Moderna Inc. (NASDAQ: MRNA) saw its stock plunge more than 14% on Thursday, following the company’s announcement of significant cuts to its annual research and development (R&D) expenses.
The biotech giant revealed plans to slash its R&D budget by $1.1 billion starting in 2027, reducing annual expenditure from $4.8 billion in 2024 to between $3.6 billion and $3.8 billion by 2027.
This decision stems from a strategic effort to prioritize its commercial portfolio, which will now focus on oncology, rare diseases, and first-in-class non-respiratory vaccines.
As part of this realignment, Moderna will discontinue five programs, including its KRAS antigen-specific therapy and Endemic HCoV vaccine.
This announcement comes at a critical time for Moderna as it seeks to navigate a challenging market environment.
The company has faced headwinds from declining COVID-19 vaccine sales, with its full-year 2024 revenue guidance being revised down to $3.0-$3.5 billion, a notable drop from its earlier projection of $4 billion.
RSV Approval
Despite the downward revision in revenue, Moderna continues to make progress in expanding its vaccine portfolio.
The European Medicines Agency recently endorsed the company’s updated COVID-19 vaccine targeting the Omicron variant, and Moderna has secured regulatory approvals for its RSV vaccine, mRESVIA, across several regions, including the U.S. and Europe.
However, the market for RSV vaccines is expected to be smaller than anticipated, adding another layer of uncertainty to Moderna’s revenue projections.
Moderna’s financial health remains a point of concern for investors. The company reported a GAAP net loss of $1.3 billion for Q2 2024, slightly better than the $1.4 billion loss in the same period last year.
The company reported $241 million in total revenue for the quarter, beating analyst expectations but reflecting the ongoing challenges in the post-pandemic landscape.
Two-year cash runway
The cash burn rate continues to be significant, with Moderna’s cash position declining to $10.8 billion as of June 30, 2024, down from $12.2 billion at the end of Q1.
With operating expenses still elevated, Moderna’s cash runway is projected to sustain the company for about two more years, putting pressure on management to deliver on its pipeline and drive revenue growth from new product launches.
The company’s valuation metrics suggest that while Moderna’s stock is not overvalued, the current market sentiment is cautious.
The stock’s price-to-earnings (P/E) ratio has been difficult to gauge given the company’s ongoing losses, but its enterprise value to revenue (EV/revenue) ratio of 4.16 indicates that investors are still assigning a premium to Moderna’s potential future growth, despite recent setbacks.
As Moderna continues to face headwinds, including competitive pressures in the respiratory vaccine market and uncertainties surrounding its oncology and rare disease programs, the path ahead is fraught with challenges.
Now, let’s examine what the charts have to say about Moderna’s stock price trajectory. The technical indicators may provide further insights into whether the recent decline represents a buying opportunity or signals continued downside risk.
Will the $67 support hold?
Moderna’s stock has seen an extended downtrend since peaking above $480 in late 2021. After crashing to below $70 in November last year, the stock experienced a strong medium-term rally that took it to $170 levels by May this year, but it has halved since then as it now trades below $80.
Source: TradingView
This recent swift down move has made Moderna’s stock weak across timeframes and today’s crash will further exacerbate it. Hence, investors looking at today’s move as a buying opportunity must exercise caution. A long position should only be considered if Moderna’s stock again sees support around $67, where it took support late last year.
Traders who are bearish on the stock following today’s news should look for bouncebacks above $70 before initiating short positions. If the stock falls below its medium-term support at $67, it will get significantly weak and can crash to significantly lower levels.
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