Recent IPOs like Lyft (LYFT) and upcoming IPOs like Uber and
Pinterest have been capturing most of the headlines when it comes to the IPO market.
However, today we wanted to profile a recent IPO that broke out to new highs on
Friday that most investors are probably not familiar with: Moderna (MRNA 28.08, +2.12, +8.17%).
Moderna is a biotech company focused on creating a new category of medicines based on messenger RNA (mRNA), hence the ticker symbol MRNA. Moderna currently has 20 mRNA development candidates in its portfolio; 11 are in clinical studies, and another three have open INDs. Its programs span infectious diseases, oncology, cardiovascular diseases, and rare genetic diseases. Moderna has strategic alliances with several major biopharma companies, including AstraZeneca, Merck, and Vertex Pharma.
To step back a bit, what is mRNA? mRNA is a molecule transfers the genetic instructions stored in DNA to ribosomes to make the proteins required in every living cell. Moderna's approach is to use mRNA medicines to instruct a patient's own cells to produce proteins that could prevent, treat, or cure diseases. Every cell in the human body uses mRNA to produce all types of proteins in varying quantities, in different locations, and in various combinations. Changing a protein encoded by an mRNA molecule requires only a change to the sequence within the mRNA. As a result, each mRNA molecule is highly chemically similar, yet mRNAs can encode proteins with divergent chemical properties and functions.
In simple terms, Moderna is leveraging the fundamental role that mRNA plays in protein synthesis. The company has developed proprietary technologies and methods to create mRNA sequences that cells recognize as if they were produced in the body. Moderna focuses on diseases for which enabling targeted cells to produce (or turn “on”) one or more given proteins will enable the body to fight or prevent a given disease. The ability that mRNA medicines have to direct protein production from within cells is something that is not possible for other drug approaches, which gives Moderna’s methods possible potential to treat or prevent diseases that today are not addressable.
The potential here is a big deal as mRNA medicines represent
an opportunity that could meaningfully exceed that of other classes of
biopharmaceuticals, says Moderna. One such class, recombinant protein
therapeutics, which focuses on secreted proteins, today generates over $200 bln
in annual worldwide sales. Two other types of proteins, intracellular and
membrane proteins, represent as much as two-thirds of all human proteins and
are critical to human biology; however, delivery of these proteins is currently
beyond the reach of recombinant protein technology. Moderna believes that mRNA
medicines could address all three protein types.
Finally, in terms of the financials, Moderna does not expect to be profitable for the foreseeable future. It does not currently generate any product revenue, although it does generate collaboration and grant revenue. The draw for investors will be any developments on the clinical front rather than financials at this point.
Something to keep in mind is, as a potential new category of medicines, no mRNA medicines have ever been approved by the FDA or other regulatory agency. There has never even been a Phase 3 trial or a commercialized product in which mRNA is the primary active ingredient. So there is risk here. However, Moderna's mRNA medicines appear promising in the early phases of development. It could be transformational if its programs get approved. On a final note, this IPO had several Tier-One underwriters (Morgan Stanley, Goldman, JP Morgan), which does provide a measure of credibility.