When Stéphane Bancel took the top job at Moderna 10 years ago, he warned his wife the business had only a 5 per cent chance of success.

The Boston-based biotech was trying to invent a new generation of medicines based on an unproved genetic engineering technique and, instead of investing in drugs one by one, was aiming to raise record amounts of money to build a platform that would work to develop the entire class of new products.

Thanks to the biggest public health crisis in a generation, it now looks likely that Moderna will win approval for the first product created by this approach three or four years ahead of schedule, after early data published this week showed its Covid-19 vaccine to be almost 95 per cent effective

On Sunday, while Mr Bancel waited anxiously for an independent review of the results, he tried to distract himself by working on Moderna’s other vaccines. Now, he feels the positive Covid-19 data has given a boost to their prospects too. 

“There is going to be a big acceleration of growth,” Mr Bancel told the Financial Times. “While we have six vaccine today in development, why wouldn’t you want 10 or 15?” 

Moderna chief Stéphane Bancel has defended charging the US government $50 for each two-dose course, arguing it is a ‘good deal’
Moderna chief Stéphane Bancel has defended charging the US government $50 for each two-dose course, arguing it is a ‘good deal’ © Gretchen Ertl/FT

Moderna, which was founded in 2010 and is lossmaking, will hope its promising Covid-19 vaccine has vindicated its bet on messenger ribonucleic acid (mRNA), its unusual platform strategy and its decision to partner with the US government rather than a big pharma company, allowing it to pocket more of the profits. Its shares have risen more than 420 per cent since it went public in 2018 with a $7.5bn valuation, the biggest biotech initial public offering ever.

After the results were published on Monday, they rose a further 10 per cent, while its market capitalisation is hovering around the $39bn mark.

Line chart of Moderna’s soaring share price ($)

But some doubters remain: the vaccine market has always been a less profitable corner of the pharma industry; Moderna still needs to prove it can manufacture billions of doses; and its Covid-19 vaccine may end up as just one in a crowded market.

A new type of vaccine

Moderna’s vaccines are all based on messenger RNA, which is used to deliver part of the genetic code of the virus to teach the immune system to recognise it and fight it off. Alongside the Pfizer/ BioNTech vaccine, which is also based on mRNA and announced positive results last week, it is set to smash records for the fastest ever vaccine to market.

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Mr Bancel describes mRNA as an “information molecule” — and says, like a tech company, Moderna can move quickly. It was able to develop a first version of the vaccine in just 42 days, without having live samples of the virus in the lab. All it needed was its genetic code, which was published online by Chinese scientists in January. 

“The only thing we need is a genetic sequence, which costs around five bucks,” Mr Bancel said. 

Infographic explaining how mRNA vaccines work

Noubar Afeyan, chief executive of Flagship Pioneering, the venture capital company that incubated Moderna, said this year was helping to prove that mRNA vaccines would work in large groups of people. The Moderna and Pfizer/ BioNTech trials combined have involved about 70,000 people. 

But the speeded-up ending has come after a long journey. “It turns out $4bn, several hundred people and 10 years later, you get to this point,” said Mr Afeyan, who is also Moderna’s chairman.

It started with glow-in-the-dark mice

Derrick Rossi, a stem cell biologist who co-founded Moderna, realised mRNA technology had promise when he used it to create glow-in-the-dark mice. He injected their thighs with the genetic code for making a luminous protein and they started to light up in the dark. The more code he injected, the more they glowed.

He became fascinated with the potential of mRNA, which translates DNA into proteins, hoping it could be used to treat rare genetic diseases. As well as vaccines, Moderna is working on mRNA therapeutics for rare diseases, heart problems and cancer. 

But Mr Rossi knew it would be hard to deliver mRNA into the body, so he recruited Robert Langer, an MIT engineering professor. He also wanted a doctor on the team, bringing in Kenneth Chien, a physician-scientist now at Sweden’s Karolinska Institute. Over breakfast at Henrietta’s Table in Harvard Square, they agreed to work together.

Dr Chien said it was clear now that mRNA was a “sleeping beauty”, whose importance had grown over time. But back then, there were serious concerns that it was unstable and expensive to produce in large amounts.

Moderna spent its early years working on these hurdles. Mr Afeyan said the company started from the premise that it would work — and then set out to prove it. The promise was mRNA could be switched in and out of cells “almost like a cassette”, delivering instructions to create different proteins, he said.

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“You could imagine tens and hundreds of products, not just one drug every five to 10 years,” he said. “We ended up concluding that making a vaccine was the least difficult thing for us to do.” 

The pitch to investors

To make the most of this flexibility, Moderna did not want to follow the traditional biotech model of focusing on one or two products for years until they were approved. Instead, Lorence Kim joined as chief financial officer in 2014 from Goldman Sachs, to raise money to build a large portfolio of products and a high-tech manufacturing facility. 

Within his first year, he had achieved the largest ever private biotech funding round by far at $502m, attracting investors with a pitch more like a tech company: funding infrastructure that would spawn an entire pipeline of products.

“Every time you turn the crank again, it gets cheaper, faster, less risky,” said Mr Kim, who left Moderna in June to become a partner at Third Rock Ventures.

As it prepared to go public in 2018, Mr Kim took Moderna on a global roadshow, meeting hundreds of potential investors in the US, Europe and Asia. 

But one person familiar with the roadshow said the company was met with a certain amount of scepticism, with biotech specialists questioning whether there was enough data to support the valuation.

A production line at Lonza, the Swiss company where Moderna’s Covid-19 vaccine will be produced
A production line at Lonza, the Swiss company where Moderna’s Covid-19 vaccine will be produced © REUTERS

“It was a company developing the mRNA technology, with a large breadth of potential applications. But it had not drilled down on a single product yet,” the person said. 

Other biotech companies working on a vaccine have partnered with big pharma groups. BioNTech is developing its mRNA vaccine with Pfizer, and CureVac has taken investment from GlaxoSmithKline. In its early days, Moderna signed a deal with AstraZeneca, but with this vaccine, it is working alone.

Instead, it raised $1.3bn in a secondary offering after it published positive early data in May, and has taken about $2.5bn from the US government. Mr Bancel said partnering with a big group might have slowed down decision-making — and now it can keep more money from the Covid-19 vaccine to invest in the other products. 

“If you look at Pfizer/BioNTech, they are splitting profits 50:50. In our case, we’re going to keep the profit,” he said. 

Yet this reliance on taxpayer funds has raised concerns. Activists have criticised Moderna for pricing its vaccine higher than competitors. While some, like J&J, have promised that a vaccine will be sold on a not-for-profit basis during the pandemic, Moderna’s price is $25 a dose for the US government, for a two-dose course. For smaller orders, it will charge up to $37 a dose.

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Mr Bancel said the US government was still getting a “good deal” — and the entire world was benefiting from its investment.

The US defence department is also probing Moderna’s patents after accusations it did not disclose government funding in the applications. Moderna had taken grants from the Defense Advanced Research Projects Agency for development of its vaccine technology.

All the while, stock sales by senior executives have raised eyebrows. Mr Bancel has sold $54m of shares, according to S&P Global, although it was on a scheduled plan and most of his net worth remains in Moderna stock.

A market disrupted by Covid

There are still vital unanswered questions about the Covid-19 vaccines under development, such as how long protection against the virus lasts, and if they prevent transmission or just stop people developing the disease.

But there are also important business questions that cannot be answered in a clinical trial. Matthew Harrison, an analyst at Morgan Stanley, said that another test for Moderna was manufacturing at scale.

Instead of relying on a large pharmaceutical company, Moderna has a deal with Swiss contract manufacturer Lonza and a very flexible goal of producing between 500m and 1bn doses next year. 

Vaccines have historically been lower margin products that provide steady revenue because of a lack of competition. But Covid-19 is likely to be different: many more companies have invested in manufacturing and new entrants such as Moderna are in the market. 

“The question mark is now, given how much investment there’s been, what sort of disruption is going to occur?” Mr Harrison said.

Mani Foroohar, an analyst at SVB Leerink, said the market might become “messy [and] competitive”, if a number of vaccines succeed. 

He thought Moderna’s share price had been boosted by “euphoria and enthusiasm” — and was not convinced that success with Covid-19 guaranteed an easy path for others. 

“No vaccine immunises [against] the law of economics,” he said. 

Additional reporting by Donato Paolo Mancini in London and David Carnevali in New York

Via Financial Times