Why Moderna Therapeutics Won’t IPO Anytime Soon
We recently wrote an article about 7 publicly traded stocks that are involved in the exciting field of RNA therapeutics or what is often referred to as RNA interference (RNAi). In that article, we noted that not all “RNA therapeutics” companies are created equal and there are actually quite a few categorizations of RNA therapeutics. mRNA is one technique that uses “modified messenger RNA” as a cellular software to direct ribosomes to express proteins or antibodies within targeted tissues. In other words, this technique uses your own body to create medicines within your cells at the precise location they need to be delivered. While previous attempts at using mRNA have been thwarted by the body’s immune system, one exciting startup has figured out that problem and claims to have all but wrapped up the mRNA space.
Founded in 2010, Moderna Therapeutics took in the largest single round of venture capital funding ever recorded for a biotech company when in January 2015 they raised $450 million. That funding round gave Moderna a valuation of $3 billion and a total cash hoard of $800 million without even a single drug candidate in human trials. This rich valuation is a result of Moderna’s aggressive ambitions to use their mRNA Therapeutics™ to address hundreds of diseases that are not treatable today, if not thousands. The Company has over 50 preclinical programs in its pipeline, all of which are being developed on their core mRNA technology platform. This ecosystem of development can be seen in the below diagram:
The potential of this platform is already reaping rewards for Moderna. In 2014, Alexion put up $100 million in exchange for 10 options to develop rare disease drugs on the platform. In 2013, AstraZeneca put up $240 million for exclusive access to select any target of its choice in cardiometabolic diseases and selected oncology with future milestone payments of $180 million. Earlier this year, Merck paid $50 million in cash to partner up on 5 antiviral treatments using the platform. Moderna also has ambitious plans of their own with 3 subsidiaries being formed so far.
Onkaido Therapeutics is their wholly-owned oncology subsidiary which is developing 15 different cancer drug candidates that were previously in preclinical testing at Moderna. Valera is their second wholly-owned subsidiary focused exclusively on the advancement of vaccines and therapeutics for the prevention and treatment of viral, bacterial and parasitic infectious diseases. Elpidera is their third wholly-owned subsidiary which is creating novel therapies to address diseases with high unmet medical need. Moderna put $20 million into each of these spinouts, all of which are operating in stealth mode. The Company has even established a unit called “Moderna Venture Incubator Laboratories” which is a lab where scientists are tasked with dreaming up “outside the box” applications of their technology which when proved viable, can then be used to create even more spinoffs. Moderna itself is only focused on developing and supporting their platform with their CEO stating “Moderna will most probably never develop and sell a drug“. Not having to develop drugs yourself but spreading the risk across multiple other companies is a low-risk approach which should be appealing to investors who are looking for lower volatility in a high volatility industry.
When you’re sitting on a platform with such great potential, you’re likely to keep it behind closed doors as long as possible. Moderna Therapeutics has openly stated that they have no intentions of an IPO anytime soon, and is even said to have turned away potential investors who had too short a horizon for an exit. While Moderna may not be looking for an IPO anytime soon, some of their subsidiaries may have a much shorter horizon. With Moderna owning the subsidiaries in whole, they can enjoy the benefits of an IPO from one or more of their subsidiaries without having to disclose their cards.
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