Moderna Therapeutics, the high-flying private company with a $1 billion war chest, is reversing course. Three years ago, it decided to hatch startups as wholly-owned subsidiaries, all working on different aspects of its unproven biomedical technology called messenger RNA.
Moderna announced today that it is ending the experiment. It is dissolving the four startups, or “ventures,” that it has created and bringing all their experimental drugs back into the Moderna nest.
“We’ve been wrestling with this decision for a while,” Moderna president Stephen Hoge told Xconomy.
Moderna has earned both envy and criticism for its ability to haul in cash, close to $2 billion to date, from a preponderance of sources at an increasingly large valuation despite little evidence that its technology works. The company creates synthetic mRNA—the strands of information inside cells that direct the production of proteins. Moderna’s idea is to inject its synthetic mRNA into patients and prompt their cells to produce their own therapeutic proteins. It would be an entirely new way of making drugs, and Moderna has begun this year to make public its early clinical data.
Other companies such as CureVac, BioNTech, and Translate Bio are in the mRNA drug making race as well. But Moderna has stood out because of its fundraising, both from investors and from corporate partnerships, and its rapid growth. The company had 192 employees at the end of 2014. As of today, its ranks have grown to about 550.
The Financial Times reported last week that Moderna has a staggering valuation of $5 billion, more than the market values of many public biotechs, such as Acadia Pharmaceuticals (NASDAQ: [[ticker:ACAD]]) and Clovis Oncology (NASDAQ: [[ticker:CLVS]]), that have drugs on the market. Its most advanced clinical prospect, a heart drug called AZD8601 that Moderna is working on with partner AstraZeneca, just completed Phase 1 testing and is headed to a mid-stage trial.
The enormous valuation and the restructuring raise questions, yet again, about a timeline to go public. Bancel says Moderna doesn’t have IPO plans “within the next few months.”
This unusual trajectory offered Moderna the freedom to experiment a few years back. As CEO Stephane Bancel (pictured) told Xconomy in 2014, the company was concerned it would stretch itself too thin if it tried to work on both its platform and its drugs. So it created a venture unit to start new subsidiaries with new management, and put several of its mRNA drugs into each of them. Moderna has formed four entities since 2014: Valera, Elpidera, Caperna, and Onkaido, and each was focused on different diseases. Valera, for instance, was an infectious disease startup. Elpidera was a rare disease company. Moderna set up separate offices minutes from its headquarters in Cambridge for each venture.
The move helped Moderna push forward therapies in several areas at once, while hedging its bets. While the company wouldn’t reap all the financial rewards of the drugs developed by its subsidiaries, it wouldn’t carry all the risk and expenses of their potential failures, either.
But Moderna’s idea to bring in new investors for the ventures never got off the ground, Bancel says. In an interview with Xconomy, he ticks off the problems: Moderna’s existing investors had trouble understanding what parts of Moderna, exactly, they would still own if new backers were brought in to support the ventures. Regulators and journals wanted more clarity on which entity was responsible for the science being submitted for publication or review.
Internally, the different research and development groups created unnecessary complexities and higher costs. There are 16 programs now in clinical or preclinical development, seven of which are in clinical trials for cancer, infectious disease, and cardiovascular disease. As Moderna grew, simultaneously growing and maintaining the four subsidiaries as well proved too complicated, Hoge says.
The ventures are being merged back into Moderna, and their employees will stay on, according to Hoge. Valera president Mike Watson is taking on a newly created position within the company. The other three subsidiaries don’t currently have a top executive.
Will running everything centrally put too much on Moderna’s plate, as Bancel feared a few years back? Hoge says there’s a risk of being stretched too thin—or, as he puts it, of “suboptimizing a part for the whole”—but he stops short of saying programs might be cut. Both Bancel and Hoge say the benefits of having everything under their control outweigh the risks of managing several separate subsidiaries.
“The proof will be in the pudding,” Hoge says. “If we’re wrong, we’ll learn from it and move on.”
