Moderna’s (MRNA) stock fell 12% and closed at its lowest level since the COVID-19 pandemic began in 2020 on news that the pharmaceutical company is cutting its research and development (R&D) budget by 20% or $1 billion.
MRNA stock finished trading in New York at $69.68 per share, its lowest level in four years. The company’s share price has now declined about 30% in the last 12 months and is down 85% from an all-time high of $450 a share reached in September 2021 when the company was bringing a COVID-19 vaccine to market.
Lower R&D Spending
The big one-day move in Moderna’s stock comes following a corporate update in which management said that they plan to reduce their R&D budget by $1 billion as sales of the company’s COVID-19 medications decline precipitously.
The company plans to lower operating expenses by a total of $1.1 billion by 2027, with most of the cuts coming from the R&D side of the business. With COVID-19 vaccine sales slowing, Moderna said it has been forced to reduce its R&D budget. The company said it now anticipates spending a total of $16 billion on research and development from 2025 through 2028, down from earlier projections of $20 billion.
Work on some drug candidates is being stopped altogether as the company’s product pipeline is streamlined and reduced. Still, Moderna said it plans to have 10 new pharmaceutical products approved in the U.S. by the end of 2027. Currently, Modern has only two pharmaceutical products commercially available, its COVID-19 vaccine and an RSV vaccine for seniors that was approved by the U.S. Food and Drug Administration (FDA) earlier this year.
Moderna’s Reduced Forward Guidance
At its Investor Day event in New York City, Moderna executives also lowered the company’s forward guidance, again citing slowing sales. Executives said they now expect total revenue of $2.5 billion to $3.5 billion in Fiscal 2025. That’s below the consensus estimate of $3.9 billion forecast on Wall Street.
This was the second time in as many months that Moderna lowered its outlook for the current Fiscal year. In August, the company lowered revenue guidance by as much as 25%, citing declining COVID-19 vaccine sales and stiff competition. The lowered guidance also contributed to the 12% slide in MRNA stock.
Is Moderna Stock a Buy or Sell?
Moderna currently has a Moderate Buy consensus rating among 17 Wall Street analysts. There are eight Buy, eight Hold, and one Sell ratings on the stock currently. In addition, the average price target on MRNA stock of $129.60 is 86% higher than where the shares currently trade.
Read more analyst ratings on MRNA stock
Conclusion
Investors were clearly spooked by news that Moderna is lowering both its R&D budget and its guidance for the current Fiscal year, driving the share price down more than 10% in a day. Going forward, Moderna will likely have to demonstrate progress on its vaccine pipeline and bring new prescription medications to market in order to win back investors’ trust and capital.
