Last night, various of my social media interlocutors shared this opinion piece from the Washington Post, which chided biotech fave Moderna for releasing early data from its Phase 1 trial studying its Covid-19 vaccine candidate. We wrote about Moderna’s announcement on Monday morning.
The gist of the WaPo piece is that “the rush to share scientific progress in combating covid-19” is undermining faith in medicine and science. Further,
Private companies, governments and research institutes are holding news conferences to report potential breakthroughs that cannot be verified. The results are always favorable, but the full data on which the announcements are based are not immediately available for critical review. This is “publication by press release,” and it’s damaging trust in the fundamental methods of science and medicine at a time when we need it most.
The most recent example is Moderna’s claim Monday of favorable results in its vaccine trial, which it announced without revealing any of the underlying data. The announcement added billions of dollars to the value of the company, with its shares jumping almost 20 percent. Many analysts believe it contributed to a 900-point gain in the Dow Jones industrial average.
Regarding this, we have a few observations.
First, a quibble, but a relevant one. Moderna is not a “private” company as Americans use the term. It is a public company, meaning that the public owns its shares, and as such Moderna has the duty to make public “material” information. There is flexibility in the timing of such announcements, and biotech companies often wait until a medical meeting of specialists in the field to release early data in a “poster” (which isn’t peer reviewed or reviewed at all), but the established fact of the massive reaction in the stock price — and indeed the entire stock market — is powerful evidence that the information is “super material” and ought to have been disclosed forthwith, as Moderna did. We were trained in our youth as a securities lawyer and spent many years advising companies as to their obligations, and can easily imagine that we would have advised Moderna to get its interim data out quickly.
Second, Moderna’s announcement was standard operating procedure in biotech — an industry we know more than a little about — and might well have happened whether or not Covid-19 were the subject. For better or worse, biotech companies are assessed by investors on the basis of “catalysts,” which are upcoming events that are expected to drive the stock price. Since such companies are in constant need of capital since they rarely actually become profitable themselves, they are routinely and as a matter of course quick to publish clinical data that might act as a catalyst. Again, completely normal. So normal that Moderna raised money on the news, as anyone familiar with the industry would have expected it to do.
Third, there is a significant short interest in Moderna, more than 22 million shares as of April 30, the most recent date for which data are available. Measuring the price gain in the stock between April 30 and last night, the shorts took it in the shorts to the tune of almost $800 million in losses. We suspect that some of the media pushback we are seeing today (and especially this piece from Stat) have been promoted by investors betting that Moderna’s stock will decline. Again, completely normal in biotech.
Fourth, regardless of the small number of patients in the Moderna data reported Monday, we know more than we knew on Sunday night. The prospects for a successful vaccine have increased, even if still far from certain. Given that the world has sacrificed trillions of dollars worth of wealth to fight Covid-19, and will sacrifice trillions more, a risk-adjusted net decrease in the estimated time to a vaccine of only a few days would easily justify a big jump in the stock market.
Have faith. There are more than 100 vaccine candidates, and at least 10 that are credible and reasonably far along, all things considered. Both Moderna’s announcement and the criticism of it are completely routine in biotech, and in that we also ought to take some comfort.
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