Pharma execs dumped millions in stock for huge profits after getting pandemic contracts

Watchdog: Stock prices were inflated by billions the Trump administration "shoveled into drug company coffers"

By Igor Derysh

Managing Editor

Published August 27, 2020 5:00AM (EDT)

Medical syringe is seen with Moderna company logo displayed on a screen in the background (Photo Illustration by Jakub Porzycki/NurPhoto via Getty Images)
Medical syringe is seen with Moderna company logo displayed on a screen in the background (Photo Illustration by Jakub Porzycki/NurPhoto via Getty Images)

Pharmaceutical executives continued to dump millions of dollars in stock in August despite criticism that they were profiting from big taxpayer-funded contracts awarded amid the coronavirus pandemic.

Stock prices have soared for pharmaceutical companies like Moderna, which is developing a leading vaccine candidate, in no small part thanks to contracts awarded by the Trump administration. The top five executives at Moderna sold more than $89 million in stock in the first five months of the year, with about three times as many stock transactions as in all of 2019, according to Stat News.

The trades come despite warnings from Jay Clayton, the chairman of the Securities and Exchange Commission, who cautioned pharmaceutical companies to avoid selling stock amid the pandemic.

"We've said for a long time: In this volatile time, please practice good corporate hygiene," he told CNBC earlier this year. "Why would you want to even raise the question that you were doing something that was inappropriate?"

Months later, executives at Moderna and other pharmaceutical companies that received government contracts have continued to sell off large amounts of stock at a big profit, according to SEC records reviewed by Salon.

"It certainly doesn't inspire much confidence to see drug company executives feverishly dumping their stock options and cashing out fortunes for themselves after stock prices were inflated by the billions of dollars the Trump administration shoveled into drug company coffers," Eli Zupnick, a spokesman for the progressive watchdog group Accountable Pharma, told Salon.

Moderna, which has been touted by President Donald Trump, received nearly $1 billion in research aid before landing a $1.5 billion deal with the government to deliver 100 million doses of its experimental vaccine — even though it has never previously brought a vaccine to market.

By June, executives at Moderna had sold about $161 million worth of stock as the company's shares soared by more than 200%, The Wall Street Journal reported last month.

The practice continued into August, as just three of the company's executives dumped more than 150,000 shares between Aug. 5 and Aug. 17 for a net profit of $9.8 million, according to SEC records.

Novavax has also benefited from Trump's Operation Warp Speed, receiving the program's largest award yet at $1.6 billion last month. It received another $60 million in funding in June from the Defense Department, though the company has never successfully developed a vaccine.

The company's stock was trading at 36 cents per share in May 2019 and did a 1-for-20 reverse stock split to stay on the NASDAQ exchange but still finished the year down 39%, according the Journal.

But Novavax's fortunes shifted when it used its power connections to pursue a government contract. The New York Times reported that the company "drew on influential ties it has cultivated in the federal government," including two former Novavax executives who serve on the Biomedical Advances Research and Development Authority (BARDA), one of the federal agencies involved in Operation Warp Speed. One of the former execs "would later complain that the company crossed ethical lines when it approached him about receiving funding this spring," according to the report.

John Trizzino, the company's chief business and financial officer, told the Times that Novavax had done nothing wrong, but did not deny using their connections to land the biggest vaccine contract yet.

"This doesn't happen by itself," he said. "This happens through years and years of working within the industry, building solid relationships, having worked with many of these partners."

With the company's stock soaring after the contract, its executives sold off more than 164,000 shares at a net profit of $16.8 million on a single day in August, according to SEC records. Trizzino made about $4.2 million in profit that day.

Another company with ties to the Trump administration has also reaped the benefits of its connections.

Before the pandemic began, Emergent BioSolutions landed a $2.8 billion deal that paid it more than double the previous price per dose for its smallpox vaccine. This happened shortly after Robert Kadlec, who formerly worked for the company as a consultant, was confirmed as assistant secretary for preparedness and response at the Department of Health and Human Services, The Washington Post reported. Emergent BioSolutions received hundreds of millions in other contracts under Trump, the Post reported last month, before the administration awarded one of its largest pandemic-related contracts — $628 million to manufacture an eventual vaccine — to the "little-known biodefense" firm in July.

Six of the company's executives sold more than $3.3 million in shares last month, according to SEC records, a month after an HHS report warned that the Trump administration's decision to award it a series of large contracts had created "vulnerabilities in the supply chain" and raised concerns about inflated costs due to the decreased competition.

"Emergent is a premier manufacturing partner to innovative vaccine companies and the U.S. government because we're one of the very few that has the highly specialized capabilities and large-scale production capacity required to address the COVID-19 pandemic," Nina DeLorenzo, the company's senior vice president for global communications and public affairs, said in a statement to Salon. "We have deliberately invested in and prepared for this kind of health emergency and are quickly deploying those capabilities to help us deliver large quantities of COVID-19 vaccine candidates as soon as possible.

"Our executive team and board of directors are held to the highest ethical standards and follow strict compliance with all laws and regulations governing financial transactions," the statement continued. "We have a pre-clearance process for directors and senior leaders, equity ownership requirements, and follow all best practices, including strict oversight and disclosure."

Moderna and Novavax did not respond to questions from Salon.

Accountable Pharma called for the SEC to investigate the stock sell-offs.

"This is another sad reminder that the Trump administration has allowed its drug industry allies to hand all the risk to taxpayers while their executives and shareholders make millions whether or not they deliver on a safe and effective vaccine," Zupnick said. "These sales should be investigated by the SEC and this should be another reminder to Congress that Trump's secretive vaccine program needs a serious dose of accountability and transparency."

By Igor Derysh

Igor Derysh is Salon's managing editor. His work has also appeared in the Los Angeles Times, Chicago Tribune, Boston Herald and Baltimore Sun.

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