A clean room at Moderna’s plant in Massachusetts.
The biotech has reached a $100 billion market cap. But after Covid, the challenges get even bigger.
A year ago, Moderna Inc. was an unprofitable company with no marketed products and a promising but totally unproven technology. None of its experimental drugs and vaccines had ever completed a large-scale trial. Experts were divided on how well the mRNA-based Covid-19 vaccine it was about to enter in a Phase III trial would stack up against older, more established vaccine technologies.
This year, Moderna could deliver 1 billion doses of its Covid shot and bring in $19 billion in revenue. It’s become the rare biotech to hit the big time without being gobbled up by, or splitting profits with, a larger, more established company. Its market value—which hit $100 billion for the first time on July 14th—exceeds that of stalwarts such as Bayer AG, the German inventor of aspirin, and biotech peers such as Biogen Inc., founded three decades prior.
The speed with which Moderna and its primary mRNA competitor, a partnership between Pfizer Inc. and BioNTech SE, devised their shots has made a major contribution to the fight to end the pandemic. With strong efficacy, steady supply, and no show-stopping safety scares (officials are carefully monitoring rare heart inflammation cases in teenagers and young adults), mRNA shots have become the vaccines of choice, at least in countries that can get them.
But for Moderna Chief Executive Officer Stéphane Bancel, the Covid vaccine is just the beginning. He’s long promised that if mRNA works, it will lead to a giant new industry capable of treating most everything from heart disease to cancer to rare genetic conditions. Moderna has drugs in trials for all three of these categories, and Bancel says his company can also become a dominant vaccine maker, developing shots for emerging viruses such as Nipah and Zika, as well as better-known, hard-to-target pathogens such as HIV.
In the past 40 years, more than 50 new human viruses have been discovered. Only three have authorized vaccines. Bancel views that as an opportunity. “We are going to totally disrupt the vaccine market,” he says during a late May interview at Moderna’s Cambridge, Mass., headquarters, which fills a 10-story building north of the MIT campus. The Swiss drugmaker Novartis AG occupies labs in an adjacent building, and Pfizer and Merck & Co. have offices a few blocks away.
Bancel, who’s 48, wears a pressed blue shirt, dark blue jeans, and a black Hermès belt. An avid runner, he appears even trimmer in person than on his frequent virtual conference appearances. He repeatedly jumps to his feet during the interview to graph on a whiteboard how the Covid outbreak could evolve. One chart forecasts seasonal waves, declining each passing year but still significant. Another projects the possible decay of vaccine efficacy over time, with mRNA shots like his starting in the best position but gradually declining. The take-home message coincides neatly with Moderna’s business prospects: Countries may want to stockpile booster shots soon. “My mother is 72, and she has leukemia,” he says. “I don’t want her to go through the fall without a boost.”
The company has vaccines for 10 viruses that are in, or about to be in, human trials. These include three types of Covid-19 boosters that are in midstage trials, a seasonal flu shot that began its first human study in July, and HIV shots that are slated to begin studies later this year. The furthest along besides the Covid shots combats cytomegalovirus, a ubiquitous bug that spreads through bodily fluids and is a common cause of birth defects; it’s set to begin a Phase III trial this year in women of childbearing age. In the long term, Moderna is aiming to develop an annual supershot that could suppress numerous respiratory ailments, including Covid, the flu, and others. “Our goal is to give you several mRNAs in a single shot at your local CVS or GP every August or September,” Bancel says.
Now comes the difficult part: delivering on that promise while keeping ahead of just about every other vaccine company in the world as they rapidly invest in mRNA. In the future, Moderna won’t have the pandemic to highlight mRNA’s most obvious advantages over older technologies—speed and flexibility. Future vaccines and drugs will usually have to go through the U.S. Food and Drug Administration’s normal approval process, meaning longer follow-ups to gather data and 6- to 10-month review timelines. That time frame will provide space for mRNA-wielding rivals and older technologies to compete.
Pfizer, with its partner BioNTech, has become an mRNA manufacturing juggernaut and expects to produce 3 billion doses this year; it has also dominated foreign distribution of mRNA vaccines so far. Another vaccine, from CureVac NV in Germany, which took a different approach to mRNA, performed tepidly, proving only 48% effective in Phase III trial data released in June, but still another, from China’s Walvax Biotechnology Co., will soon begin Phase III testing in seven countries.
More established technologies are reasserting themselves, too. On June 14, Novavax Inc. said its recombinant protein vaccine was 90% effective in a nearly 30,000-person trial in the U.S. and Mexico, with relatively few side effects—results that more or less matched those of the best mRNA shots. Vaccine giants Sanofi and GlaxoSmithKline Plc are in Phase III trials on their own protein-based Covid vaccine, which could hit the market by yearend.
Mani Foroohar, an analyst at SVB Leerink LLC, calls Moderna’s accomplishments with the Covid vaccine “truly breathtaking.” But he also says it’s far from certain whether such vaccines will have clear efficacy advantages with other viral diseases. And how big a role the technology could play in treating noninfectious diseases such as cancer is unknown. So though public expectations are boundless, he says, “the revenue opportunity is not.”
The reply, for Bancel and the others pouring money into tiny RNA strands, lies in those two key advantages of speed and adaptability. At their heart, mRNA vaccines are a modular technology; they deliver the genetic code telling cells how to make the virus proteins that provoke an immune response, and the cells do the hard work from there. Now that Moderna is profitable and sitting on almost $8 billion in cash—Bancel’s own stake, including options, is worth around $7 billion, according to the Bloomberg Billionaires Index—it can move quickly and aggressively into numerous new applications simply by changing the genetic code it puts into the mRNA. While Moderna’s shot appears to be holding up well against the currently surging delta variant, for example, it’s a straightforward process for the company to incorporate mutations into the vaccine if needed. “We don’t have to introduce new technology or new processes,” Bancel says. “It’s exactly the same thing.”
When Bancel left the top job at the French diagnostics company BioMérieux SA and became the second employee at Moderna—the name is a mashup of “modified” and “RNA”—a decade ago, the idea that messenger RNA could be medically useful was radical. At the time the molecule, which evolved to carry protein blueprints from DNA in the cell’s nucleus to the compartments that synthesize proteins, had a reputation among lab scientists as fragile and hard to work with. When mRNA is artificially inserted in the human body, the immune system identifies it as a threat and attacks it. And because mRNA’s function is temporary, enzymes found throughout the body can break it down. Neither are desirable outcomes for a drug or vaccine.
Starting in 2005, two researchers at the University of Pennsylvania, Katalin Karikó and Drew Weissman, managed to slightly modify mRNA so it generated less of an immune reaction in the body. The finding drew little recognition at the time, but it turned out to be a critical advance. (Katalin left Penn to join BioNTech in 2013.) In 2010 a trio of Harvard and MIT scientists funded by venture firm Flagship Pioneering picked up on the idea and founded Moderna, bringing Bancel on the next year. Moderna and BioNTech later licensed the Penn technology.
Bancel recalls telling his wife before he changed jobs that there was a 5% chance the mRNA concept would succeed, but if it did, it would be huge. When Bancel pitched Moderna’s now-president, Stephen Hoge, on the company the following year, Hoge says, his reaction was, “He’s either brilliant or crazy.” Hoge was then a McKinsey & Co. partner with a medical degree, and he was interested in doing something that would have more societal impact. He slowly came around to Bancel’s view that mRNA therapy, if it worked, “was really going to transform medicine.”
The concept behind mRNA vaccines is simple. When the shots bring those protein-making instructions to cells, they effectively turn them into microscopic vaccine factories in their own right. This allows developers to streamline what is normally a messy manufacturing process. Many flu vaccines, for example, are made inside chicken eggs, and even newer genetically engineered vaccines still require growing viral proteins inside vats of live cells. Bypassing such steps lets mRNA vaccine manufacturers shift gears fairly quickly. It also appears to be relatively easy for them to make complicated vaccines involving multiple viral proteins.
“Everything with mRNA is just simpler,” says Barney Graham, deputy director of the Vaccine Research Center at the National Institute of Allergy and Infectious Diseases (Niaid), whose lab has been formally collaborating with Moderna since 2017. “For me, making vaccines that are as simple as possible is the way to go.” Graham says gene-based shots such as mRNA vaccines are particularly well-suited to fighting viruses, because they seem to be adept at producing the so-called killer T-cells that destroy virus-infected cells.
Before Moderna could create an mRNA-based product, it had to crack the problem of how to protect the molecule from the body’s defense systems. By modifying the RNA, the Penn researchers had figured out how to dampen the hair-trigger immune response it provoked, but their approach would be useless if it were broken down by enzymes before it could reach cells. The key to solving that problem turned out to be adding protective lipid nanoparticles to surround the mRNA molecules—essentially creating “balls of fat with little bits of RNA mixed in there,” says Kerry Benenato, a chemist who left AstraZeneca Plc to join Moderna in 2014.
When Moderna started working on this approach in 2013, it had been tried mostly on much smaller types of RNA molecules, and there were concerns about side effects. “People had decided they were toxic,” Hoge says. Nanoparticles contain synthetic fats, and in early iterations some of those fats tended to accumulate in cells, building up over time and potentially causing liver damage or other side effects.
Moderna’s Revenue
Data: Compiled by Bloomberg
Benenato’s assignment was to devise nanoparticles that could safely and efficiently carry the mRNA into cells, release the payload, and then quickly break down. When she started, the chemistry involved in using nanoparticles with mRNA was so unexplored that there were few published scientific papers to guide her. She and her team made one tweak after another, pinpointing changes that improved tolerability without harming their ability to deliver mRNA. By 2015, Moderna had made a breakthrough, finding a series of lipid molecules that fit the bill. “Then it was off to the races,” Benenato recalls. They patented the formulas and started deploying them in vaccines.
In its early years, Moderna had focused on therapeutics, including programs for cancer, heart disease, and other lucrative areas. The company gradually turned to vaccines as Bancel realized they would be the best way to prove mRNA technology worked. You have to inject only a couple of doses to stimulate a long-lasting immune reaction.
Working with Graham’s team at Niaid, Moderna began formulating a Covid vaccine as soon as Chinese scientists released the coronavirus RNA sequence in early January 2020. Later that month, Bancel asked his manufacturing chief what it would take to make a billion vaccine doses in 2021. “He looked at me like I was insane,” Bancel recalls. The Moderna plant had never made more than 100,000 doses of anything in a year. The U.S. government agreed to pay $955 million for the vaccine trials and initial small-scale production, but Bancel says he couldn’t initially persuade any country to pay for a full scale-up. Moderna instead raised $1.3 billion in a May 2020 stock offering for the purpose. The move allowed the company to take its leap onto the world stage—and laid the groundwork for what comes next.
Moderna produces its nanoparticles and mRNA in a former Polaroid factory in the Boston suburb of Norwood, 15 miles south of its headquarters. The plant, which opened in July 2018, has been running around the clock since November. It looks less like a factory than like a cross between a tech startup and a molecular biology lab. Dozens of operations and quality-control workers dressed in casual clothing occupy a large warren of open-layout desks in the front of the building. Covid vaccines are produced in clean rooms, some of which are visible behind glass panels in the back. There are nine of these clean rooms making the shot here, up from three in December, and six more are scheduled to be running by the end of the year. The suites, which are roughly 1,000 square feet each, were built for flexibility, with mixing reaction vessels, chromatography instruments, and other equipment on wheels so they can be easily reconfigured.
The process starts with pieces of DNA called plasmids that Moderna brings in from a contract manufacturer. These plasmids contain the genetic blueprint for the Covid-19 spike protein. In one set of clean rooms, the spike protein DNA is synthesized into mRNA using a technique called in vitro transcription. It’s basically the laboratory version of a process that normally occurs in cell nuclei.
The mRNA solution can be made in a matter of hours, says Scott Nickerson, a senior vice president who oversees the site. It then takes several days to purify unreacted enzymes and other extraneous material. From there, the purified mRNA goes to a separate set of clean rooms, where workers spend another few days formulating it with the lipid nanoparticles. The final product is frozen in sterile bioprocessing bags, encased in a protective shell, and shipped in temperature-controlled trucks to Catalent Inc.’s plant in Bloomington, Ind. There the vaccine is diluted, put into vials, labeled, and shipped. When Moderna started making the Covid vaccine in commercial quantities last year, the process took as long as 19 days to complete. Now it takes only 10 days to prep a batch for shipping to Catalent.
Last May, Moderna signed a 10-year deal, since expanded twice, with Lonza Group AG, which is expected to produce the bulk of its European supply at factories in Switzerland and the Netherlands. Moderna also made pacts this year with Sanofi, Samsung Biologics, and Thermo Fisher Scientific to bolster the vial-filling capacity that Catalent and Laboratorios Farmacéuticos Rovi in Spain currently provide. Increasing so-called fill-finish capability will become important as a greater share of the population is vaccinated and doctors can’t find enough patients to use up the larger vials now in use, which contain between 10 and 15 doses.
Moderna’s production this year, 800 million to 1 billion doses, will amount to only about a third of Pfizer and BioNTech’s output. Pfizer had “100 times more people” at the start of the pandemic, along with existing plants it could retool for vaccine production, Bancel says. Moderna’s head count has almost doubled since last year, to 1,500. Next year, with more capacity and a significant portion of its output potentially going into booster shots and pediatric formulations that use lower doses, the company and its partners expect to produce as many as 3 billion doses, approaching Pfizer and BioNTech’s projected 2022 supply of 4 billion. If Novavax meets its production goals, Sanofi’s protein-based vaccine also works, and companies such as Johnson & Johnson and AstraZeneca solve their manufacturing bottlenecks, at some point next year the world could shift from being desperately short of Covid shots to swimming in them.
As the virus settles down to a more manageable threat over the next few years, Covid vaccine sales may decline—perhaps precipitously. Morningstar Inc. analyst Karen Andersen says this market could top out at $72 billion worldwide this year, slip to $65 billion in 2022, and plummet to $8 billion a year after that. The extent of the slide will depend on how many people need booster shots, how often, and whether Moderna, Pfizer, and others will be able to raise prices to compensate for a smaller market. The science on booster shots is still unsettled—it’s not yet clear how often, or even whether, they’ll be needed in large numbers.
Moderna has three types of boosters in Phase II trials, including a lower-dose version of its existing vaccine, one booster that’s been customized against the beta variant that was first spotted in South Africa, and a third that combines both. More variants can be added if necessary. The process for the beta booster went even faster than for the original shot. Design work started on Jan. 22, with Moderna ultimately switching out some of the chemical “letters” in its original mRNA vaccine, so they correspond to the spike protein in the beta variant. Manufacturing began three days later, and the first trial dose was administered on March 10—only 47 days in all, compared with the 65 for the main vaccine.
Moderna is already cutting deals that encompass potential booster doses, including a June order from the U.S. for 200 million additional shots in late 2021 and early 2022. Despite the uncertain need for boosters, Bancel’s pitch is that it’s best to be prepared for an evolving virus. At an investor conference in early June, he told everyone that “the smart countries are saying, ‘I’d rather be two months too early than two months late.’ ”
Beyond Covid, most of Moderna’s experimental vaccines remain in early stages of human trials. An exception is the shot for cytomegalovirus. No vaccine exists for this virus now, and the shot could turn into a multibillion-dollar product if it works. Moderna also plans human trials this year of a vaccine against another complicated pathogen, Epstein-Barr virus, which causes mononucleosis.
Influenza is an obvious target, and a shot for that could be combined with Covid boosters, locking them into an existing annual market. With the Pfizer-BioNTech alliance also slated to start trials on a flu shot later this year, researchers say they’re hoping the mRNA vaccines can improve on existing versions, which must sometimes begin production six months in advance based on experts’ assessment of which strains are likely to circulate. The shorter lead times required to make mRNA shots could, in theory, let health officials more closely match flu strains and improve upon typical 40% to 60% efficacy rates. “The mRNA vaccines have a very high likelihood of being better than the egg-based vaccines we use now,” says Andrew Pekosz, a virologist at Johns Hopkins Bloomberg School of Public Health. He adds that the shorter lead times could “shave off months” from the process. But he notes that it’s an open question whether there would be a good economic case for mRNA-based flu vaccines if they turn out to be more expensive and only modestly better than the old ones.
Moderna is also targeting a few nasty respiratory viruses that don’t have vaccines. These include metapneumovirus, which can lead to hospitalization in infants, and respiratory syncytial virus, which causes more than 175,000 U.S. hospitalizations annually in the elderly and about 50,000 more in young children. In the latter case, Moderna’s vaccine will be competing with efforts at GlaxoSmithKline and Johnson & Johnson that draw on other technologies and are further ahead.
Hoge says Moderna could combine as many as a dozen or more viral strains in one shot. The goal is a seasonal vaccine that “eliminates the majority of the respiratory viral diseases that we all suffer from,” he says. “The only way that we’re really going to get good, broad population immunity against these respiratory viruses is if we can make it feel like your flu shot.”
The concept makes sense on paper, according to Tony Moody, a physician-researcher at the Duke Human Vaccine Institute, which is working on mRNA-based flu vaccines. Combinations are “one of the strengths of the technology,” he says. He estimates that it would cost only a few dollars more per shot to add the necessary mRNA for a given viral target. “If you could get a combo shot that gives you a degree of protection against a lot of respiratory viruses, I think there would be a market for that,” he says. It won’t be fast or easy. Researchers will first have to show that the individual vaccines work and then perform studies showing that complex combinations don’t compromise efficacy or result in troublesome side effects.
To realize its vision, Moderna will have to move quickly. Competitors are investing heavily to catch up. Sanofi said in late June it would spend €400 million ($475 million) annually on mRNA research, focusing on stable vaccines with few side effects. With emergency authorizations unlikely in the future, considerations such as side effects and convenience will assume new prominence. Moderna is working on eliminating the complicated refrigeration requirements of its Covid shot. Future products will also have to find ways to reduce the high rates of fatigue, headache, and muscle pain produced by the shot. For the boosters, the company is testing lower doses, which may help.
How broadly mRNA can expand beyond vaccines into the far larger and more lucrative therapeutics market remains to be seen. There will be additional technical hurdles to surmount. To treat chronic diseases, for example, companies will have to prove that they can deliver the therapies to the target organs and that mRNA can be administered safely. And to develop cancer vaccines, mRNA researchers will have to solve the thorny problem of teaching the immune system to distinguish between specific tumors and healthy cells. Many previous approaches have failed.
The good news is that mRNA’s adaptability also makes it easier to try out many possibilities. Within a few years, Moderna could have 60 drugs and vaccines either in human trials or nearing them, according to Bancel. If it works out the way he hopes, mRNA will make inventing vaccines and drugs a bit more like creating software. “We use the same four-letter code” for every vaccine and drug, Bancel says. “We can scale the number of products we have in development at a pace that has never been done before.”
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