Moderna Writes Medicine Like Software
This August, Moderna (MRNA -1.25%) and Merck (MRK -1.34%) reported that their personalized cancer vaccine, intismeran autogene, cut the risk of melanoma recurrence after surgery when added to Keytruda. The result came from a phase 3 trial, the large final-stage study regulators lean on for approval. Moderna stock jumped 177% in one day and is up nearly 580% so far this year.
Moderna has plenty more to prove:
- The personalized cancer vaccine: Merck and Moderna plan to present the full melanoma data at a medical meeting and to file for FDA approval. They haven’t given a filing date.
- Other cancers: The same vaccine is being tested in lung, kidney, and bladder cancer. Including melanoma, nine clinical studies are under way.
- Rare genetic liver disease: Moderna expects pivotal data before year-end in propionic acidemia, an inherited disorder in which the body can’t properly break down certain proteins.
- Autoimmune disease: This is the next big opportunity that the CEO believes Wall Street hasn’t priced in yet.
At FoolFest, our annual member event, Tom Gardner spoke with CEO Stéphane Bancel about the science, the stock reprice, and why he prefers the long-term game over the next quarter.
Key Insights From Moderna’s CEO
On the Technology
Every cell in your body runs on messenger RNA, or mRNA. These are short-lived instructions that tell the cell which protein to build. Moderna writes its own instructions. Inject them, and the body builds whatever protein Moderna chose. That could be a piece of a virus for a vaccine, or a cancer marker the immune system can learn to hunt.
What we at Moderna figured out — it took us 10 years to do so before the pandemic — is how to make a safe mRNA molecule in a reactor that will be the instruction for any protein we want your body to make on demand.
On Being a Platform Company
Most drugmakers start from scratch with each new medicine. Moderna’s drugs share the same building blocks and the same factories. Only the code changes.
We knew from the beginning that it was going to be zero drugs or a lot of drugs. It made no scientific sense that it would be a one-drug or a two-drug company.
So Moderna established itself as a platform company. Every new approval makes the next medicine easier to develop. So far, the record backs that up. Six of Moderna’s seven phase 3 trials have succeeded. The one miss was a vaccine for CMV, a common virus that can harm babies before birth.
If you look at the industry average, starting from phase 1 to phase 3, it’s around 10%. At Moderna, we’re around 85%.
On Intismeran
Intismeran is made for one patient at a time. Moderna sequences the patient’s tumor, and an algorithm picks 34 of its mutations. Moderna codes those into a custom vaccine. Patients get it alongside Keytruda, Merck’s blockbuster cancer drug.
Keytruda basically gives energy back to the T cells … that attack your cancer. What intismeran does is, we teach your immune system how to look for new signatures, new mutations in your cancer.
After two to three doses, the body generates brand-new T-cells specifically trained to target the tumor. The results have been impressive so far.
From the phase 2 data, at five years out, 80% of people were disease-free, which in skin cancer is considered a cure.
On Patents and Competition
Moderna patents the system, layer by layer, rather than one molecule at a time. It keeps filing new patents with every new technology it discovers.
Think about it almost like a lasagna. We build layers and layers and layers of patents on mRNA. And then when you do a drug, you just take a slice of that lasagna.
Copycat drugs usually skip costly trials by proving they’re identical to the original. Moderna keeps intismeran’s mutation-picking algorithm secret, even from its CEO, and Bancel doesn’t see how a rival could prove a match without it.
How can you go to the FDA and say it’s the same drug and waive the clinical trial cost? I think this will not happen.
On Artificial Intelligence
Bancel says AI can tackle highly complex biology and shorten development timelines. After a phase 3 positive study, drugmakers typically spend about six months gathering and cleaning data before they can file for approval. Every month saved is another month of sales.
We are starting more and more to get to three months at Moderna, and I want that to become one day.
On the Stock’s 95% Decline
It was clearly not fun, but we kind of knew this was going to happen … As the sales come down, the market reprices the stock.
Bancel is referring to Covid sales here. The company remained undeterred and continued to invest in its platform, which is now paying off. The CEO backed his conviction with his own money.
I had options expiring that were 10 years old … At 29 bucks, I bought all of them, cash. I paid my taxes, I bought everything, I bought 100% of the stock.
On the Long-Term Game
Earnings per share is the profit figure Wall Street dissects every quarter. Bancel judges Moderna by the cash it returns over 10 years instead.
I’m not looking at the EPS of next quarter. I never have and most probably never will, because what happens next quarter is things we decided and worked on two or three years ago.
Today’s Question!
Will Moderna beat the market over the next five years? Why, why not?
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