Coronavirus vaccine czar to divest some holdings amid conflict concerns


Posted on: May 19th, 2020 by ABC News No Comments

Drew Angerer/Getty ImagesBy SOO RIN KIM and KATHERINE FAULDERS, ABC News

(WASHINGTON) — President Donald Trump’s newly appointed vaccine czar, Moncef Slaoui, plans to divest his equity holdings in a company leading the coronavirus vaccine development effort, the Department of Health and Human Services told ABC News on Monday.

The move follows sparks of conflict of interest concerns from ethics experts in part regarding more than $12 million-worth of shares underlying stock options Slaoui holds at Moderna Therapeutics, one of the biotech companies leading the coronavirus vaccine development efforts with sizable funding from the federal government.

“Dr. Slaoui has resigned from his position as an independent member of the Board of Directors for Moderna,” an HHS spokesperson wrote in a statement to ABC News. “Further, he has directed the divestiture of his equity holdings in Moderna and that sale should be effective tomorrow morning.”

The HHS also said that Slaoui has “committed to donate to cancer research all incremental value accrued from his Moderna shares between the evening of Thursday, May 14, prior to the announcement of his position on Operation Warp Speed and the time of sale, scheduled for tomorrow morning.”

Though the stock options are currently estimated to be worth more than $12 million, the structure of the holding indicates that Slaoui would receive more than $5.5 million for a portion of the options based on current stock prices and, an industry expert said, likely forfeit the rest as part of a full divestment.

Some ethics experts said the Moderna divestment plan didn’t go far enough and that they were still concerned about Slaoui’s ties to and history with private industry.

“Because so much is at stake, his integrity needs to be unimpeachable,” said Virginia Canter, chief ethics counsel at Citizens for Responsibility and Ethics in Washington (CREW). “We can’t afford to have somebody who many be looking out for one company’s interest by putting one company’s interests over other companies that actually may have a better product.”

The HHS statement did not discuss any of Slaoui’s other business ties, including his work with a health-focused investment firm. The White House declined to comment for this report, but Moderna’s executives congratulated Slaoui upon the announcement of his appointment to the government post, highlighting his “extensive” experience in vaccine and therapeutic development over the years.

“I greatly appreciate Moncef’s contributions to the Moderna Board in his role of Chair of the Product Development Committee,” said Stéphane Bancel, Moderna’s chief executive officer. “His expertise and skills were invaluable as we approach advanced stages of development across our clinical programs.”

According to financial records filed to the Securities and Exchange Commission, the Moroccan-born Belgian-American researcher and businessman holds more than 155,400 in stock options in Moderna — or more than $12 million-worth based on the company’s stock price as of this report.

Of his current stock options, Slaoui will be able to divest about half his Moderna holdings, according to SEC filings, and could net more than $5.5 million from the sale, based on the current stock price.

The rest, some of which was acquired last year and more just this past month and are not set to be vested until next month and next year, respectfully, are likely to be forfeited, said Courtney Yu, director of research at Equilar, a company that tracks executive compensations. Based on the current stock price, those options represent shares worth more than $6 million, though their value in the future is unknown.

Moderna’s stock price has been skyrocketing since the company announced last month that it has received $483 million in federal funding as part of the coronavirus vaccine development effort. On Monday, the company released promising early results of its phase 1 vaccine testing, saying the results have been “generally safe and well-tolerated.”

The stock price as of Monday afternoon was at $80.00, nearly double the price just at end of last month, when Slaoui last acquired about 18,000 in options at the exercise price of about $46.37, an SEC filing shows. At the beginning of this year, Moderna’s stock price was as low as $19.23. The previous year, another SEC record shows, Slaoui had acquired 54,660 in stock options, with exercise price set at just $14.34.

Financial experts said given his history of yearly acquirement of Moderna stock options and standard practices in the industry, the options appear part of his regular compensation as a member of the board of directors. Moderna has not responded to questions from ABC News about the nature of Slaoui’s stock holdings and whether they were part of his compensation package.

Sen. Elizabeth Warren, D-Mass., had called on Slaoui to sell off his Moderna holdings shortly after his appointment to the vaccine effort by Trump Friday, calling it a “huge conflict of interest.”

Kedric Payne, general counsel and senior director at Campaign Legal Center, said Moderna was not the only financial concern.

“The financial conflict of interest issue is still here, and that interest is that as an official in charge of policy making, he has financial interests that could benefit from that,” Payne told ABC News. “That’s not only from these Moderna options, but as a venture capitalist with this company Medicxi.”

In addition to his leadership roles in various pharmaceutical and biotech companies, Slaoui is also a partner at Medicxi, a life sciences-focused investment firm. According to the firm’s website, the company works with nearly 60 different pharmaceutical and biotech companies across the country and around the world.

Slaoui also serves as chairman of the board at Galvani Bioelectronics, a joint venture between Verily Life Sciences and British pharmaceutical company GlaxoSmithKline (GSK), where Slaoui used to run the vaccine division. GSK announced last month that the company is joining forces with Sanofi in the vaccine development effort as well.

“Given his history and also his involvement with this type of company, it doesn’t give me a great deal of confidence that even if he divests from them, that he will be serving the public interest as opposed to the interests of the companies with which he was associated,” CREW’s Canter said.

Canter said instead of a person from the private sector closely affiliated with corporate interests, the Trump administration should have found experts from the public health sector, the National Institute of Health, hospital officials or from academia.

Canter also said Slaoui would need a waiver on an ethics rule in the Trump administration that sets a two-year cooling off period before an official can serve in a public policy role that directly affects his or her previous employer.

“I think what’s disconcerting about this is, he’s coming from a venture capital firm,” Canter said. “He’s going he’s going to have access to a lot of nonpublic information, proprietary information not only about his own companies but also their competitors.”

“How how long will he be refrained from getting back into the venture capital business after he leaves this position?” Canter added.

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