Death of a unicorn

Moderna’s upsized IPO is the biggest-ever for a pre-commercial biotech. But its share price has fallen in early trade on its first day.

Moderna’s IPO today is biggest, for a pre-revenue biotech, of all time. Expanding its offering to over 26 million shares has allowed it to raise $604m and values the messenger RNA company at more than $7.5bn – not bad for a group whose projects have barely reached the clinic.

The enlarging of the deal – the group had initially stated that it would offer just under 22 million shares – indicates strong interest from investors. The 20% drop in the share price at the end of the first day of trading, however, is a reflection of the fact that Moderna has a great deal to prove.

The $23-per-share deal might yet increase further in size. Moderna has granted the underwriters a 30-day option to purchase an additional 3.9 million shares of common stock at the IPO price, less discounts and commissions.

Moderna times

Moderna has been talked of as a unicorn for so long it is worth remember exactly how early in their development its products are. The group has nine active clinical trials, all in viral infections or cancers, and all phase I. One of these studies was scheduled to conclude in September and another in October, but so far no data has been forthcoming. 

Moderna's active clinical trials – all phase I
Status  Candidate Conditions N NCT ID Primary completion date
Recruiting mRNA-4157 Solid tumours 90 NCT03313778 Sep 2019
Recruiting mRNA-2416 Relapsed/refractory solid tumour malignancies or lymphoma 75 NCT03323398 Jul 2019
Recruiting mRNA-1647 and mRNA-1443 Cytomegalovirus 209 NCT03382405 Feb 2020
Recruiting mRNA-2752 Relapsed/refractory solid tumour malignancies or lymphoma 130 NCT03739931 Aug 2020
Active, not recruiting mRNA-1325 Zika virus 90 NCT03014089 Feb 2019
Active, not recruiting VAL-506440 Influenza 201 NCT03076385 Oct 2018
Active, not recruiting VAL-181388 Chikungunya virus 60 NCT03325075 Mar 2019
Active, not recruiting VAL-339851 Influenza 156 NCT03345043 Sep 2018
Active, not recruiting mRNA-1653 Human metapneumovirus and human parainfluenza 119 NCT03392389 Jul 2019
Source: EvaluatePharma.

It is true that Moderna has partnerships with Astrazeneca, Merck & Co and Vertex, so it does have some cash trickling in. But the shareholders who’ve enabled Moderna to raise this huge haul, conferring a value of $7.5bn on the Cambridge, Massachusetts company in the process, will be waiting with ill-disguised impatience for clinical data, knowing that that will be the first clue to whether their bet has been a smart one. 

And they won’t be waiting alone. Investors’ interest in pre-commercial companies appears to have increased sharply this year: the top four pre-revenue biotechs to go public have done so in the last five months.

Top five IPOs of pre-revenue biotechs… ever
Company Amount raised ($m) Offering price Date Stock exchange
Moderna 604 $23 December 7, 2018 Nasdaq
Innovent Biologics 422 HKD13.98 October 24, 2018 Hong Kong Stock Exchange
Ascletis Pharma 400 HKD14 August 1, 2018 Hong Kong Stock Exchange
Allogene Therapeutics 373 $18 September 11, 2018 Nasdaq
Axovant Sciences 362 $15 June 11, 2015 Nasdaq
Source: EvaluatePharma.

The growth in mega-sized venture capital rounds means that more highly valued private companies are nearing a point where early investors want to exit, likely prompting many to look at a public float. That, combined with fears that the IPO window may be swinging shut thanks to both macroeconomic factors and a cooldown in biotech-specific enthusiasm, is speeding these big VC-backed groups into becoming publicly traded companies.

Moreover, the sector has been enjoying the biggest bull market since 2000 and investors are open to earlier-stage, higher-risk propositions. As for Innovent and Ascletis, they seized the opportunity provided by the Hong Kong exchange changing its listing rules to allow pre-profit or pre-revenue companies to float.

The poor showing Moderna made today might lead to this atmosphere starting to dissipate.

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