A bitter pill: The day after the largest biotech IPO ever, Moderna’s stock fell more than 19%

After a historic IPO, biotech startup Moderna had a terrible first day of trading.


December 10, 2018

Last week, Biotech company Moderna raised $604.3m in an IPO that valued the company at $7.5B. But, the celebration was short-lived: Its stock slumped more than 19% in its first day of trading. 

Moderna’s flashy IPO and historically bad first day send mixed signals about the biotech market, which was breaking records this year until the recent stock slump.

Don’t shoot the messenger RNA

Moderna specializes in messenger RNA therapy, a type of treatment that uses a patient’s own cells to fight diseases. If Moderna’s drugs work, they could provide revolutionary (and valuable) new treatments for cancer. 

But like many biotech companies, Moderna has yet to bring any drugs to market: Moderna is currently running 21 drug research programs (only 10 of which have passed the lab phase and moved on to human trials). 

Investors have pumped $7.1B into 60 biotech companies this year, making 2018 the 2nd largest year of biotech funding (after 2014). So, how can biotech companies raise billions without viable products?

Everyone’s hoping for a miracle (drug)

Biotech investing is like venture capital on steroids: Investors are happy to invest in dozens of experimental drugs because they only need 1 to succeed. 

Because pharmaceutical R&D is so expensive, many promising biotech startups IPO early so they have more money for research. But biotech stocks are still risky. 

Since the trade-war stock slump began, some investors have stopped taking their medicine. The Nasdaq Biotechnology index was up 14% in August: Now it’s up only 0.2% for 2018.

An uncertain prognosis

Moderna’s first day of trading was the 5th-worst performance of any 2018 IPO. Now, it’s uncertain whether the company will make a recovery. 

With its new cash, the company will have enough money to push its drugs through further clinical trials. 

But unless some of them show promising results in the near future, Moderna could be in trouble. Moderna spent $475m in operating expenses in 2017, and its funding will only last so long.

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