Moderna Shifts Focus to Diversification Amid Revenue Decline

Key Takeaway

• Moderna plans to cut R&D spending by 7% to $4.5 billion amid a 64% revenue decline, focusing on diversifying beyond Covid vaccines.
• Aiming for sales growth in 2025 and profitability by 2026, Moderna is optimizing operations and may delay projects for financial stability.
• With a shift towards operational efficiency and a cultural adaptation, Moderna prioritizes essential programs amidst declining vaccine demand.

Revenue Diversification Efforts

Moderna, the biotech company, is strategically diversifying its commercial drug sales to reduce its dependence on Covid vaccines, which have seen a decline in demand. The company aims to balance speed and cost more effectively in the coming years, as highlighted by Jamey Mock, Moderna’s chief financial officer. Moderna reported a 64% revenue decline to $6.8 billion last year, with a net loss of $4.7 billion, following a surge in R&D expenses. The company is expanding its respiratory business and focusing on oncology and latent diseases to bolster revenue streams amidst declining vaccine sales.

Cost-Cutting Measures and Revenue Projections

Moderna is taking steps to cut costs, including reducing R&D expenses by 7% to $4.5 billion this year. The company is also looking at trimming research spending, delaying share buybacks, and enhancing manufacturing efficiency through automation. With 45 programs in its pipeline, including nine in late-stage studies, Moderna anticipates returning to sales growth in 2025 and breaking even in 2026. Mock mentioned that if needed, Moderna would consider delaying programs or seeking project financing to maintain financial stability.

Operational Efficiency and Productivity Enhancements

Efficiency improvements are a key focus for Moderna, particularly in manufacturing facilities and clinical trial designs. The company is streamlining its manufacturing network, investing in new facilities, and optimizing productivity across its business operations. Moderna has not repurchased shares since the first half of 2023, with a $3 billion buyback program largely unused. The company's cash and cash equivalents stood at $2.91 billion as of December 31, down 9% from the previous year.

Management's Cultural Shift and Employee Engagement

Jamey Mock emphasized the importance of cultural adaptation within Moderna to align with the company's revised pace and revenue challenges. With a significant increase in full-time headcount to 5,600 employees by the end of 2023, Moderna is navigating a cultural shift to prioritize essential programs and spending. Mock highlighted the need to slow down, prioritize key initiatives, and ensure effective allocation of resources to address the evolving business landscape.

Management Quotes

• Jamey Mock, CFO of Moderna:

  "We are trying to balance speed and cost a little bit more as we look forward into the next three years." "You sell some of the risk of those products to others and investors." "There is a little bit of pruning around the edges of programs as well as trying to make ourselves more productive." "As our financial profile changed, we did make a conscious decision to stop share buybacks in the second half of last year. We have not said how long we’ll hold off, but we did say for the foreseeable future, we will not be buying back any shares." "The challenge is really a cultural one. We need to slow down. We need to understand which programs are the most important right now, which dollars to spend are the most important right now versus during that time period we had to grow as fast as we could."

Street Views

• Karen Andersen, Healthcare Strategist at financial-services firm:

  “It’s a lot of juggling different kinds of trials and trying to figure out when the company has flexibility to make some decisions on adding some more trials.”