Moderna Vacuums Up Another $110M to Make Messenger RNA Drugs

11/20/13Follow @xconomy

Moderna Therapeutics doesn’t need cash to keep the doors open, like many biotech startups. It just went out and raised a ton of dough, anyway.

The Cambridge, MA-based biotech startup, which is attempting to make injectable messenger RNA molecules that trigger production of protein drugs in the body, has raised a whopping $110 million in new equity financing.

Moderna isn’t disclosing who is doing the bankrolling this time, but Flagship Ventures remains the only venture capital firm with an ownership stake, CEO Stephane Bancel says. Taken together, Moderna has now raked in $415 million in cash through a combination of this investment, prior venture capital from Flagship, government support from the Defense Advanced Research Projects Agency, and largesse from its pharmaceutical partner, AstraZeneca.

The company isn’t saying what it plans to do with the new loot, other than it will have more to say about it in 2014.

Stephane Bancel, Moderna Therapeutics CEO. KeithSpiroPhoto, courtesy of Kendal PRess

Stephane Bancel, Moderna Therapeutics CEO. KeithSpiroPhoto, courtesy of Kendal PRess

“We want to go really big,” Bancel says via email. “$340 million in the bank allows us to invest and do both clinical programs, and develop the best mRNA platform in the world.”

Noubar Afeyan, the managing partner of Flagship, added that the financing includes many returning and some new investors. “The promise of creating a new drug modality remains strong,” he said.

For those new to the Moderna story, here’s some background to help understand its big, audacious dream: Today’s pharmaceutical industry is mostly about making small-molecule chemical compounds that people take as pills, or large-molecule protein drugs that people take via injections. A third class of RNA-based treatments has stirred excitement over the past 10-20 years, with specific technologies like antisense, RNA interference, and microRNA therapy that seek to precisely alter disease processes at the molecular level. The RNA category is thought to be exciting, in part, because of its potential to hit molecular targets that are “undruggable” with existing small molecules or larger protein drugs.

Moderna is taking a different spin on RNA-based therapy. It synthesizes messenger RNA molecules as the therapies themselves. These messenger RNA molecules carry the instructions for making proteins, which can take the form of enzymes, growth factors and other 3-D molecules that carry out most human bodily functions. The Moderna mRNA molecules are designed to be injected, get inside cells, and to stimulate the cellular machinery to make proteins that scientists know have therapeutic value. In theory, it’s another way of making insulin for diabetes, or erythropoeitin for anemia.

Moderna’s financing is all equity, no debt, and was done without the help of an investment banking firm or a chief financial officer, Bancel says. That means the company saved about 5 percent in discounts and fees, he adds. If you were to rank Moderna’s private financing alongside the biotech initial public offerings in terms of size, it would be in the top 10, in the same league with a few neighbors in Cambridge, MA—Foundation Medicine (NASDAQ: FMI), Agios Pharmaceuticals (NASDAQ: AGIO), and Bluebird bio (NASDAQ: BLUE).

By raising such a mountain of cash as a privately held company, Moderna avoids the expense, and risk of making detailed disclosures to investors through filings with the Securities and Exchange Commission. By staying private, Moderna can keep its competitors in the dark for longer, and avoid the scrutiny that comes from scientific experts employed by hedge funds, mutual funds, and big banks.

Moderna, as a private company, also can take its time to make sure it can optimize its technology before pushing into clinical trials — the ultimate proving ground for all drugs, and the place where many big biotech visions fizzle out. When I visited Bancel at his office in September, he said he didn’t want to rush into the clinic and make a mistake that could set the field back a decade or more. The historic precedent is clear, in the field of gene therapy.

Moderna was started in 2010, but didn’t tell the outside world what it was doing until December 2012. That was when the company said it had raised $40 million in venture capital from Flagship Ventures. The company made much bigger waves in March, when it said AstraZeneca had agreed to shell out the jaw-dropping sum of $240 million in upfront cash (plus much more in potential milestone payments) to develop the Moderna mRNA platform technology. By striking that deal, AstraZeneca gained the rights to 40 different drug candidates for cardiovascular, metabolic, and kidney conditions, as well as certain forms of cancer.

As the year has continued, Moderna has been seeking to nail down as much intellectual property as it can. It has carefully sought to keep its cards close to the vest, while also parceling out bits of information to show scientists that it’s not just full of hot air. In September, the company’s academic co-founders—Kenneth Chien and Derrick Rossi—published a paper in Nature Biotechnology that said their mRNA molecules were able to improve heart function in mice. Early in October, the company announced it had passed a technical review by DARPA and secured $25 million in contract support to make mRNA therapies against infectious diseases.

At no point has the company publicly divulged its secret sauce of how it makes mRNA drugs that can be injected without setting off an immune system defense reaction—a key technical challenge for anyone attempting to make drugs this way. Some things about the Moderna approach are being kept as trade secrets, which the company won’t ever have to disclose in public applications to the U.S. Patent and Trademark Office, Bancel told me in September.

While working feverishly on the technology, the company has been rounding up lots of big names to help it figure out how to make the most of its situation. The company has the usual gold-plated scientific advisory board, and a board of directors that includes former Genzyme CEO Henri Termeer. In late July, Moderna’s senior management team added Joseph Bolen, the former chief scientific officer at Millennium Pharmaceuticals, as president of R&D.

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