Bhavneesh Sharma

Top 20 Ranking (28.2% Avg Return) --TipRanks

Moderna Therapeutics: Potential to Disrupt a $200B+ Market


  • Moderna Therapeutics launched IPO last December. After more than doubling in the past few weeks, shares have pulled back due to the overall biotech sector pullback and are presenting a good buying opportunity with minimum 2-3 year timeframe.
  • The company’s mRNA-based therapeutics has origins in the research done in Harvard labs. It has several novel proprietary technologies, for example, its proprietary mRNA sequence identification algorithms and proprietary lipid nanoparticle mRNA delivery system (which has shown advantages over currently available LNP delivery methods).
  • The company is pursuing a parallel development program, developing over 20 programs simultaneously to reduce the biological risk. Proof-of-concept has been shown in several programs in preclinical or phase 1 programs. Its technology has been validated through partnerships with big pharma like AstraZeneca and Merck.
  • While the company may appear pricey at its market cap of $7B+, it has the potential to disrupt a $200B+ therapeutics proteins industry by its ability to produce even intracellular proteins (which cannot be done by current recombinant proteins). If its pipeline is successful, the company has the potential to join the large cap club in biotech companies, for example, Regeneron and Gilead. I consider the stock a Buy on the pullback and plan to buy it over next 72 hours.

Quick investment snapshot:

I will divide my initial coverage on this company into two different articles due to the extensive developmental pipeline. In this first part, I will focus on three therapeutic modalities of the developmental pipeline. I will cover the cancer and the infectious disease vaccine part of the pipeline in the part 2 of this article, which I plan to publish later this week.


Why mRNA-based therapeutics?

mRNA is a temporary set of instructions for the cells to make a protein using the instructions which are stored in the DNA. Proteins based on recombinant reporting technology have over $200 billion in worldwide sales annually. However, many proteins like those located intracellularly or inside the cell membranes and are beyond the reach of current recombinant protein technology. Moderna therapeutics believes that using the mRNA, they have the ability to produce these intracellular and membrane proteins and if they are successful the potential could be much larger than the current sales of drugs based on recombinant protein technology.

Using mRNA technology to make the proteins may have several advantages: for example, reduced immunogenicity, inability to make proteins that are unstable outside the body, create multi-protein complexes, and use multiple mRNAs to produce multiple proteins. Moreover, unlike DNA-targeting therapeutics like gene therapy,  which may produce permanent changes, mRNA therapy affects can be transient and limit the risk of irreversible changes to the cell’s DNA.


Moderna's unique selling proposition

1. Use of data analytics and proprietary software to create mRNA sequences

The company utilizes its proprietary web-based drug design studio to tailor mRNAs for a specific protein and then further optimize it using its proprietary bioinformatics algorithms. Once the company has designed mRNAs using it the drug design studio, it tests them in cells and animal models. The drug design studio mRNA sequence is integrated into a modular synthesis system using high output automation to make thousands of unique RNA sequences in formulations per month for testing in cell or animal models.

2. Novel, proprietary lipid nanoparticle delivery technology

The company has developed its proprietary lipid nanoparticles, LNP formulations for the delivery of mRNA molecules to specific tissues. The company’s proprietary LNPs have several advantages over the existing legacy LNP systems, for example, increased tolerability and reduced toxicities with repeated administration. When used as vaccines, the company’s proprietary LNPs showed reduced muscle necrosis and inflammation as well as lower serum cytokine levels compared to legacy LNPs. Apart from safety, the company’s proprietary LNPs have also shown up to six times improved protein production after intravenous administration compared to legacy lipid nanoparticles. In addition, unlike legacy lipid nanoparticles, the company’s proprietary lipid nanoparticles have shown negligible loss impotency, liver damage or immune system activation even after repeated dosing.

3. Proprietary manufacturing process and a 200,000 square foot new manufacturing facility

The company’s proprietary manufacturing process creates mRNA using an approach called in vitro transcription in which an mRNA polymerase enzyme binds to and transcribes a DNA template. The company has designed its proprietary manufacturing process to impart desirable pharmacological features like increasing the potency in a vaccine and reducing the impurities that could activate the immune system adversely.

The company’s proprietary manufacturing process results one of the biggest assets. For example, in a preclinical registry, the expression of a secreted protein in the Relaxin program showed approximately six times increase in the maximal concentration of the protein compared to other manufacturing process. It has opened a new 200,000 square foot GMP manufacturing facility in Norwood, MA.

4. Partnerships with big pharma adds confidence to the company’s technology

In 2013, Moderna signed a five-year agreement with the biotech giant AstraZeneca (AZN) to discover mRNA therapeutics in various clinical indications like cancer, cardiovascular, metabolic and kidney diseases including a $240 million upfront payment. In 2014, it entered into $125 million partnership for using mRNA therapeutics in orphan diseases with Alexion pharmaceuticals (ALXN). In 2015, Merck signed an agreement with Moderna to use its technology for discovering vaccines against viral diseases. In 2016, the cystic fibrosis giant, Vertex pharmaceuticals (VRTX) signed a collaboration with Moderna to develop mRNA therapeutics for cystic fibrosis.

5. Experienced management with a successful track record

CEO, Stéphane Bancel, has a Harvard MBA and worked as CEO of the French diagnostics company bioMérieux SA. He also worked as an Executive Director, Global Manufacturing Strategy and Supply Chain at Eli Lilly (LLY). He also serves on the Board of Directors at Qiagen. Chief of Technical Operations, Juan Andres previously served as Global Head, Technical Operations at Novartis (NVS) and VP, Pharmaceutical Manufacturing at Eli Lilly. Chief Medical Office, Tal Zaks served as the Senior VP and Head of Global Oncology at Sanofi (SNY) and a leadership role in translational research at Glaxosmithkline (GSK). Co-founder and Board member Noubar Afeyan also serves as the CEO of Flagship Pioneering, a venture capital firm and is on the faculty at MIT’s Sloan School of Management.

The figure given below summarizes the company’s approach using mRNA-based therapeutics in its current developmental programs.


Therapeutic category 1:

Systemic therapeutics, intracellular

I consider this therapeutic category as one of the most important in the company’s pipeline since it cannot be addressed by currently available technology, for example, systemic administration of recombinant proteins.

Advantages of using mRNA therapeutics in this area is that intracellular proteins, for example, those involving mitochondria can be expressed. mRNA therapeutics may have certain advantages over gene therapies, for example, allowing repeating dosing at a lower cost, lower immunogenicity, lack of the potential of permanent changes in the DNA.

In metabolic diseases like, methylmalonic acidemia, MMA or propionic acidemia, PA, the defect is intracellular and thus, cannot be corrected by systemic administration of the replacement protein. mRNA therapeutics has the advantage that it can enter the cells and thus, allow expression of these intracellular proteins as well.

mRNA-3704: targeting methylmalonic acidemia

The target market is approx. 500-2000 MMA MUT deficiency patients. The mortality rate is approx. 50% with current therapies. Only approved therapies are Carglumic acid in the EU for treating elevated ammonia levels due to MMA. Live transplant or combined liver/kidney transplant is used in severe cases.

Due to its intracellular location, MUT is a good target for mRNA based therapy. Preclinical proof-of-concept was shown in mouse models. GLP toxicology studies have been completed. Positive activity was shown in animal models and an IND is open for a planned phase 1/2 trial. The planned phase I/2 study will be a dose escalation trial testing ascending doses IV every 3 weeks.

Ongoing natural history studies in MMA and PA are aiming to identify clinical and biomarker endpoints for these two diseases. Up to 60 MMA patients and another 60 PA patients will be followed prospectively for 1-3 years. Twenty patients have been enrolled so far in the MMA natural history clinical study. The program has FDA Orphan drug designation.

mRNA-3927: targeting propionic acidemia

This disorder affects about 1 in 100K people in the U.S. In preclinical studies in mice, a dose-dependent increase in hepatic PCC activity and a decrease in disease biomarkers like serum ammonia, 2-methylcitrate, etc.  was seen. IND-enabling GLP toxicology program is ongoing (once monthly IV dosing). Twelve patients have been enrolled so far in the PA natural history study.

mRNA-3283: targeting phenylketonuria

The target market is approx. 21K-32K patients in the U.S. It is due to a deficiency in the enzyme phenylalanine (PHE) hydroxylase, PAH due to mutations within this enzyme. Affected patients have high PHE levels and thus develop mental disability. So far, 950 gene variants have been identified for phenylketonuria, PKU.

Usually, it is treated by low protein diet. Approx. 20-56% patients respond to sapropterin dihydrochloride, which improves phenylalanine metabolism but does not cure patients. Biomarin has marketed a pegylated version of phenylalanine lyase enzyme which metabolizes phenylalanine in the blood, however there is a risk of immune response to this enzyme.

In preclinical studies, POC has been shown in a mouse model, and there was a significant reduction in blood PHE levels. IND-enabling GLP toxicology program is ongoing. One potential competition in this indication is Homology Medicines's (FIXX) gene editing program in PKU.


Therapeutic category 2:

Localized Regenerative Therapeutics Modality

The target market is coronary artery disease which resulted in approximately 366,000 deaths in the United States in 2015 and approximately 8.9 million deaths worldwide.

The lead program is AZD8601, which uses mRNA sequence encoding for local production of vascular endothelial growth factor- type A (VEGF-A). It is a phase 1a/b trial in patients with diabetes. The study met its primary objectives of showing safety and tolerability. It also met the efficacy criteria of showing protein production and changes in the blood flow at the local site after injection.

A phase 2a trial has been started by AstraZeneca testing this product candidate in patients with ischemic heart disease. This phase 2a study will enroll 24 patients who underwent coronary artery bypass for ischemic heart disease.

Differentiator: The use of mRNA to produce a desired protein locally closely mimics the optimal tissue exposed the profile for regenerative applications and it cannot be achieved by injection of recombinant proteins that rapidly diffuse out of the tissue after injection. There are other advantages like lower potential toxicity and potential for dose titration and repeated dosing.


Therapeutic category 3:

Systemic Secreted Therapeutics Modality

This modality aims to use systematically administered mRNA sequences to encode for various recombinant proteins which could act as antibodies are enzyme replacement therapies. The company has collaborations with AstraZeneca, and Bill and Melinda Gates foundation for these product candidates. The advantages of using mRNA rather than systematically administering recombinant proteins is that many proteins which cannot be made using recombinant technologies can be encoded by systematically administered mRNA. The recombinant proteins which are produced in the body using administered mRNA undergo natural or foundational modifications like glycosylation, which are not performed in recombinant proteins. This will lead to increased side effects, lower efficacy and increase immunogenicity against recombinant proteins.

The target market is huge, for example, monoclonal antibody market is expected to reach approximately $132 billion by 2023 from approximately $91 billion in 2017. Enzyme replacement therapy market size was $7.4 million billion dollars in 2018 and is expected to reach $21 billion by 2025. Moderna thus has the ability to disrupt this huge target market.

Product candidates:

mRNA-1944: Antibody against Chikungunya virus

There are no effective therapies to prevent the spread or treat this virus. There is no prophylactic vaccine against this disease which is increasingly becoming a public health problem and has spread to the western world.

In preclinical studies, complete survival of the mice was seen after giving the highest dose of mrna-1944.

A randomized, placebo-controlled, phase 1, single, ascending-dose study in healthy adults is ongoing. Dosing in 8 subjects has been completed so far and no safety issues have been seen so far.

AZD7970, Relaxin: Targeting heart failure

Relaxin is a naturally occurring hormone that is known to have cardioprotective effects. It acts by promoting vasodilation and angiogenesis as well as anti-arrythmic action. Previous attempts at using relaxin as a protein therapeutic have failed. AZD7970 is LNP -encapsulated mRNA encoding for a long acting relaxin protein.

The target market is approx. 1.1M cases annually in the U.S. The mortality rate is high despite currently available medical therapies, approx. 36.5% in median 3-year follow-up.

In preclinical studies in rodents and non-human primates, prolonged duration of relaxin protein production was seen for as long as 10 days vs. just few minutes with recombinant relaxin. AstraZeneca may start a phase 1 trial for the program.  

mRNA-3630: targeting Fabry’s disease

This disease is caused by defective alpha-GAL gene which results in the accumulation of abnormal substrates and impaired renal function. The annual incidence of Fabry’s disease is 1 in 80K. Currently, enzyme replacement therapies, ERTs are used but many patients continue to experience a deterioration in the renal function and also develop an immune response to ERTs, thus decreasing their efficacy over time. Still, Fabrazyme, an ERT had $840M sales in 2017. Recently, a small molecule called migalastat was approved as well.

MRNA-3630 program is using LNP-encapsulated mRNA sequence to code for alpha-GAL gene. In animal studies in mice, sustained reduction of the abnormal substrate, lyso-Gb3 was seen up to 12 weeks after a single IV injection of mrna-3630.

An IND-enabling GLP toxicology study is ongoing. A phase 1/2 open-label trial is planned.


This concludes my part 1 of the initiation coverage on Moderna Therapeutics. I consider the stock as a Buy on the recent pullback. However, in this part 1, I have already laid out the core of my investment interest in this company, for example the 5 key points in the unique selling proposition mentioned above.

In the part 2 of my coverage on this company, I will cover the other three key parts of the developmental pipeline, i.e. neoantigen cancer vaccines (an area that I am very interested in), intra-tumoral oncology pipeline and the infectious diseases pipeline. I will publish the part 2 this week.

Risks in this investment

While its appears promising, the company's pipeline is still in early stage. Investing in developmental stage biotechnology company is risky and may not be suitable for all investors. It is possible to lose almost the whole capital invested if the clinical trials of a developmental stage biotech company fail. If the clinical trials fail, partners like AstraZeneca or Merck may cancel their partnership deals which may cause the stock price to fall. While the company is well-funded for now and I don't anticipate a need for immediate capital raise for 12 months, its extensive developmental pipeline will need more funding in the future, thus causing equity dilution for common shareholders. Newer therapies like gene therapy and gene editing are on the horizon and it is possible that they may be more successful as one time treatments compared to Moderna's approach.


This article represents my own opinion and is not a substitute for professional investment advice. It does not represent a solicitation to buy or sell any security. Investors should do their own research and consult their financial adviser before making any investment. Investing in equities, especially biotech stocks has the risk of significant losses and may not be suitable for all investors. While the sources of information and data in this article have been checked, their accuracy cannot be completely guaranteed.

I am/we have no position in MRNA but may pick up a long position in the stock in the next 72 hours.

Bhavneesh Sharma covers biotech as one of the original contributing analysts at FATRADER. A market expert with a medical degree and MBA, he is ranked among the top 15 financial bloggers and top 100 overall financial experts (including Wall Street analysts) on TipRanks.
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