On December 7, 2018, Moderna Therapeutics Inc. made its public debut – bringing the company’s valuation to $7.5Bn. Hoping to raise $620M, the heavily funded biotech startup sold 27 million shares of common stock on the NASDAQ Global Select Market at $23 a share when trading began. According to the startup, the largest chunk of the proceeds from the share sales will go towards drug discovery and clinical development, expansion of Moderna’s manufacturing capabilities, and infrastructure to support its pipeline. Also, about $75 – $85M of the proceeds would be diverted towards the development of its mRNA technology platform and the creation of new modalities.

The Cambridge-based startup’s share rates are high as it’s invested in promising research that seeks to find personalized vaccines and therapeutics for 21+ diseases using messenger-RNA (a nucleic acid). Yet, it’s important to note that only 10 have entered clinical studies and none of the potential cures has received much traction in the FDA pipeline.

“We’ve continued to show our investors progress, as well as setbacks, but everybody has setbacks in research,” said Moderna’s Chief Financial Officer Lorence Kim. He believes that such a trajectory has “kept investors happy.”

Getting IPO-ready

Moderna kicked off its IPO debut at a time when it is said to be saddled with $360M+ in operating costs amassed in the first nine months of 2018.

Yet, the startup is currently already quite cash-flushed. As of September 2018, with $1.2Bn in cash (and no debts). It also amassed $2.6B in total funding from its strategic collaborators and investors. In fact, its total revenue was $100M+ in the first nine months of 2018 or more than a quarter of total expenses.

But as the capital-burning research trials progress, they will definitely need more money to function in the future. Also owing to the wavering investor sentiment for the sector, what with the recent S&P Biotechnology Select Sector Index selling off 20%+, it would be intuitive for Moderna to keep its options open.

This year, a number of other biotech companies have decided to go public including Singapore-based Aslan Pharmaceuticals (raised $42M), China-based Innovent Biologics (raised $421M), California-based Equillium (hopes to raise $86M).

It is believed that biotech startups need $2Bn+ and 12+ years just to develop a drug, and becoming profitable tends to be longer than the life cycle of a typical biotech venture fund. By going public, VCs can hope for earlier returns and the startup can add to its reserves for its drug-making journey.

The intent to go public, coming 8+ years since Moderna’s inception, makes it one of the rare biotech startups to stay private for so long. According to Moderna Therapeutics’ CEO Stephane Bancel, this has helped them take risks and try out new things (such as working on multiple projects at the same time) without worrying too much about public scrutiny or pressure.

“We very consciously decided to stay private to be able to turn on a dime based on what we learn in the labs initially,” Bancel told Xconomy. “That has served us well, because over the 6 years the company has been operating, there have been a couple of bumps on the road on the science—and nobody panicked.”

The Road to the Future of mRNA

This proverbial road to achieving greatness in science, particularly in mRNA therapy, first started in 2010. It was in this year that Harvard University scientist Derrick Rossi manipulated mRNA to deliver proteins that turned adult cells into embryo-like stem cells. Seeing potential business value in this solution, Harvard cardiovascular scientist Kenneth Chien and serial entrepreneur Robert Langer joined forces with Rossi to pitch a new stem cell company to Flagship Pioneering, a venture capital firm.

At that time, Flagship’s CEO Noubar Afeyan felt that the proposers need to try something different, He suggested that they seek out ways to use mRNA as a protein therapy vehicle. Subsequent experiments, on mice, showed that modified mRNA could produce proteins in the liver that would then be circulated through the bloodstream. With this academic proof, Afeyan became an instant believer and joined the trio to setup Moderna in the same year.

Now, to understand exactly what Moderna does, here is a quick biology lesson: mRNA translates the genes of DNA into dynamic proteins that can be used to treat diseases.

“Because mRNA is nothing more than a copy of DNA, you could potentially make any protein you want, because the code is there,” said Afeyan in an interview with CNBC.

Typically, biotech companies spend a lot of time and money cooking up these proteins (as drugs) using genetically engineered cells inside large industrial vats. Moderna turns the industry on its head, by injecting the diseased with individualized synthetic mRNA that turns the body into ‘little drug factories’. So, when this injectable mRNA enters the body, it delivers instructions to diseased cells to generate specific proteins that can, in theory, treat the disease. And even though it’s called a vaccine, mRNA therapies are not built to prevent illness but to coax the immune system to recognize and attack certain markers on affected cells (such as cancerous cells).

What’s more, this kind of a solution can be used just to fight more diseases than just cancer. In fact, Moderna already has (early stage) clinical trials ongoing for diseases such as CMV, HMPV/PIV3, Influenza H10 and H7, Zika and Chikungunya.

Even with so much going in, for the first two years, Moderna kept all their work in the dark, without any talk of their trials or successes. This move faced a lot of criticism, as they were seen to be withholding information. But they soldiered on undeterred. Moderna spent the time filing broad and deep intellectual property. This ensured that even if other companies succeed in using mRNA-based techniques in areas not yet considered by Moderna, it could still enjoy royalties.

Out of Stealth Mode

In 2012, Moderna announced that they had raised $40M in funding and started publishing papers about the technology it was developing. This was followed by a spree of successful fundraising efforts. In March 2013, Moderna inked its first big pharma partnership with a $240M investment by AstraZeneca to co-develop mRNA therapies that can stop heart attacks along with metabolic, and renal diseases. October that year, it raised a grant worth $24.6M from the Defense Advanced Research Projects Agency (DARPA) for creating therapies to combat infectious diseases. Then, in November it also raised $110M in new equity financing from undisclosed sources.

To ensure that it doesn’t spread itself too thin working on various drugs and its platform, in 2014 it created a venture unit to start a bunch of subsidiaries – Valera, Elpidera, Caperna, and Onkaido. Each of these had different management teams and employees to manage different sets of its mRNA drugs. While this move helped the brand make progress on several therapies at the same time, with risks hedged, it was too complicated for Moderna and its investors to wrap their minds around. So in September 2017, they shut this down.

Meanwhile, in January 2015, the then-preclinical biotech company secured $450M in financing. And then in July 2016, a partnership worth up to $315M to Moderna was announced, with Boston-based Vertex Pharmaceuticals Inc. to combat cystic fibrosis.

“We’re playing a very long game,” Bancel said. “Our goal is to bring the best medicines to patients, and we always like to start with a partner who can bring expertise to a new area we’re looking at. It’s about whatever organ system we can get messenger RNA into.”

It also began clinical trials for solid tumors, in 2017, with pharma giant Merck (signed partnership in 2016 for $200M). And by November 2017, a cancer vaccine was injected into its first patient.  

Most recently, in its S-1 report, Moderna states that it raised $560M in a Series G funding round in January and February 2018, followed by $125 million in a Series H funding round in May 2018. What’s interesting to note, is that even with no marketable product (vaccine) in hand, it’s still garnering quite a bit of investor attention.

It has also invested some of these funds into setting up and hiring for its new GMP clinical development manufacturing plant, in Norwood, Mass, that opened in July 2018. The 200,000-sq. ft. facility, has been designed to produce materials for pre-clinical, Phase 1 and Phase 2 programs. It also features state-of-the-art facilities including an army of machines and robotic handlers.

According to a report in the American Chemical Society, in the last five years, the 645 employee-strong Moderna has spent $450M on research. And it plans to spend another $500M across the next five years.

Their research is expected to eventually solve the startup’s issues with creating synthetic mRNA drugs that are safe for human consumption, while also being able to generate the right quantities of protein to be effective against the disease.

Towards a Bigger and Better Moderna

Getting the research right would be the first step towards Moderna’s aim to become a company worth more than $50Bn – something very few biotech companies (such as Amgen, Gilead Sciences, and Biogen) have achieved.

But there is enough room and more in the market to make this goal possible, as the global mRNA vaccines & therapeutics industry is expected to stand at more than $115M by 2020.

Others such as CureVac, Translate Bio, and BioNTech are as well are working on similar mRNA-based solutions. But truly unique about Moderna is the fact that for the longest time while remaining privately held, it has secured $1.6Bn+ in venture financings and $1Bn+ through partnerships. So the public sentiment is strong with this one.

Though it’s still to see the quantifiable success of its therapies, Moderna remains confident of its progress. “We built and continue to invest in a platform to advance the technological frontier of mRNA medicines,” Moderna said in its S1 filing report. “We made and continue to make forward investments in scalable infrastructure and capabilities to pursue a pipeline of potential medicines that reflect the breadth of the mRNA opportunity.