Top investor slashes Moderna’s valuation as company struggles to live up to its own hype

Biotech’s biggest unicorn just took a billion-dollar haircut.

One of Moderna Therapeutics’ largest investors slashed its assessment of the company’s value by 34 percent, a painful write-down that comes as the ambitious young biotech struggles to retain talent and make good on its lofty promises to upend the drug industry.

The privately held Moderna has raised nearly $2 billion from investors and partners since it launched in 2010 with a promise to revolutionize drug development. The company is now valued at $5 billion.

But according to investment giant Fidelity, that figure is $1.7 billion too rich.

In its last private financing round, Moderna raised $474 million at $8.78 per share. But in filings posted online Wednesday, Fidelity’s biotech fund cut its valuation of the company to just $5.80 per share as of April 30.

Do the math and that suggests at least one longtime investor — Fidelity has backed Moderna since 2013 — believes the company is worth just $3.3 billion.

Moderna declined to comment on Fidelity’s decision.

Fidelity’s write-down follows a trying stretch for Moderna. Troubling safety concerns have forced the company to pivot away from its most forward-thinking — and potentially lucrative — projects and focus instead on the crowded and commoditized field of vaccines. At the same time, an escalating legal fight is threatening Moderna’s ability to ever make a dollar from its most advanced work.

Whether those factors weighed on Fidelity’s decision is unclear. The firm doesn’t comment on specific investments as a rule, a spokesman said. In filings with the Securities and Exchange Commission, Fidelity says it uses a multitude of factors when valuing its investments, including market trends and company-specific risks.

The Fidelity move doesn’t change anything tangible for Moderna in the short term, and it won’t affect the amount of cash the company already has on hand. But it does suggest that Moderna’s investors might be losing faith in the company’s future — and it could weaken Moderna’s prospects for the blockbuster debut on Wall Street for which it once seemed destined.

Moderna’s rapid rise is based a simple pitch: Using custom-built strands of messenger RNA, or mRNA, the company promises to turn the body’s cells into deputized drug factories, producing the proteins needed to treat an array of diseases. Stéphane Bancel, Moderna’s charismatic and divisive CEO, has promised to craft hundreds of drugs with his company’s technology, touting its potential in cancer, rare diseases, and deadly viruses.

But things haven’t worked out that way so far.

Moderna’s first major bet, a treatment for the rare and debilitating Crigler-Najjar syndrome, never proved safe enough to test in humans, leading to an indefinite delay, as STAT first reported in January. Subsequent attempts to treat chronic disease with mRNA have run into similar problems, according to former Moderna employees.

Now the uncommonly secretive company is pushing forward with using mRNA to develop vaccines for infectious disease. They have shown early signs of safety and efficacy in a small clinical trial. But there’s a sizable problem: Moderna doesn’t own the technology key to making its mRNA vaccines work, and the company that does claims Moderna is using it illegally. A Canadian judge recently sided against Moderna, setting the stage for a trial this fall that could leave the company with no right to sell its most advanced products.

All the while, the Cambridge, Mass., company is hemorrhaging talent.

James Kasinger, Moderna’s chief counsel, stepped down this month just as the company’s legal woes escalated. Moderna’s head of early-stage research left the month before. The president of the company’s oncology division also quit this year, just months before the promised start of the company’s first clinical trial for an mRNA cancer therapy.

In the last three years, Moderna has also lost its leaders of rare disease research, science, finance, technology, and manufacturing. Bancel’s absolute insistence on making Moderna a success has bred a fractious, high-turnover workplace, former employees told STAT last year, a place with no patience for the routine failures of science and little room for institutional dissent.

Meanwhile, each departure cuts against Moderna’s self-perpetuated narrative: If indeed the company is poised to revolutionize biotech, why is top talent so inclined to quit? And if Moderna is heading toward what would be the industry’s largest-ever initial public offering, why are so many employees leaving before their shares can be sold?

Through it all, Moderna hasn’t curtailed its ambition. The company plans to spend $300 million on research and manufacturing this year, planning to construct a $110 million plant in suburban Boston to crank out new mRNA treatments.

But even with its substantial resources — Moderna says it ended 2016 with $1.3 billion in cash — the company will eventually have to raise yet more money.

For most biotech companies, the next step would be an IPO, and Moderna reorganized its business last year to prepare for one. But investors who spoke to STAT are skeptical the company and its vaccine-focused pipeline can convince the public markets to support the multibillion-dollar valuation it expects.

And Fidelity’s write-down, whatever the reason, won’t help Moderna make its case.