Shenanigans! This Is Why I HATE Big Pharma...

Written by Jason Simpkins
Posted November 13, 2020

On Monday, Pfizer and European drug company BioNTech said early data suggests the vaccine could be more than 90% effective.

It was big news to kick off the week and it led to an immediate 15% surge in the company's share price.

“I think we can see light at the end of the tunnel,” said Pfizer Chairman and CEO Dr. Albert Bourla. “I believe this is likely the most significant medical advance in the last 100 years, if you count the impact this will have in public health, global economy.”

And yet, that same day, Bourla filed to sell millions of dollars of his company's stock, coincidentally profiting from this historic announcement. 

Indeed, Bourla sold 132,508 Pfizer shares at a price of $41.94, raking in $5.6 million. And another Pfizer insider, Executive Vice President Sally Susman, sold 43,662 shares at the same $41.94 price that Bourla sold at, netting more than $1.8 million.

Both said these sales were part of a pre-arranged plan. 

But we've heard that story before...

Earlier this year, drugmaker Moderna secured $2.5 billion from the government as part of Operation Warp Speed. And when the company announced positive early data from a vaccine trial in May, Moderna stock surged 63% from $48 to $80 per share practically overnight. 

Ultimately, the stock would peak at $94 per share in July (up from $17 in January), which just so happened to coincide with a massive wave of insider selling.

According to NPR, company executives sold roughly $90 million worth of Moderna stock from June to September, with two cashing out completely.

  • CEO Stéphane Bancel has sold roughly $40 million worth of Moderna stock held by himself or associated investment funds.
  • Chief Medical Officer Tal Zaks has sold around $60 million.
  • And President Stephen Hoge has sold more than $10 million.

Like the Pfizer executives, Moderna contended that these actions were pre-arranged through 10b5-1 plans. But NPR also found that multiple executives adopted or modified those 10b5-1 plans right before key announcements about the company's vaccine. 

On Jan. 21, 2020, Chief Medical Officer Dr. Tal Zaks amended his 10b5-1 plan. That was one day before the company confirmed it was working with the government on a coronavirus vaccine on Jan. 22. And on the following day, Jan. 23, the company announced it had received additional funding to support its coronavirus vaccine development.

On Friday, March 13, three Moderna executives adopted new 10b5-1 plans, according to records reviewed by NPR: Zaks, Chief Technical Operations, Quality Officer Juan Andres, and then-Chief Financial Officer Lorence H. Kim.

Then, on Monday, March 16 — one business day later — the company announced that it had given a participant the first dose of its vaccine as part of its phase 1 trial. The stock ended that day up 24% compared to the previous day's close. 

Kim has since left the company, but Zaks and Andres remain, though they've now completely sold off their Moderna holdings.

CEO Bancel amended his plan on May 21, in between announcements of major vaccine trial milestones on May 18 and May 29. And company president Hoge amended his trading plan on June 1.

When contacted by NPR, Ray Jordan, Moderna's Chief Corporate Affairs Officer, said the company has strict internal policies in place to prevent illegal insider trading, and that the news organization was mistaken, saying "I believe you must have your dates wrong."

But when confronted with documentation of those dates from the company's official disclosures to the government, Jordan changed his story, and instead claimed that those executives did not have "material nonpublic information" — an assertion that strains credulity. 

In Pfizer's case, CEO Bourla’s 10b5-1 was set up on August 19, according to the SEC filing. That was a few weeks before Pfizer and its development partner BioNTech announced positive results from animal trials of their vaccine, while the phase 3 human trial of the vaccine began July 27.

To be clear, none of this is evidence of wrongdoing, but it's certainly suspicious. And it certainly wouldn't be the first time pharmaceutical executives scored millions through suspect trades.

And it's just one of the reasons I tend to avoid the biotech sector — especially at a time like this, when so much greedy money has flooded the sector looking for a quick payout. 

If that's something you're considering just remember that the CEOs behind these "breakthroughs" are getting their money upfront. And in many cases, they're the ones selling you their shares.

Fight on,

Jason Simpkins Signature

Jason Simpkins

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Jason Simpkins is Assistant Managing Editor of the Outsider Club and Investment Director of The Wealth Warrior, a financial advisory focused on security companies and defense contractors. For more on Jason, check out his editor's page. 

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