Lorence Kim, M’99, WG’00, attended Penn Medical School with a fascination for clinical science. Then, wanting to synthesize an understanding of science and technology with business, he switched to a joint degree at Wharton. He entered investment banking when having a deep industry expertise was just beginning to be a differentiator, and bankers were pivoting from being generalists who worked across industries.
At Goldman Sachs, he focused on serving biotech companies providing innovative medicines, which is capital-intensive and risky. During his 14 years there, Lorence advised his clients strategically in M&A situations, helped them through volatility and raising billions in capital.
Working with hundreds of companies that were facing uncertainty, he gained experience and perception that prepared him to innovate at Moderna. In 2014, he left his role as Co-Head of Goldman Sachs’ U.S. biotechnology investment banking effort and joined Moderna as CFO. Six years ago, it was an early-stage, science-driven technology company with an ambition to build a new class of medicines. Lorence shares this company’s story of innovation, which may lead to an important vaccine to effectively deal with SARS-CoV-2 (COVID-19).
What is Moderna?
At its core, Moderna is a science-driven company. It was founded in 2010 on the foundation of mRNA technology, with the idea that mRNA could be engineered into a new class of drugs.
Messenger RNA (mRNA) copies a piece of DNA code when the body needs to send instructions to make proteins. Moderna can produce mRNA that, in the case of vaccines, gets the body to make viral proteins to generate immune responses.
About 100 years ago, the pharmaceutical industry grew out of the chemical industry, and it developed small molecule drugs. Then, about 40 years ago, proteins formed a new class of medicines, which accounts today for $200 billion of annual revenues. Moderna’s founding pillar was that mRNA could be yet another class of medicines, a big white-space opportunity. Moderna’s other pillar was the decision to do its own engineering. Moderna’s story of innovation is taking this really big idea and translating that science through engineering and infrastructure. A big part of our story of innovation was not only investing in science, but also doing the intricate work to create a fundamental infrastructure.
When you say Moderna built its fundamental infrastructure, what do you mean?
A big example for us was that, in 2016, we built our own manufacturing facility for $150 million. Sometimes, biotech companies contract out their manufacturing. For us, nobody had made mRNA drugs before, so there was no one for us to go to. So, we had to figure it out. If we had not invested there, the process would have been many months longer. Manufacturing was strategic for us. It has become a core competency and a major advantage today. We protect our processes, and we are not beholden to anyone.
That is audacious to invest $150 million into your own manufacturing plant.
We believed in our strategy and in our team. A lot of the cost is in the quality systems and ensuring sterility in the environment, which is needed when you are making vaccines that people will inject into themselves. Now that our COVID-19 vaccine, mRNA-1273, is ramping up, with the potential for making up to 1 billion doses, we are pivoting to accelerate the process, and are working with the global contract manufacturer, Lonza.
What does it mean that Moderna’s roots are in science? And how is that leveraged?
We have about 200 scientists who do platform research — chemists, molecular biologists, computational modelers, toxicologists, immunologists and so on. From multiple fields of science, they are all interrogating our processes — how our drugs work. If you accept that a vaccine plugs into core biological processes, then the more you understand those biological systems, the more potent a drug can be.
Our company can invest a few million dollars into scientific experiments to make our mRNA medicines three to four times more potent. But the beauty is that, with a platform technology, and a class of medicines that work off of that core science, once one drug works, many more drugs should work.
Our platform approach makes the investment more efficient and powerful. We have been willing to invest deeply with the knowledge that anything we discover, like that threefold or fourfold potency improvement, will make every future medicine coming out of Moderna, better.
Talk about your perspective as CFO. To accommodate these huge infrastructure projects, your role was to raise significant amounts of capital. Can you speak to innovation in your approach to capital formation?
We held successive private rounds of equity issuance. In 2014, we raised $500 million in an equity round. In 2016, we raised $470 million and, in early 2018, $560 million. At our IPO, in late 2018, we raised $600 million. That was the biggest biotech IPO in history, and the private rounds were each the largest biotech private rounds. This May, we raised $1.3 billion, which was the largest biotech public follow-on. In total, we’ve raised about $5 billion.
Investments in science, by necessity, are long-term. Businesses also create value in the near term. Part of Moderna’s story is that we invest over multiple time horizons. That is where outsized fundraising comes into play. Because we were able to get such large funding to build up our balance sheet, we could both operate to keep the company going, while also building infrastructure for the future.
Part of my role was to explain to investors why this idea of scale could work so well within Moderna, that deploying more capital didn’t increase risk. Instead of increasing risk, it allowed us to manage risk across this new platform that could generate so much value and impact in the form of so many new medicines. Often, in biotech, if a firm has only one good idea, then demand for funds isn’t great. Our executive team had many big ideas, so we needed to scale right from the start.
From the way you describe this, Moderna is not scaling in a linear mode, but your platform scales multidimensionally!
Yes! Spot on! Think about all these scientific verticals and our pushing innovation in each one. Let’s say they each generate a two-times improvement in the efficacy of the drug. If there are 10 different insights across these skills, and they are all two times, that’s exponential. I kid you not. From 2013 to 2016, we had a 1,000-times improvement in the potency of our drugs for that reason.
Talk about speed of development in terms of Moderna’s COVID-19 vaccine.
Last December, it was understood that something worrisome was occurring in China. We had already been working for several years with Dr. Fauci and his team at NIH on other coronavirus vaccines. On January 11, China published the genetic sequence of the novel coronavirus.
That enabled our team to finalize the sequence for our vaccine, mRNA-1273 on January 13. About 42 days later, we shipped the first batch of test vaccine ready for human trial use in the Phase 1 study. And in 63 days, only two months from when we designed the vaccine, the NIH started human dosing.
How was that possible?
Our prior research into other coronaviruses and investment in basic science, gave us a great foundation. Then our manufacturing platform to make mRNA vaccines utilizes the same process for each of our vaccines. If we had not invested there, the process would have been many months longer. Lastly, our prior clinical trial investments enabled us to go to the clinic for mRNA-1273 so quickly, because we had gotten nine prior vaccines to clinical studies before.
It’s not speed from being cavalier or disregarding safety. It is speed because we had deliberately invested over the past 10 years in this platform. Innovation does not happen by accident.
What have you learned from Wharton that helped you as CFO at Moderna?
Drug development is a team sport. So many disciplines come together. Wharton was instrumental in laying the foundation for mobilizing a team from diverse backgrounds for a common goal. I remember how we had to figure out how to make our learning team gel early that first year, and some of those management nuggets from Professor Mike Useem still rattle around in my head!