Moderna leaves key questions unanswered as investors seek the reality behind the hype

NEW YORK — Moderna Therapeutics, biotech’s most richly valued and hotly debated startup, made headlines Thursday morning with a cheery update on its pipeline of futuristic medicines.

Hours later, about 100 of biotech’s top investors and analysts packed into a ballroom at Manhattan’s tony W Hotel for a closed-door presentation they hoped would take them behind the press release — and tell them whether Moderna truly deserves its $5 billion valuation.

Several who attended said they were not overly impressed. Instead, they said, Moderna’s five-hour presentation underlined lingering questions about whether it can live up to its own hype.

“None of the answers they have really seem like the ‘a-ha’ moment,” said one attendee, speaking on condition of anonymity because the event was closed to the public.

Moderna, founded in 2010, has risen to its record-setting valuation on the promise that it can transform the body’s cells into deputized drug factories with a novel technology. Using custom-built strands of messenger RNA, or mRNA, the company claims it can generate the proteins needed to treat an array of diseases, from cancer to viruses.

On Thursday, the company said that its most advanced therapy, meant to regrow heart tissue by boosting production of a protein called VEGF, proved safe in a 44-patient study. That sparked positive headlines in the U.S. and abroad.

But a key data point was missing: How much of that protein did patients actually generate after getting the experimental drug?

AstraZeneca (AZN) , which is co-developing the drug, saw enough promise in the results to start planning a larger trial. But since Moderna did not release that crucial data point, outsiders can’t judge how much therapeutic potential there may be.

Another important caveat: The drug is meant to be delivered as a one-time-only injection. Moderna’s sweeping ambitions — used to justify its valuation — involve deploying mRNA technology to treat a wide array of rare diseases. That would require repeated injections over a patient’s lifetime.

To date, none of Moderna’s rare disease therapies has proved safe enough to test on humans, former employees and collaborators have told STAT.

Moderna did not respond to requests for comment.

As one indication of the challenges ahead, Moderna confirmed on Thursday that it has sidelined what was once its most ambitious effort, a project to treat the rare and deadly Crigler-Najjar syndrome. In January, former employees told STAT that the Crigler-Najjar therapy, developed alongside Alexion Pharmaceuticals (ALXN), ran into repeated toxicity issues in animal studies, indefinitely delaying the project. Alexion has since severed ties with Moderna.

Instead, Moderna has reset its rare disease pipeline and turned its attention to methylmalonic acidemia, a life-threatening metabolic disorder that affects about 1 in 48,000 people. But Moderna’s therapy is in the earliest stages of development, at least a year away from clinical trials.

In the meantime, Moderna’s struggles to develop a treatment safe enough for repeated dosing have cost the company its lead in the field. Translate Bio, a privately held Massachusetts startup, plans to take its first therapy, an inhaled mRNA drug for cystic fibrosis, into clinical trials early next year.

In the course of its presentation Thursday, the famously cagey Moderna provided more details than ever before on its inner workings, attendees said, acknowledging the scientific difficulty of its work while insisting on the vibrancy of its future.

Stéphane Bancel, the company’s charismatic but divisive CEO, largely ceded the spotlight to Dr. Stephen Hoge, Moderna’s president, who speaks in a measured, professorial tone. Attendees said it was a refreshing change from Bancel’s bluster, even if the crowd — an invite-only mix of investment bankers, analysts, and fund managers — left with crucial questions about the company’s technology still unanswered.

Moderna remains enviably wealthy, with about $1.1 billion in cash as of July, according to its presentation. But the company is spending more than $300 million a year as it works to advance its pipeline and build out a manufacturing plant in suburban Boston, meaning it will need yet more money in the near future.

The next logical step is an initial public offering — something Bancel has repeatedly promised — but investors remain incredulous that Moderna can convince Wall Street to back its $5 billion valuation, let alone increase it in what would already be biotech’s largest-ever IPO. That means Moderna will have to raise more cash from private investors, some of whom seem to have grown impatient with its repeated pivots and delays.

At least one of the company’s investors sold its stake to Fidelity this year, cashing out its shares at 34 percent discount to their most recent value, regulatory filings show. Wellington, an investment giant with more than $1 trillion worth of assets under management, invested in Moderna in 2015 but is no longer listed among the company’s investors on its website.

A Fidelity spokesman said the firm doesn’t comment on specific investments as a rule. Wellington did not respond to requests for comment.

The presentation to investors also made clear that Moderna is prioritizing vaccines. They are easier to develop from mRNA because patients need just one dose, which eliminates some of the safety issues that have plagued more ambitious projects such as therapies for rare diseases.

Moderna noted that six of its vaccines are now in clinical trials, and from a scientific point of view, they do look promising.

Investors, however, have not been enthusiastic about those projects because vaccines are seen as a commodity, low-margin product that can’t generate anywhere near the profits seen in more lucrative fields like rare diseases and oncology.

Moderna tried to shift the narrative Thursday by telling investors about its work in oncology. The company has begun dosing patients with an mRNA treatment, injected directly into tumors, that it believes can elicit an immune response. The company has not disclosed timing on the phase 1 study.

Another vaccine, developed in concert with Merck (MRK), is meant to work as an add-on to cancer immunotherapy, by making tumors more vulnerable to the blockbuster drug Keytruda. The Food and Drug Administration has given the green light to begin human trials, Moderna said. But the company did not say when it would do so.