Stéphane Bancel has relented to Wall Street’s desire for cost-cutting and reining in Moderna’s pipeline.
To kick off its annual R&D day in New York, Moderna said Thursday that it will slash its annual spending on research and development by $1.1 billion by 2027. The biotech will also stop developing five early-stage programs, place other drugs on the backburner and focus on a handful of late-stage mRNA medicines.
Simultaneously, Moderna overhauled its long-term financial projections, and it now forecasts the company’s break-even point in 2028 instead of 2026. The shake-up will not include major layoffs, Bancel told Endpoints News, and he envisions the company staying around its 6,000-employee headcount for the next three to five years.
“It’s a moment of evolution, in the sense the platform is working, which is the most important thing,” Bancel said. “We just want to be responsible and financially disciplined.”
The new measures are the latest in Moderna’s attempt to diversify beyond the Covid-19 vaccine that supercharged its growth over the past few years and is one of only two approved products. Like Pfizer and BioNTech, Moderna has struggled to predict the Covid shot market through the transition from pandemic to endemic.
Moderna’s stock price $MRNA has fallen over 80% over the past three years, erasing about $150 billion in market value from its all-time, pandemic-tinged highs. Several Wall Street analysts have recently argued significant cost cuts could help turn around the biotech’s fortunes.
Moderna’s stock traded down 16% at Thursday’s market open, as Wall Street analysts debated if the changes are sufficient and will take effect soon enough to convince investors of the path ahead.
“R&D reductions are too far out chronologically to be credible from a management team that we think has proven serially unable to project the performance of their business,” Leerink Partners analyst Mani Foroohar wrote in a Thursday morning note to investors. Foroohar holds an underperform rating on Moderna’s stock.
Jefferies analyst Michael Yee also said he expects the investor debate to continue over whether Moderna can reach profitability without raising additional money, noting that the R&D cuts are occurring “further out in time.”
Break-even forecast delayed two years
The changes are the result of a summer tradition at Moderna. Each year, leadership and the board review different scenario-based five-year plans for the company, Bancel said.
This year’s plan provides cost-cutting concessions desired by some investors, but not large enough to achieve a previously stated forecast of breaking even by 2026. The company is now targeting 2028 to break even on an operational basis, excluding stock-based compensation, depreciation and amortization expenses. Bancel said the summer review considered more drastic cuts that could achieve break-even by 2026, but they determined these weren’t the right steps in creating value.
“The scenario of cutting for the sake of cutting to drive profitability we think was destroying enormous amounts of shareholder value and also being the wrong outcome for patients,” he said.
He highlighted the company’s norovirus vaccine candidate as an example. Moderna said Thursday it will “imminently” launch a pivotal Phase 3 study for the shot. Bancel said comparable studies cost between $600 million and $700 million, and he would expect to proceed to regulatory filing in roughly two years. On the day of launch, he estimated that the vaccine would be worth $5 billion to $10 billion, calling that a “pretty nice return.”
“That’s what investors want us to do more than being profitable next week but not creating the return,” he said.
Ten launches by the end of ‘27
The cuts will slash Moderna’s R&D spending by about 20% from 2025 to 2028, from a total of $20 billion to $16 billion. The biotech also said its expected R&D spending this year is now $4.8 billion, up from $4.5 billion.
The focus will be 10 product launches by the end of 2027, including vaccines for Covid, flu, RSV, norovirus, and cytomegalovirus, or CMV.
Moderna said Thursday its RSV vaccine succeeded in a Phase 3 study in high-risk younger adults, and it plans to apply to expand its approval into that population this year. The company expects to use a priority review voucher to shorten the review timeline. So far, Moderna has struggled to gain commercial traction with its RSV vaccine, called mResvia, in an intensely and newly competitive market with rival shots sold by GSK and Pfizer.
“We should have done a better job planning and forecasting,” Bancel said on the disappointing RSV launch. “We were a bit naïve that because a product is coming in the middle of season, [we thought] customers were going to wait for us.”
Other prioritized programs include two rare-disease therapies and a Merck-partnered cancer vaccine program.
That cancer vaccine, mRNA-4157, has become a key investor focus following positive mid-stage results in melanoma. Moderna said Thursday that initial FDA feedback “has not been supportive of accelerated approval based on the current data.” A Phase 3 melanoma study is now “substantially enrolled,” although Moderna did not provide timing on a potential readout.
‘We just have to pace ourselves’
Moderna is pumping the brakes on developing vaccine candidates against the Epstein-Barr virus and the varicella-zoster virus. Both shots had been advancing toward Phase 3 studies.
“We’re not saying we will never develop them,” Bancel said, noting the company could resume development if sales accelerate or it strikes a deal with a pharma company. But their near-term future remains uncertain.
Moderna is also stopping five early-stage programs:
- mRNA-1287, an endemic human coronaviruses vaccine
- mRNA-1345, its RSV vaccine in the infant population
- mRNA-5671, a KRAS-targeting cancer vaccine
- mRNA-2752, a cancer drug
- mRNA-0184, a heart failure therapy
In addition, Moderna’s ambitions in rare disease will be dialed back. Bancel said programs against conditions like glycogen storage disease type 1a, ornithine transcarbamylase deficiency, and phenylketonuria have a future at his company, but not as part of this next wave of anticipated approvals.
“They are being put on the back burner,” he said, adding they will keep providing the drugs to people in ongoing studies but aren’t enrolling additional patients or expanding those trials. “We’re not increasing investment as we could on those programs because of the clinical signal we are seeing, [but] because we just have to pace ourselves.”
This story was updated to include Moderna’s stock move upon Thursday’s market open and analyst reaction.