Moderna (NASDAQ:MRNA) stock fell 5.9% premarket Thursday trading following its announcement of cuts to its research and development (R&D) budget.
The drugmaker revealed at its annual R&D Day that it plans to reduce its R&D expenses by approximately $1.1 billion, lowering projected costs from $4.8 billion in 2024 to between $3.6 billion and $3.8 billion by 2027.
The company explained that the decision is part of its broader strategy to prioritize its existing product pipeline and focus on commercial growth.
CEO Stéphane Bancel highlighted Moderna's success in advancing its mRNA-based vaccines and therapeutics but acknowledged that the company now needs to slow down the pace of new R&D investment to focus on delivering ten new products by 2027.
"Our demonstrated probability of success in R&D has been higher than industry standards at every stage of development," said Bancel.
However, he added: "The size of our late-stage pipeline combined with the challenge of launching products means we must now focus on delivering these 10 products to patients, slow down the pace of new R&D investment, and build our commercial business."
The new products include the anticipated approval of a next-generation COVID-19 vaccine and a combination flu/COVID vaccine in 2024, along with advancements in oncology and rare diseases.
Despite the budget cuts, Moderna highlighted its high rate of success in clinical trials, with a combined probability of success at 66%, significantly higher than the industry average of 19%.
However, the decision to scale back R&D spending has raised concerns among investors, contributing to the decline in stock price.
Moderna also updated and extended its financial framework through 2028. The company's revised financial framework outlines plans to expand its commercial portfolio and maintain profitability from its respiratory vaccine franchise starting in 2024.
The company expects 2025 revenue of $2.5 billion to $3.5 billion. For 2026-2028, Moderna expects a compounded annual growth rate of more than 25%, driven by new product launches.