Messenger RNA therapeutics company, moderna (MRNA), if successful, could completely transform modern medicine. We're talking a potential paradigm-shift here. They're using messenger RNA (mRNA) to treat a variety of diseases with their three programs covering immuno-oncology, vaccines for unmet medical needs, and rare diseases. On December 7, 2018 moderna had the largest IPO in biotech history. They sold ~26.3MM shares at ~$23/share, raising ~ $604MM and valuing the company at ~$7.5B. While massively impressive in its scale, the IPO didn’t go so well. Shares tanked by ~19% shortly thereafter, and the current price is right around the IPO price. They had a bit of a hiccup when one of their candidate CMV vaccines did not meet their internal quality standards, and it had to be pulled. A hold was placed on the trial by the FDA, and moderna ended up removing the vaccine from their study. That said, moderna has a robust, albeit very early-stage, pipeline consisting of 22 candidates, most of which are in either preclinical development or Phase 1, and one that is in Phase 2. Furthermore, moderna has impressive strategic collaborations with AstraZeneca (AZN), Merck (MRK), Vertex (VRTX), and The Bill and Melinda Gates Foundation, just to name a few.
Currently, no mRNA drugs have been approved by the FDA. However, there is incredible growth potential if moderna gets this right. Globally, according to a ResearchAndMarkets report, the protein therapeutics market is estimated to exceed $200B by the end of 2020, and moderna is setting up to be a leader and top-dog in this therapeutic realm of the future.
mRNA Drugs: The Science
The flow of information from our DNA goes from DNA to mRNA to protein. The mRNA is transcribed from DNA, and then translated into proteins, which are the functional molecules that drive all biochemical processes in the human body such as growth, metabolism, and suppression of cancerous cells. To put it more simply, moderna likes to think of DNA as our information storage, mRNA as the software, and proteins as the applications. They want to introduce mRNA into specific cells and tissues of the body, and then let the body turn that mRNA into proteins, which will have a therapeutic or curative function.
Since mRNAs are produced in the body, in vivo, they can hit targets that small molecule drugs cannot. Furthermore, mRNAs can be designed and tested in a very short period of time, greatly expediting the process from preclinical development to clinical trials compared to traditional small molecules or biologics. According to moderna’s CEO Stéphane Bancel, “we believe our mRNA medicines provide a higher probability of technical success and faster timelines to clinical trials and to the market relative to traditional medicines.”
Scientists at moderna employ a cutting-edge, cloud-based computing method which allows them to rapidly design a plethora of mRNA candidates. They're able to generate mRNA for any protein in the human body, including antibodies, as well as novel mRNAs that code for highly complex proteins and can be use to target pathways that are thus far undruggable. To top it all off, moderna isn’t just designing the drugs, they’re also designing a delivery system. They have an immune nanoparticle research program aiming to develop nanoparticles capable of delivering mRNAs to a broad spectrum of immune cells, including lymphocytes and, if successful, this technology could be used to treat a wide range of diseases from neurological disorders and autoimmune disorders, to cancer.
This is One Impressive Early-Stage Pipeline!
At present, moderna has five immuno-oncology programs, and their five rare disease programs are aiming to treat methylmalonic acidemia (MMA), propionic acidemia (PA), phenylketonuria (PKU), Fabry disease, and glycogen storage disorder (GSD1a). They are also working on vaccines for unmet medical needs, which include respiratory syncytial virus (RSV), cytomegalovirus (CMV), human metapneumovirus (hMPV), Zika virus, Chikungunya virus, and two pandemic influenza viruses. With moderna’s support, Merck has advanced an improved version of an RSV vaccine, and they’ve recently filed an IND (investigational new drug application) with the FDA. Additionally, moderna’s preclinical data for their Chikungunya antibody was recently accepted for publication by the Journal of Science Immunology, and they plan to present Phase 1 data on their personalized cancer vaccines at the upcoming American Society of Clinical Oncology (ASCO) meeting.
Some of moderna’s main competitors are CureVac, Regulus Therapeutics (RGLS) and Arrowhead Pharmaceuticals (ARWR), but their pipeline is larger than those of the competition. Arrowhead has five candidates in Phase 1/Phase 2, CureVac is mostly preclinical, while moderna has around twelve clinical trials underway. There are other companies in the RNA therapeutics space, such as Sarepta Therapeutics (SRPT) and Alnylam Pharmaceuticals (ALNY), but their approach is different. Alnylam, like Arrowhead, uses RNA interference (RNAi), which employs small interfering RNAs (siRNAs) to halt the body's production of harmful proteins, while Sarepta employs phosphorodiamidate morpholino oligomer (PMO) chemistry, which involves synthetic constructs modeled after the structure of RNA that are used to target RNAs in the body to either increase or decrease the production of certain disease-related proteins.
How Did Their Recent Quarter Go?
The company ended Q1 2019 with $1.55B in cash, cash equivalents and investments, compared to $1.69B at the end of last year. Their net cash used in operations was ~$144MM, compared to $111MM in Q1 of 2018. Revenue came in at $16MM compared to $29MM in the first quarter of last year, and this missed Wall Street’s expectations of ~$33.6MM. However, they noted on their conference call that they adopted a new revenue recognition standard, ASC 606, which was not completed as of January 1, 2019, and total revenue under the previous standard would have reflected $38MM for Q1 2019. Overall, they had a loss of $0.40 per share, compared to Wall Street’s average expectation of $0.35.
Research and development expenses came in at $131MM, compared to $90MM in Q1 of 2018. This increase was attributable to an increase in their number of R&D employees, including stock-based compensation, as well as heightened costs of clinical trials, manufacturing, laboratory supplies, consulting, and outside services. G&A expenses came in at ~$27MM compared to $16MM in the year-ago quarter, and these increases were mainly attributable to growing the size of their staff and the consulting and services fees associated with becoming a publicly-traded company.
The Bottom Line
Any early-stage biotech with a promising future is going to be pouring cash into R&D, as they should in order to advance their pipeline, so this is a great thing to see. Though early in its stages, moderna’s pipeline is incredibly robust and impressive. They also have a strong balance sheet. The biggest bet here though, the holy grail, is their technology. mRNA drugs represent a new generation of therapeutics with virtually unlimited potential. However, developing these types of drugs is no easy task. Normally, mRNAs are made inside of cells, so moderna has to be successful in getting their mRNAs past the body’s immune system to their desired target location inside the body in order to exert their therapeutic effects. With cutting-edge technology to design, test, and deliver their mRNA drugs, moderna is poised to be the leader in this space.
Please keep in mind that this is a very speculative play, high-risk/high-reward, but I do believe in moderna. They've been conducting R&D on mRNA drugs since 2010, and they have some amazing scientists on their team. The company is still very far away from getting a therapy to market, but if they're successful, it's going to be mind-blowing! If you have room in your portfolio for a small-positioned, speculative biotech play, you may want to consider moderna.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.