Moderna Shares Fall After Announcement of Research and Development Spending Cuts

Shares of Moderna (MRNA) fell for the second consecutive day following the company’s announcement of plans to reduce its research and development (R&D) expenditures. The stock experienced a 3% decline, with JPMorgan analysts contributing to the pullback by downgrading their rating on the shares to underweight from neutral. They also lowered their price target to $70 from $88, significantly below Wall Street’s consensus of around $100.

Moderna’s Cost-Cutting Measures

Moderna, a medical biotechnology firm, revealed that it intends to cut $1.1 billion in expenses by 2027. As part of these cost-cutting measures, the company acknowledged that its individualized neoantigen therapy (INT) cancer treatment is unlikely to receive accelerated approval from the Food and Drug Administration (FDA).

While Moderna’s mRNA platform has achieved significant clinical wins, the company’s decision not to pursue accelerated approval for INT and the expectation that quarterly results may not consistently exceed expectations pose challenges for the stock’s performance, according to JP Morgan analysts.

Market Reaction and Projections

Moderna’s stock experienced a 12% drop on Thursday, closing at approximately $70. Year-to-date, the stock has declined by around 30%. The company’s announcement of projected fiscal 2025 revenue of $2.5 billion to $3.5 billion fell short of analyst projections of $2.9 billion.

However, Moderna expects to achieve break-even on an operating cash cost basis by 2028, with projected revenue of $6 billion once additional products have gained approval.

Analyst Downgrade and Wall Street Consensus

JPMorgan’s downgrade of Moderna’s shares to underweight from neutral reflects their pessimistic outlook on the company’s future performance. The downgrade was accompanied by a reduction in the price target to $70, significantly lower than the consensus target of around $100 among Wall Street analysts.

This downgrade by JPMorgan has contributed to the decline in Moderna’s stock, as investors react to the negative assessment of the company’s prospects. The lower price target suggests that JPMorgan believes the stock is overvalued and may not generate significant returns for investors.

Investor Concerns and Market Volatility

The decline in Moderna’s stock price and the negative sentiment expressed by JPMorgan analysts highlight investor concerns about the company’s ability to deliver on its future growth prospects. The reduction in R&D spending and the uncertainty surrounding the INT cancer treatment have raised doubts about Moderna’s ability to sustain its recent successes.

These concerns have contributed to increased market volatility, as investors reassess their positions in Moderna and other biotechnology stocks. The stock’s decline over the past two days reflects the market’s reaction to the company’s cost-cutting measures and the potential impact on its future revenue and profitability.

Conclusion

Moderna’s decision to reduce its research and development spending has led to a decline in its stock price and a downgrade by JPMorgan analysts. The company’s acknowledgment that its INT cancer treatment is unlikely to receive accelerated approval from the FDA has also raised concerns among investors.

While Moderna has achieved significant clinical wins with its mRNA platform, the challenges posed by the INT cancer treatment and the potential for underwhelming quarterly results have dampened investor sentiment. The lower price target set by JPMorgan reflects their pessimistic outlook on the stock’s performance.

Investors will continue to monitor Moderna’s progress and assess the impact of its cost-cutting measures on future revenue and profitability. The market volatility surrounding the stock underscores the uncertainty surrounding the company’s prospects and the importance of careful analysis for investors considering Moderna as an investment option.