efficient manner toward that very product”. In addition they opined that small-company manage- ment teams fail to differentiate the value of a tech- nology-derived product, ie a therapeutic drug, ver- sus the value of a specific platform technology. This is an oft-cited criticism, and it has been argued that most small pharmaceutical companies do not have the bandwidth to carry out such an approach. The consequences are dilution of effort, poor tactical and strategic decision-making, lack of focus and considerable risk enhancement. Ben- Joseph and Manning concluded that such an approach is “ left to big pharma”2! We dis- cuss these contrarian viewpoints of companies util- ising PD3 approaches and assess such contribu- tions to valuation.

Moderna and PD3 revisited We recently described a PD3 company as a corpo- rate entity that contains1: i. Scientific and technological core competencies. ii. Competencies are utilised to generate new ther- apeutic drug candidates. iii. Enhanced application of competencies across a range of disease indications. The platform of such companies can consist of

proprietary hardware, biological, molecular and digital technologies, or some hybrid mix of some or all of them combined. Thong has suggested that these companies must initially be able to generate a revenue stream and establish a “credible technology and/or service provider” capability (Platform Technology Partnering Company)3,4. As the com- pany evolves and develops a sustainable reputation associated with aggressive fund-raising, then it can start to fund its own platform-driven proprietary projects and create its own drug candidates in spe- cific disease indications. During this stage of growth, the platform company should partner with large pharmaceutical companies which fund the expensive late-stage clinical trials (Asset Creation and Out-Licensing Company). The company may ultimately transform itself into a fully-fledged phar- ma/biopharma company, suffering all the travails of risk but potentially enjoying all the rich rewards of its own drug candidates reaching market (Product Development and Commercialisation Company).

Moderna valuation We have described in detail the history, platform, drug pipeline and business model of Moderna1. The company was founded in 2010 and went pub- lic in December 20185. However, Moderna does not have any commercially-available drugs on the market. The valuation of the company was primar-

Drug Discovery World Spring 2019

ily driven by the mRNA platform. Noubar Afeyan in an interview last year on WBUR (a public radio station in Boston) articulated his views on the changing paradigm of DDD associated with a PD3 approach. He stated “I’d say the one big shift that [we’ve seen] is that people are making this less of a bet on a single drug, and more of a bet on a plat- form which can produce many drugs. And in that regard those companies require a lot more capital, but also provide a lot more opportunity for reward than the single bet that used to be the biotech com- panies of the past”6. Afeyan asserts that PD3 strategies can help facilitate increased valuation of DDD companies. Indeed, we have opined that the valuation of Moderna dramatically increased from $2.5 billion up to $7.5 billion prior to the IPO, mostly due to its perceived platform capabilities1. But, it should not be overlooked that Moderna now possesses a robust mRNA DDD pipeline of 21 mRNA drug candidates, which clearly contributes to its stratospheric valuation.

Moderna IPO Moderna executed a successful IPO on December 7, 2018. In this much-anticipated event, Moderna raised $604.3 million by selling 26.3 million shares at $23 per share, valuing the company at $7.5 bil- lion7. This was the largest IPO in the biotech sector to date for a pre-revenue company. The company started trading on the Nasdaq stock exchange under the ticker symbol ‘MRNA’. However, the irrational exuberance of the Moderna IPO quickly soured as the new shares lost a fifth of their value on the first day of trading. Investors took stock of a company with no market drug products, and a class of potential drugs that had never been assessed nor approved by any US, European or Asian regulatory authority. In addition, cash burn had been very high, with the company spending $548.3 million in total operating expenses in 2018, and it had incurred net losses each year since incep- tion in 2010. At the end of 2018 the company had an accumulated debt of $865.2 million. The stock ultimately hit a low of $13.52 on December 26, 2018, but more recently (January-March 2019) has been trading in the range of ~$19-22. Investors have priced in the value of the innovative platform of Moderna, but are now waiting to see whether it can deliver in terms of marketable drug products.

Comparative analysis – PD3 companies Currently, there are more than 100 different PD3 companies. At least five of these companies are classified as ‘Unicorns’ (privately-held companies valued >$1 billion). The size and valuation of these


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