Moderna block funds Covid-19 vaccine development

IFR 2334 - 23 May 2020 - 29 May 2020
5 min read
Robert Sherwood, Stephen Lacey

Moderna, a biotech notable (so far) for its expertise in the funding markets as much as its ability to develop successful treatments, followed up an announcement that its efforts to develop a Covid-19 vaccine are making decent progress by raising US$1.34bn from a block sale of primary stock.

That the revelation was more for disclosure reasons than proof of success was of little immediate consequence.

Moderna shares soared 30% – to a high of US$87 before closing the day at US$80 (up 20%) – following the release on Monday morning of interim Phase I results that seemed to suggest that the vaccine had generated an immune response in test subjects. At the close, Moderna's market cap was US$29.6bn – remarkable for a company with no approved products – while US stocks added some US$1trn on prospects for re-opening of the global economy.

Moderna seized on that momentum to launch the block sale that evening.

The money raised gives it the ability to manufacture the yet-to-be-approved vaccine the company said. The goal is to have hundreds of millions of vaccines in place even while testing is still ongoing.

Morgan Stanley offloaded its purchase of 17.6m shares at US$76, a 5% discount to last sale and an increase from a US$1.25bn commitment. The shares sold represent a 4.8% capital increase.

At least three other banks competed for the mandate, which netted Morgan Stanley US$33.3m, according to two sources involved in the process and regulatory filings.

"If there was ever going to be a candidate to do a large all-primary block in the biotech sector it would be Moderna," said one of the sources, pointing to a deep bench of former Wall Streeters in the company's management and venture backers supporting it.

And the company certainly showed a trader's timing. The following day the stock fell to US$71.67 – and the wider market followed suit – as those who understand the tricky process of developing vaccines expressed scepticism about the announcement.

An article in Stat, a publication covering the life sciences, was particularly influential. "While Moderna blitzed the media, it revealed very little information – and most of what it did disclose were words, not data," the article said.

By the close on Thursday Moderna's shares were trading at US$67.05.


For all the hope invested in it, Moderna has proved to be a relatively controversial company and one dogged by accusations of opportunism and conflicted interests.

Moncef Slaoui, an independent director on Moderna's board, was appointed the previous Thursday by President Donald Trump as chief adviser to the US government's coronavirus task force – Operation Warp Speed.

Slaoui, a former GlaxoSmithKline exec and current venture capitalist, resigned from the Moderna board and sold his stock holdings, but not without political backlash and after having outlined confidence in Moderna's efforts to develop a vaccine.

Indeed, it was Slaoui's appointment by Trump that led to the decision by Moderna management to disclose progress on the Phase I trials. That disclosure, in turn, allowed the biotech to proceed with the stock sale, according to the sources.

That Moderna CEO Stephane Bancel has been selling stock in the biotech before it even brings products to market is an additional layer of controversy. The sales are part of a 10b5-1 programme where Bancel has no control over their timing, in an effort to avoid any conflicts and blackouts.


In January, the US government selected Moderna to conduct Phase I trials under a collaborative effort. The first patient in the 45-person trial was dosed in March and preliminary results from the study released on Monday morning showed antibodies were created – albeit in only eight people – and the drug "was generally safe and well tolerated".

Moderna's vaccine relies on a messenger RNA technology, whereby a synthetic form of a virus is able to direct the creation of antibodies against a specific disease – in this case Covid-19.

"mRNA vaccines can be developed faster than traditional vaccines and mass produced at a commercial scale while mimicking the natural infection by getting the body to produce antibodies," said Yasmeen Rahimi, co-head of biotechnology research at Roth Capital Partners.

Moderna has already gained regulatory approval for a Phase II study of its vaccine and hopes to advance to Phase III by July. If those trials are successful, it plans to seek expedited regulatory approval to administer the vaccine.

Scaling up is expensive – Moderna expects to spend US$1bn this year on the vaccine programme – but there are huge potential profits.

Analysts at Morgan Stanley see a US$10bn–$30bn market opportunity through 2022 to address the current pandemic, and a US$2bn–$25bn opportunity annually for ongoing vaccinations.

That assessment is based on a 1.8bn global population, the Morgan Stanley analysts said in research published on May 17, ahead of the May 18 stock purchase by the investment bank. It excludes India (1.3bn), China (1.4bn) and Russia (150m), which the analysts believe would be reluctant to accept a vaccine developed by a western company.

Capitalising on the good news