As mRNA vaccine pioneer commits to advancing 10 candidates to approval by 2027, one analyst questions whether company can deliver on sales, R&D plans

Moderna’s $1.1B R&D Cut, Profitability Delay Jolt Investors

Moderna’s $1.1B R&D Cut, Profitability Delay Jolt Investors

As mRNA vaccine pioneer commits to advancing 10 candidates to approval by 2027, one analyst questions whether company can deliver on sales, R&D plans

By Alex Philippidis

September 16, 2024

Exterior of Moderna's Global Headquarters in Cambridge, MA. Moderna jolted investors this past week by pushing back its profitability forecast two years, to 2028, and announcing a $1.1 billion cut in R&D spending. [Moderna]

Moderna (MRNA) jolted investors Thursday, then partially bounced back after it preceded its annual R&D Day with revised forecasts revealing that the company won’t reach break-even as soon as it expected and will pursue a path to profitability that entails significant cuts to its R&D activity and pipeline.

The mRNA vaccine pioneer revealed that it had pushed back by two years, from 2026 to 2028, its plans to break even on an operating cash cost basis—which excludes stock-based compensation, depreciation, and amortization expense—with $6 billion in revenue.

“The company has sufficient capital to fund its plans until achieving break even on a cash cost basis without raising additional equity,” Moderna said in a statement.

That’s open to discussion, according to Jefferies equity analyst Michael J. Yee.

“We believe this will remain a significant debate, and investors are unlikely to believe this until further credibility,” Yee wrote Thursday in his first of two research notes on Moderna.

In the second note, Yee downgraded Jefferies’ rating on Moderna stock from “Buy” to “Hold,” and slashed by 46% the firm’s 12-month price target on the company’s shares, from $120 to $65. He cited the two-year delay in reaching profitability: “We have low confidence on hitting this based on our model.”

As a result, Yee continued, Jefferies has “significantly increasing concerns on capital needs.”

Moderna finished the second quarter with $2.478 billion in cash and cash equivalents, down about 15% from $2.907 billion as of December 31, 2023. However, the company has another $6.01 billion in investments, up 5.5% from $5.697 at the end of last year.

But Jefferies’ model, Yee said, shows that by 2028, Moderna will be left with “maybe $1–2B of cash which is very low for [a company with] this operating structure + market cap size.” Moderna’s market capitalization—the product of the share price and the number of outstanding shares—stood at $26.247 billion as of Friday.

Yee offered a third reason for Jefferies’ downgrade: Moderna said it no longer anticipates receiving accelerated approval for the individualized neoantigen therapy (INT) or cancer vaccine being developed in partnership with Merck for adjuvant melanoma, based on Phase II results. Instead, the companies are carrying out a Phase III trial that Moderna said was “substantially enrolled” enough to close screening to new patients in many countries.

No support for accelerated approval

“Moderna and its partner Merck have had preliminary discussions with regulators on approval based on the Phase II results. While discussions are ongoing, initial feedback from FDA has not been supportive of accelerated approval based on the current data,” Moderna’s statement added. “The company and its partner Merck will continue engaging with regulators on the program, and remain focused on executing the Phase III trial.”

Moderna has projected approval for INT in melanoma in 2027, followed by launch in 2028.

At its R&D Day, Moderna said it would focus its R&D activity on bringing 10 pipeline candidates to approvals, up from the current two (the COVID-19 vaccine SpikeVax, and respiratory syncytial virus [RSV] vaccine mRESVIA, the latter approved in May). The 10 include three of Moderna’s five respiratory vaccines with positive Phase III results, which the company expects to submit for approval this year.

Additional priority candidates are expected to emerge from five non-respiratory candidates now in pivotal studies across cancer, rare diseases, and latent vaccines that the company says have potential for approval by 2027.

“The size of our late-stage pipeline combined with the challenge of launching products means we must now focus on delivering these 10 products to patients, slow down the pace of new R&D investment, and build our commercial business,” Moderna CEO Stéphane Bancel said in a statement.

Investors responded coolly at first to the updates, sending Moderna’s shares tumbling 19% to an all-day low of $64.11 at 9:50 a.m., 20 minutes after the opening bell, from Wednesday’s close of $79.51. Shares rebounded afterward, climbing back to $69.68 by the end of the trading day, which reduced the day’s loss to a 12% drop.

Moderna declined another 2% Friday, closing at $68.28, as Jefferies and several other firms downgraded Moderna shares, including:

J.P. Morgan (Jessica Fye)—From “Neutral” to “Underweight.” Fye also lowered the firm’s price target 20%, from $88 to $70.

Oppenheimer (Hartaj Singh)—From “Outperform” to “Perform.”

The falloff in Moderna’s stock appears to be more of a Wall Street response to Moderna pushing back its breakeven projection two years than to the R&D spending and pipeline cutbacks, Myles R. Minter, PhD, research analyst, healthcare with William Blair, and a colleague wrote Thursday in a research note.

“We have long questioned the quality of Moderna’s original 2026 breakeven assumptions and therefore the timing pushback is not necessarily a surprise to us,” wrote Minter and colleague John Boyle, PhD.

Stock down 59% Since May 24

Moderna shares have nosedived 59% since May 24, when they closed at their 2024 high of $166.61, as investors reacted to lower-than-expected vaccine sales and questions about how well Moderna can execute on its sales and R&D strategies.

The skid accelerated August 1, the day Moderna held its second-quarter earnings call with analysts, when shares dropped 21% from $119.22 to $94.17 as investors reacted to the company lowering its 2024 revenue guidance from approximately $4 billion to $3 billion–$3.5 billion—a decline Moderna blamed on forecasts of lower COVID vaccine sales in the European Union, rising competitive pressures on both its marketed vaccines, and deferrals of revenue.

During R&D Day, Moderna cut the low end of its revenue forecast by $500 million, resulting in a range of between $2.5 billion to $3.5 billion—before quickly adding that it expected a compounded annual growth rate of more than 25% or more between 2026 and 2028 due to the launches of new products it anticipates.

Over the next three years, Moderna added, it will cut about between $1 billion and $1.2 billion in expenses by shrinking its R&D budget by about 20%, going from the $4.8 billion it anticipates spending this year to between $3.6 billion to $3.8 billion by 2027.

Moderna also said it was halting development of five pipeline programs:

Endemic human coronavirus or HCoV (mRNA-1287): The program will not advance beyond the preclinical phase into Phase I.

RSV infants (seronegative, < two years) (mRNA-1345): Moderna said it does not expect the program to advance beyond Phase I “based on emerging clinical data.”

KRAS antigen-specific therapy (mRNA-5671): No further development plans for the Phase I program, which had been in development to prevent colorectal, non-small cell lung, and pancreatic cancers. Moderna had agreed to split global profits 50-50 with Merck & Co.

Triplet (OX40L/IL-23/IL-36γ) (mRNA-2752): Moderna said it “deprioritized further development of the therapeutic designed to treat solid tumors and lymphoma, “based on emerging clinical data.”

Relaxin (mRNA-0184): The cardiovascular therapeutic is wrapping up Phase I, Moderna said.

Yee said Jefferies’ downgrade of Moderna shares also reflected concerns about the company being able to deliver on sales and R&D forecasts: “Investors have heightened concerns on guidance credibility + execution.”

In announcing second-quarter results August 1, Moderna acknowledged that its launch of mRESVIA was slower than expected. “We think rest of 2024 will show very small sales of RSV which will imply GSK/PFE [GlaxoSmithKline and Pfizer] have locked up contracting + rebating and we still see risk of disappointing Covid sales,” Yee commented.

“We are at low end of guidance so if they come in low on 2024, then investors will have further doubt on future guidance,” Yee added.

Leaders and laggards

Fulcrum Therapeutics (FULC) shares plunged 61% from $8.85 to $3.44 on Thursday, after the company said it would suspend further development of its facioscapulohumeral muscular dystrophy (FSHD) candidate losmapimod after it failed the Phase III REACH trial (NCT05397470). Losmapimod—which Fulcrum has licensed from GlaxoSmithKline (GSK) since 2019—did not achieve its primary endpoint of statistically significant change from baseline in relative surface area (RSA) compared to placebo. Participants receiving losmapimod demonstrated a 0.013 improvement in RSA at week 48 compared to placebo patients, who showed a 0.010 improvement in real workspace (RWS). Fulcrum said it will pivot its R&D effort toward advancing pociredir for the treatment of sickle cell disease; other therapeutic agents for the treatment of Diamond-Blackfan Anemia (DBA), and early discovery programs. Analysts from Bank of America, Cantor Fitzgerald, Leerink Partners, and Stifel downgraded their firms’ ratings on Fulcrum stock.

Monopar Therapeutics (MNPR) shares soared 65% from $2.40 to $3.95 Thursday, after the company announced positive early data from its ongoing open-label Phase I imaging and dosimetry trial (NCT06337084), assessing the radioactively-labeled monoclonal antibody MNPR-101-Zr in solid tumor cancers. Monopar said the data confirmed MNPR-101-Zr’s tumor targeting ability in humans. MNPR-101-Zr is a zirconium-89 imaging radioisotope conjugated to MNPR-101, a first-in-class humanized monoclonal antibody designed to targets cancers that express the urokinase plasminogen activator receptor (uPAR)—including a majority of all triple-negative breast, colorectal, bladder, ovarian, gastric, and pancreatic cancers.

Oncternal Therapeutics (ONCT) shares plummeted 59% from $4.16 to $1.70 Thursday, after the company said it would explore strategic alternatives and halted trials of its two clinical candidates, the dual action androgen receptor inhibitor ONCT-534 for the treatment of metastatic castration resistant cancer, and the ROR1-targeting autologous chimeric antigen receptor T-cell (CAR-T) program ONCT-808, for the treatment of aggressive B-cell lymphoma. Oncternal said interim results from a Phase I study (NCT05917470) showed ONCT-534 did not result in clinically meaningful improvements of disease, including prostate-specific antigen (PSA) levels, in the 20 patients treated in eight dosing cohorts. An interim analysis of results from a Phase I study (NCT05588440) of ONCT-808 showed anti-tumor activity at every dose tested, including a complete metabolic response lasting eight months and long-term persistence of the CAR-T cells, with what Oncternal called “expected” adverse events for a CAR-T therapy—including one death due to complications of shock at the highest dose tested.

Singular Genomics Systems (OMIC) shares more than doubled, rocketing 119% from $5.65 to $12.38 Friday after the company disclosed that it received a non-binding proposal from existing shareholder Deerfield Management to acquire all of the company’s outstanding common stock for $10 a share cash. According to a filing with the U.S. Securities and Exchange Commission, funds and individuals associated with Deerfield control nearly 1 million (about 27%) of Singular Genomics’ shares. Singular Genomics added that its board had formed a special committee of independent directors to evaluate and consider Deerfield’s proposal among strategic alternatives.

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