Moderna Shares Tumble As R&D Cuts Follow COVID Business Slump

Moderna’s post-pandemic future remains highly uncertain. The company revealed new plans to slash $1.1 billion in expenses by 2027 to steer toward profitability. This comes a little over a month after investors were left disappointed following management’s outlook cut on slumping vaccine sales amid a sliding Covid business. 

“Moderna’s broad clinical success and recent commercial challenges necessitate a more selective and paced approach to its research and development investment. Through portfolio prioritization and cost efficiencies, the company expects to reduce annual research and development expense by approximately $1.1 billion starting in 2027,” the Cambridge, Massachusetts-based company wrote in a press release.

Here are the key initiatives management outlined:

• Focuses on ten product approvals through 2027

• Expects to submit next-generation COVID vaccine for approval in 2024

• Expects to submit flu/COVID combination vaccine for approval in 2024

• Announces positive Phase 3 results for its RSV vaccine for high-risk adults aged 18 to 59; expects to submit sBLA for US approval in 2024

• Announces positive Phase 3 results for its standalone flu vaccine for adults aged 65 and older relative to high-dose licensed comparator

• Announces norovirus vaccine advances into Phase 3 study, bringing the total of non-respiratory pivotal stage programs to five, across oncology, rare diseases and first-in-class vaccines

• Implements portfolio prioritization and cost efficiencies to reduce R&D expense by $1.1 billion, from $4.8 billion in 2024E to $3.6-3.8 billion in 2027

• Updates and extends financial framework through 2028

In response to a sliding Covid business, Moderna said it would “expand its commercial portfolio into oncology, rare diseases, and first-in-class non-respiratory vaccines. The company expects this strategy to yield 10 product approvals over the next three years.” 

“We are still dealing with a market of uncertainty,” Moderna CFO Jamey Mock said in an interview, which Bloomberg quoted. 

Mock said, “We hope that will settle out this year, but we have to brace ourselves just in case vaccination rates continue to go down.” He noted that the R&D cuts are a sign the company “is exercising financial discipline,” adding that the need to reduce costs was based on expensive later-stage trials. 

 Moderna expects ten products to be approved for US commercial use in the next three years. 

“We do recognize the need to pace ourselves because there is now this huge bolus of important medicines to get approved,” Moderna President Stephen Hoge said in an interview.

In early August, Moderna posted a second straight quarterly loss. It downgraded its sales outlook to a range between $3 billion and $3.5 billion, down from its prior outlook of roughly $4 billion. The company does not project breaken until 2026.

At the time, Jefferies analyst Michael Yee said the forecast cut “heightens concerns, given Moderna is already running net losses and raises doubt about hitting profitability and cash burn goals.” 

Bloomberg Intelligence’s Sam Fazeli noted, “Moderna’s reduced 2024 sales guidance of $3-$3.5 billion, from $4 billion at the end of 1Q, may still not be enough, given vaccine fatigue and the competitive nature of the nascent US market. The lack of any commentary on the potential sales of its mRESVIA RSV vaccine is also a concern.” 

In markets, Moderna shares plunged 11% in premarket trading in New York. Through Wednesday’s close, shares tumbled into a bear market year-to-date.

Current Bloomberg data shows 25.6 million shares in the float are short, or about 7.48%. A steady short position has been building in a post-pandemic world. 

Moderna executives just need another pandemic to clear all the uncertainty from the air…