Shares of Moderna (MRNA) plunged in trading on Thursday after the company announced some important financial and program updates. Specifically, the pharma and biotech company plans to slash its research and development budget by 20% over the next three years to $16 billion from a prior budget outlay of $20 billion.
In addition, from 2027 onwards, MRNA intends to reduce its annual R&D expenses by $1.1 billion. To achieve these cost savings, the company will discontinue five programs and slow down late-stage studies of treatments for rare and latent diseases.
The decision to scale back on its R&D expenses comes amid the company’s disappointing vaccine sales and delayed profitability.
MRNA Reduces Revenue Forecast for FY25
Adding to the disappointment of investors, the company lowered its revenue forecast for FY25, with sales projected to be in the range of $2.5 to $3.5 billion. Furthermore, in FY24, the company has projected sales between $3 billion and $3.5 billion, down from its prior outlook of around $4 billion.
Consequently, the biotech pushed its break-even target on an operating cash cost basis (which excludes stock-based compensation, depreciation, and amortization expense) from 2026 to 2028, raising concerns about its cash reserves and potential need for additional funding.
MRNA Has Reduced Its Forecast as Part of a Broader Strategy
According to a Bloomberg report, the company’s CFO Jamey Mock explained in an interview that the cuts are part of its broader strategy to exercise financial discipline amid market uncertainty, especially as vaccination rates decline. He added that the reduction in R&D costs is partly because the company has achieved success in the clinical trials of its drugs, but late-stage trials require more funding. Despite this, Moderna expects to have 10 products approved over the next three years.
MRNA Is Focusing More on Cancer Research
Additionally, the company is focusing more on its cancer research, including its promising melanoma vaccine developed with Merck (MRK). While initial feedback from U.S. regulators has delayed hopes for a fast approval of the vaccine, the company is prioritizing its late-stage trial. Furthermore, Moderna plans to focus on a combined flu and Covid vaccine, shelving its plans for accelerated approval of its standalone flu shot.
What Is the Prediction for MRNA Stock?
Analysts remain cautiously optimistic about MRNA stock, with a Moderate Buy consensus rating based on eight Buys and Holds each, and one Sell. Over the past year, MRNA has plunged by more than 30%, and the average MRNA price target of $129.60 implies an upside potential of around 98% from current levels.
