Moderna's Future Uncertain as R&D Cuts Follow COVID Business Slump

Plans to Cut Expenses

Moderna, a pharmaceutical company, has announced plans to cut $1.1 billion in expenses by 2027 in an attempt to move towards profitability. This decision comes in the wake of a slump in vaccine sales and a reduced outlook from management, which has left investors disappointed. The company, based in Cambridge, Massachusetts, has stated that its recent commercial challenges and broad clinical success require a more selective and paced approach to research and development investment. Through portfolio prioritization and cost efficiencies, Moderna expects to reduce annual research and development expense by approximately $1.1 billion starting in 2027.

Key Initiatives Outlined

Management has outlined several key initiatives, including a focus on ten product approvals through 2027. The company also expects to submit a next-generation COVID vaccine for approval in 2024, along with a flu/COVID combination vaccine. Positive Phase 3 results have been announced for its RSV vaccine for high-risk adults aged 18 to 59 and for its standalone flu vaccine for adults aged 65 and older. The company also plans to expand its commercial portfolio into oncology, rare diseases, and first-in-class non-respiratory vaccines.

Market Uncertainty

"We are still dealing with a market of uncertainty," Moderna CFO Jamey Mock said in an interview. He noted that the company needs to brace itself in case vaccination rates continue to decrease. He also said that the R&D cuts are a sign that the company is exercising financial discipline. The need to reduce costs was based on expensive later-stage trials.

Product Approvals

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.

Financial Outlook

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 to break even until 2026.

Market Response

Following the announcement, 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.

Bottom Line

The future of Moderna remains uncertain as the company grapples with a slump in COVID business and plans to cut $1.1 billion in expenses. The company's decision to focus on a more selective and paced approach to research and development, along with its plans to expand its commercial portfolio, could potentially steer it towards profitability. However, the market's response to these plans remains to be seen. What are your thoughts on Moderna's recent decisions and their potential impact on the company's future? Share this article with your friends and sign up for the Daily Briefing, which is delivered every day at 6pm.