables them to set up a schedule that sets their stocks to trade at a pre-determined price, amount, or date, but only if they do not have privileged information that could affect stock prices.

Once such a sale is planned, it cannot be changed at the last minute, even if its timing ultimately raises questions.

Nonetheless, Pfizer and Moderna’s rule seems “legally questionable,” according to Daniel Taylor, associate professor at the University of Pennsylvania’s Wharton Business School, who has been studying major pharmaceutical companies since the pandemic began.

“The question is, what did executives know when they pre-planned the deal?” he asked.

According to Pfizer, on August 19, Bourla had only re-approved a plan for a share sale originally approved in February “with the same price and volume terms”.

A day later, the company issued a statement describing the preliminary results of its clinical trials as “positive”.

“Level playing field”

It is of course not only normal but also desirable that the lab minds be encouraged to develop a safe and reliable vaccine as soon as possible, Taylor said.

“If they want to sell their stocks, they have to make sure they are operating on a level playing field and not taking advantage of other investors with more information,” he said.

Taylor added a word of caution, “I don’t think companies have internalized the reputational risk for these deals” by selling stocks despite the fact that COVID-19 cases are spiraling upwards around the world.

When a top manager has to sell stocks to pay for a yacht, a new house, or his children’s education, the public is seldom aware of it. But given the pandemic, the laboratories are under intense scrutiny.

Covid-19: When lab managers sell stocks worth millions, questions arise

Jay Clayton, chairman of the US Securities and Exchange Commission, will testify at a Congressional hearing on June 25, 2020. He has urged company executives to follow best practices

Honesty with investors

For Sanjai Bhagat, a professor at the University of Colorado-Boulder who specializes in corporate governance, top managers should simply not be allowed to sell company shares until a year or two after they’ve left the company.

“When they have a lot of vested stocks and stock options, they have an incentive to keep the stock price as high as possible, even if they are not entirely honest with the investing audience,” he said.

Bhagat believes that company boards should avoid temptation.

“Not doing anything illegal is not the yardstick by which you should be judged,” he said. “In these times in particular, people expect them to act responsibly.”

The SEC contacted by AFP wouldn’t say whether they are investigating any of the lab directors.

In a May interview on the CNBC network, SEC chairman Jay Clayton urged executives to respect best practices.

“Why would you even want to ask the question that you’ve done something inappropriate?” he asked.

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© 2020 AFP

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