Moderna’s market capitalisation rose by more than US$130 billion between the end of September and Thursday to nearly US$140 billion, according to a ranking compiled by QUICK-FactSet.
Its gains, largely propelled by the success of its mRNA coronavirus vaccine, outpaced pharmaceutical giants that have been around for a century or more.
Second-ranked Eli Lilly increased its market cap by about US$120 billion over the same period, while Roche came in fourth with a roughly US$75 billion gain.
Founded in 2010 by a Massachusetts Institute of Technology professor, Harvard Medical School researchers and investors, Moderna is not far removed from its start-up roots.
The company received significant funding from the US defence advanced research projects agency and other backers even before going public, and raised over US$600 million through its initial public offering in December 2018.
The company’s success largely stems from its aggressive investment strategy, pouring funding into promising fields despite diving into the red in the short term.
It invested US$1.3 billion in research and development in 2020 while earning about US$800 million in revenue, resulting in a net loss of US$700 million.
But Moderna earned about US$4 billion in profits from this January to June once its vaccines began contributing significantly to its earnings.
It is now using the windfall from the pandemic to apply its technology toward cancer and other treatments.
BioNTech, which ranked seventh in valuation gains, has also focused on mRNA technology.
Founded in 2008, the German company partnered with Pfizer to bring a coronavirus vaccine to market in 11 months through Project Lightspeed, an initiative launched by CEO Ugur Sahin himself.
Pharmaceutical giants have war chests that dwarf those of their smaller, newer competitors.
Pfizer, which ranked 14th, spent US$9.4 billion on research and development in 2020.
But “they have a hard time concentrating resources into specific fields, which would trigger pushback from investors seeking balanced and stable growth”, said Shinya Tsuzuki, senior analyst at Mizuho Securities.
Many are instead choosing to collaborate with newer players on risky, cutting edge technology.
The trend has only become more apparent during the coronavirus pandemic, which has put extra pressure on companies to develop new treatments quickly.
Eli Lilly’s intravenous antibody therapy is based on technology from Shanghai Junshi Biosciences.
Roche is jointly developing an oral antiviral with US-based Atea Pharmaceuticals.
Both Junshi and Atea were founded in 2012.
The ratio of research and development spending to revenue among 15 big pharmaceutical companies came to 18.6% in fiscal 2020, up about four points from fiscal 2011.
Continued increases have weighed on the companies’ financial position, and a dramatic surge is becoming increasingly unlikely.
“We will need to consider partnering with domestic and foreign newcomers as well as research institutions that hold cutting edge technology,” said Tetsuya Yamaguchi, executive vice-president at Roche unit Chugai Pharmaceutical, echoing a growing sentiment in the industry.
No Japanese company ranked in the top 15 for valuation gains, as they lag on coronavirus vaccines and treatments, and few are involved in partnerships like the one between Pfizer and BioNTech.
In fact, investors now appear to be shying away from Japanese biotechnology companies.
Among 45 players that are tracked by Mizuho Securities and have comparable data available from the end of 2019, total market capitalization has dropped roughly 5% to just under ¥2.4 trillion.
PeptiDream is working on treatments that use peptides, which are found in protein.
But the Kawasaki-based company is not expected to commercialise its technology until the end of 2022, later than overseas rivals, and its market capitalisation has dropped by over ¥300 billion.
Following Moderna’s success, newer pharmaceutical companies with cutting edge technology are expected to continue drawing attention.
Several players in genome-editing therapies have published promising clinical trial results.
Intellia Therapeutics, founded in the US in 2014, has gained more than US$8.5 billion in market capitalisation during the pandemic.
Still, it remains unclear whether Japanese players could benefit from the current trend.
Unless the country can create an environment that encourages promising start-ups, its pharmaceutical industry as a whole could suffer.
“There are few start-ups in Japan that can take the findings from advanced pure research and apply them to the real world,” said Osamu Nagayama, president of the Japan Bioindustry Association.
“We also have few investors with a good eye for these things.”