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Baillie Gifford
Updated 19 Jan 2024
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This is a non-independent marketing communication commissioned by Baillie Gifford. The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.

As with any investment your capital is at risk.

Moderna gained global fame for its Covid-19 vaccine, which the biotech company hopes will be the first of many transformative applications of its messenger RNA (mRNA) technology.

In Scottish Mortgage’s Invest in Progress podcast, Manager Tom Slater asks Moderna’s chief executive Stéphane Bancel what’s next for its cell-coding science, and how it could solve some of humanity’s most challenging health issues, from respiratory illnesses to cancer.

Writing the code of life

It’s easy to forget that triumphantly helping to contain a global pandemic was unforseeable when Bancel joined Moderna in 2011. He admits he was initially sceptical about mRNA technology – using code to create molecules that instruct our cells to produce the antibodies needed to fight off viruses and unwanted bacteria.

He changed his mind when he saw the data and recognised how repeatable the process could be. He believed if the company could find a way to make mRNA technology work, “it would have a profound impact on humanity, on society, by developing many medicines that just aren’t doable using old analogue technologies.”

“So, that’s what we set out to do,” he explains, “to build a company that would be a platform that would have many verticals [drug categories].”

Bancel explains “With mRNA, it’s four letters, like zeros and ones with software. You code everything.” – the only difference with most vaccines is the order of those letters. Because this platform has digital characteristics, the more it is used, the more data it collects, and thus, the more accurate and powerful its future results become.

Compare this to traditional pharma, where production starts from scratch each time, the success of one drug telling you nothing about the success of the next, and you can see why Moderna may be onto something big.

He likens the different verticals of Moderna’s platform to the varying services of Amazon. “Vaccines are just our first vertical getting to market, and Covid-19 is just the first vaccine of that vertical.”

Cracking Covid

But Covid-19 was never in the business plan. Bancel recalls that initially he thought it would be an outbreak like SARS or MERS. It was in January 2020 that he realised “this is going to be like the 1918 flu pandemic. It’s going to be everywhere and it’s going to kill a lot of people.”

Once the Chinese government released the code of the virus, the team at Moderna immediately inputted the protein instruction to their software, dissected the technical specifications and had a proposed code for a vaccine in just 10 minutes.

The next challenge was conducting testing and approval to get the vaccine to market as quickly as possible. But what is seldom highlighted is “[the] massive, almost miraculous scaling up of manufacturing”. To put this in context, Moderna delivered 100,000 doses in clinical trials in 2019, and in 2020 delivered 10,000 times that – 100mn doses of the approved Covid-19 vaccine.

From Covid to cancer

It’s a challenge that will keep evolving as Moderna continues to develop a wide range of treatments for various clinical needs.

One way to address this in the vaccination space is combining vaccines for Covid-19 with the most common respiratory diseases causing flu-like symptoms. A single effective vaccine given once a year could reduce hospitalisations, reduce strain on healthcare systems, and promote consistency of vaccine take-up, securing revenues for Moderna.

The advent of Moderna’s personalised cancer vaccines will also change the manufacturing dynamic from Covid’s one-vaccine-a-billion-doses to one-vaccine-one-dose.

Bancel explains that, in simple terms, Moderna’s technology reads the DNA of a patient’s healthy cells compared with their cancerous cells to identify where the mutations are occurring. They then write a code that instructs the immune system to ’reboot’ to enable it to detect the mutations that it wasn’t seeing before.

To achieve this level of individualisation, the company is focused on innovation, developing robotics and digital tools to shrink the time it takes to tailor these products for one human at a time.

Bancel thinks if current safety trials go as the company hopes, “A 2025 launch for melanoma [a type of skin cancer] is doable.”

Another area of significant progress is in latent viruses. These are viruses that once contracted, never leave your system – HIV, EMV and CMV, for example. These viruses are extremely complex and cause all kinds of health issues. But many of them don’t yet have a clinical solution because of their complexity.

Bancel explains that Moderna has been working on solutions – currently in phase 3 trials [the final stage before a treatment receives US regulatory approval] – and if successful, they could have a monumental impact on public health.

Decoding the future

Moderna is a large holding for Scottish Mortgage, and the team is often asked about the investment case due to the challenging period the company has experienced following the pandemic.

Slater believes the reason for this is, quite simply, the market’s huge focus on Covid. The vaccine was the immediate cash generator and the demand for it post-pandemic has been lower than expected. The company has a rich pipeline of products that have not yet been approved and the market has attached a higher risk weighting to that than we have.

In short, Scottish Mortgage believes Moderna's established success increases the likelihood of further breakthroughs. With its focus on innovation and potential to address unmet clinical needs, Moderna offers hope for a brighter and healthier future for millions.

Slater concludes “There are huge areas of unmet clinical need that cause untold human suffering, that its [Moderna’s] technology will be able to address. And it will create a huge amount of value for society in doing that. And even if it takes a small fraction of that value… that will translate into an enormous business opportunity.”

Important information

This communication was produced and approved at the time stated and may not have been updated subsequently. It represents views held at the time of production and may not reflect current thinking.

This content does not constitute, and is not subject to the protections afforded to, independent research. Baillie Gifford and its staff may have dealt in the investments concerned. The views expressed are not statements of fact and should not be considered as advice or a recommendation to buy, sell or hold a particular investment.

Baillie Gifford & Co and Baillie Gifford & Co Limited are authorised and regulated by the Financial Conduct Authority (FCA). The investment trusts managed by Baillie Gifford & Co Limited are listed on the London Stock Exchange and are not authorised or regulated by the FCA.

A Key Information Document is available by visiting scottishmortgage.com

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