A federal appeals court issued two rulings that were unfavorable to Moderna.
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The Covid-19 vaccine maker Moderna went from being a company known largely to biotech specialists, to perhaps one of the best-known pharmaceutical brands in the world in less than a year in 2020.
Even now, however, with the company expected to report $17.4 billion in revenues this year, Moderna remains something of a start-up, with all of the uncertainties for investors that implies.
A case in point came on Wednesday, when the federal appeals court tasked with hearing appeals on patent disputes in the U.S. issued two rulings that were unfavorable to the company, and cast some questions over its long-term earnings.
Moderna (ticker: MRNA) shares fell 11.9% on Wednesday, and were down another 2.8% in premarket trading on Thursday. Shares of the winner in the case, Arbutus Biopharma (ABUS), were up 44.1% on Wednesday and another 8.2% in premarket trading. Stock in another company with a stake in the patents at issue, Roivant Sciences (ROIV), was up 34.1% on Wednesday but fell 2.4% before the open on Thursday.
The actual implications of the decisions are impossible to know at this point, and it is likely that Wednesday’s selloff on the news was overblown. Coming on top of reports of a separate Moderna patent dispute with the National Institutes of Health, however, the new ruling highlights the uncertainties for Moderna, which only has one approved product, its Covid-19 vaccine, and has seen its share price nearly triple this year.
In a statement about the ruling, Moderna said that it didn’t believe that its vaccine was covered by the patents at issue. “While we disagree with the remainder of the decisions maintaining certain other claims or not considering their validity because of a procedural issue, we are confident that Moderna’s COVID-19 vaccine is not covered by those claims,” the company said.
The two decisions by the Federal Circuit U.S. Court of Appeals would allow Arbutus to sue Moderna for patent infringement over its Covid-19 vaccine, based on patents that Moderna had sought to have voided that relate to the so-called lipid nanoparticles that contain the messenger RNA used in messenger RNA-based vaccines.
What would come of that lawsuit, or whether such a suit might even be filed, remains impossible to judge. In a note out early Thursday, SVB Leerink analyst Dr. Geoffrey Porges listed other unknowns, including whether other vaccines under development by Moderna might theoretically infringe on the patents, whether other messenger RNA-based vaccine makers’ vaccines might do so, and how aggressively the patent holders will want to enforce the patents.
Porges wrote that he thinks that the most likely long-term outcome is that Moderna could end up paying a “low single single digit royalty on Covid mRNA vaccine sales.”
In a separate note, however, SVB Leerink analyst Mani Foroohar said that any such royalty agreement wouldn’t come for a while. “We note there is no evidence of a near-term settlement under discussion based on company disclosures and management commentary, and disputes such as this often take many years to settle,” Foroohar wrote.
That suggests that the patent fight is far from the most important issue facing Moderna shares at the moment. In the short term, there are other reasons to take a dim view of the stock, including Moderna’s loss of market share to Pfizer
‘s (PFE) Covid-19 vaccine, as Foroohar said.
As Barron’s highlighted last month, negative headlines have hammered the company in recent months. Moderna’s third-quarter sales fell short of expectations.
After climbing nearly 270% from the start of the year through the end of September, Moderna stock has stumbled. The stock is down 19.3% since the start of October, while BioNTech
‘s (BNTX) American depositary receipt is up 22.5% over the same period.
The coming of the Omicron variant provides a new opportunity for Moderna to prove the strength of its platform, as the company rushes to produce a variant-specific booster designed to protect against Omicron.
Write to Josh Nathan-Kazis at [email protected]
