Good vaccine news and a flurry of stock sales by executives. There’s a pattern, study finds

A monitor at the New York Stock Exchange shows the names and logos of Pfizer and other drugmakers.
Pfizer’s CEO sold off 60% of his company shares Nov. 9, the day the firm announced positive Phase 3 results from its COVID-19 vaccine trial. The company’s stock jumped 15%.
(Richard Drew / Associated Press)

As they raced to develop vaccines against COVID-19, executives at some pharmaceutical companies received huge paydays by selling shares around the time their companies announced positive news about the vaccines.

Such well-timed sales, which occur frequently in the healthcare industry, are highlighted in a new study released Monday that illustrates how executives use prearranged stock sale plans to unload shares on days when their companies release good news. The practice raises thorny questions about whether the trades sometimes cross the line.

The analysis, conducted by Columbia Law School professor Joshua Mitts, has found that executives across several sectors make prearranged sales of company stock far more frequently on days when their companies announce positive news than on days when negative, neutral or no news is released. In some cases, sales were nearly three times as likely to occur on good-news days as on other days, Mitts found.


The pattern is by far most pronounced in the healthcare sector, according to the study, which analyzed more than 12 million transactions from Jan. 1, 1996, through Oct. 30, 2020.

Pfizer Chief Executive Albert Bourla shed 60% of his holdings in the company Nov. 9, the same day his firm announced the results of trials that showed its vaccine was highly effective in preventing the disease caused by the coronavirus. The news caused the company’s stock to jump 15%. Bourla is one of seven Pfizer executives who collectively have earned $14 million from stock sales this year, according to data provided to the Los Angeles Times by Equilar, an executive compensation and corporate governance data firm.

That amount is dwarfed by sales made by executives at Moderna, a Cambridge, Mass.-based firm that has never brought a product to market but has produced a vaccine reported to be nearly as effective as Pfizer’s. Executives there collectively made $287 million from stock sales this year, according to Equilar.

Moderna’s CEO, Stéphane Bancel, has accounted for $81 million of the sales, which he made through an average of 24 trades each month, some of which he scheduled during the time his company was developing the vaccine, the Equilar data show. Despite the offloading, Bancel retains 23.5 million shares of the company’s stock, worth $3.5 billion. Elizabeth Nabel, a Moderna board member, made a stock sale plan May 21 resulting in a sell-off worth $6 million on July 15, the day after Moderna released positive results about its early vaccine trials.

Insider trading can happen when someone with confidential knowledge about a company — “material nonpublic information” in industry jargon — unloads stock before bad news about the company becomes public. But the opposite can also result in questionable trades if an insider plans to sell stock based on confidential knowledge that there may be good news in the future that will boost the stock price.

Representatives for Pfizer and Moderna defended the stock sales, saying they were executed according to predetermined schedules, known as 10b5-1 plans, that allow executives to plan out future trades. The plans, named for a Securities and Exchange Commission rule created in 2000, are meant to be a way for executives to sell stock while avoiding allegations of illegal insider trading.


But the new study has found evidence that suggests the preplanned trades are vulnerable to abuse by executives.

“It has become almost like a ‘get-out-of-jail free’ card,” Mitts said.

Mitts’ study, issued as a white paper published on the Social Science Research Network, does not accuse any executives of illegal activity. He calls on the SEC to examine the apparent correlation between 10b5-1 plans and the disclosure of good news. The Washington-based progressive watchdog group Accountable has also called on the SEC to investigate the Pfizer and Moderna trades.

Last month, in response to questions about the sales during a Senate hearing, SEC Chairman Jay Clayton called for a “cooling-off period” of at least four to six months so that executives did not immediately sell shares after creating 10b5-1 plans.

Mitts said one way a 10b5-1 plan could be problematic was if it was set up so that a sale was automatically triggered once the stock reached a certain price. An executive could schedule a sale knowing the company was likely to release positive news about a drug or other product that could boost the company’s stock to the sale price. And having a sale planned could incentivize an executive to strategically release bursts of positive news meant to bump up the stock price, Mitts added.

But because the details or existence of 10b5-1 plans do not need to be disclosed, there is little transparency about the process. Executives often add a footnote to disclosure forms that certain trades have been made as part of a 10b5-1 plan, but they’re not required by law to do so, and the disclosures typically come out one or two business days after the trades.

“You’re taking advantage of investors. They have no clue they’re trading against a massive sell order” by executives, Mitts said. “If you’re a corporate insider, you owe your shareholders a duty of loyalty. You have to be transparent with them.”


The $5.6 million in stock sales by Bourla, the Pfizer CEO, were made as part of an existing 10b5-1 plan he renewed Aug. 19, the day before the company announced positive early data on its vaccine. The sale was set into motion when the company’s stock hit the plan’s price target, the company told The Times in a statement last week. Bourla set up the plan as part of his personal financial planning, and his net worth “remains overwhelmingly tied to Pfizer’s stock performance,” the statement said.

Moderna said last week that to “avoid any distraction as we pursue our mission,” its executives and board members had agreed not to adopt any new 10b5-1 plans, amend existing ones, or engage in unscheduled sales of Moderna stock on the open market until the vaccine was submitted for final FDA approval or the vaccine project was stopped.

The study surveyed transactions from every publicly traded company across numerous sectors, including energy, real estate, industrials, utilities, information technology and others. It found the highest volume of 10b5-1 sales on good-news days in the healthcare industry, followed by the consumer staples and consumer discretionary sectors. Pharmaceutical and biotech firms may be driving the high numbers in the healthcare industry, Mitts said. Products from those fields tend to be “make or break” innovations, causing executives whose compensation is paid mostly in stock options to feel more pressure to cash in on good news.

Mitts’ analysis included transactions made by an executive at Nantkwest, a company that is owned by Patrick Soon-Shiong, also owner of the Los Angeles Times. NantKwest and a privately held company of Soon-Shiong’s, ImmunityBio, are jointly developing a COVID-19 vaccine.

NantKwest’s president and chief administrative officer, Barry J. Simon, made a total of $5.5 million in stock sales from May through July, according to SEC filings. The trades were called for in a 10b5-1 plan Simon set up Dec. 12, 2019, weeks before the first reports of the virus emerged from Wuhan, China.

There are no records of Soon-Shiong selling any NantKwest shares this year, according to the Equilar data.


Some investment experts say there is nothing nefarious about 10b5-1 plans or the decisions by executives to reduce holdings in their own companies.

Andrew Left, an activist short seller who leads Citron Research, said it might be financially smart for the executives to offload some of their company’s shares while enthusiasm and interest in their vaccines were high. He compared it to finding a gold mine: Your stock may be highest when you announce that you have struck gold, so why wait until the gold is actually dug up?

“Does the drug work? Is the info they’re giving to the Food and Drug Administration accurate? If it is, then God bless them. Let them sell and do whatever they want to do,” Left said.

John Longo, a professor at Rutgers Business School and chief investment officer and portfolio manager at Beacon Trust, said 10b5-1 plans were a very common and legal way for executives to diversify their holdings. He cautioned, though, that selling a majority of one’s stock in a single day — as Pfizer’s CEO did — warranted more scrutiny.

“That raises more concerns,” he said, “because you would like to see the selling spread across several months. You would like to see 25% or less of someone’s shares sold.”

Still, the stock sales by vaccine company leaders — and the use of 10b5-1 plans more broadly — is causing concern among some who track the issue closely.


Daniel Taylor, a professor of accounting at the Wharton School at the University of Pennsylvania, said it was not common for executives to cash out their stock in advance of issuing a highly anticipated new product.

“They’re selling a vaccine that people are already skeptical of,” Taylor said. “There is a point when the actions of the executives will affect what people think of the vaccines themselves.”