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A sign marks the headquarters of Moderna Inc, which is developing a vaccine against COVID-19, in Cambridge, Mass. on May 18, 2020.

Brian Snyder/Reuters

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Biotech firm Moderna Inc could reap tens of billions of dollars in sales and stock appreciation if it wins the race for a COVID-19 vaccine. If it loses, the early-stage company’s value could crash.

In the meantime, the firm’s chief executive is pocketing millions of dollars every month by selling shares that have tripled in price on news of Moderna’s development progress, a Reuters analysis of corporate filings shows. The sales – by CEO Stéphane Bancel, his children’s trust and companies he owns – amount to about $21 million between January 1 and June 26, including $6 million in May.

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The company’s chief medical officer, Tal Zaks, has cashed out the majority of his available stock and options, netting over $35 million since January, the filings show.

The lucrative liquidations highlight the unusually powerful incentives for biotech executives to highlight development milestones for drugs that often never get approved or sold, according to interviews with seven executive-compensation experts. Optimistic corporate statements on coronavirus vaccines, they said, could cause investors to overpay for company shares or create false hope among the public and health officials seeking new weapons to fight the pandemic.

Bancel set a fixed schedule for his share sales – known as a 10b5-1 plan – long before the pandemic hit. Such executive share-sale plans are meant to guard against insider trading, avoiding the potential for executives to sell in advance of bad news they know is coming, or to put off selling until after a positive announcement.

Zaks sharply increased the pace of his sales with a new plan he put in place on March 13. That was three days before Moderna announced it had dosed the first human with a vaccine candidate, news that sent its stock price up 24% and signalled that future development milestones might push the shares higher.

The sales give the firm’s executives an unusual opportunity to lock in big profits on what could be fleeting market optimism, said Jesse Fried, a Harvard Law School professor who wrote a book about executive compensation.

“This may be their one shot at making a boatload of money if the vaccine doesn’t work out,” Fried said. Executives have wide discretion in releasing information, he said, and Moderna’s chiefs have a powerful motivation to “keep the stock price up.”

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

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Many news outlets have reported sales by Moderna executives in the wake of positive news on its vaccine efforts. Reuters is the first to report that Bancel and affiliated entities are selling 90,000 shares every month and that Zaks moved to sharply increase his sales in March, three days before Moderna released market-moving news.

A Moderna spokesman said that Bancel is liquidating only a small portion of his holdings and that “substantially all of his family’s assets remain invested in Moderna.” This stakeholding reflected Bancel’s “long-term commitment” to the firm, the spokesman said. Bancel, his companies and his children’s trust own more than 24 million Moderna shares, making him the second largest stockholder, owning about 8% of the firm, down slightly from the beginning of the year.

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

The high frequency, volume and profits of Bancel’s transactions – at about 90,000 shares monthly – are unique among the CEOs of 26 companies identified by Reuters as developing COVID-19 vaccines or treatments and that regularly publish information on executive trades of company shares.

Twenty-one of the firms have seen their stock rise since the end of January, just before coronavirus spread globally, and ten of those, including Moderna, have seen share prices at least double. But just four of the CEOs of those firms, including Bancel, have sold company stock. Only one – Chad Robins of Adaptive Biotech – made substantial, regular sales under a 10b5-1 plan, like Moderna’s Bancel. Adaptive Biotech, however, has seen a far smaller recent stock-price increase – about 50% – than Moderna. During May and June, Robins sold about $12 million in stock after Adaptive’s stock price rose on news that it is researching antibody therapies and a coronavirus test that delivers faster results.

Adaptive Biotech declined to comment and referred to a company filing that said Robins sold the stock to diversify his investments.

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Most of Bancel’s sales have been carried out through plans in place since December 2018, the filings show. The transactions started in November 2019, when a trust belonging to his children began selling 11,046 shares each week. This January, Bancel and two companies he controls started selling stock regularly. Since then, they have collectively sold about 90,000 Moderna shares each month.

‘High risk, high rewards'

Such scheduled sales are more common at early-stage biotech companies such as Moderna – which face intense risk-reward scenarios – than at more established and diversified drug firms, where executives frequently hold their equity until they leave the company.

Executives’ ongoing sales are an effective hedge against the bigger downside risk faced by companies like Moderna. Based in Cambridge, Massachusetts, the firm has more than 20 therapies and vaccines in development – but none near approval. Investors view the firm as a front-runner in creating a COVID-19 vaccine, but it faces 17 serious competitors with candidates in clinical evaluations and 129 others in earlier development stages, according to the World Health Organization. Only a very small number of companies are expected to get vaccines to market, biotech executives and health experts say.

If Moderna successfully launches its coronavirus vaccine and a dozen other of its most promising trial medicines, its stock price could rise to $279 based on the new revenues, according to Morgan Stanley analysts. That would yield Bancel a fortune of about $10 billion including currently unvested share options, the Reuters analysis shows.

The firm’s stock has soared from $18 in late February – just before it announced it had shipped its vaccine candidate to the U.S. government for trials – to close at $56.57 on July 2, down 5%, after a report that the start of its large vaccine trial would be delayed. That 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 would be worth only as much as the cash on its balance sheet if all of its vaccine and drug candidates don’t make it to market.

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‘Science by press release’

Bancel and Zaks have been bullish on Moderna’s prospects in public statements.

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

“We are not aware of anybody else who can do this at this scale, with this focus, at this speed,” he told investors on June 2. Earlier, in a May 7 earnings call, Bancel said he had “never been as excited and optimistic about the future of Moderna.”

Many investors and analysts are optimistic as well but say it is difficult to evaluate Moderna’s prospects given the early stages of trials.

The company drew criticism from scientists for releasing incomplete data from a trial being conducted by the U.S. National Institutes of Health (NIH). On May 18, Moderna announced that its vaccine candidate had produced protective antibodies in a small subset of healthy trial volunteers. The news pushed Moderna stock up 20% to its peak of $80.

Some scientists suggested Moderna should have held off publishing until it had all test subjects’ results. “This was science by press release,” said Paul Offit, director of the Vaccine Education Center at Children’s Hospital of Philadelphia. Without complete data, he said, “you’re left to read the tea leaves.”

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Dr. Anthony Fauci – the nation’s top infectious disease expert – shared the test results with U.S. governors, Vice President Mike Pence said in a Twitter post the day of Moderna’s announcement. But Fauci – who is running the Moderna trial – later said he didn’t 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 worried the information had been seen by too many people, including at the NIH. He said the company made the partial findings public because it worried the data would get leaked – and it considered the incomplete results material information that all investors should receive at the same time. A company spokesman told Reuters the company believed it needed to release the information to comply with Securities and Exchange Commission rules.

The day after the May 18 announcement, Zaks sold 125,000 shares – netting him nearly $10 million – at a price of $78, up from $66 on the Friday before the Monday press release. Company filings show the sale was executed in accordance with the plan that Zaks put in place on March 13.

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