New York Attorney General Letitia James has filed a lawsuit against Robert G. Kramer, the former chief executive officer of Emergent BioSolutions, Inc.
Kramer is being accused of insider trading after allegedly selling company stock worth more than $10.1 million while in possession of non-public information about serious contamination problems affecting COVID-19 vaccine production.
The lawsuit, filed under New York’s Martin Act, alleges that Kramer illegally profited by executing a stock trading plan while Emergent was facing undisclosed manufacturing failures tied to its contract with AstraZeneca PLC to produce the company’s COVID-19 vaccine.
In a related settlement, Emergent has agreed to pay $900,000 in penalties for approving Kramer’s trading plan and to implement reforms to its executive stock-trading policies.
“Corporate executives who use insider information to illegally trade company stocks and make a profit betray the public’s trust,” Attorney General James said in a statement. “At the height of the COVID-19 pandemic, Robert Kramer illegally profited millions by selling his company shares while knowing that Emergent faced serious issues producing vaccines for millions of people.”
Emergent, a biopharmaceutical contractor for pharmaceutical companies and the federal government, entered into two contracts worth $261 million with AstraZeneca in the summer of 2020 to manufacture a large-scale commercial supply of the COVID-19 vaccine. Following the announcement, Emergent’s stock price surged more than 43 percent, rising from $94.99 to $136.49.
However, by early fall 2020, Emergent began experiencing significant manufacturing difficulties at its production facility, including contamination that rendered large quantities of the AstraZeneca vaccine unusable. According to the attorney general’s investigation, Kramer was made aware of these issues well before they became public.
Court filings state that on Oct. 6, 2020, Emergent’s executive vice president for manufacturing shared internal materials with Kramer detailing aborted and contaminated vaccine batches. By Oct.13, the company concluded that multiple batches were likely lost due to contamination. The following day, Kramer instructed his investment advisor to implement a stock trading plan.
While executives are permitted to trade shares under pre-arranged plans allowed by SEC Rule 10b5-1, the lawsuit alleges that Kramer’s plan was created while he possessed material non-public information, making the trades unlawful under both federal and New York law.
Despite ongoing contamination problems that threatened Emergent’s ability to meet production timelines, the company did not publicly disclose the issues during investor calls and regulatory filings in early November 2020, according to the lawsuit. On Nov. 13, Emergent approved Kramer’s trading plan.
Kramer subsequently sold company stock in January and February 2021, receiving more than $10.1 million in proceeds. Shortly after his final sale on February 8, 2021, Emergent’s stock price began a sustained decline and has not recovered. In April 2021, the U.S. Food and Drug Administration permanently halted Emergent’s production of the AstraZeneca vaccine.
Attorney General James is seeking damages, disgorgement of profits, and costs from Kramer for alleged violations of state securities laws.
The case is being handled by attorneys from the Investor Protection Bureau and the Economic Justice Division within the Office of the Attorney General.
