Early Enthusiasm for Cancer Drug Reformulated for Ophthalmic Use

 An ocular implant containing a reformulated cancer drug preserved vision and stabilized retinal thickening for up to a year while dramatically reducing treatment burden for neovascular age-related macular degeneration (nAMD), according to a small study reported here.

Both the axitinib (Inlyta)-containing OTX-TKI implant and bimonthly aflibercept (Eylea) produced a 1- to 2-letter improvement in best-corrected visual acuity (BCVA) at 52 weeks, while mean central subfield thickness (CSFT) increased by about 20 µm with the implant versus a decrease of about 2 µm with intravitreal aflibercept, a clinically insignificant difference.

Patients who received the bioresorbable implant had an 89% reduction in treatment burden as compared with aflibercept treatment, reported Robert L. Avery, MD, of California Retina Consultants in Santa Barbara, at the American Society of Retina Specialistsopens in a new tab or window (ASRS) meeting.

"The study showed good safety, no signs of drug-related problems," said Avery. "The bioresorption of the implant is complete by 12 months, and due to the pharmacokinetics and pharmacodynamics, it seems like this would warrant a re-treatment in 9 to 12 months."

In response to a question, Avery said the implant is less likely to be noticeable to a patient, in comparison with a dexamethasone implant, for example.

"It goes through a 25-gauge needle instead of 23-gauge, and it's more translucent ... because of its size and not casting as much of a shadow," he said. "I would not say that no one has seen it, but I think it is a lot less likely."

A multitargeted tyrosine kinase inhibitor (TKI), axitinib has 10 times greater preclinical potency for inhibiting VEGF receptors, particularly VEGFR2, "the most pathologic of the receptors," said Avery. OTX-TKI combines the potent TKI with a bioresorbable implant made from proprietary technology developed for targeted, sustained drug delivery. The device has an estimated drug-delivery interval of 9 to 12 months.

Avery reported findings from a small randomized (3:1) trial comparing the implant to intravitreal aflibercept administered every 8 weeks. Eligible patients had already received intravitreal anti-VEGF therapy. Patients allocated to OTX-TKI received a single intravitreal dose of aflibercept 4 weeks after implantation, followed by sham injections to mimic the aflibercept control arm.

The primary outcomes were safety, changes in BCVA and CSFT, and need for supplemental anti-VEGF injections. Criteria for supplemental injections were a 10-letter loss in BCVA, a 5-letter loss plus a 75-µm increase in CSFT, or a new macular hemorrhage.

The study included a total of 21 advanced-age patients (mean ages of 76 and 84) with a mean nAMD duration of 18 months. Baseline mean BCVA was about 70 letters, and mean CSFT was 274 µm in the OTX-TKI group and 241 µm in the aflibercept group. Patients in each group had received an average of eight intravitreal injections in the previous 12 months.

At 6 months, 80% of patients in the OTX-TKI group had received no supplemental anti-VEGF injections. About three-fourths remained free of supplement injections at week 40, tailing off to about 60% to week 52 (33% inclusive of week 52).

"These were heavily treated patients, most of them receiving monthly injections," said Avery. "Afterwards, there's a dramatic 89% reduction in the treatment burden ... The median time to rescue injection was 44 weeks, so the implant was durable."

No drug-related ocular or systemic adverse events (AEs) occurred in the implant group. One patient developed endophthalmitis following the required aflibercept injection at 4 weeks, and the inflammation resolved with antibiotics. The same patient developed a mild cataract that resolved.

Avery said a planned phase II/III pivotal trial of OTX-TKI could begin before the end of the year.

In a separate report at ASRS, suprachoroidal injection of axitinib achieved a similar reduction in treatment burden while maintaining visual acuity during 6 months of follow-up, reported Rahul N. Khurana, MD, of Northern California Retina Vitreous Associates in Mountain View.

Khurana presented results from a 28-patient dose-escalation study of CLS-AX, an axitinib suspension administered by intrachoroidal injection. Eligible patients had nAMD, two or more anti-VEGF treatments in the previous 4 months, and confirmation of persistent, active disease.

Khurana focused on 14 patients treated with the three highest doses of CLS-AX. The patients had a mean age of 83, a baseline mean BCVA of 63 letters, and a mean CSFT of 208 µm. Duration of nAMD averaged 53 months, and the patients had received a cumulative total of 35 anti-VEGF injections (approximately 10 per year).

In the 6 months prior to treatment with CLS-AX, the study participants had received an average of five intravitreal injections. During the 6-month follow-up after CLS-AX administration, the mean number of injections was about one, representing reductions in treatment burden of 77% to 85% across the three dose groups. BCVA remained stable throughout the 6 months of follow-up.

"CLS-AX had an excellent safety profile at all doses," said Khurana. "There were some really exciting early signs of durability, with a nearly 80% reduction in the treatment burden. CLS-AX is now being evaluated in a phase IIb clinical trial for neovascular AMD."

Disclosures

The OTX-TKI study was supported by Ocular Therapeutics.

Avery disclosed relationships with 4DMT, Adverum, Alcon, Aldeyra, Alimera, Allergan, Amgen, Apellis, AsclepiX, Aviceda, Bausch + Lomb, Cardinal Health, Clearside, Coherus, EyePoint Pharma, ForwardVue, Genentech, Glaukos, InFocus Capital Partners, Iridex, Imprimis, Ingenia, Iveric, Kodiak, Kriya, Notal Vision, Novartis, NVasc, Ocular Therapeutics, OcuTerra, Outlook, Pr3vent AI, Pulsmedica, RegenXBio, Replenish, Re-Vana Therapeutics, Santen, Tenpoint Therapeutics, Verana Health, Vial, and Visionary Ventures.

The CLS-AX study was supported by Clearside Biomedical.

Khurana disclosed relationships with Annexon, Apellis, Arrowhead Pharmaceuticals, Bausch + Lomb, Chengdu Kanghong, Clearside Biomedical, EyePoint, Genentech, NGM Biopharmaceuticals, Opthea, Oxurion, Regeneron, and RegenXBio.

Primary Source

American Society of Retina Specialists

Source Reference: opens in a new tab or windowAvery RL, et al "OTX-TKI for the treatment of neovascular age-related macular degeneration: 12-month results from a U.S. clinical trial" ASRS 2023.

Secondary Source

American Society of Retina Specialists

Source Reference: opens in a new tab or windowKhurana RN, et al "Safety and tolerability of suprachoroidal injection of CLS-AX in neovascular AMD with persistent activity after anti-VEGF therapy" ASRS 2023.

https://www.medpagetoday.com/meetingcoverage/asrs/105732

Routinely Removed Organ Linked to Increased Mortality, Cancer Risk

 Thymectomy carried a substantially increased risk of all-cause mortality and cancer for adults, a "landmark" study showed.

Adults who had undergone thymectomy had at least double the risk of all-cause mortality and cancer at 5 years post-surgery compared with matched patients who had undergone cardiothoracic surgery without thymectomy:

• All-cause mortality: 8.1% vs 2.8% (relative risk [RR] 2.9, 95% CI 1.7-4.8)
• Cancer: 7.4% vs 3.7% (RR 2.0, 95% CI 1.3-3.2)

Autoimmune disease did not differ substantially between groups overall, reported David T. Scadden, MD, of the Center for Regenerative Medicine at Massachusetts General Hospital in Boston, and colleagues in the New England Journal of Medicineopens in a new tab or window.

But after excluding patients with potentially confounding conditions (preoperative infection, cancer, or pre-existing autoimmune disease), autoimmune disease was a relative 50% more common after thymectomy (12.3% vs 7.9%; RR 1.5, 95% CI 1.02-2.2).

Even when comparing unmatched thymectomy patients to the general population, all-cause mortality was higher in the thymectomy group (9.0% vs 5.2%), as was mortality due to cancer (2.3% vs 1.5%).

Incidental thymectomy is common during cardiothoracic surgery due to the pyramid-shaped organ's location in the chest in front of the heart where surgeons need to access the surgical field.

While the thymus plays a critical role in normal immune system development, it was thought to be safe to remove in adulthood, "particularly since the thymus naturally involutes with age," the researchers noted.

Their conclusion from the study was that the thymus continues to be functionally important for human health in adulthood.

In an accompanying editorialopens in a new tab or window, Naomi Taylor, MD, PhD, of the National Cancer Institute Pediatric Oncology Branch in Bethesda, Maryland, called the research a "landmark" study with "important repercussions for the care of patients undergoing cardiothoracic surgery and strongly argues against total thymectomy if it can be avoided."

Prior studies had shown that the adult thymus continues to produce T lymphocytes, under both pathologic and physiologic conditions, and this study supports an important role of that function, she noted.

"[I]t is remarkable that the possibility that thymectomy would lead to detrimental effects in adults without underlying pathologic conditions was only studied in depth 25 years later," she added.

The study used the Mass General Brigham Research Patient Data Registry to identify all 1,420 adults who had thymectomy at Massachusetts General Hospital from January 1993 to March 2020. Patients who died within 90 days after the procedure or who had nonlaparoscopic cardiac surgery within 5 years after the procedure were excluded.

Patients were matched by sex, race, preoperative conditions (infections, cancers, or autoimmune disease), and age (within 5 years) to all 6,021 adults who had nonlaparoscopic cardiac surgery and no history of thymectomy at the same center from January 2000 through December 2019. Along with the exclusions for mortality or repeat cardiac surgery, the control group couldn't have preoperative heart failure.

The general population comparison with CDC data included an adjustment of 17% to account for the difference between overall U.S. mortality and that in Massachusetts, as well as proportional weighting to the distribution of ages at thymectomy and years in which surgery was performed.

The study also included some blood testing to start unraveling the mechanism. A subset of 22 thymectomy group patients and 19 control group patients with a mean follow-up of 14.2 postoperative years had T-cell production and plasma cytokine levels measured.

Among the significantly altered levels of 15 different cytokines in the thymectomy versus control groups, interleukin-23, interleukin-33, thrombopoietin, and thymic stromal lymphopoietin were more than 10 times as high as control levels, Taylor pointed out.

Thymectomy patients had reduced production of newly formed T cells compared with controls.

Higher T-cell receptor oligoclonality was found after thymectomy in the subset of patients with postoperative cancer, which would tend to support "a mechanism of attenuation of T-cell differentiation after thymus removal," Taylor noted.

"However, the diminished richness of the [T-cell receptor] repertoire may be related to the significantly higher levels of inflammatory cytokines that were detected in patients who had undergone thymectomy, regardless of whether cancer developed after surgery," she added.

"Thus, the immune environment in patients who have undergone thymectomy is biased toward a cytokine milieu that is known to result in immune dysregulation and inflammation," she wrote. "Although the mechanisms contributing to this microenvironment are not clear, it is tempting to speculate that the thymus may regulate T-cell function through the physiological recirculation of mature T cells into this organ."

"[O]ne could hypothesize that the recirculation of activated T cells to the thymus may induce self-tolerance or negative selection, providing a level of regulation that would be removed by thymectomy," she said.

The researchers cautioned that the retrospective and observational study design precluded determination of causality of the findings.

"However, they provide evidence of an association between thymectomy and adverse outcomes in patients," Scadden and colleagues concluded. "These results strongly suggest that when possible, preservation of the thymus should be a clinical priority."

Disclosures

This study was supported by the Tracey and Craig A. Huff Harvard Stem Cell Institute Research Support Fund, the Gerald and Darlene Jordan Professorship of Medicine, and a grant from the National Institutes of Health. Kooshesh received support from the American Society of Hematology, and a co-author received support from the Swedish Research Council and the John S. Macdougall Jr. and Olive R. Macdougall Fund.

Scadden also disclosed financial relationships with Agios Pharmaceuticals, Clear Creek Bio, the Craig Huff Family, Editas Medicine, Fate Therapeutics, Garuda Therapeutics, LifeVault Bio, Lightning Biotherapeutics, Magenta Therapeutics, the NIH, Simcere of America, Sonata Therapeutics, and Vcanbio, as well as patents on methods to enhance T-cell regeneration and bioengineered scaffolds for modulation of the immune system.

Taylor disclosed no relationships with industry.

Primary Source

New England Journal of Medicine

Source Reference: opens in a new tab or windowKooshesh KA, et al "Health consequences of thymus removal in adults" N Engl J Med 2023; DOI: 10.1056/NEJMoa2302892.

Secondary Source

New England Journal of Medicine

Source Reference: opens in a new tab or windowTaylor N "The thymus -- Not a graveyard after all, even in adults?" N Engl J Med 2023; DOI: 10.1056/NEJMe2306576.

https://www.medpagetoday.com/surgery/thoracicsurgery/105729

Novel Drug Reduces Acute Pain After Common Surgeries

 A novel, investigational NaV1.8 sodium channel blocker known as VX-548 reduced acute pain after abdominoplasty or bunionectomy at the highest dose, but not at lower doses, two phase II trials showed.

The primary endpoint was the time-weighted sum of the pain-intensity difference (SPID) over 48 hours (SPID48), calculated from Numeric Pain Rating Scale (NPRS) scores (which range from 0 to 10, with higher scores indicating greater pain) at 19 time points after the first dose of VX-548 or placebo.

In the abdominoplasty

opens in a new tab or window trial, the mean difference in time-weighted SPID48 between high-dose VX-548 and placebo was 37.8 (95% CI 9.2-66.4), said Jim Jones, MD, PharmD, of Vertex Pharmaceuticals in Boston, and co-authors.

In the bunionectomyopens in a new tab or window study, the mean SPID48 difference between high-dose VX-548 and placebo was 36.8 (95% CI 4.6-69.0), the researchers wrote in the New England Journal of Medicineopens in a new tab or window.

Sodium channels are a logical target for pain reduction, noted Mark Wallace, MD, of the University of California San Diego, in an accompanying editorialopens in a new tab or window.

"Attempts to use systemic nonselective sodium channel blockers have not succeeded because of dose-limiting side effects," Wallace pointed out. "Now, years of research on sodium channel blockers that are specific to the subtypes located on structures of the peripheral nervous system have come to fruition."

"It is perhaps disappointing that the effect size of this very original selective peripheral sodium channel blocker was small, and limited conclusions can be made about its effectiveness as compared with other agents because it was not directly compared with hydrocodone bitartrate-acetaminophen, which is a standard drug for the treatment of acute pain," he added. "However, these trials represent an early foray into an exciting new class of drugs in a difficult field."

Opioids are used to treat acute pain

opens in a new tab or window, but come with safety concerns about the possibility of misuse and addiction. Non-opioid pain treatments include nonselective sodium-channel inhibitors like lidocaine, nonsteroidal anti-inflammatory drugs (NSAIDs), and acetaminophen. Most approved analgesic drugs either act on the opioid-receptor system or are NSAIDs, Jones and co-authors noted.

"The voltage-gated sodium channel NaV1.8 is a therapeutic target for pain because of its role in transmitting nociceptive signals and its selective expression in peripheral nociceptive neurons of the dorsal-root ganglia," they wrote.

Jones and colleagues randomized 303 participants in the abdominoplasty study and 274 in the bunionectomy trial. Baseline mean NPRS scores were 7.2 to 7.4 in the abdominoplasty trial and 6.6 to 6.9 in the bunionectomy trial.

"Abdominoplasty, which is considered to be a model of soft-tissue pain, and bunionectomy, which is considered to be a model of bone pain, are common surgical procedures resulting in moderate-to-severe postoperative acute pain that is generally treated with analgesic medicines, including opioids, NSAIDs, and acetaminophen," the researchers noted.

Baseline demographic and clinical characteristics were similar across groups in each trial. Most participants were women and white.

In the abdominoplasty trial, participants were randomly assigned 1:1:1:1 to receive one of the following over 48 hours: a high-dose of VX-548 (100-mg oral loading dose followed by a 50-mg maintenance dose every 12 hours), a middle dose of VX-548 (60-mg loading dose followed by a 30-mg maintenance dose every 12 hours), hydrocodone bitartrate-acetaminophen (5 mg of hydrocodone bitartrate and 325 mg of acetaminophen every 6 hours), or placebo every 6 hours.

In the bunionectomy trial, participants were randomly assigned in a 2:2:1:2:2 ratio to receive either high-dose VX-548, middle-dose VX-548, low-dose VX-548 (20-mg loading dose followed by a 10-mg maintenance dose every 12 hours), hydrocodone bitartrate-acetaminophen every 6 hours, or placebo every 6 hours.

The main analysis compared each dose of VX-548 with placebo. Participants who received lower doses of VX-548 had results similar to placebo.

Most adverse events were mild or moderate, and headache and constipation were common. In the abdominoplasty trial, three participants had serious adverse events, including one in the middle-dose VX-548 group; none were considered treatment-related. No serious adverse events occurred in the bunionectomy trial.

In both trials, fewer participants discontinued high-dose VX-548 than placebo or hydrocodone bitartrate-acetaminophen. Both studies appeared to show a treatment effect with VX-548 compared with hydrocodone bitartrate-acetaminophen, Jones and co-authors said.

Most participants were women, which was a limitation, the researchers acknowledged. No accepted effect size based on SPID is considered minimally clinically meaningful, they added.

"Sodium channel modulation is one of many mechanisms involved in pain transmission, and it is perhaps unlikely that modulating just one mechanism will lead to large effects on pain," observed Wallace. "At the moment, postoperative pain is still best managed by multimodal therapies, such as those that combine drugs with different mechanisms."

Disclosures

This study was funded by Vertex Pharmaceuticals.

Jones is the vice president of clinical development at Vertex. Several co-authors are also employees of the firm.

Wallace had no disclosures.

Primary Source

New England Journal of Medicine

Source Reference: opens in a new tab or windowJones J, et al "Selective inhibition of NaV1.8 with VX-548 for acute pain" N Engl J Med 2023; DOI: 10.1056/NEJMoa2209870.

Secondary Source

New England Journal of Medicine

Source Reference: opens in a new tab or windowWallace MS "Trials for managing acute pain -- A clinically meaningful small effect size?" N Engl J Med 2023; DOI: 10.1056/NEJMe2305480.

https://www.medpagetoday.com/neurology/painmanagement/105735

'COVID Cleared of Increasing Risk of Type 1 Diabetes in Kids?'

 COVID-19 infection didn't appear to precipitate a diagnosis of type 1 diabetes in kids, a prospective multinational cohort study suggested.

Researchers tested more than 4,500 adolescents every few months for type 1 diabetes, SARS-CoV-2 infection, and vaccination antibodies from January 2020 through December 2021. However, there was no difference among the 45 kids diagnosed with type 1 diabetes during this time when it came to COVID-19 infection history, reported Jeffrey Krischer, PhD, of the University of South Florida in Tampa, and colleagues.

According to the correspondence published in the New England Journal of Medicine

opens in a new tab or window, five of these children were diagnosed with type 1 diabetes prior to testing positive for SARS-CoV-2 nucleocapsid antibodies. One child was diagnosed with diabetes after a COVID infection.

As for the other 39 kids diagnosed with type 1 diabetes during the study, they never had a positive test for nucleocapsid antibodies. Of these, 30 were never vaccinated, two were vaccinated prior to type 1 diabetes diagnosis, four were vaccinated after the diagnosis, and three were not tested.

"COVID infections or vaccinations are not implicated in promoting type 1 diabetes in adolescents," Krischer told MedPage Today.

"There have been many articles from around the world that have noted an increase in the number of type 1 diabetes cases comparing the pre-pandemic years to the pandemic years," he said. "While the authors concluded that the increase was due to COVID, none of the studies included systematic COVID testing."

Several studies released over the past few years suggested a link between COVID-19 infection and development of diabetes, particularly in children. Early in 2022, CDC data

opens in a new tab or window indicated that kids who tested positive for COVID had more than a two-fold higher risk for developing new-onset diabetes -- type 1, type 2, and other types of diabetes -- compared with those with other respiratory infections.

Other studies looking specifically at type 1 diabetes showed a similarly elevated riskopens in a new tab or window compared with other respiratory infections, as well as a higher incidence of type 1 diabetes diagnoses in childrenopens in a new tab or window during the pandemic.

"The increase in the number of cases seen during the pandemic was due to other factors," Krischer explained. "It might have been the result of enhanced monitoring for the disease or more rapid clinical presentations -- for example, cases that would have been diagnosed later, but were diagnosed earlier because of symptoms."

"We wanted to know the extent of COVID infections and vaccinations among children," he added. "The TEDDY projectopens in a new tab or window is investigating possible causes of type 1 diabetes and this would be an important finding, as there is much speculation about an infectious origin of the disease."

While an infectious origin of type 1 diabetes is still being debated, there are "theoretical biologic reasons why COVID could be such an agent," he noted.

However, despite this possibility, the current study found no evidence to suggest a link between the two.

Among the 4,586 children ages 9 to 15 included in the study, 15.4% tested positive for SARS-CoV-2 nucleocapsid antibodies. This included 15% of 4,146 children without islet autoantibodies and 18.6% of 440 children with islet autoantibodies.

Looking specifically at the kids without islet autoantibodies, only 1% (40 kids) experienced seroconversion to persistent and confirmed positivity for islet autoantibodies. Of these 40 kids, only five had nucleocapsid antibodies -- which appeared after seroconversion. The other 35 kids never tested positive for nucleocapsid antibodies.

That being said, none of the other 623 children without islet autoantibodies who had SARS-CoV-2 infection experienced seroconversion. Seroconversion was seen only in the 1% of children without islet autoantibodies who didn't have a SARS-CoV-2 infection.

During the study, kids were tested every 6 months for type 1 diabetes if they didn't have islet autoantibodies. Those who did were tested every 3 months. All kids were tested for COVID infection and spike antibodies (indicating vaccination) at every follow-up visit. During the 2-year study, children were seen either four or eight times depending on if they had islet autoantibodies.

Participants were located in the U.S., Finland, Germany, and Sweden, with Sweden having the highest rates of COVID-19 among children (21.5%). COVID-19 rates were double for those with a BMI between 36 and 40 (30%).

The narrow age range of children included in the study was a limitation, Krischer and colleagues noted.

Disclosures

Funding was provided by the National Institute of Diabetes and Digestive and Kidney Diseases, National Institute of Allergy and Infectious Diseases, Eunice Kennedy Shriver National Institute of Child Health and Human Development, National Institute of Environmental Health Sciences, the CDC, the Juvenile Diabetes Research Foundation, and National Center for Advancing Translational Sciences awards to the University of Florida and the University of Colorado.

Krischer reported no disclosures. Other study authors reported relationships with Prevention Bio, Sanofi, Diamyd Medical AB, and Janssen, and holding type 1 diabetes-related patents.

Primary Source

New England Journal of Medicine

Source Reference: opens in a new tab or windowKrischer JP, et al "SARS-CoV-2 -- no increased islet autoimmunity or type 1 diabetes in teens" N Engl J Med 2023; DOI: 10.1056/NEJMc2216477.

https://www.medpagetoday.com/endocrinology/type1diabetes/105741

Schrodinger Q2 misses

 Announces IND Clearance for CDC7 Inhibitor SGR-2921, Continued Progress for MALT1 Inhibitor SGR-1505

Delivers Second Quarter Total Revenue of $35.2 Million

Raises 2023 Software Revenue Guidance and Reduces Drug Discovery Guidance

Schrödinger will host a conference call to discuss its second quarter 2023 financial results on Wednesday, August 2, 2023, at 4:30 p.m. ET. The live webcast can be accessed under "News & Events" in the investors section of Schrödinger’s website, https://ir.schrodinger.com/news-and-events/event-calendar. To access the call by phone, please dial 1-888-440-5983 (Toll-Free) or 1-646-960-0202 (Toll) and refer to conference ID 2440689. The archived webcast will be available on Schrödinger’s website for approximately 90 days following the event.

https://finance.yahoo.com/news/schr-dinger-reports-second-quarter-200000439.html

FDA warns that some lots of Tydemy birth control pill may be ineffective

 The Food and Drug Administration said Tuesday that two lots of birth-control pill Tydemy, made by privately held Lupin Pharmaceuticals, "may have reduced effectiveness," which could result in "unexpected pregnancy" due to decreased levels of one of its ingredients, ascorbic acid. The lots affected were distributed in the U.S. between June 3, 2022 to May 31, 2023. The FDA said it had not received any reports of adverse events related to using Tydemy. Lupin issued a voluntary recall and notified consumers on Saturday, the agency said. The company advised patients to continue taking their medication and contact their health care provider for advice about an alternative contraceptive method, the FDA said.

https://www.morningstar.com/news/marketwatch/202308021019/fda-warns-that-some-lots-of-tydemy-birth-control-pill-may-be-ineffective

BlackRock And Its ESG 'Voting Choice' Ruse

 by Andy Pudzer via RealClear Markets,

Amid growing criticism of its environmental, social and governance (ESG) investment  practices, BlackRock has announced that it will offer retail investors in its largest exchange-traded fund (ETF) the opportunity to participate in its “Voting Choice” program. Open to institutional clients since January 2022, this program allows investors to choose from a limited set of options to guide BlackRock in voting their shares. While perhaps an effective PR tool, Voting Choice is little more than a ruse that neither empowers investors nor diminishes BlackRock’s power to impose its ESG goals on American businesses. 

BlackRock’s equity index has about $4.5 trillion in assets under management (AUM), empowering it to cast a whopping 10% of the shareholder votes for the entire S&P 500.  As BlackRock CEO Larry Fink has admitted, BlackRock uses that formidable power to “force behaviors” on the companies in which it invests. 

For example, in his 2020 annual letter to CEOs, Fink stated that BlackRock would use both “disclosures” and “engagement” to ascertain whether companies had operating plans that assume the Paris Agreement’s climate goals are “fully realized.” He cautioned that in 2019, “BlackRock voted against or withheld votes from 4,800 directors at 2,700 different companies” and warned that it would be “increasingly disposed to vote against management and board directors” who failed to perform as instructed.

People noticed.

In August 2022, 19 red state attorneys general wrote to Fink informing him that proxy voting to advance ESG or other ideological causes violated their laws governing fiduciary duties. Ten states passed laws making it clear that such proxy voting is a breach of fiduciary duty. The Voting Choice program is an attempt to create a defense against fiduciary-malfeasance claims by making it appear that BlackRock has seen the errors of its ways and is returning proxy-voting power to investors. But that simply is not the case.

As of March 31, $2.1 trillion of BlackRock’s $4.5 trillion equity index AUM was eligible for Voting Choice. Only 26% was participating. The program’s recent expansion to certain retail investors will slightly increase the eligible amount to $2.3 trillion. If the participation percentage holds, Voting Choice would reduce BlackRock’s discretionary voting power from about 10% of all votes cast for S & P 500 companies to a still-massive 8.7%. That’s assuming no participants choose the option “to continue to vote according to the BlackRock Investment Stewardship policy,” which obviously does nothing to reduce BlackRock’s discretionary voting power.

The program does offer investors the additional option to choose from third-party voting policies offered by proxy-advisor giants ISS and Glass Lewis, both strong ESG supporters themselves.  Actual voting choice – voting the shares individually – does not appear to be an option in the expanded program but would be irrelevant even if it were.

BlackRock is expanding the program to include retail investors in its S & P 500 ETF – with 500 annual shareholder meetings involving thousands of director nominees and shareholder resolutions. It is unlikely that any individuals would assume the burden or have the resources to vote intelligently on every director or resolution even if they had the choice.

The program does offer one arguably non-ESG-supporting option to vote with management, which often (not always) opposes ESG initiatives. But management remains subject to BlackRock’s behind-the-scenes ESG pressure diminishing the value of that option. In his 2020 letter to CEOs, Fink called this pressure “engagement.” More formally, BlackRock calls it “investment stewardship.” Both terms are euphemisms for compulsion – with ESG at the forefront.

According to BlackRock, its “stewardship” and “investment” teams work together to provide corporate management with “insight on environmental, social, and governance (ESG) considerations.” Its goal is to include “the assessment and integration of environmental and social issues, within an investment context” and “hold directors accountable for their action or inaction.” That sounds a lot like what BlackRock has been doing with proxy voting.

But “stewardship” is both more effective and more insidious than proxy voting, as it occurs in C suite conference rooms and on Zoom calls, beyond the purview of both investors and those who would protect their interests. And, make no mistake, “investment stewardship” is where BlackRock’s real power resides. It’s the “investment stewardship” team that votes the shares BlackRock holds – and the CEOs of those companies know it. 

Wiser states will legislatively mandate disclosure of investment-stewardship meetings and make it clear that pressuring companies to support ESG or other ideological objectives over profits is itself a breach of fiduciary duties, even if informal.

In any event, it is very unlikely that red states will allow BlackRock to use its so-called Voting Choice ruse as a shortcut around its fiduciary obligations. Legislators, attorneys general, and state financial officers are following these issues closely. And as the elected stewards of their states’ (and taxpayers’) investments, they are holding BlackRock and other ESG supporting firms accountable.

Andrew F. Puzder is the former CEO of CKE Restaurants, Inc. and a senior fellow at the Heritage Foundation and the Pepperdine University School of Public Policy.

https://www.zerohedge.com/political/blackrock-and-its-esg-voting-choice-ruse