Moderna Inc. (NASDAQ: MRNA) had been the biggest biotech initial public offering ever. The company was quite unlucky in the timing for its IPO, but it managed to get back into favor with investors. First, it was the so-called messenger RNA (mRNA), and more recently it was generating interest around its efforts around assisting with a cure or treatment for the Wuhan coronavirus. After filing an automatic shelf registration to allow for a capital raise, Moderna almost simultaneously released news that it has commenced an underwritten public offering of $500 million in shares of common stock.
It was no secret that Moderna would need additional capital at some point. It is in a very cash-intensive mode of R&D, and with no real products on the market it had accumulated losses of about $1.37 billion through the end of last September. Moderna has been burning about $100 million in losses per quarter.
The company is a leader in messenger RNA for therapeutics and vaccines using new methods to develop potential treatments and cures for patients. on top of the $500 million in the offering press release, Moderna has granted the underwriting syndicate a 30-day overallotment option to purchase up to an additional $75 million worth of common stock at the offering price.
The original automatic shelf registration, which has to generally be filed prior to any formal announcement of a capital raise, included a mix of any sales of common or preferred stock, debt, warrants and units.
The good news is that all the shares being sold are being offered by Moderna rather than by existing shareholders. It had been assumed that Moderna was going to need to revisit the capital markets to keep funding its massive R&D platform and pipeline. The release said:
Moderna expects to use the net proceeds of the offering to fund clinical development and drug discovery in existing and new therapeutic areas; to fund further development of its mRNA technology platform and the creation of new modalities; and the remainder to fund working capital and other general corporate purposes.
A longer explanation of the “use of proceeds” under the larger shelf registration statement said:
We intend to use the net proceeds from the sale of any securities offered under this prospectus for general corporate purposes unless otherwise indicated in the applicable prospectus supplement. General corporate purposes may include research and development costs, potential strategic acquisitions or licensing of complementary businesses, services or technologies, expansion of our technology infrastructure and capabilities of our mRNA technology platform and repayment and refinancing of debt, working capital and capital expenditures. We may temporarily invest the net proceeds in a variety of capital preservation instruments, including investment grade, interest bearing instruments and U.S. government securities, until they are used for their stated purpose. We have not determined the amount of net proceeds to be used specifically for such purposes. As a result, management will retain broad discretion over the allocation of net proceeds.
Joint book-runners for the equity offering were listed as Goldman Sachs and Morgan Stanley. Moderna noted that the sale was “subject to market and other conditions,” but there has been ample interest and demand from the public and institutions.
Moderna shares closed up 1.7% at $23.65 on Monday, within a 52-week trading range of $11.54 to $29.79. Its consensus analyst target price from Refinitiv was last seen at $29.78.
Shares of Moderna traded down about 4.2% at $22.65 in Monday’s after-hours trading session.