Moderna's stock price skyrocketed as much as 30% on Monday after the biotech company announced promising early results for its coronavirus vaccine. As ordinary investors piled in, two insiders were quietly heading for the exits.
Moderna's chief financial officer and chief medical officer executed options and sold nearly $30 million of shares combined on Monday and Tuesday, SEC filings reviewed by CNN Business show.
The sales occurred after Moderna (MRNA) excited Wall Street before markets opened Monday by announcing encouraging vaccine trial results. Moderna's market value swelled to $29 billion -- even though the company has no marketed products.
After spiking to as high as $87 on Monday, Moderna's stock price has since retreated below $70 as medical experts have debated the importance of the early findings.
The securities transactions were done through automated insider trading plans, known as 10b5-1 plans, that lay out future stock trades at set prices or on set dates.
Lorence Kim, Moderna's chief financial officer, exercised 241,000 options for $3 million on Monday, filings show. He then immediately sold them for $19.8 million, creating a profit of $16.8 million.
The next day, Tal Zaks, Moderna's chief medical officer, spent $1.5 million to exercise options. He immediately sold the shares for $9.77 million, triggering a profit of $8.2 million.
Moderna said the sales were executed under 10b5-1 trading plans that were established in advance.
"These transactions are executing automatically pursuant to these trading plans," the company said.
Although the fortuitous timing of the transactions may raise eyebrows, Charles Whitehead, professor at Cornell Law School, said the stock sales did not appear to raise any legal red flags.
"On its face, there is nothing wrong with these trades," Whitehead said. "It's what a 10b5-1 plan is intended for, assuming the requirements are met."
These plans regulate when and how many shares company insiders, including directors and executives, are allowed to sell. The transactions are typically executed automatically, without the insiders taking any action.
Kim, the CFO, also made stock sales prior to the vaccine news. On May 15, just days before the results were announced, Kim sold 20,000 shares of stock worth $1.3 million.
Moderna's stock has since retreated
Andrew Gordon, director of research services at Equilar, said there would only be a "legal issue if they created or modified their 10b5-1 plan while in possession of material insider information."
"It's not uncommon for insiders to sell shares they own, nor is it bad for them to capitalize on the current stock price," Gordon said in an email.
Moderna's share price fell 10% to $71.67 on Tuesday after health website STAT reported that vaccine experts concluded the company did not release enough information to know how significant the Phase 1 findings are.
By Thursday, Moderna finished at $67.05, down 16% from its Monday close.
"It'll look bad from a PR perspective if Moderna's stock price starts to fall dramatically after all this trading," Gordon said.
Moderna shares did rebound 2% to $68.60 on Friday after Dr. Anthony Fauci, the nation's top infectious disease expert, cheered the vaccine trial findings.
"Although the numbers were limited, it was quite good news because it reached and went over an important hurdle in the development of vaccines," Fauci said during a CNN town hall. That's the reason why I'm cautiously optimistic about it."
'Optics are terrible'
Moderna is one of the early frontrunners to develop a vaccine for Covid-19, which has killed more than 90,000 Americans. The biotech company's vaccine produces neutralizing antibodies that bind to the virus and disable it from attacking human cells.
Moderna said its trial vaccinated dozens of participants and measured antibodies in eight of them.
All eight developed neutralizing antibodies to the virus at levels reaching or exceeding the levels seen in people who have naturally recovered from Covid-19, the company said.
If future studies go well, Moderna has said its vaccine could be available to the public as early as January.
Charles Elson, a corporate governance expert at the University of Delaware, said the Moderna stock sales underscore why he has always believed executives should not sell stock while they are at the company.
"Even if it can be done legally, the optics are terrible because it shows you have a better place to put your money," said Elson. "It shows a lack of confidence in your company going forward."