This is Bloomberg Business Week with Carol Masser and Bloomberg Quick Takes Tim Stenovik from Bloomberg Radio. I'm Carol Masser and I'm Tim Stanovik, the cover story this week. At the beginning of the pandemic, a few of us had ever heard of Moderna. Now the company is a household name with a billion dollar market cap, and it's COVID nineteen vaccine may have nineteen billion dollars in sales this year.
So what comes next? The company has or will soon have messenger RNA based vaccines and trials for no fewer than ten different viruses, including flu, HIV, and zika, And if that's not enough, it's also working on cancer, rare genetic diseases, and even heart disease. The company's CEO sees m RNA coming to dominate the market for viral vaccines and one day make the hard work of designing drugs
and vaccines a bit easier, more like creating software. If he can pull it off, the medical implications would be huge, as with the financial payoff for the company, But it's not going to be easy for Maderna now that Messenger RNA vaccines have succeeded so spectacularly, every major vaccine company is trying to catch up, and as it expands beyond COVID Maderna will have to prove messenger RNA can work in large trials for difficult to treat diseases such as cancer.
A year ago, Moderna was an unprofitable company with no marketed products and a promising but totally unproven technology. None of its experimental drugs and vaccines had ever completed a large scale trial. Experts were divided on how well the mRNA based COVID nineteen vaccine it was about to enter in a phase three trial with stack up against older, more established vaccine technologies. This year, Moderna could deliver one billion doses of its COVID shot and bring in nineteen
billion dollars in revenue. It's become the rare biotech to hit the big time without being gobbled up by or splitting profits with larger, more established company. It's worth over ninety billion dollars more than stalwarts such as Bayer, the German inventor of aspirin, and biotech peers such as Biogen founded three decades prior. The speed at which Moderna and its primary mRNA competitor, a partnership between Fiser and bi on Tech, devised their shots, has made a major contribution
to the fight to end the pandemic. With strong efficacy, steady supply, and no show stopping safety scares, officials are carefully monitoring rare heart inflammation cases in teenagers and young adults. mRNA shots have become the vaccines of choice, at least in countries that can get them. But for Moderna Chief executive officer Stefan Bonsel, the COVID vaccine is just the beginning.
He's long promised that if mRNA works, it'll lead to a giant new industry capable of treating most everything from heart disease to cancer to rare genetic conditions. Moderna has drugs and trials for all three of these categories, and bon Cell says his company can also become a dominant vaccine maker, developing shots for emerging viruses such as NIPA and zica, as well as better known, hard to target
pathogens such as HIV. In the past forty years, more than fifty new human viruses have been discovered, only three have authorized vaccines. Bonzell views that as an opportunity We're going to totally disrupt the vaccine market, he says, during a late May interview at modernist Cambridge, Massachusetts headquarters, which fills a ten story building north of the m I T campus. The Swiss drug maker Novartists occupies labs in an adjacent building, and Fighter and Merk have offices a
few blocks away. Bonzell, who's forty eight, wears a pressed blue shirt, dark blue jeans, and a black air miss belt. An avid runner, he appears even trimmier in person than on his frequent virtual conference appearances. He repeatedly jumps to his feet during the interview to graph on a whiteboard how the COVID outbreak could evolve. One chart forecast seasonal
waves declining each passing year, but still significant. Another projects the possible decay of vaccine efficacy over time, with m RNA shots like his starting in the best position but gradually declining. Countries may want to stockpile booster shots soon. My mother is seventy two and she has leukemia, he says, I don't want her to go through the fall without a boost. The company has vaccines for ten viruses that
are in or about to be in human trials. These include three types of COVID nineteen boosters that are in mid stage trials, a seasonal flu shot that began its first human study in July, and HIV shots that are slated to begin studies later this year. The furthest along besides the covid shots, combat cit omegalovirus, a ubiquitous bug that spreads through bodily fluids and is a common cause of birth defects. It's set to begin a Phase three
trial this year in women of childbearing age. In the long term, Moderna is aiming to develop an annual supershot that could suppress numerous respiratory ailments, including covid, the flu, and others. Our goal is to give you several m RNA's in a single shot at your local CVS or GP every August or September. Bond Sell says now comes the difficult part delivering on that promise while keeping ahead of just about every other vaccine company in the world
as they rapidly invest in m RNA. In the future, MODERNA won't have the pandemic to highlight m r as most obvious advantages over older technologies, speed and flexibility. Future vaccines and drug will usually have to go through the US Food and Drug Administration's normal approval process, meaning longer follow ups to gather data and six to ten month review timelines. That time frame will provide space for mRNA
wielding rivals and older technologies to compete. Fiser, with its partner by On Tech, has become an m RNA manufacturing juggernaut and expects to produce three billion doses this year. It has also dominated foreign distribution of m RNA vaccine
so far. Another vaccine from Kervak in Germany, which took a different approach to m RNA, performed tepidly, proving only forty eight percent effective in phase three trial data released in June, but still another from China's While vax Biotechnology will soon begin phase three testing in seven countries, more
established technologies are reasserting themselves too. On June fourteenth, Novovac said it's recombinant protein vaccine was effective in a nearly thirty thousand person trial in the US and Mexico with relatively few side effects, results that more or less matched those of the best mRNA shots vaccine. Giant Sinophi and Glaxow Smith Klein are in Phase three trials of their own protein based COVID vaccine, which could hit the market
by year end. Many for Uhar, an analyst at s vp Lerinc, Calls Moderna's accomplishments with the COVID vaccine truly breathtaking, but he also says it's far from certain whether such vaccines will have clear efficacy advantages with other viral diseases, and how big a role of the technology could play in treating non infectious diseases such as cancer is unknown, So though public expectations are boundless, he says, the revenue opportunity is not the reply for Boncell and the others
pouring money into tiny RNA strands lies in those two key advantages of speed and adaptability. At their heart, mRNA vaccines are modular technology. They deliver the genetic code telling cells how to make the virus proteins that provoke an immune response, and the cells do the hard work from there.
Now that Moderna is profitable and sitting on almost eight billion dollars in cash, bon Sell's own stake including options, is worth around seven billion dollars according to the Bloomberg Billionaires Index, it can move quickly and aggressively into numerous new applications simply by changing the genetic code it puts
into the m RNA. While modernas shot appears to be holding up well against the currently surging delta variant, for example, it's a straightforward process for the company to incorporate mutations into the vaccine if needed. We don't have to introduce new technology or new processes. Bon Sell says. It's exactly the same thing when Bontell left the top job at the French diagnostics company Bio Murio and became the second employee at Moderna. The name is a mashup of modified
and RNA. A decade ago, the idea that messenger RNA could be medically useful was radical at the time. The molecule, which evolved to carry protein blueprints from DNA in the cells nucleus to the compartments that synthesized proteins, had a reputation among lab scientists as fragile and hard to work with. When m RNA is artificially inserted in the human body, the immune system identifies it as a threat and a tax it, and because m RNA's function is temporary, enzymes
found throughout the body can break it down. Neither a desirable outcomes for a drug or vaccine. Starting in two thousand five, two researchers at the University of Pennsylvania Catalincaiko and Drew Wisseman managed to slightly modify mRNA so it generated less of an immune reaction and in the body. The finding drew little recognition at the time, but it
turned out to be a critical advance. Catalan left Pen to join BioNTech in in a trio of Harvard at m I T scientists founded by venture firm Flagship Pioneering picked up on the idea and founded Moderna, bringing Boncell on the next year. Moderna and BioNTech later licensed the PEN technology. Boncell recalls telling his wife before he changed jobs, that there was a five percent chance the m RNA concept would succeed, but if it did, it would be huge.
When Boncell pitched Moderna's now president, Stephen Hog on the company the following year, Hoax says his reaction was he's either brilliant or crazy. Hog was then a Mackenzie partner with a medical degree, and he was interested in doing something that would have more societal impact. He slowly came around to Boncell's view that mRNA therapy, if worked, was really going to transform medicine. The concept behind m RNA
vaccines is simple. When the shots bring those protein making instructions to cells, they effectively turned them into microscopic vaccine factories in their own right. This allows developers to streamline what is normally a messy manufacturing process. Many flu vaccines, for example, are made inside chicken eggs, and even newer genetically engineered vaccines still require growing viral proteins inside vats of live sales. Bypassing such steps lets mRNA vaccine manufacturers
shift gears fairly quickly. It also appears to be relatively easy for them to make complicated vaccines involving multiple viral proteins. Everything with m RNA is just simpler, says Barney Graham, Deputy director of the Vaccine Research Center at the National Institute of Allergy and Infectious Diseases WHO LAB has been formally collaborating with Moderna since seventeen. For me, making vaccines that are as simple as possible is the way to go,
Graham says. Gene based shots such as m RNA vaccines are particularly well suited to fighting viruses because they seem to be adept at producing the so called killer T cells that destroy virus infected cells. Before MODERNA could create an mRNA based product, it had to crack the problem of how to protect the molecule from the body's defense
systems by modifying the RNA. The pen researchers had figured out how to dampen the hair trigger immune response it provoked, but their approach would be useless if it were broken down by enzymes before it could reach cells. The key to solving that problem turned out to be adding protective lipid nanoparticles to surround the mRNA molecules, essentially creating balls of fat with little bits of RNA mixed in there, says Carrie Bennatto, chemist who left asdra Zenica to join
MODERNA in. When MODERNA started working on this approach in it had been tried mostly on much smaller types of RNA molecules, and there were concerns about side effects. People had decided they were toxic coaxes. Nanoparticles contained synthetic fats, and in early iterations, some of those fats tended to accumulate in cells, building up over time and potentially causing
liver damage or other side effects. Beninato's assignment was to devise nanoparticles that could safely and efficiently carry out the m RNA into cells, release the playload, and then quickly break down. When she started, the chemistry involved in using nanoparticles with m RNA was so unexplored that there were few published scientific papers to guide her. She and her team made one tweek after another, pinpointing changes that improved
lnerability without harming their ability to deliver mRNA. By Moderna had made a breakthrough finding a series of lipid molecules that fit the bill. Then it was off to the races. Ben and Otto recalls they patented the formulas and started deploying them in vaccines. In its early years, Moderna had focused on therapeutics, including programs for cancer, heart disease, and other lucrative areas. The company gradually turned to vaccines as Boncelle realized they would be the best way to prove
mRNA technology worked. You have to inject only a couple of doses to stimulate a long lasting immune reaction. Working with Graham's team at NAIAD, Moderna began formulating a COVID vaccine as soon as Chinese scientists released the coronavirus RNA sequence in early January. Later that month, Bonzell asked his manufacturing chief what it would take to make a billion vaccine doses in one He looked at me like I
was insane. Bon Cell recalls the Moderna plant had never made more than one hundred thousand doses of anything in a year. The US government agreed to pay nine hundred fifty five million dollars for the vaccine trials and initial small scale production, but bon Sell says he couldn't initially persuade any country to pay for a full scale up. Moderna instead raised one point three billion dollars in a
May stock offering for the purpose. The move allowed the company to take its leap onto the world stage and laid the groundwork for what comes next. Moderna produces its nanoparticles and m R and A in a former Polaroid factory in the Boston suburb of Norwood, fifteen miles south of its headquarters. The plant, which opened in July, has been running around the clock since November. It looks less like a factory than a cross between a tech startup
and a MOLECUA. Their biology lab, dozens of operations and quality control workers dressed in casual clothing, occupy a large warren of open layout desks in the front of the building. COVID vaccines are produced in clean rooms, some of which are visible behind glass panels in the back. There are nine of these clean rooms making the shot here, up from three in December, and six more are scheduled to
be running by the end of the year. The suites, which are roughly one thousand square feet each, were built for flexibility. The process starts with pieces of DNA called plasmids that Moderna brings in from a contract manufacturer. These plasmids contain the genetic blueprint for the COVID nineteen spike protein. In one set of clean rooms, the spike protein DNA is synthesized into m RNA using a technique called vitro transcription.
It's basically the laboratory version of the process that normally occurs in cell nuclei. The m RNA solution and can be made in a matter of hours, says Scott Nickerson, a senior vice president who oversees the site. It then takes several days to purify unreacted enzymes and other extraneous material. From there, the purified mRNA goes to a separate set of clean rooms, where workers spend another few days formulating
it with lipid nanoparticles. The final product is frozen and sterile bioprocessing bags, encased in a protective shell, and shipped in temperature controlled trucks to Catalants plant in Bloomington, Indiana. There, the vaccine is deluded, put into vials, labeled, and shipped. When Moderna started making the COVID vaccine and commercial quantities last year, the process took as long as nineteen days to complete. Now it takes only ten days to prep
a bat for shipping to Catalan. Last May, Moderna signed a ten year deal since expanded twice with Lonza Group, which is expected to produce the bulk of its European supply at factories in Switzerland and the Netherlands. Moderna also made packs this year with Sonofie, Samsung Biologics, and Thermo Fisher Scientific to bolster the vile filling capacity. Increasing so
called phil finished capacity will become important. That's a greater share of the population is vaccinated and doctors can't find enough patients to use up the larger vials now in use, which contained between ten and fifteen doses. Moderna's production this year eight hundred million to one billion doses will amount to only about a third of Fiser and bion Tech's output. Fiser had one hundred times more people at the start of the pandemic, along with existing plants it could retool
for vaccine production. Bond Sal says Moderna's headcount has almost doubled since last year to fift hundred Next year, with more capacity and a significant portion of its output potentially going to booster shots and pediatric formulations that use lower doses, the company and its partners expect to produce as many as three billion doses, approaching Fiser and bion Tech projected to supply of four billion if Novavax meets its production goals.
Snopie's protein based vaccine also works, and companies such as Johnson and Johnson and Azra Zenica solve their manufacturing bottlenecks at some point next year, the world could shift from being desperately short of COVID shots to swimming in them. As the virus settles down to a more manageable threat over the next few years, COVID vaccine sales may decline,
perhaps precipitously. Morning Star analyst Karen Anderson says this market could top out at seventy two billion dollars worldwide this year, slip to sixty five billion in two, and plummet to eight billion a year after that. The extent of the slide will depend on how many people need booster shots, how often, and whether Moderna, Fiser and others will be able to raise prices to compensate for a smaller market.
The science on booster shots is still unsettled. It's not clear on how often or even whether they'll be needed in large numbers. Moderna has three types of boosters in phase two trials, including a lower dose version of its existing vaccine, one booster that's been customized against the beta variant that was first spotted in South Africa, and a third that combines both. More variants can be added if necessary. The process for the beta booster went even faster than
for the original shot. Design work started on January twenty second, with Moderna ultimately switching out some of the chemical letters in its original mRNA vaccine so they corresponded to the spike protein in the beta variant. Manufacturing began three days later and The first trial dose was administered on March tenth, only forty seven days and all compared with the sixty
five for the main vaccine. Moderna is already cutting deals that encompass potential booster doses, including a June order from the US for two hundred million additional shots in late and early Despite the uncertain need for boosters, Bonzale's pitch is that it's best to be prepared for an evolving virus. At an investor conference in early June, he told everyone that the smart countries are saying, I'd rather be two
months too early than two months late. Beyond COVID, most of Moderna's experimental vaccines remain in early stages of human trials. An exception is the shot for psyto megalovirus. No vaccine exists for this virus now, and the shot could turn into a multibillion dollar product if it works. Moderna also plans human trials this year of a vaccine against another
complicated pathogen, epstein bar virus, which causes mononucleosis. Influenza is an obvious target at a shot for that could be combined with COVID boosters, locking them into an existing annual market with the fiser BioNTech Alliance, also slated to start
trials on a flu shot later this year. Researchers say they're hoping the mRNA vaccines can improve on existing versions, which must sometimes begin production six months in advance based on experts assessment of which strains are likely to circulate. The shorter lead times required to make mRNA shots could, in theory, let health officials more closely match flu strains
and improve upon typical forty to sixt efficacy rates. The m RNA vaccines have a very high likelihood of being better than the egg based vaccines we use now, says Andrew pocash A Virology just that JOHNS. Hopkins, Bloomberg School of Public Health. He adds that the shorter lead times could shave off months from the process, but he notes that it's an open question whether there would be a good economic case for m RNA based flu vaccines if they turn out to be more expensive and only modestly
better than the old ones. MODERNA is also targeting a few nasty respiratory viruses that don't have vaccines. These include mennuma virus, which can lead to hospitalization and infants, and respiratory sencidal virus, which causes more than one d seventy five thousand US hospitalizations annually in the elderly and about
fifty thousand more in young children. In the latter case, Moderna's vaccine will be competing with efforts at Glaxo Smith, Klein, and Johnson and Johnson that draw on other technologies and are further ahead. Hoak says Moderna could combine as many as a dozen or more viral strays in one shot. The goal is a seasonal vaccine that eliminates the majority of the respiratory viral diseases that we all suffer from.
He says, the only way that we're really going to get good broad population immunity against these respiratory viruses is if we can make it feel like your flu shot. The concept makes sense on paper, according to Tony Moody, a physician researcher at the Duke Human Vaccine Institute, which is working on mRNA based flu vaccines. Combinations are one
of the strengths of the technology. He says he estimates that it would cost only a few dollars more per shot to add the necessary mRNA for a given viral target. If you could get a combo shot that gives you a degree of protection against a lot of respiratory viruses. I think there would be a market for that, He says.
It won't be fast or easy. Researchers will first have to show that the individual vaccines work and then perform studies showing at complex combinations don't compromise efficacy or result in troublesome side effects. To realize its vision, Moderna will have to move quickly. Competitors are investing heavily to catch up.
Snophie said in late June it would spend four D seventy five million dollars annually on mRNA research, focusing on stable vaccines with few side effects, with emergency authorizations unlikely. In the future, considerations such as side effects and convenience will also assume new prominence. Moderna is working on eliminating
the complicated refrigeration requirements of its COVID shot. Future products will also have to find ways to reduce the high rates of fatigue, headache, and muscle pain produced by the shot. For the boosters, the company is testing lower doses, which may help how broadly mRNA can expand beyond vaccines into the far larger and more lucrative therapeutics market remains to be seen. There will be additional technical hurdles to surmount.
To treat chronic diseases, for example, companies will have to prove that they can deliver the therapies to the target organs and that m RNA can be administered safely. And to develop cancer vaccines, mRNA researchers will have to solve the thorny problem of teaching the immune system to distinguish between specific tumors and healthy sales. Many previous approaches have failed. The good news is that mRNA's adaptability also makes it
easier to try out many possibilities. Within a few years, moderna could have sixty drugs and vaccines either in human trials or nearing them. According to bond Sell, if it works out the way he hopes, mRNA will make inventing vaccines and drugs a bit more like creating software. We use the same for letter code for every vaccine and drug. Bond Sales says, we can scale the number of products we have in development at a pace that has never been done before, and that's this week's cover story. Find
more in the current issue of Bloomberg Business Week. Magazine on newstands, online at Bloomberg dot com and always on the Bloomberg Terminal. And be sure to listen to our Bloomberg Business Week Radio show, airing live Monday through Friday at two pm Wall Street Time on Bloomberg Radio. You can watch US two on our daily broadcast on YouTube. Just search Bloomberg Global News and catch me on Quick Take, available at Bloomberg dot com slash Qt. I'm Carol Masser
and I'm Tim Stanovick. This is Bloomberg
