Moderna (MRNA) stock is plunging Thursday after the COVID-19 vaccine maker announced plans to slash research and development (R&D) expenses and instead focus on receiving approvals for the many drugs in its pipeline.
Moderna's plans include a $1.1 billion reduction in R&D expenses by 2027 to a range of $3.6 billion to $3.8 billion. Rather than spending to explore new products, the company will shift its focus to winning approvals for the 10 products in its pipeline.
"Moderna now has five respiratory vaccines with positive Phase 3 results and expects to submit three for approval this year," said Moderna CEO Stéphane Bancel in a statement. "In addition, we have five non-respiratory products in pivotal studies across cancer, rare diseases and latent vaccines with potential for approval by 2027."
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Bancel adds that "the size of our late-stage pipeline combined with the challenge of launching products means we must now focus on delivering these 10 products to patients, slow down the pace of new R&D investment, and build our commercial business."
The shift in strategy comes as Moderna has seen a sharp decline in sales of its COVID-19 vaccine, including a 37% year-over-year decrease in its most recent quarter.
In the release, Moderna also said it anticipates fiscal 2025 revenue to be in the range of $2.5 billion to $3.5 billion and sales to grow at a 25% compound annual growth rate from 2026 to 2028, "driven by new product launches."
The midpoint of MRNA's revenue outlook for its upcoming fiscal year, $3 billion, came in well below analysts' expectations. Wall Street is expecting revenue of $3.74 billion in fiscal 2025, according to Yahoo Finance.
Is Moderna stock a buy, sell or hold?
Moderna had a good run up the price charts to start 2024, but the healthcare stock is now down 33% for the year to date. Still, Wall Street remains bullish on the drugmaker.
According to S&P Global Market Intelligence, the consensus analyst target price for MRNA stock is $125.71, representing implied upside of more than 90% to current levels. Additionally, the consensus recommendation is Buy. However, analysts may revise their targets lower following the reaction to its updated R&D plans.
And some analysts are already on the sidelines when it comes to the large-cap stock, including financial services firm William Blair, which has a Market Perform rating (equivalent to a Hold) on MRNA.
"Like other biotechnology companies with development pipelines, Moderna's risks center on commercial, regulatory, and clinical development," said William Blair analyst Myles Minter in an August 16 note.
The analyst adds that key risks specific to Moderna include the "potential for greater-than-anticipated drop-off in the COVID market, possible failure to show equivalent efficacy across various flu strains versus currently available and other emerging flu vaccines, poor tolerability and/or efficacy with repeat mRNA therapeutics dosing, and other potential clinical setbacks including failed or delayed trials."
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