Moderna: An Atypical Investment with an Asymmetric Payoff

Heading into this week, Moderna was one of our largest positions. On Wednesday, Moderna announced that the Phase 3 trial of intismeran autogene met its primary endpoint of recurrence-free survival in adjuvant melanoma. This is the first positive Phase 3 result for an individualized neoantigen therapy in history – heralding, we hope, a revolutionary new era of personalized cancer vaccines. The stock rose 177%, the largest single-day gain by an S&P 500 constituent this century. We sold virtually our entire position. Given the size of both the move and the sale, we wanted to share our thoughts.

In April of 2025, we bought shares in Moderna (MRNA) at an average price of ~$25. Moderna was not a typical Bireme investment for several reasons. As a general rule, we buy solid businesses with strong cash flows trading at cheap valuations. Yet when we bought Moderna, it was hemorrhaging cash: it was still investing in R&D as if the pandemic-era windfall of nearly $20b in annual sales would persist indefinitely, despite that business being in rapid decline. Also, we have historically avoided the biotech sector because it combines low average returns on capital with a high degree of unpredictability, especially for those – like us – who are not biotech experts.   Though we may not be biotech experts, we do consider ourselves experts at identifying unloved companies where excessive negative sentiment has created a clear divergence between stock price and expected value. It was obvious after the post-pandemic crash that biotech as a whole was dramatically undervalued. By April 2025, roughly a quarter of the Nasdaq Biotechnology Index were trading for less than the cash on their balance sheets – the highest proportion on record – and vaccines had been vilified by the new administration. Trump officials also attacked and defunded mRNA technology specifically despite its proven efficacy in respiratory settings and its immense promise in oncology.   Moderna found itself at the very center of this maelstrom. The stock price duly suffered, down 95% from its covid-era peak. Yet Moderna did not share the characteristics that made most of the biotech sector uninvestable for us. First, Moderna’s pipeline was not a small handful of idiosyncratic drugs that required deep and specialized knowledge to properly analyze. Instead, record-setting pre-covid funding and the covid vaccine windfall had allowed Moderna to plow nearly $20b of R&D into an enormous array of assets across respiratory, rare disease and oncology, using a delivery mechanism that had already been proven safe and effective. Second, Moderna in 2025 was not investing indiscriminately in whatever assets it happened to own. Instead, as vaccine sales declined and losses ballooned, management was forced to dramatically cut costs, continuing development on only its most promising assets. That winnowing was painful, but it left the go-forward pipeline exceptionally strong.   At our original entry price, Moderna’s entire enterprise value – market capitalization less the cash on its balance sheet – was only $600m, while Moderna generated $3.2b of revenue in the prior year alone. This created a unique situation in which a proven, next-generation platform with diverse and unusually promising late-stage assets could be acquired for almost nothing – a lottery-ticket style payoff with sharply positive expected value.   After the intismeran Phase 3 results were released Wednesday, the market immediately repriced Moderna from a declining covid franchise to the market leader in a transformative new class of personalized cancer treatments. While it deserves this status, to justify today’s share price Moderna would need to see substantial success for intismeran not just in melanoma, but in several other oncology indications as well. That may very well happen, but it’s a different bet than our asymmetric upside thesis, and, frankly, not a bet we’re in the business of making. So with our original thesis fully realized, we sold the vast majority of our shares in the $140s on Wednesday.   We think the success of our Moderna investment is a potent validation of our investment approach. Our cognitive bias framework combined with our generalist mandate allows us to identify and capitalize on idiosyncratic fat pitches wherever they arise, even far outside our typical geographic or sector strike zone. It did not take years of medical school to spot the promise of mRNA technology – that has been well-known for decades. It did not take an MBA to spot a company trading at a negligible enterprise value – that would show up on any valuation screen. All it took to buy Moderna at $25 was a willingness to combine those two facts and the contrarianism to look through temporary negative sentiment.   While Moderna at current prices no longer meets our investment criteria, we remain extremely enthused about the promise of its technology. We hope – and expect – to hear of many more successful trials in the future.   We are grateful for your business and your trust. Please reach out if you have any questions.   - Bireme Capital   Follow our content by subscribing here. __________________ Advisory fees and other important disclosures are described in Part 2 of Bireme’s Form ADV. Reported performance is a dollar-weighted average of the securities in the Fundamental Value L/S Model Portfolio maintained at Interactive Brokers from inception through October 2023. From November 2023 onward, reported performance is a dollar-weighted average of the performance of all client accounts invested solely in the Fundamental Value L/S strategy with no client-directed customizations to the portfolio composition. Performance is shown net of a 1% management fee and 10% performance fee. Available for Qualified Clients only as SEC rules do not permit performance fees for nonqualified investors. 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