COVID-19 Startups Venture

With Flagship Behind It, Moderna Quickly Scaled From Startup To World-Changing Biotech

Moderna shook the world this morning with the announcement that its COVID-19 vaccine was 94.5 percent effective in Phase 3 trials. Together with a similarly positive outcome from a Pfizer/BioNTech vaccine effort last week, the results offer the most seemingly realistic path yet for a return to normalcy after a long and deadly pandemic.

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Markets soared on the news, with the Dow hitting an intraday record high. Moderna shares jumped 10 percent, landing the company a market capitalization around $39 billion. Even Dr. Anthony Fauci, the top U.S. infectious disease expert and a man not known for his Pollyanna-ish projections, declared the Moderna trial outcomes “as good as it gets.”

While the results are remarkable enough on their own, here’s one more thing to consider: The company that accomplished this is itself little more than a startup. It’s been public for less than two years. A decade ago, it was just a concept-stage company in the earliest stages of formation at Boston area biotech venture firm Flagship Pioneering.

Moderna’s high profile among vaccine developers and its promising results create the impression of a mature biotech powerhouse. In reality, however, it’s the product of a comparatively recent trend in the biotech startup sphere: The rise of platform companies launched by venture firms with historically large piles of capital to invest.

Flagship’s role in particular looms large in Moderna’s success. Founded in 2000, the firm is known for its approach to company building. While most VCs go out and look for founders with startups to fund, Flagship has a history of building innovative biotech companies in-house. Commonly, partners identify an area of nascent research seen as promising for startup innovation, then assemble a team around that concept.

Cambridge, Massachusetts-based Moderna was founded with a mission around discovery and development of messenger RNA (mRNA) therapeutics and vaccines. Other examples of Flagship-backed platform companies, not necessarily incubated in-house, include Editas Medicine (genome editing, now public), Indigo (sustainable agriculture, raised $1.2 billion to date), and Seres Therapeutics (microbiome therapeutics). Since its founding, Flagship has made over 200 investments, per Crunchbase data.

The highest profile company of the moment, Moderna came out of stealth mode in 2012, under the leadership of founding CEO Stephane Bancel, a longtime biotech executive who also serves as a venture partner at Flagship. Alongside Bancel, Flagship founder Noubar Afeyan serves as chairman of Moderna, with another firm colleague, managing partner Stephen Berenson also on the board.

As a private company, Moderna raised over $2.7 billion in venture and growth funding, with backing from a mix of venture capital firms and corporate investors. At the time of its IPO in December 2018, Flagship was the largest shareholder, holding 19.5 percent of outstanding shares, followed by Bancel and affiliated entities (10 percent) and AstraZeneca (8.4 percent).

This year, key shareholders have reportedly been whittling their stakes. However, they still maintain substantial holdings.

By any measure, the investment has been a home run for early backers. However, the biggest winners from the success of Moderna and other vaccine pioneers will hopefully be the rest of us, all collectively yearning for the chance to put COVID-19 behind us.

Illustration: Dom Guzman

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