Business
2013, Moderna signed an agreement with AstraZeneca to develop mRNA therapeutics in a variety of major disease conditions. The agreement included an eye-watering up-front payment of $240 million, one of the largest licensing deals made that did not include a drug already in clinical trials. This mega-deal was followed by an agree- ment with Alexion Pharmaceuticals in January 2014. It agreed to pay Moderna $125 million for 10 orphan disease drug products. In addition, Alexion made a $25 million preferred equity investment into Moderna. The company then announced a deal with Merck for the development of vaccines against viral diseases in January 2015. Merck made an upfront payment of $50 million as well as a $50 million equity investment into the company. During 2016, Moderna expanded its deals with AstraZeneca (January) and Merck (January), as well as a new deal with Vertex (July). In the same year (June) the company entered into a new deal with Merck ($200 million up-front pay- ment) to develop mRNA precision medicine vac- cines to treat a number of different cancers. These relationships have continued to develop as candi- date drugs have started to emerge, and a good example is the Moderna-AstraZeneca drug co- development deal signed in November 2017 for the mRNA treatment of heart disease (drug candidate AZD7970). Moderna also pursued an aggressive, but stealth-
like mode in seeking equity investments. As noted above, Noubar Afeyan at Flagship had provided the initial seed funding of $40 million in December 2012 (see Table 1). Flagship followed this up with another investment of $110 million in November 2013. Over the next three years, Moderna raised an astonishing $949 million in equity investment alone from a variety of sources, including pharma- ceutical companies, institutional and private investors. All this occurred in the context that Moderna had no actual drug therapies on the mar- ket, and that the business model was still evolving. In spite of such uncertainty, lack of demonstrable progress and no translation of discovery into prod- ucts, the estimated valuation post-money, after the $474 million investment in August 2016 was $2.974 billion (see Table 1). It appeared that secre- cy could pay off if you have a talented manage- ment and advisory board team, and you have framed your potential product(s) (mRNA thera- peutics) in an exciting and paradigm-shifting new light!
Problems and uncertainty: Any company that had a record of secrecy along with an ‘evolving’ busi-
Drug Discovery World Fall 2018
ness model, as well as an ability to expeditiously raise significant equity investments, write success- ful federal grants and generate substantial service- based revenues could be expected to have ‘growing pains’. In an attempt to peek behind the Moderna curtain of secrecy, Damian Gade noted in a scathing commentary written in 2016 that “the company’s caustic work environment has for years driven away top talent and that behind its obses- sion with secrecy, there are signs Moderna has run into roadblocks with its most ambitious pro- jects”8. The most pointed criticism was leveled at Stephane Bancel, the CEO of the company. Apart from the usual character-flaw issues such as ego, assertive control and impatience, the most egre- gious complaint was that company valuation was the dominant force driving company function and not the science. This led to a toxic work environ- ment that resulted in high management and staff turnover, which is rather unusual in well-funded, early-stage companies. Additional complaints lev- elled at the company included the fact that a focus on vaccines was shortsighted and even more damn- ing was the fact that the company had published no data supporting its claims to produce mRNA therapeutics. Gade quoted an anonymous former employee of the company that appeared to capture the essence felt by many at the time, namely that “it’s a case of the emperor’s new clothes. They are running an investment firm and then hopefully it also develops a drug that’s successful”8. In addition to personnel issues there was also the
problem of a still uncertain and ‘evolving’ business model. Early in the life of the company, a venture unit was conceived that was responsible for the creation of new subsidiary companies associated with mRNA therapies in distinct disease indication areas. These companies were initially wholly- owned subsidiaries complete with their own man- agement teams. This organisational structure was designed to facilitate a Moderna push forward on a multitude of therapy fronts simultaneously, while attempting to mitigate risk but maximise reward. The companies were: i) Onkaido LLC: formed January 14, 2014, responsible for mRNA therapies in oncology. ii) Valera LLC: formed January 2015, responsible for the development of mRNA products for the prevention of infectious diseases. iii) Epidera LLC: formed May 2015, responsible for mRNA treatments in rare diseases. iv) Caperna LLC: formed October 2015, responsi- ble for precision cancer vaccines. Unfortunately, this model never fully materi- alised, and the company announced in September
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