Moderna's CEO said "strategy is evolving." The company's stock fell to its lowest level so far in 2020.

Moderna Inc (MRNA.O) has paused several drug programs and cut costs as it waits for profits to return.

Moderna's stock fell sharply on Thursday after the company announced it would significantly reduce its research and development efforts as the drugmaker tries to stretch cash to cope with ongoing losses.

The company said it plans to cut research and development spending by 20% starting in 2025, pausing several drug programs and discontinuing others. Total research and development spending is expected to reach $16 billion from 2025 to 2028, down from a previous forecast of $20 billion.

Moderna's stock fell 12.4% to $69.68 at the end of the day, its lowest closing price since August 2020.

Moderna said the cuts would allow it to break even on operating cash costs in 2028. The new target is two years later than the 2026 break-even date Moderna set last November.

The financial reset comes as the company’s vaccine sales continue to fall short of expectations. Moderna said Thursday it expects total revenue in 2025 to be between $2.5 billion and $3.5 billion, below the current FactSet consensus estimate of $3.9 billion.

Moderna said cost savings mean it won’t need to raise capital until it breaks even, which should ease Wall Street’s concerns about whether the company’s once-strong cash pile — $10.8 billion as of June 30 — will be enough to support a return to profitability.

“We want to be financially disciplined,” Chief Executive Stéphane Bancel said.

Moderna said it hopes to launch 10 products in the coming years, including a flu vaccine, a combination flu and COVID-19 vaccine, a norovirus vaccine, and a cancer drug developed in partnership with Merck.

“The platform is extremely productive,” Bancel said. “But at the same time, we are also realistic about the business challenges we face; including the uncertainty around COVID-19, the release of RSV, etc.”

Bancel said the company would control the pace and focus first on the 10 expected products to achieve diversification and reduce its reliance on COVID-19 vaccine revenue.

“It’s not a shift in strategy, it’s just an evolution of strategy,” Bancel said.

Before Thursday, Moderna’s shares had fallen 20% this year. In early August, the company cut its 2024 revenue forecast by as much as 25%, citing weak sales of its coronavirus vaccine in Europe and fierce competition in the United States.

The downward revision raises questions about Moderna's 2026 break-even goal and sparked concerns that the company could run out of cash.

In addition to reduced demand for its coronavirus vaccine, intense competition also appears to be squeezing Moderna. “Price erosion is indeed happening faster than we expected,” Bancel said.

Still, Bancel said he feels confident the company won’t need to raise capital. “We really believe we don’t need to issue shares because we have done the financial calculations of the low sales situation and we have significantly reduced our product portfolio,” he said. “We are slowing down the pace of our strategy and progress.”

Bancel said the cash generated by the COVID-19 and RSV vaccines, plus the cash on the company's books, will be enough to support the company to break even. "These two sources of cash - the cash from operations and the cash on the books, are more than enough to support what we are going to do," he said.

Unlike Pfizer (PFE.N), which used the huge proceeds from its COVID-19 vaccine to go on a massive acquisition spree, Moderna is using the cash it earned to fund its own internal research and development, aimed at advancing the messenger RNA technology it pioneered with the COVID-19 vaccine.

As part of its development presentation Thursday, Moderna plans to share results from a trial of its RSV vaccine in adults ages 18 to 59. It will also provide positive results from a separate trial of its flu vaccine.

The company said it will ask regulators this year to approve its so-called second-generation COVID-19 vaccine, expand approval of its RSV vaccine to cover younger adults, and approve its combination vaccine.

In total, Moderna expects to submit approval applications for three respiratory vaccines this year and has five non-respiratory products currently in late-stage trials that could lead to approval by 2027.

Moderna said it would halt five programs, including an early-stage program for an RSV vaccine for infants.

The biggest savings in R&D would come from pausing development of vaccines to protect against latent viruses, including the Epstein-Barr virus vaccine and the shingles vaccine. These products are considered the second wave of products that the company plans to launch in 2029 and 2030.

“We are just putting those assets on hold for now,” Bancel said.

The article is forwarded from: Jinshi Data