Please remember that the value of an investment can fall and you may not get back the amount invested. This article originally featured in Baillie Gifford’s Spring 2023 issue of Trust magazine.
In the autumn of 2021, I had the pleasure and misfortune of presenting at a conference straight after Moderna chief executive Stéphane Bancel. It was a bit like having to go on after Freddie Mercury at Wembley. There are some acts you simply cannot follow, no matter how hard you try.
After all, Moderna’s impact on the world has been staggering. Its Covid vaccine is estimated to have saved nearly two million lives in 2021 alone, a powerful testament to the positive impact companies can have on the world.
Yet on stage Stéphane talked not of being content with having helped end a deadly global pandemic or of liberating the world from the confinement of lockdowns. Instead, he claimed that defeating Covid was merely Moderna’s opening act. This was only the start of a healthcare revolution.
The breadth of Moderna’s potential has always been clear to Stéphane. When he started his journey with Moderna in 2011, he believed there was only a 5 per cent chance the company would be successful. To many at the time, the ‘messenger’ RNA (mRNA) technology it was pioneering seemed more akin to science fiction.
Despite those long odds, he joined Moderna because he believed that if it could get the technology to work for one disease, it would be possible to make it work for many. Now, with mRNA technology proven against Covid, there’s an opportunity to apply that same technology to countless other diseases, such as flu, Zika, HIV and even cancer.
To understand why this breadth of applicability is possible, we need to think back to high school biology. Almost everything our bodies do relies on proteins.
The blueprints for those proteins are stored as information within our DNA. The role of mRNA is to copy, translate and deliver those blueprints to our cellular machinery for protein production. This means that mRNA exists naturally in our body as an information molecule instructing our cells to make the different proteins we need.
Moderna’s technology enables scientists to write their own mRNA instructions and have them delivered into cells. It’s similar to the way you might write software for a computer program. It unlocks the ability to design specific tools that our body might need and have our own body make them, whether that be a viral antigen, a cancer-blocking molecule or even a hormone to grow more heart tissue.
In the case of Covid, that specific tool was a harmless ‘spike’ protein that looked like Covid. It trained our immune system to be ready for the real thing, thereby saving millions of lives.
Usually, healthcare innovation is incredibly difficult, slow and expensive. Any new molecule takes time to design and synthesise and requires a long safety approval process. However, each new mRNA medicine can use the same chemistry and manufacturing process.
The hardware stays the same, only the software code needs to change. This allows product development to occur at an unprecedented pace. There is also an unusual ability to iterate. In drug development, either a drug works or it doesn’t. For mRNA, you can tweak and improve the code.
Still, we should not underestimate how important Covid was to the development of mRNA medicine. In normal circumstances, paradigm shifts do not happen this fast. Not only did the pandemic validate the science of mRNA, but it provided the safety data from billions of shots, a global mRNA manufacturing capacity and regulatory backing.
Moderna now has masses of data, know-how, patents, scale manufacturing and $17bn (as at 30 September 2022) in cash on the balance sheet with which to invest both in its technology platform and in its many potential applications. There are now 48 programmes in development. Only nine relate purely to Covid.
Beyond Covid is therefore where the greatest value lies. We are now getting a trickle of real-world validation of that claim. In late 2021, Moderna provided data showing that its mRNA flu vaccine appeared to elicit roughly the same response as the market-leading flu vaccine.
Moderna was also quick to point out that it had achieved this in its first iteration. The company assumes it only gets better from here. That matters given that the efficacy of traditional flu vaccines usually ranges from just 40 to 70 per cent, with the virus still causing 300,000 deaths every year.
A year later it announced the successful trial results of a vaccine for RSV, another potentially deadly respiratory disease.
The real goal, though, is not to offer a new flu or even RSV vaccine. It is to leverage the abilities inherent within mRNA to combine multiple vaccines. In other words, mRNA with different bits of chemical code, all delivered within a single injection.
Moderna aims to use this to deliver a seasonal pan-respiratory shot each winter that covers Covid, flu and RSV. It would offer convenience and protection to patients alongside material cost savings to healthcare systems.
At the same time, demonstrating the breadth of possibilities, Moderna has developed a personalised vaccine for skin cancer. A biopsy sample is taken from the patient’s tumour which is then used to formulate an mRNA code for each patient.
The vaccine then trains their immune system to defend them against the specific tumour’s various mutations. Significant validation came late last year with trial results demonstrating the vaccine reduced the risk of recurrence or death by 44 per cent.
The opportunity set for Moderna’s technology platform, therefore, appears both broad and meaningful, with programmes covering everything from flu to cancer and much else in between.
Not every programme will be successful, but the firm has enough shots on goal that not all need to be. The market is focused on estimating the magnitude of the decline in Covid vaccine revenues as the world shifts from a pandemic to an endemic state. The risk, though, is that it fails to see the wood through the trees.
What Moderna offers is far more valuable than even a Covid vaccine. It offers a technology platform that can be used to create a wide range of tools, of which a Covid vaccine happens to be just one.
Deputy Manager, Scottish Mortgage
Lawrence Burns was appointed Deputy Manager of Scottish Mortgage in 2021. He joined Baillie Gifford in 2009 and became a Partner of the firm in 2020. During his time at the firm, his investment interest has become focused on transformative growth companies. He has been a member of the International Growth Portfolio Construction Group since October 2012 and in 2020 became a manager of Vanguard’s International Growth Fund. Lawrence is also co-manager of the International Concentrated Growth and Global Outliers strategies. Prior to this, he also worked in both the Emerging Markets and UK Equity teams. Lawrence graduated BA in Geography from the University of Cambridge in 2009.
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