Why Moderna's delayed break-even goal may not even be possible

Shares of Moderna (MRNA) have been falling this week after the biotech company pushed back its break-even goal by two years and predicted 2025 sales to come below its forecast for the current year. Moderna also delayed the timeline for developing key products, sending shares close to a four-year low.

Jefferies biotech analyst Michael Yee joins Market Domination to discuss why he downgraded Moderna to Hold and the company's outlook within the competitive sector.

Yee points to several factors impacting his decision to downgrade Moderna. He first notes that the company lowered its 2024 guidance for its COVID and RSV segments and that RSV scripts came in much lower than expected. He also explains that the delay in the company's break-even point is disappointing and argues that its new timeline may not even be possible:

"Two things are going to occur. One is that they are going to burn a significant amount of cash in that time point. We're calling for the potential risk of needing to raise capital... And the second is that we believe there's concerns over some of their projections as it relates to the pipeline. And so we just don't think that that revenue or break-even timeline is possible. We think they're going to have to raise money."

While Moderna's mRNA technology has been proven to work, Yee acknowledges that the company operates in a "very competitive space." He adds, "We think it works. But things have been pushed out and they are spending way too much money. That is the problem. The revenues do not match the expenses. They are burning the cash and like many companies... we need to really adjust to the post-COVID time."

However, Yee held off on giving Moderna a double downgrade to Sell, arguing that while there has been a "significant pullback" in the stock, a lot has already been priced in. "Our call is more 12 months; we're going to see some more problems. And then also there is this potential for the CMV vaccine which is going to have positive Phase 3 data coming up. So I would just say that we definitely have some structural concerns over the medium to longer term," he explains.

For more expert insight and the latest market action, click here to watch this full episode of Market Domination.

This post was written by Melanie Riehl

Video transcript

Moderna pushed back its break even goal by two years on Thursday, predicting 2025 sales, uh, below its forecast for the current year and delay the timeline for developing several key products.

Their shares are close to a four year low, and our next guest slashed is rating on the vaccine maker to hold from by.

Joining us now is Michael Yee, Jeffrey's biotech analyst.

Michael, great to see you on set.

I know.

Very exciting.

Great to be here.

So you did.

Let's just start there.

So you you do take the rating annual hold Michael, to explain why explain the downgrade?

You know, there were two huge concerns that happened recently at Moderna.

Uh, the first, uh, was that they lowered guidance uh, for 2020 before on covid and RSB, uh, two, areas that both have been disappointing.

The scripts for RSV very, very low versus expectations.

And the second thing that just happened this week, which really caused a lot of concern for us, is that they pushed out the profitability break even point for this company, which is burning billions of dollars per year to break even from 2026 to 2028.

That's a far way out here.

So two things are gonna occur.

One is that they are going to burn a significant amount of cash.

In that time point, we're calling for the potential risk of needing to raise capital.

You imagine This is a company that's doing $20 billion a year in covid.

And now we're talking about having to raise money.

Uh, and the second is that we believe there's concerns over some of the projections as relates to the pipeline.

And so we just don't think that that revenue or break even, uh uh, timeline is possible.

We think they're gonna have to raise money when it comes to the pipeline.

The idea, of course, was OK. Once we figure out that the RMMRN a platform works, we should be able to apply it to all kinds of things.

That was the promise of this.

Why is that promise not being fulfilled?

Is it just that it's hard to do that, that it takes a long time that Covid sort of fooled us into thinking it was quick and easy?

I think there's, uh, on one.

I think that we can agree that I'm RN.

A technology works.

Uh, they obviously have the covid vaccine approved.

They now have the RSV vaccine approved, and I will even go on record to say it's very possible that the CM VA another virus, particularly that can affect babies, may have positive day in the next couple of months.

So we know it works.

I think that where we know is that it's very good for respiratory vaccines and preventing, uh, obviously respiratory diseases.

But that's a very competitive space.

They're not the only player.

And obviously part of the issue here, particularly with RSV, is that they were not able to hit any of the sales projections.

The pricing went down for covid, so this is a tough space where the technology works.

It has not yet fully played out for orphan diseases.

And you might mention cancer.

What happened to the cancer vaccine with Merck that does look promising.

However, they announced yesterday that although they had promising phase two data, they're not gonna be able to file that drug until a few years down the road until finishing it and contra expectations.

Uh, the FDA pushed back and said, We want you to finish a phase three.

So we think it works.

But things have been pushed out and they are spending way too much money.

That is the problem.

The revenues do not match the expenses.

They are burning the cash.

And like many companies, you know, sometimes I think, uh, EV companies or whatever we're talking about, they really need to adjust it.

We need to really adjust to the post covid time zone.

When you talk about these challenges like it sounds daunting.

I'm curious.

What?

What stopped you from doing a double downgrade to go to sell because some of cos on the street I saw JP.

Morgan cut to underweight?

Yes, there was a double downgrade today.

There was another downgrade to hold.

I think that on one hand you do already have a significant pull back in the stock.

It went from about 50 billion to 25 billion in the last couple of weeks or month.

And so at 25 billion.

Uh, you know, a lot has been sort of priced in.

I know the stock only down modestly today, So our call is more 12 months.

We're gonna see some more problems, and then Also, there is this potential for the CMV vaccine, which is gonna have positive face of data coming up.

So I would just say that we definitely have some structural concerns over the medium to longer term in the short term.

A lot of the pushback today has just been looked.

Stock is down a bunch.

You know, Lot's already been priced in et cetera.

Can I Can I ask you, though, about that stock?

Because it is down about 40% now, Michael, in the past 12 months.

Do you think this company has the right leadership team in place to navigate the kind of challenges you're outlining here?

It's a fair question.

I use the word credibility in my last earnings note in the analyst event yesterday, we did say there is some guidance, credibility and management credibility issues that I think not just me.

But Wall Street, obviously, is, uh, reflecting.

Uh, and no one generally believes the forward guidance, and that's probably a credibility thing.

So I do think that's a fair question.

I will leave it to other people to, uh, push harder on that.

Maybe shareholders, uh, to to to call further aggressive change.

But, uh, it's a fair question